Key takeaways: 

1. 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.
2. Running out of stock can hurt sales and Amazon rankings, while excess stock leads to high storage fees and reduced profits. 
3. 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.
4. 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.
5. Amazon Seller Central and inventory management tools like Orderhive, Zoho Inventory, and inFlow make tracking stock easier. 

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.

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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.

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In this article, we will look at some best practices for Amazon inventory planning and management. 

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What is inventory management on Amazon?

Inventory management on Amazon involves storing and tracking Amazon inventory to meet customer demand efficiently. 

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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. 

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. 

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. 

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. 

7 effective tips for Amazon inventory management. 

Here are some effective tips to help you manage your Amazon inventory: 

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1. Keep around 60 days of supply 
2. Maintain a close relationship with your supplier
3. Plan for busy or unexpected seasons
4. Track inventory in real time 
5. Reduce the excess inventory 
6. Lower demand when inventory is low 
7. Use Amazon inventory management software 

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. 

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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: 

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• 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

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. 

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 integrates directly with Amazon and helps 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. 

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. 

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. 

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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. 

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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. 

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.

Frequently Asked Questions (FAQs)

What is Amazon's inventory management?

Amazon’s inventory management is the process of tracking, storing, and replenishing products to ensure they are available for customers when needed. For sellers, it involves using tools like Amazon Seller Central or Fulfillment by Amazon (FBA) to monitor stock levels, forecast demand, and avoid both overstocking and stockouts.

Can I make $1000 a month on Amazon?

Yes, you can! Many sellers earn over $1,000 a month on Amazon, but success depends on several factors, including the kind of product you sell, pricing strategy, inventory management, and marketing efforts. 

What are the 4 types of inventory management?

The four major types of inventory management are:

1. Just-in-Time (JIT): Stock is ordered and received only when needed, minimizing storage costs.
2. First-In, First-Out (FIFO): Older inventory is sold first to prevent spoilage or obsolescence.
3. Economic Order Quantity (EOQ): Involves finding the sweet spot between ordering too frequently and ordering too much at once, ensuring you always have enough inventory to meet demand without tying up excess capital or storage space.
4. ABC Analysis: Inventory is categorized based on importance. A (high-value, low-quantity), B (moderate value and quantity), and C (low-value, high-quantity) items.

What inventory method does Amazon use?

Amazon primarily uses the FIFO (First-In, First-Out) inventory method, especially within its Fulfillment by Amazon (FBA) system. This means the first products received into a fulfillment center are the first ones shipped out to customers.

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