Posted on: January 16, 2019 | Posted by: Jonathan Dean |
Managing your Amazon inventory can be a pain sometimes, but it doesn’t have to be when you follow these effective tips!
As an Amazon seller, keeping up with logistics is one of the most difficult and tedious tasks, A.K.A. handling Amazon inventory management. There are definitely GOOD and BAD ways to go about ensuring inventory levels are adequate at all times, the latter leading to lost sales and product ranking.
Why is Amazon Inventory Management So Important?
Strategic, proactive management of your inventory levels is essential to the success of your Amazon business. Many Amazon sellers use inventory management software to help crunch numbers, but that’s only part of it all. Maintaining a multi-channel inventory management strategy with the assistance of multi-channel inventory software can streamline your process.
If anything, this formula perfectly sums up Amazon inventory management issues:
Idle Inventory = Lost Money
What exactly does this mean? Amazon inventory that sits in the warehouse collecting dust is money you have spent. If you do not sell your units, that’s a cost you will have to bear in the form of lost sales revenue for months, maybe even years.
If you need additional help with ways to help maintain the success of your Amazon listing, check out The Ultimate Guide to Amazon Business Maintenance and Growth below:
If you do not keep an eye on your current inventory levels, a few things can occur:
Inventory may expire or become damaged over time
For sellers that offer products with an expiration date (consumable products, etc.) or products with limited lifespans, this can result in a major inventory expense. Realistically, you cannot sell products that are no longer in peak condition nor have compromising efficacy.
Additionally, sitting on a warehouse shelf may also take its toll over a long period of time. If you have boxes sitting on top of one another, the packaging may become crushed or broken, thus potentially harming the product itself.
If you attempt to sell products that have obviously passed their prime, it will show in your product reviews and return requests.
Customers may no longer want your product
Depending on what kind of product you are selling, timeliness in selling them may be a factor in consumer demand for that product. Some factors that may affect your selling timeframe include:
Model year (perhaps a new model is available)
Becoming outdated or obsolete with the advent of newer products
Virality (your product was once popular, but now the fad has passed)
“Stocking Out” results in lost revenue and ranking
On the other end of the Amazon inventory management spectrum, not having enough inventory to fulfill sales can also be troublesome (especially if your products are selling quickly) and can have detrimental effects on your listing.
If you “stockout,” or run out of stock completely, your product listing is likely to suffer in a few ways:
Your listing will likely drop in the rankings due to a sudden drop in sales
You will miss out on sales opportunities that will likely go to your competitors
Amazon may penalize your listing for being out of stock by featuring your ads in premium placements less often.
How to Achieve Better Amazon Inventory Management
We have compiled a comprehensive list of Amazon inventory management tips that you can employ in your own logistics to keep your inventory available and your storage costs down.
1. Predict sales accurately
In the beginning, accurately predicting your sales velocity and inventory needs can be tricky. You don’t really know what to expect when you first launch your product.
However, if you are doing a proper product launch using giveaway coupons as featured in the Cerebro Product Rank method used by Helium 10 CEO Manny Coats, you can get an indication pretty quick. With product launches, you should expect your product to sell quickly during the giveaway period, so ordering more than you think you may sell on average would not be out of place.
If your sales taper off a bit after your product launch, tracking the sales data for days, weeks, and months can help you to build a realistic expectation for how many units you should order from your supplier and how often.
When determining what your realistic average is going to be, here are some of the factors you should include into your calculations:
Trends in your product niche’s market
Your sales numbers at this time yesterday, the day before, last week, last month, and last year
Your brand’s average growth rate month over month and year over year
guaranteed sales from automatic reorders (applicable to consumable products)
Seasonality and rises/dips in demand for your product type
The state of the overall economy in the country of your chosen marketplace(s)
Any upcoming or current product promotions
Any upcoming or current advertising on and off Amazon
2. Order 2 or 3 times the inventory you think you may need for a month
When you are preparing to launch a product on Amazon, you should always budget for it to become a fast bestseller. In so doing, you are in fact preparing for times between shipments as insurance inventory for unexpected changes like a fast-selling product. You will want to allocate enough cash flow to ordering a little bit extra inventory than you anticipate going through so that you are never without units to sell.
Also, lead time on your next inventory shipment can take up to a month, so ensure that you have enough inventory to cover the time lapse.
3. Don’t wait to place next inventory order
Even if you just received a new batch of inventory from your supplier, you need to always be thinking about the future. As you are just beginning to sell your current inventory, you need to be communicating with your supplier about your next shipment.
Given the fact that a product order can take 30 days or more for your supplier to manufacture and ship your order to your warehouse, you must order well ahead of even getting close to running out of inventory. Knowing when the best time to order will depend on your product’s average sales velocity.
4. Set minimum inventory levels
So how do you know when you should send in your next order to your supplier? If you are having trouble determining when a good time is, try setting a minimum inventory level for your product. In so doing, you will consistently ensure that your inventory numbers do not fall below a certain threshold, and therefore never run out of stock.
5. Ensure the oldest inventory is sold first
Have you ever noticed when you go to the grocery store and start looking at expiration dates on the shelf, they tend to place the older products in front of the newer ones? It’s no accident because the store is trying to maximize profits by selling older products before they are no longer sellable.
Savvy Amazon inventory management follows the same concept. When you or a 3rd party warehouse is fulfilling an order, be sure to pack and ship the OLDEST unit in your inventory first, particularly if it has an expiration of any kind. Doing this ensures that your remaining inventory can stand to remain in your warehouse for longer.
Of course, use common sense when finding the oldest product in your inventory to ship; DO NOT send something that is on the cusp of expiration or damaged, as you will likely get an angry review along with a quick return.
6. Maintain a strong relationship with suppliers
This point should go without saying, but the stronger your relationship is with your supplier(s), the more likely they are to help you with any supply chain issues that may arise. If you need inventory produced quickly because of an unexpected hiccup, the supplier may be more willing to go out of their way to help the situation.
However, if you have a poor relationship with your supplier, you may be on your own in solving any inventory crisis. Be sure to establish mutual respect and clear lines of communication with your supplier so that if you do have a mishap, they can help you find a solution.
7. Regularly check your inventory numbers and statuses
Most companies dread doing an audit inventory count at the end of every fiscal year to ensure that the numbers on their records match what is in the warehouse. This year-end counting is very time and labor intensive, and often requires much of the business to slow or stop entirely until it is done.
Instead of waiting a whole year to know if your inventory count is off or not, you can opt to schedule regular audits of your inventory on a weekly or monthly basis. If you sell multiple products, alternate counting different kinds of product every month. Otherwise, you can just count certain pallets every time so that the work is spread out over the year and won’t force you to halt your business protocols.
In checking your inventory regularly in increments, you can maintain a more accurate count of your stock numbers throughout the year and have time to correct any issues without debilitating the business in the process.
8. Create contingencies for all possible problems
Just like any good Plan A, you must always have a Plan B, C, D, etc. Conducting efficient Amazon inventory management is probably one of the more laborious tasks you will have as a seller, and mistakes will inevitably happen. However, how you handle those mistakes can either help or harm your Amazon business.
Create a plan that outlines any possible issues that may arise with managing your inventory and how you will respond to the problem. If you already have contingencies in place, you will likely be able to recover much quicker than if you panicked when a problem arose.
9. Use FBA to let Amazon help you manage things
This one may also go without saying, but many of these problems can be removed from your plate by entrusting Amazon itself to take care of the logistical side of your business via the Fulfilled by Amazon (FBA) system. For a fee, Amazon will handle your day-to-day inventory management and fulfillment needs and keep you in the loop of any problems.
Additionally, Amazon will take care of many of the things on this list to ensure that your inventory is managed effectively. However, you do need to ensure that a regular flow of inventory replenishes your reserves so you do not unexpectedly stockout and lose your hard-earned product ranking or waste ad spend.
10. Check out competitors’ stock with Helium 10’s Inventory Level tool
To help you learn more about your competitors, Helium 10 has developed the Inventory Level tool within the Helium 10 Chrome Extension. As one of the more useful inventory management tools out there, you will be able to see how much inventory your competitors currently have available and who is close to running low.
Not only does this provide you with a sneak peek at your competitors, but it can also provide you with an idea of how many units your most successful competitors keep on hand at any one time. This knowledge can help you to develop your own Amazon inventory management strategy that keeps your stock at reasonable levels to keep pace with sales velocity and within your budget.
Have more questions about creating an efficient Amazon inventory management strategy as a seller? Share your concerns with us in the comments below!
Jonathan has been writing about the entrepreneurial world for several years, having interviewed many major players at several SoCal companies. He also has extensive experience in crafting product listings and performing product and keyword research.
Cerebro is Jonathan's favorite Helium 10 tool because of its' versatility and value for FBA sellers.