Leaked emails show Amazon is stockpiling on products made in China due to coronavirus risk on its supply chain - after having said there's 'no interruptions' to its operations
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- Amazon has placed increased 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 is to "prepare for possible supply chain disruptions due to recent global events originating in China."
- The move shows the urgency Amazon is working with to prevent any potential supply chain disruptions it could face due to 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 seller account performances.
- The CEO of MGA Entertainment, the maker of the popular LOL Surprise dolls, told Business Insider that the coronavirus is a "worldwide crisis" and that it's "very concerned" about its potential impact.
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Amazon has reached out to a number of suppliers last week, placing last minute orders to increase its inventory of products made in China, Business Insider has learned.
The move is intended to stockpile on certain products shipped from China, in anticipation of potential supply chain slowdowns caused by the coronavirus outbreak in the region, according to Amazon suppliers who spoke to 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 that the new orders are for products sold in the US but made in China, and that the change is in response to the coronavirus outbreak. In one of the emails viewed by Business Insider, Amazon said it's placing "stock-up purchase orders for several weeks of supply," and that it's giving the suppliers 5 extra days to ship the products to Amazon's warehouse. Amazon is also "proactively waiving" certain late shipment fees, the emails said.
The move reflects the urgency Amazon is working with to mitigate the impact of the coronavirus on its supply chain. About 40% of Amazon's sales volume come from these first-party wholesale suppliers, with many of them depending on Chinese factories to source their products. Amazon previously told Reuters that the coronavirus is causing "no interruptions" to its operations.
In an email statement to Business Insider, Amazon's representative confirmed the order increase, saying it's 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," it said.
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 is aware of the virus and how it's "impacting 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 impacted by the virus. The recommended precautions include cancelling previous orders that sellers are no longer able to deliver, placing their accounts in vacation status, or 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 has also decided to pull out of this month's Mobile World Congress in Barcelona due to concerns over the spread of the virus, Reuters reported Sunday. Amazon has made certain travel bans for employees going to China as well, Amazon's CFO Brian Olsavsky said during a call with reporters last month.
"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 potential losses due to Chinese suppliers shutting down, while 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 due to the virus, according to the New York Times.
Isaac Larian, CEO of MGA Entertainment, the maker of the popular LOL Surprise dolls, told Business Insider that the coronavirus is a "worldwide crisis" disrupting every company's supply chain.
He said MGA, a first-party wholesale partner to Amazon, is also experiencing supply chain disruptions due to the outbreak. Several toy factories in China, including the largest one in the country, have extended their closure by another week, after having shut down the last two weeks, 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."
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