There was some overhead to commingling once it got extended to FBA, because in order to increase commingling they did attempt to track inventory provenance information even on commingled inventory.

My first job out of college in 2013 was working at Amazon on one of the teams that was implementing inventory commingling at the warehouse level, and my first big project was implementing this process into the receiving software, which is when inventory arrives at warehouses from vendor/seller trucks and employees scan everything to make database records that lead to paying for the goods. Note: in Amazon lingo "vendor" means a provider of goods that are legally purchased and owned by Amazon in the warehouse, while "sellers" are FBA sellers that maintain ownership of their goods and basically rent Amazon's warehouse services.

The big software undertaking was determining, at inventory receive time, whether we trusted the seller enough to allow their inventory to be commingled with others. If yes we would be "virtually track" the provenance: store in the database a record of the vendor, but if the item became commingled (according to UPC scans as it moves around the warehouse) with other sellers' inventory, blur the information so as to not falsely attribute provenance when it was no longer known. The whole project was based off the cost:benefit analysis that the efficiency and customer experience benefits outweighed the cost of not being able to attribute damage to the correct vendors (particularly the fact that you could ship a customer a product from the closest warehouse that it had it, instead of transshipping it from the warehouse that had the one owned by the person they bought it from).

In cases where sellers were not trusted enough to commingle there were alternate processes that were supposed to track their items individually; the most granular was "LPN" receive, license-plate-number, where every product got an individual UPC to distinguish it from all others. This was borrowed from Zappos, whose one warehouse in Vegas was initially the only one who used this process; I was told that was because the online shoe business heavily relied on letting customers do loads of returns and so it was implemented out of necessity early on. One of our projects was rolling LPN out to more of the North American network. But it was a lot more expensive (in the stickers, labor, data management, and picking inefficiency) so it was dispreferred whenever possible.

At the time the whole commingling initiative was regarded to be a big win for both Amazon and customers. It was fairly janky from the beginning, though, and I'm not at all surprised that sellers (and to a lesser extent vendors) began taking advantage of it as soon as they began to realize how it worked. There were a lot of initiatives around the time I left to provide better accountability in the whole process, but it is ultimately an arms race between Amazon and the merchants and my impression is that for many years Amazon was losing.

It is amusing that they're ending it. I never heard how things were going after I left, but had the impression externally that it was ending up being a disaster, and knowing how it works on the inside it's not a surprise. In hindsight trusting FBA sellers to not become essentially malevolent actors seems comically naive.

I worked on Prime and Delivery Experience until 2013 and commingling was considered relatively taboo due to the destruction of customer trust that would likely result. It was an obvious optimization. There was already an issue with return fraud and resellers listing fraudulent items that weren’t commingled under the same product listing. I was pretty shocked when it launched after I left.

It turned out pretty much the way we figured it would.