Key takeaways:
- Successful Amazon sellers know that efficient inventory management ensures products are always available to meet demand while avoiding costly overstocking. It’s the backbone of a smooth, profitable operation.
- Running out of stock can hurt sales and Amazon rankings, while excess stock leads to high storage fees and reduced profits.
- Sellers can manage inventory better by keeping around 60 days of supply, maintaining strong supplier relationships, planning for busy seasons, tracking inventory in real time, and using management software. These strategies help balance demand and supply effectively.
- Amazon imposes FBA restock limits based on sellers’ Inventory Performance Index (IPI) and product sell-through rate. Improving your IPI score, boosting sales, and using third-party fulfillment centers can help increase restock limits and prevent stock restrictions.
- Amazon Seller Central and inventory management tools like Orderhive, Zoho Inventory, and inFlow make tracking stock easier.
- US sellers should account for production time, freight, customs, and FBA check-in delays. Demand spikes during Q4, Prime events, and major holidays can drain inventory fast, so forecast 60 to 90 days ahead.
- Poor inventory control hurts Account Health: stockouts lead to cancellations and late shipments that raise your Order Defect Rate and Late Shipment Rate.
Small businesses across the United States sell more than 4,000 products every minute. That is over 4,000 packages being picked, packed, and shipped to customers all over the world.
At ePlaybooks, we know that effective inventory management and fulfillment are the heartbeat of a thriving Amazon business. Successful Amazon business owners know that to keep their business humming, they need effective Amazon inventory management.
Staying on top of your inventory isn’t just good practice; it’s what keeps your business running efficiently and your customers happy.
In this article, we will look at some best practices for Amazon inventory planning and management.
What is inventory management on Amazon?
Inventory management on Amazon involves storing and tracking Amazon inventory to meet customer demand efficiently.
In other words, your Amazon inventory management involves ensuring that the right products are available to customers at all times.
Inventory management helps to ensure that stocks are continuously available to your customers so as not to lose out on sales. With effective management, you can also avoid overstocking, which incurs unnecessary costs.
Why is inventory management important for Amazon FBA sellers?
- Effective Amazon inventory management will ensure you attract customers and have enough to sustain customer orders. If you consistently run out of stock, you risk losing your customers to your competitors.
- By having the right products in stock, you can build trust with your customers and increase the likelihood of positive reviews and repeat purchases.
- Proper inventory management ensures that products are readily available for shipping, allowing you to meet Amazon's expectations for quick and efficient order processing.
- With proper inventory management, you can monitor inventory levels and reduce losses from expired or damaged goods.
- Proper inventory management also helps you reduce the costs of storing unsold goods, since Amazon charges additional fees for products that remain in its fulfillment centers for an extended period.
- Forecasting demand and planning for future sales trends helps you adjust inventory levels proactively, so you are well-prepared for peak seasons or unexpected changes in demand.
What are the most common inventory management issues?
If you're selling on Amazon, you may have heard or encountered one or more of these inventory management problems:
No/low inventory levels.
As an Amazon seller, you want to avoid going out of stock at all costs. Having no or low inventory can impact your sales negatively. There's nothing worse than losing a customer to your competitors just because you didn't have enough products to meet their demand. Also, Amazon promotes available products, and being out of stock consistently can reduce your Best Seller Rank and organic ranking on Amazon.
Excess stock.
Having products to meet customer demand is a great thing. However, having excess stock can do more harm than good to your business. Amazon considers products with over 90 days of supply or at least one unit aged over 90 days to be excess inventory.
Amazon wants products to move as quickly as possible from fulfillment centers.
Excess inventory can incur long-term storage costs and also affect your inventory performance index (IPI) score.
With costs piling up, you may end up selling at a loss. If you're selling with Amazon FBA, you can monitor your stock levels and check for excess inventory on your Amazon Seller Central account.
Here are some tools on Amazon Seller Central that can help you manage excess inventory:
- Restock Inventory tool: Shows how much supply you have left and how much you need to replenish on FBA.
- Manage Excess Inventory tool: Shows listings that may have excess inventory and suggests ways to sell them off, such as lowering prices or advertising.
- FBA Inventory Age tool: Shows how long your inventory has been in storage, the units that may incur aged inventory fees, and opportunities to increase sales of slow-moving goods.
- Stranded Inventory tool: Shows your stranded inventory so you can fix the listing or remove the units to avoid extra costs.
- Manage FBA Returns: Lets you keep an eye on all FBA returns, including customer refund dates and return received dates.
Stranded inventory.
Stranded inventory is sellable inventory stored in Amazon fulfillment centers but not connected to an active listing on Amazon. This means that while this inventory is sellable, customers cannot purchase it. What's worse, you will be charged monthly storage fees.
This can happen for several reasons, such as a suppressed listing, expired products, or pricing errors. Note that you may not get a notification from Amazon, so it is important to check every so often.
To prevent this, you need to check the Fix stranded inventory tool on your Amazon Seller Central regularly. You can check out our article here to find out more about Amazon Stranded Inventory and how you can fix it.
9 effective tips for Amazon inventory management.
Here are some effective tips to help you manage your Amazon inventory:
- Keep around 60 days of supply
- Maintain a close relationship with your supplier
- Plan for busy or unexpected seasons
- Track inventory in real time
- Reduce the excess inventory
- Lower demand when inventory is low
- Use Amazon inventory management software
- Know your supply chain lead times
- Forecast demand and set reorder points
Keep around 60 days of supply.
To cover your estimated sales and avoid overstocking, we recommend that you maintain around 60 days of supply.
To forecast your estimated sales, you will need to monitor your sell-through rate and go through your inventory report. Your sell-through rate measures how well you can balance your sales and inventory levels. This is calculated by dividing the total units of products sold to customers for the past 90 days by FBA inventory units available during the same period.
To check your sell-through rate, simply go to your Seller Central account and check your FBA Inventory Tool. A sell-through rate of over 7 indicates that you are selling seven times more than you are storing. A sell-through rate of less than one indicates that you are overstocking.
Maintain a close relationship with your supplier.
Your suppliers play a critical role in the running of your business. Maintaining a good relationship with your supplier can go a long way in ensuring your products are delivered to you on time. If you treat your suppliers right, they will prioritize you and treat you right in return.
Working closely with your suppliers will also help you understand your lead times. Your lead time is the time it takes for your product to arrive at Amazon warehouses or your warehouse. Understanding your lead time will help you effectively manage your customer demands. Here are a few tips to help you maintain a good relationship with your supplier:
- Speak to your suppliers with respect and offer constructive feedback
- Pay your bills on time
- Speak with your suppliers frequently
- Refer other businesses to them
Regularly update your suppliers on your inventory needs, sales forecasts, and any changes in your business that may impact your orders. Be transparent about your expectations, timelines, and any challenges your business may face.
Plan for busy or unexpected seasons
You may encounter delays such as shipping delays or delays from FBA warehouses, while selling on Amazon. If you can accurately predict your demand, you can store extra inventory using your warehouse or third-party fulfillment centers. This can be very helpful even during holiday seasons when demand is high.
It is important to figure out which products will be fast-moving during seasonal holidays and which will be slow-moving, so you know which products to order in higher quantities from your suppliers. Demand spikes during Q4, Prime events, and major holidays can drain inventory fast, so plan 60 to 90 days ahead and factor in your supplier's turnaround time to avoid unexpected delays.
Track inventory in real time.
Relying on outdated spreadsheets can lead to costly errors. Instead, use tools that give you real-time visibility into your inventory levels across all sales channels. Tools like SellerApp and SoStocked integrate directly with Amazon and help you track stock movement, generate restock alerts, and forecast future needs. Real-time tracking keeps your operations proactive rather than reactive.
Reduce the excess inventory.
Perhaps you already have excess inventory and don't know how to get rid of it. Here are a few tips to help you deal with the excess stock:
- Accelerate sales with promotions: For your slow-moving inventory, you can run promotions using things like coupon codes and buy-one-get-one deals. Doing this will help free up your storage space and prevent excess costs.
- Create removal order: To avoid those long-storage fees, you can create a removal order in your Amazon Seller Central to have your Amazon inventory removed and sent back to you.
- Raise keyword bids: To reach more customers with your ads, you can raise your keyword bids. Raising your keyword bids will increase your conversion rate and ultimately sales.
- Liquidate excess inventory: Liquidating excess inventory may fall as a last resort if all other efforts have failed. You can liquidate your inventory to gain some capital on the product. You can then reinvest the capital to buy products that can bring you profit.
- Donate your inventory: If you are unable to sell your excess inventory, you have the option of donating it to charity organizations. This saves you the money you would otherwise spend on storage fees.
Lower demand when inventory is low
If you are running low on inventory, you can influence your prices to lower demand instead of running completely out of stock. You can do this by pausing advertising campaigns or raising prices temporarily.
By increasing prices or pausing your advertising campaigns, you can slow down sales and also maintain your in-stock rate.
When you have a good amount of stock, you can then resume your advertising campaign and adjust your prices.
Use Amazon inventory management software.
To keep track of your inventory levels, you can invest in a stock management system or software.
An inventory or stock management software is a web application that helps you track your inventory from the manufacturer or supplier to the warehouse and point of sale. With this software, you can not only monitor inventory levels and maintain inventory control, but also carry out other processes like invoicing, financial reporting, tracking shipments, etc.
Orderhive, Zoho Inventory, and inFlow are examples of inventory management software you can invest in.
Other options include Cin7, Veeqo, SoStocked, and Extensiv, which sync stock across Amazon and other sales channels. See our guide to Amazon inventory management tools for a full comparison. Apart from third-party tools, Amazon offers its own tools through Seller Central, including the Inventory Performance Index, Inventory Age report, and FBA Restock tool.
Know your supply chain lead times
US sellers should account for production time, freight, customs, and FBA check-in delays when planning replenishment. Monitor your lead times across each stage so you are never caught short.
Forecast demand and set reorder points
One of the foundational elements of effective inventory management on Amazon is accurate demand forecasting. Analyze at least 90 to 180 days of historical sales data to build a reliable demand baseline, then factor in seasonality, market trends, and any upcoming promotions that could spike or suppress sales velocity.
Set reorder points based on your lead times, and maintain a safety stock buffer to give you breathing room when supply chains get unpredictable. Keep a close eye on your Inventory Performance Index (IPI) score to avoid hitting storage limits, and reforecast monthly so your numbers stay aligned with real market conditions.
Amazon FBA restock limits.
If you sell products using Fulfillment by Amazon (FBA), you are subject to restock limits.
Amazon places a storage limit on Amazon FBA sellers to ensure that products sent to Amazon fulfillment centers are sold quickly.
The Amazon FBA restock limits are restrictions that specify the amount of stock you can send and also store at Amazon fulfillment centers. This varies from seller to seller.
Amazon introduced restock limits for different storage types as of February 2022: standard-size storage, oversize storage, etc.
If you send products with a high sell-through rate, you will be allowed to send more products to fulfillment centers because they will sell fast.
However, if you send products that don't sell well, your inventory performance index (IPI) score will dip and decrease your Amazon restock limits.
Perhaps your restock limit is low. Here are a few tips to increase it:
- Increase your IPI score: Your IPI score is based on factors like excess inventory, stranded inventory, in-stock inventory, and sell-through rate. One way to increase your restock limit is to improve your IPI score. To increase your IPI score, focus on improving your sell-through rate, fixing your stranded inventory, and ensuring you have the most popular products in stock. Sellers who have a consistently high IPI score will receive higher restock limits.
- Use third-party fulfillment centers: One way to avoid the Amazon restock limit is to work with third-party fulfillment centers.
- Generate more sales: To increase your chances of getting a higher restock limit, focus on generating more sales. Invest in PPC campaigns, optimize your product listing, and price your products competitively to increase conversion rates and sales.
How poor inventory management affects your Account Health
Inventory management and Account Health are more connected than many sellers realize. When you run out of stock, orders get cancelled, and cancellations directly raise your Order Defect Rate, one of Amazon's most closely monitored performance metrics. Delayed shipments caused by inventory gaps push up your Late Shipment Rate, while unfulfilled or slow orders drive negative feedback that damages your seller reputation.
Consistently poor inventory control can ultimately trigger a performance notification or, in serious cases, a selling suspension. Staying on top of your inventory isn't just a logistics decision. It's an Account Health protection strategy.
See also: Top Hacks to Improve Your Multi-Channel Inventory Management
Final thoughts on Amazon inventory management.
Managing your inventory effectively not only keeps your products in stock but also prevents overstocking, which can incur unnecessary costs.
You can easily track your inventory using your Amazon Seller Central account or inventory management software.
This article provides practical tips to help you take control of your Amazon inventory and boost your overall sales performance.
And if you’d rather leave the heavy lifting to the experts, ePlaybooks is your trusted partner. We help Amazon sellers streamline inventory management so you can focus on what matters most: growing your business.
