Amazon Inventory Management 2021 Guide
A key part of running an Amazon business is inventory management. It will help you avoid two major profit killers: loss of sales due to stock shortages and expensive storage fees due to overstocking.
The key to good inventory management is finding the right balance between too much and too little stock. You can determine how often to reorder inventory to maintain optimal levels of stock if you have the right strategies.
Why is inventory management important?
Customers don’t have the patience to deal with poor inventory management. Customers expect speed and convenience when shopping online. 68% of U.S. customers expect items to arrive within two to three days after purchase. 47% will pay more for faster shipping. Online shoppers don’t want to wait for their products to be back in stock. 70% of them would be disappointed if they received their order late.
Your customers will be forced to buy from your competition if you have insufficient inventory. This can increase your organic ranking and decrease yours. If you have too much inventory, your business will be tied down and you may face long-term storage fees.
Many factors can affect Amazon seller’s inventory management: the manufacturing and shipping times of your supplier, customs delays and FBA storage capacities and fees, as well as the sell-through rate, all play a part.
It can be hard to determine how much inventory you should order when you launch your first product on Amazon. Your brand-new listing won’t have any reviews and it won’t convert nearly as well as the listings of your competitors.
You will eventually learn how quickly your inventory sells so that you can order more accurately to avoid selling out or overstock.
Common inventory issues Amazon sellers face
Inventory problems are something that most sellers will encounter at some point in their lives. It’s important to be ready to deal with any issues that may arise.
Running out of inventory
Don’t sell out of stock. It will hurt your Amazon Best Seller Rank. If you are running out of stock and waiting for shipments, a great way to keep your inventory in stock is to slow down the demand side. This can be done by putting a halt to marketing strategies like off-channel campaigns or ads, as well as setting a higher price for your product. This will allow brands to retain existing customers, while slowing down the acquisition of new customers.
Avoiding stock outage is your goal, even if it means slowing sales and advertising less.
Your Best Sellers Rank (or organic keyword ranking) will suffer more damage if you’re out of stock for longer periods. Amazon only promotes products that are always available. You may lose your ranking if your products aren’t available consistently.
Overstocking inventory
You don’t want your inventory to be depleted, but you also don’t want to stockpile too many products. If you use FBA, this can lead to you spending more money on inventory than you would otherwise need to replenish faster-selling products.
Amazon will consider your excess inventory if the product is out of stock for more than 90 days and/or has at least one unit older than 90 days. Amazon is not a fulfillment center, but a storage facility. They expect products to be moved in and out in 90 days. The quicker, the better.
Your overall IPI score (inventory performance indicator) will be affected if you have too much inventory. If you have too many inventory in Amazon fulfillment centers, they will decrease your inventory storage limit and charge you monthly storage fees. These costs can add up, sometimes even exceeding the actual value of your unsold inventory.
Seller Central provides tools that will help you identify excess inventory in FBA and address long-term seller fees.
FBM (fulfillment through Merchant) can cause your money to be held in slow-moving inventory, even if you use it. You could also be paying storage fees if you use a third-party fulfillment center.
Stranded inventory
Many sellers aren’t familiar with how to deal with stranded inventory. It happens when inventory in Amazon’s warehouse doesn’t have an active listing. It is basically in limbo — it is still available for sale, but it cannot be purchased by customers.
The worst thing about stranded inventory? Even if your products aren’t listed for sale, you will still have to pay monthly storage fees per unit.
Amazon will display inventory that is currently stranded in your Inventory Dashboard. This section is not subject to Amazon alerts, so you need to check it regularly.
Long-term storage fees
Let’s get back to the subject of excess inventory at an Amazon fulfillment center. This is another problem you should avoid. Amazon can charge you a lot depending on how long-term you store your inventory.
Amazon evaluates its entire fulfillment network every 15th of each calendar month to determine the age of all sellers’ stored inventory. The date your inventory arrives at FBA warehouses is the start of its age. Long-term storage fees will apply to inventory that is kept for longer than one year. These fees are in addition to the normal monthly storage fees.
Amazon states: “Inventory that has been in a fulfillment center for more than 365 days will be charged a monthly long-term storage fee of $6.90 per cubic foot or $0.15 per unit, whichever is greater.”
Watch the below video for Amazon Inventory Management in 2021 — Master These Key FBA Inventory Management Strategies Today!
Proven tips for properly managing inventory
Proper inventory management skills will help you stay ahead of your competition. Let’s look at some strategies and tips to help you keep your inventory under control.
1. Keep a close relationship with your supplier
You should invest energy to construct and support relationships with your suppliers — they’re responsible for rejuvenating your product ideas!
In the event that you have a decent relationship with your provider, they will often prioritize your orders over one more client of theirs. Else, you might be trusting that your products will be completed, consequently causing a stock out on your end. See how they work and how you as a brand can make their work simpler.
Regard and appropriate communication go far with your suppliers. On the off chance that you treat them right, they will treat you right.
As you work all the more intimately with your provider, you’ll have a strong understanding of the lead times in your inventory network. Knowing what amount of time it requires to manufacture, ship, and be gotten at Amazon is an absolute necessity.
2. Maintain around 60 days of supply
Give a valiant effort to keep around 60 days worth of inventory close by consistently to cover your expected sales volume. This will assist you with abstaining from overstocking just as leaving stock. You can forecast your sales volume by reviewing Amazon’s inventory reports just as by monitoring your sell-through rate.
Your sell-through rate for FBA is measured by how well you are balancing your inventory levels and sales. It’s determined by partitioning the all out units sold and shipped to customers in the course of recent days by the average number of FBA inventory units during that equivalent time-frame.
You can see your sell-through rate for every product you sell under the “Inventory Age” segment in the Inventory Dashboard in Seller Central.
A sell-through rate is more than 7 is considered brilliant. This implies you are selling multiple times a larger number of units than you are putting away on average. On the off chance that your sell-through rate is under 1, this implies you held more inventory than you sold in the previous 90 days.
3. Reduce excess inventory
On the off chance that you overestimated the sales volume of one of your products, relax! It happens to everybody 一 even large brands.
There are a couple of various approaches to manage excess inventory.
Run promotions: This can incorporate utilizing coupons codes, get one-get-one deals, or running steep discounts. Lowering your price is generally an incredible method to accelerate sales for sluggish inventory. Regardless of whether you’re assuming a slight misfortune in sale price, it could add up to not as much as what you would owe in long-term storage fees if the units keep on sitting in storage.
Raise your keyword bids: If you are running ads for your products (which you ought to do in any case) a decent method to get before more customers to dispose of the product is to raise the bids on keywords you are targeting. This strategy, combined with lowering your price, is a certain fire approach to move stale inventory.
Make a removal order: If you have another spot to store inventory other than Amazon, make a removal order in Seller Central and have the inventory shipped off you prior to getting hit with large storage fees. Amazon now and again will run promotions where they will eliminate the inventory free of charge.
Liquidate the inventory: Liquidation is generally a final retreat yet in the event that any remaining efforts fall flat, you can attempt to sell the entirety of your excess inventory in mass at a large discount. This will permit you to recover some capital that can be reinvested into a better-selling product.
Donate the inventory: You additionally have the alternative of giving your products to charity organizations or non-benefit like Goodwill. You can regularly discount the donated inventory on your taxes to compensate for the losses.
4. Plan for the unexpected
Not all things run flawlessly constantly. You might have delays with your supplier, shipping delays, customs delays, FBA warehouse delays, and different issues. The COVID pandemic was an ideal illustration of this: upset assembling and supply chains came about in 53% of U.S. consumers encountering trouble discovering products online start in March 2020.
In the event that you can, request reinforcement units simply on the off chance that something occurs along your supply chain.
This can incorporate putting away extra units in your own warehouse or in any event, utilizing an outsider storage/fulfillment center. In case of a deferral, you can keep up with stock in FBA without stress, or even satisfy orders utilizing FBM.
This is possibly suggested in the event that you can precisely foresee the interest for your item and can request and store extra units. Try not to arrange extra in case you are lacking in capital or storage space.
5. Use inventory management software
Having a reliable inventory management system in your armory will put you way in front of any competitors who aren’t utilizing one. Amazon inventory management tools will assist you with effectively dealing with your inventory levels and moderate the dangers we discussed previously.
Inventory Manager is a high level interest forecasting device intended to precisely calculate your inventory needs for your Amazon FBA business. The apparatus will anticipate future deals dependent on request that will assist you with deciding how much inventory to request to keep away from stock outs or overstocking.
