Amazon is experiencing a dilemma that other ecommerce companies wish they had: a demand that exceeds supply chain infrastructure. In a note in mid-July, Amazon told sellers using Fulfillment by Amazon that with the peak sales season coming, the company would restrict warehouse space starting August 16 based on inventory productivity.
FBA is transitioning from a storage and fulfillment service to just a fulfillment one. In the future, storing inventory in FBA for more than a month incurs additional fees. FBA is now designated as a just-in-time supply to enable Prime shipping. This change is problematic for third-party sellers who now need an inventory storage alternative.
Amazon has announced plans to build new warehouses, but they will not be ready for the holiday season. Just last week Amazon announced new fulfillment centers in El Paso, Texas, and Mt. Juliet, Tennessee, that will open in 2021.
Amazon is slowly restoring its logistics operations to normal after it was deluged with orders for masks, hand sanitizer, and disinfectant at the beginning of the pandemic, resulting in delivery delays and inventory shortages. Warehouse operations have since stabilized, but a big spike in orders could again strain its inventory and shipping operations. Amazon is therefore skittish about holding its 2020 Prime Day extravaganza, which was scheduled for July 15 and 16.