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Effective Inventory Management Strategies for Amazon Sellers

Inventory Management

To stay on top of Amazon FBA Capacity limits, you should be well aware of certain tips and strategies regarding efficient inventory management. 

 

In this article, we will cover everything inventory-related, from why good management is vital to everyday challenges and tips on optimizing inventory management. So, if you are ready, let’s start! 

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Importance of Amazon Inventory Management 

 

Managing Amazon’s inventory is important for several reasons. 

 

First, good inventory management helps optimize stock levels and avoid stockouts. Thus, you will always be able to meet customer demand without overstocking risks. 

 

Inventory management will also help you increase your customer satisfaction rate. When customers want an item that is out of stock, it can cause frustration. However, items in stock contribute to higher customer satisfaction rates and a good business reputation. 

 

Finally, good inventory management improves operational efficiency and cash flow. 

 

Common Inventory Challenges Amazon Sellers Face 

 

When it comes to inventory management, oftentimes, it gets more complicated than anticipated. This happens especially when your business keeps actively expanding. So, let’s briefly overview the main inventory management challenges that Amazon Sellers regularly face. 

 

Stockouts 

 

One of the most common challenges that Amazon Sellers face is stockouts. If the inventory management strategy is not set well, then it can lead to stockouts. Once in a while, it can happen to everybody, but if stockout is a regulated occurrence, then it will negatively impact your brand’s reputation and your product performance on Amazon. After all, stockouts result in lost sales and unsatisfied customers. 

 

Overstocking 

 

In contrast to stockouts, another common inventory challenge is overstocking. If your products have been in Amazon storage for over 90 days, then these are automatically categorized as excess inventory. 

 

It negatively affects your IPI score (inventory performance index). Why? Amazon, first of all, is a fulfillment center, not just a warehouse, to store the inventory. Thus, they encourage inventory movement (in and out) within a 90-day span. 

 

If you fail to sell within 90 days, at some point, Amazon can reduce your inventory capacity. 

 

Aged Inventory Surcharge 

 

One more common challenge Amazon Sellers face when it comes to inventory management is additional fees on aged inventory. 

 

You can be charged long-term storage fees if your inventory stays in the Amazon Warehouses for over 90 days. It is an extra expense that can be easily avoided with a good inventory management strategy. 

 

Stranded Inventory 

 

Many sellers have to deal with stranded inventory issues regularly. Essentially, this occurs when the inventory stored in the warehouse is not connected to the active listing of your Amazon store. It means you cannot sell products in stock, but you will still be charged a storage fee. 

 

All of these issues are a direct result of improper inventory management strategy. So, it is time to fix it.

 

Tips & Strategies

 

Tips and Strategies for Effective Amazon Inventory Management 

 

In order to successfully manage your inventory levels, you need to implement certain tips and strategies. These range from building good supplier relationships to implementing different inventory-level management strategies. So, let’s take a more detailed look at each. 

 

Maintain Optimal Stock Levels 

 

If you want to cover anticipated sales volume yet avoid excess inventory, aim to maintain around 60 days of supply. 

 

To know more precisely how much inventory you need to keep in stock, monitor sales data such as sales volume, sales trends, and sell-through rate with Amazon Business Reports. This will help you forecast future sales volume and optimize inventory levels based on it. 

 

Adapt Stock Levels to FBA Capacity Levels 

 

If you want to avoid additional storage charges, then familiarize yourself with FBA capacity limits. Amazon FBA has monthly capacity limits. If you want to increase the capacity limits, then keep track of your IPI score. 

 

A better IPI score will provide you with more monthly capacity. Factors that can negatively influence your IPI score include excess inventory and stranded inventory. 

 

Get Rid of Excess Inventory 

 

This headline sounds harsh, but it does not mean throwing it away. It means focusing on implementing strategies to sell all excess inventory as soon as possible. Here are some ways to do it: 

 

1) Promotions and discounts. Run different promotions and offer bundles and discounts to sell excess inventory.

 

2) PPC campaigns. Start running ad campaigns to improve your rankings and sales. 

 

3) Donations and liquidation. If none of the above strategies work, liquidate or donate the excess inventory. 

 

Monitor Stranded Inventory 

 

Stranded inventory can result in additional costs and lost sales, yet you can easily identify stranded items and fix the issue. Amazon offers a “Fix stranded inventory” tool. Do not postpone fixing this issue, as according to the new policy, Amazon can remove stranded inventory from the warehouse within 30 days. So, you can simply lose your stock. 

 

Optimize Inventory Health 

 

Amazon offers a variety of useful reports, including Inventory Health Reports. So, navigate to it and start regularly monitoring the health of your current inventory. This report provides you with insights on inventory levels and allows you to easily identify products that are running low or products that are overstocked. 

 

When monitoring different metrics with the reports, make sure to keep an eye on the sell-through rate, inventory turnover ratio, and days of inventory (DOI). Regarding the DOI rate, aim for a lower DOI as it means fewer holding costs and faster inventory movement. 

 

Improve Supplier relationships 

 

Putting effort into building and maintaining good supplier relationships always pays off in the long run. Good relationships with the suppliers will help you ensure your orders are prioritized, and delays are minimized. All of it results in quick order fulfillment and enables you to avoid stockouts. 

 

Optimize Amazon Inventory Management Today 

 

Managing all the aspects of Amazon stores can be quite challenging. So, if you are looking for ways to optimize store and inventory management, then you are in the right place. 

 

Enso Brands is an Amazon Store Management Agency offering services ranging from inventory management to sales performance optimization. We will help you efficiently manage your Amazon Store to grow your business. 

Contact us to learn more about how we can help you grow.

 

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