- Amazon increased its orders last week for some products that are sourced from China, according to emails seen by Business Insider.
- Amazon told first-party suppliers in the email that the move was to “prepare for possible supply chain disruptions due to recent global events originating in China.”
- The change shows the urgency Amazon is working with to prevent any supply-chain disruptions it could face because of the coronavirus outbreak in China, where the bulk of its products are sourced from.
- Amazon also told third-party sellers to take “precautions” to protect their account performances.
- The CEO of MGA Entertainment, the maker of the popular LOL Surprise dolls, told Business Insider the coronavirus was a “worldwide crisis” and that the company was “very concerned” about its impact.
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Amazon reached out to a number of suppliers last week and placed last-minute orders to increase its inventory of products made in China, Business Insider has learned.
The company made the move to stockpile certain products shipped from China in anticipation of supply-chain slowdowns caused by the coronavirus outbreak in the region, according to Amazon suppliers who spoke with Business Insider. The virus that originated in Wuhan, China, has killed more than 900 people and infected over 40,000, causing work stoppages and factory closures in the country.
“Amazon issued off-cycle orders to you last night in order to prepare for possible supply chain disruptions due to recent global events originating in China,” Amazon said in one of the emails viewed by Business Insider.
Amazon told these suppliers the new orders were for products sold in the US but made in China and that the change was in response to the coronavirus outbreak. In one of the emails viewed by Business Insider, Amazon said it was placing “stock-up purchase orders for several weeks of supply” and giving the suppliers five extra days to ship the products to Amazon’s warehouses. Amazon is also “proactively waiving” certain late-shipment fees, the emails said.
The move reflects the urgency Amazon is working with to mitigate the influence of the coronavirus on its supply chain. About 40% of Amazon’s sales volume comes from these first-party wholesale suppliers, and many of them depend on Chinese factories to source their products. Amazon previously told Reuters the coronavirus was causing “no interruptions” to its operations.
In an emailed statement to Business Insider, Amazon’s representative confirmed the order increase and said it was a cautionary move.
“Out of an abundance of caution, we are working with suppliers to secure additional inventory to ensure we maintain our selection for customers,” the representative said.
‘Unforeseen event’
It’s not the only change Amazon has made in response to the coronavirus outbreak.
Amazon notified its third-party sellers last week that it was aware of the virus and its influence on “millions of individuals around the world,” according to a message to sellers seen by Business Insider. It said sellers should take precautions to make sure their sales performance is not affected by the virus. The recommended precautions include canceling previous orders that sellers are no longer able to deliver, placing their accounts in vacation status, and taking additional steps to manage inventory, the message said.
“We will consider this unforeseen event when we evaluate your account’s recent performance,” it said.
Amazon also decided to pull out of this month’s Mobile World Congress in Barcelona, Spain, because of concerns over the spread of the virus, Reuters reported on Sunday. Amazon has made certain travel bans for employees going to China as well, Amazon’s Chief Financial Officer Brian Olsavsky said last month during a call with reporters.
“We’re watching it very carefully,” Olsavsky said during the call, referring to the coronavirus outbreak.
Amazon isn’t the only company affected by the outbreak. Apple warned investors in January about losses because of Chinese suppliers shutting down, and Disney said theme-park closures in Shanghai and Hong Kong could reduce its profitability. Factories run by Tesla, Ford, and Nissan have also faced work stoppages because of the virus, according to The New York Times.
Isaac Larian, the CEO of MGA Entertainment, which makes the popular LOL Surprise dolls, told Business Insider the coronavirus was a “worldwide crisis” disrupting every company’s supply chain.
He said MGA, a first-party wholesale partner to Amazon, was also experiencing supply-chain disruptions because of the outbreak. Several toy factories in China, including the largest one in the country, extended their closure by another week after shutting down two weeks ago, he said.
“We are very concerned about our fall 2020 products manufacturing, as well as our plan for Easter toy sales,” Larian told Business Insider. “The damage from the coronavirus has already disrupted the supply chain.”
