Running an Amazon FBA business is a very rewarding venture, but one of the greatest hurdles that sellers have is through managing their inventory. Whether you’re just starting out or you are now an established seller, understanding how the Amazon FBA inventory management system works for you can make or break your success. Here’s a guide to help you manage your Amazon FBA inventory like a pro.
Familiarize with the Amazon Inventory Management System
Before proceeding with strategies of managing the inventory, you must first know how the system of Amazon’s FBA functions. With products you are sending to the fulfillment centers, you hand over responsibility of the stock’s storage, packing, and shipment to Amazon; however, the duty to check on your stock level so you’re never non-compliant falls back to you.
Amazon also offers various useful tools that will be used to aid the seller in managing his inventory. The “Inventory Dashboard” included in the Seller Central provides a view of stock that is left over, history of sales, and reorder recommendations. Knowing how to use these tools efficiently can save time and also prevent costly mistakes.
Make Use of Inventory Replenishment Alerts
One of the best ways you can keep ahead of your stock shortages and overstocking is through Amazon’s inventory replenishment alerts. These alerts notify you whenever your stock gets low, or even better, when a particular product has extra inventory. From there, track your alerts and then take action on time. You will never run out of stock again, and yet you will not hold unnecessary funds on excess inventory.
Furthermore, monitoring your sales trend and then regulating the replenishment alerts according to seasonal fluctuations and promotional periods are also necessary. Then, you will be able to predict the demand more accurately and be ready all the time.
Improve Your Inventory Turnover Rate
The quicker your products turn over, the better your cash flow and profit margins will be. To improve your turnover rate, look at selecting fast-selling products, and always keep track of how long it takes for your inventory to sell. A fast-moving product can lead to higher sales volumes, and Amazon even rewards sellers with fast-moving inventory by lowering storage fees.
Use the “Restock Inventory” function offered by Amazon, which you can use to calculate how much you should ship to Amazon by calculating your present sales velocity and lead time. So you want just enough inventory for when demand shows up without overstocking, which often results in dead stock.
Forecast demand based on available data and trends.
The most critical aspect of managing your inventory would be the accurate forecast of demand. You can project how much you will need the following months if you have sales data from before, seasonality trends, and promotions approaching. Amazon Seller Central has a few built-in tools to support this, but there are some third-party ones that specialize in demand forecasting for FBA sellers such as Forecastly, Restock Pro, or SoStocked.
Be mindful of holidays, special sales events, or even new product launches as a way to keep track of potential external factors affecting demand. These can lead to stockouts and excess stock that are costly for your bottom line.
Minimize Long-term Storage Fees
Amazon charges you long-term storage fees for items that sit too long in the fulfillment centers- those that have stayed there for more than 365 days. This means that fees can get pretty steep if you’re not keeping your stock rotation in check. One of the ways you can avoid such fees is through Amazon’s “Inventory Age” report, which shows you how old each SKU in your inventory is. When products have been in the warehouse too long, discount them or run promotions to get rid of them before the fees take effect.
You must also prepare a periodic check on slow movers and should initiate action for removal from Amazon’s warehouse if needed by either liquidation, returning it or by utilizing the help of “Removal Orders” from Amazon.
Perform Periodic Inventory Audit
Even if Amazon runs your fulfillment, you should check on your inventory. The more frequent you conduct inventories, you can compare what Amazon is claiming to have stocked in their warehouses. Mistakes can therefore be due to mishandling, misshipping errors, and failure to process returns. Don’t let it happen by conducting regular checks and even making periodic demands for inventory reports.
Once you discover there is an error, contact Amazon immediately to correct that point. You will be assured never to over sell or sell a product that cannot be fulfilled.
Use Automatic Replenishment Tools
Automation can really change the game of better management in handling your inventory. With automated restocking recommendations from Restock Pro, SoStocked, and Forecastly, you never run out of stock, nor do you overstock; you will just use what your historical sales and seasonal fluctuations call for, knowing what to ship when and in what quantities, thanks to data of lead times of suppliers.
An automated system will save you loads of time, reduce human errors, and smooth out the inventory management process so that you focus on other dimensions of your business.
Make Use of Multiple Fulfillment Centers
Amazon has numerous fulfillment centers across the globe. To optimize your inventory management, you should make use of Amazon MCF or distribute your inventory across multiple fulfillment centers. This minimizes long shipping times and thus reduces Amazon’s fees for shipping long distances.
Sending to Amazon should include following the recommendation to “send to multiple locations” when possible. In addition, monitoring inventory at different fulfillment centers is also good to avoid stockouts in a specific location
Product Bundles and Multi-Pack Listings are not to be forgotten
To get some more sales in and make managing the inventory more efficient, you may want to utilize product bundles or multi-pack listings. Bundling complementary products together, such as a skincare set or phone accessory kit, can increase average order value while reducing the SKUs you must manage.
This means that you can send a greater volume of the same product, thereby streamlining your inventory and avoiding stockout risk.
Conclusion
Managing your Amazon FBA’s inventory is an important skill any seller should know. Once you know how Amazon’s system works, by using automated tools, you are able to make forecasts for the demand for certain products and ensure the optimal amount of stock to ensure a smooth running business and good profit. Remember, it’s not just about keeping products in stock—it’s about finding the right balance between having enough inventory to meet demand and not overstocking to avoid long-term fees. Implement these tips and you’ll be well on your way to managing your inventory like a pro. Happy selling!