What is FBA? Basics of Logistics Outsourcing and MECE Decomposition of Operational Efficiency for EC Newcomers
When starting sales on Amazon, unavoidable thing is design of "Logistics". FBA (Fulfillment by Amazon) is not mere delivery proxy, but powerful business leverage utilizing Amazon's advanced logistics infrastructure as own 3PL (Third Party Logistics). In this article, we explain overview of FBA that EC new person in charge should hold and MECE (Mutually Exclusive and Collectively Exhaustive) thinking method to maximize unit economics.
Table of Contents (Click to Expand)
1. Definition of FBA and 5 Elements of Fulfillment
FBA is advanced fulfillment service where Amazon collectively acts for product storage to order processing, delivery, return response, and customer service. Decomposing this into MECE, it is aggregated into following 5 processes.
- Storage (Inventory Storage): Secure inventory management at Amazon's Fulfillment Center (FC).
- Picking: High-precision product extraction linked with WMS (Warehouse Management System).
- Packing: Standardization of packing by optimal material selection.
- Delivery (Last One Mile): Provision of rapid and reliable last one mile through delivery network.
- CS (Customer Service): Automation of customer support including return/refund response.
By outsourcing these processes, sellers can concentrate resources on core business (value creation process) such as "product development" and "marketing".
2. Thinking with MECE: Merits and Demerits of Using FBA
When considering validity of FBA introduction, it is necessary to organize into MECE from both quantitative (cost/time) and qualitative (brand/trust) aspects.
Merit (Improvement of Revenue/Efficiency)
- Improvement of CVR (Conversion Rate): Eliminates purchase barrier of users seeking same-day delivery by granting "Prime Mark".
- Advantage on SEO: On Amazon's algorithm, high delivery quality contributes to search ranking (Buy Box Acquisition Rate).
- Securing Scalability: Possible to expand shipping capacity without being bound by own physical/human resources even in peak season.
Demerit (Management of Cost/Constraint)
- Fluctuation of Profit Margin by Commission: Precise break-even point analysis incorporating inventory storage fee and delivery agency fee is essential.
- Black Box: Since confirmation of actual product is physically separated, strict condition management requires tracking by SKU unit.
3. Cost Structure Analysis for Operational Efficiency
To maximize utility value of FBA, total cost comparison with own delivery (seller shipment) is essential. The following chart visualizes composition ratio of "logistics cost" in general EC business.
By utilizing FBA, especiallyconverting 'own warehouse/labor costs as fixed costs' to 'variable costs linked to sales', improving financial health in uncertain markets.
4. Optimization Strategy of FBA Inventory Management
The biggest KPI in FBA operation is "inventory turnover rate". To prevent cash flow deterioration due to long-term storage fee, let's segment inventory into MECE.
- Rank A (High Output): Prioritize avoidance of stockout. Formulate JIT (Just In Time) delivery plan.
- Rank B (Medium Output): Adjustment of buffer inventory considering seasonal fluctuation and promotion.
- Rank C (Low Output): Early decision making of ad cost investment or return/disposal to prevent dead stock.
FAQ
- Q. Does sales surely increase if I use FBA?
- A. CVR improves due to improvement of delivery speed and reliability, but fundamental "product power" and "competitive advantage" are important. It is essential to analyze these into MECE and make FBA function as booster.
- Q. Can dangerous goods or large items be left to FBA?
- A. Based on Amazon's terms, advance application or additional fee may be required. Since tier of FBA fee differs greatly depending on size classification, it is necessary to perform accurate simulation in advance.
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FBA is essential tool to change "logistics" which tends to be bottleneck in growth of EC business into scalable asset. However, not aiming introduction itself, but decomposing and analyzing cost structure and inventory turnover rate into MECE and designing operation maximizing own profit becomes important mission of new person in charge. First, let's start by visualizing current operation.
Published: 2026-2-9 / Author: Yuta Ito
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References
- [1] Amazon Seller Central Help - Fulfillment by Amazon (FBA)
- [2] Supply Chain Management Institute - E-commerce Logistics Optimization