Mar 29 , 2023
As an Amazon seller, properly managing your inventory is one of the things that either boosts or destroys your performance on Amazon. So, before we dive into the best practices you can implement into your inventory management system, you must understand the importance of properly managing your Amazon inventory.
Why is Amazon Inventory Management Important?
1. Running out of inventory damages your Best Sellers Rank
When you run out of inventory, the overall ranking of your listings drops because Amazon’s algorithm immediately perceives you have a low performance. As people stop clicking on your listings and buying from you, Amazon no longer considers your product listing relevant and may stop displaying it on the first pages.
2. Excess inventory affects your overall IPI (inventory performance index) score
When there is extra inventory stored in Amazon's fulfillment centers, your inventory capacity limits may be reduced and you may be charged both monthly and long-term storage fees. These fees can accumulate quickly and, in some cases, may exceed the value of your unsold inventory!
Having learned about the consequences of both excess and insufficient inventory, let's delve into ways to avoid these scenarios and explore vital tips for managing your products efficiently on Amazon.
6 Tips for Proper Amazon Inventory Management
1. Start by understanding your supply chain and setting your inventory minimum
By understanding how your supply chain works you can make informed decisions about inventory levels, reorder points and safety stock, as well as identify areas for improvement and cost savings. For example, by knowing your supplier's lead time, you can determine the optimal reorder point to avoid stockouts.
Also, you will need to establish what your inventory minimums are. A safe inventory level means that you are aware of the need for restocking soon but, will not run out of stock while waiting for your supplier to fulfill the order. The time taken for the product to arrive at your warehouse after placing an order with a supplier is known as the lead time.
2. Monitor your sell through-rate and your Amazon inventory reports
Amazon provides inventory reports that showcase how much inventory you have, how fast it's selling, and when you need to reorder, which allows you to forecast your sales volume and avoid stockouts or overstocking.
An important indicator that measures how efficiently you are handling your inventory and sales is called the sell-through rate. It’s calculated by dividing the total units sold and shipped to customers over the past 90 days by the average number of FBA inventory units during that same period.
You can see your product’s sell-through rate in the FBA Inventory tool or the overall sell-through rate in Inventory Performance.
3. Use inventory management software to effectively manage your inventory levels
We recommend using inventory management software tools like Jungle Scout to optimize your inventory management processes, reduce the risk of stockouts or overstocking, and increase your sales and profits. This tool helps you predict future sales based on your demand to determine how much inventory you need to order.
However, if you opt to use a different software tool make sure to select a system that:
- Syncs with your order fulfillment or selling website
- Provides demand forecasting
- Includes alerts when your items are running low
- Allows quick and easy barcode scanning
- Tracks relevant information about your product
4. Restock your best sellers quickly and plan ahead of time
By stocking in-demand products you can contribute to your business's growth and success as you’ll be making sure you’re meeting customer demand, even during the busiest seasons like the holidays- when you are likely to have a higher number of orders.
We recommend tracking the days of supply for your top-selling products so that you can strategically plan and reorder to prevent stockouts, avoid losing potential sales, and maintain profitability.
5. Lower the demand for your product when running low on inventory
If you’re running low on inventory, decrease the demand for your product by raising your price and pausing your advertising campaigns to keep your in-stock rate and improve your IPI score.
Amazon's Inventory Performance Index (IPI) is a metric that measures a seller's inventory management performance. The IPI ranges from 0 to 1000, and Amazon considers a score of 400 or higher to be good. A low IPI score can result in Amazon limiting your storage space, which can impact your sales.
Once you have a healthy amount of inventory, you can lower your price point and go hard on your PPC campaigns!
6. Reduce excess inventory to avoid long-term storage fees
Amazon considers a product to have excess inventory if it has:
- Over 90 days of supply
- At least 1 unit aged over 90 days
- A better ROI opportunity (such as reducing the price to increase sales)
Whenever you have excess inventory, you can implement the following strategies:
- Offer promotions such as coupon codes or buy-one-get-one deals to accelerate sales for slow-moving inventory.
- Create a removal order in Seller Central to avoid big storage fees and send your inventory to an alternative storage location outside of Amazon.
- Raise your keywords bids to get your products in front of the right customers.
If you're struggling to manage your inventory effectively on Amazon, don't worry anymore! Marknology offers innovative warehousing solutions and speedy fulfillment services to alleviate your concerns.
From trying new fulfillment methods, adding inserts, and prepping for package care- to just innovative changes throughout the logistics chain, we have you covered. Get expert advice and ensure your products meet Amazon's standards with our experienced team.Request a consultation