#54 Incoterms for Amazon Sellers, Amazon Inventory Forecasting and China Inspection – Q & A Tuesday No. 6
#54 Q & A Tuesday No. 6 Show Notes
Q1 : Gareth [INCOTERMS]
We are in the process of sourcing our first product and we are struggling with what we need to ask for in terms of delivery. Does the term FOB only refer to shipping (boat)? What is it we need to ask for to get air freight delivered to the door to FBAI (or equivalent) in the US? As we seem to be getting different responses from different suppliers?
Incoterms (“International commercial terms” in full) refer to the Freight deal you have with a supplier [aka Vendor=Seller].
There are 9 3-Letter codes denoting the 9 possible agreement types:
More precisely, it shows how much of the supply chain your supplier [the Seller] takes responsibility for, and at what precise point you as the Buyer take on responsibility for your consignment and any costs of transporting it/dealing with import/export etc.
The early in the Chain the Vendor passes responsibility on to the Buyer, the cheaper it is but the more work you as Buyer need to sort out yourself. Or of course hire someone to sort out.
FOB =Free On Board– strictly only for sea shipping but Chinese suppliers use this for everything!
This is okay to use to compare quotes if most suppliers give you the price in that way.
However, that is all.
I prefer to get quotes EXW=Ex Works i.e. literally just manufacture with no Freight. However I would never place an order EXW unless using a Freight Forwarder.
If your supplier will give you DDP=Delivered Duty Paid, this is the most expensive but simplest option. I would always start with this as a new seller unless you have expertise or experience or contacts in the freight/import area.
If you not you could go for the next best thing, Sometimes known as “DDU=Delivered Duty Unpaid”, [which really should be known as DAP=Delivered At Place in proper incoterms, but is known as DDU among some suppliers]
Note the difference between Air Freight and Air Courier. The latter is basically a well known courier like DHL, UPS, Fedex. They have their own channels for clearing customs in USA and are simplest for beginners or if you dislike freight issues!
You can always get a customs broker if shipping into USA – I’ve used Western Corporation Overseas for extra security around USA customs clearance. It will add to your costs but can provide peace of mind on first shipment.
Bear in mind that Chinese suppliers will know more than you (probably) when you’re first starting out but they are not experts in freight. Particularly bear in mind: They are speaking a foreign language! The nuances between “Freight” and “courier”, for example, may not be clear to your supplier – but they are nevertheless real when it comes to Freight. But they will be very used to using Air Express services like DHL.
If in doubt: 1. use your supplier’s courier account; stick to Air Courier; get DDP if possible or the closest you can.
OR use a Freight Forwarder if you want to do Sea Freight (a bit more involved for a first batch of first product in some ways but may be necessary for heavy items) or even Air Freight.
Q2. Chat [Inventory] Forecasting methods/techniques.
How do people project and plan for how much inventory they will need? What is important to consider when planning ahead for growth?
“Feels like you kind of have to guess a lot more in the beginning! Started off at 500 units and down to around 460. Most of those are giveaways though. only 3-4 are organic.”
3-4 units is almost no sales history so don’t try to make any predictions yet.
Get your reviews, start PPC and then after say 100 sales or two weeks or so you’ll have enough data to predict. Get some consistency if possible. If you’re buried on page 5, 10 etc, your sales will be low and also therefore will fluctuate a lot in relative terms.
The basic maths is simple:
weeks of inventory cover=Total units left of product÷weekly sales
e.g. in this case, if in say 4 weeks’ time you have 350 units left and are selling a steady 5 a day average=35 a week, that gives you:
weeks of inventory cover=350 units left÷35 units a week sales=10 weeks’ cover.
If your Lead time between placing an order and actually getting product live on Amazon is say 6 weeks, you will need to reorder at 6 weeks out the latest. Better to add a couple of weeks for delays.
Bear in mind delays at Chinese ports, delays getting into American ports especially before Xmas, processing at FBA Inspection etc, esp. in 4th Quarter , time to ship to Amazon etc.
If you have a duff product, e.g., no sales, no profit, you may not even choose to restock it. But if you do have sales and it looks profitable or that it will be next order, then this all becomes relevant.
Q 3: Ben Leonard: Inspection.
OK, so I know inspection is important. However, is it always necessary [?] Here is my situation:
My supplier is experienced, appears professional, stocks a lot of FBA sellers, and is very helpful. They have agreed to send me photographs throughout the process of manufacture, pre-labelling, and during packing of the order ready for shipping. I plan to put in place a purchase order contract which covers all of these.
I have no reason to believe why they’d send me a poor standard of product (samples were excellent), and we have already both expressed desire for a long relationship.
In this situation, would anyone here risk not having inspection?
Perhaps inspect once, and then not again, or not for another 3-4 orders?
Michael: My answer is simple: yes inspection is necessary. Definitely on the first order. No question. The fact that your supplier is responsive and experienced is an excellent reason to work with them in the first place. But that is just good due diligence on your supplier. Inspection is a separate matter.
Listen to the 2nd half of the interview with Manuel Becvar and read notes -it has your name on it! www.amazingfba.com/53.
If it’s a simple product, a man-day (sorry ladies, that’s the standard term, sexist I know) will cost you just 100 USD with Trigo.
Either way there is no reason to skip it and every reason to do it.
If I were you, I would just get that set up and move on. 100 USD is peanuts to have peace of mind and avoid negative reviews.
As Sellers we sometimes don’t consider the sheer expense of one negative review.
If it’s early days and you have say 9 reviews with 5 stars from review giveaways and you get one 1 star review, that means average review drops from 5.0 to 4.6. That could easily halve your conversions. Assuming your Pay per click costs stay the same, that could easily mean you go from profit to breakeven or even to loss.
You could lose your 100 USD within a week or less and then continue to lose money until you’ve either got rid of your one star review or buried it under new giveaways.
If this happens, just deal with it of course , it’s not the end of the world – but why not just take simple steps to avoid or minimise it in the first place?
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