April 4, 2023

Tips for Effective Amazon Inventory Management

Learn how to optimize your Amazon inventory management with these effective tips. Keep your products in stock, minimize excess inventory, and improve your sales performance on Amazon. Get started now and streamline your inventory management for a more profitable online business.
Tips for Effective Amazon Inventory Management
Tips for Effective Amazon Inventory Management

For every minute that passes, small businesses in the United States sell over 4000 items. These items are carefully packaged and sent to customers all over the world. 

Successful Amazon business owners know that to keep their business humming, they need effective Amazon inventory management. 

Inventory management involves processes that ensure optimum stock levels. It involves finding the balance between too little and too much stock. 

To maintain optimum inventory levels, you need to implement effective inventory management techniques.

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, 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. 

6 effective tips for Amazon inventory management 

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

  1. Keep around 60 days of supply 
  2. Maintain a close relationship with your supplier
  3. Plan for busy or unexpected seasons
  4. Reduce the excess inventory 
  5. Lower demand when inventory is low 
  6. 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. 

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

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. 

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. 

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 that 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. 

You can go through this article for effective tips to help you manage your inventory and increase sales on Amazon. 

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