Perform Efficient Amazon FBA Inventory Management To See Your Business Grow

Amazon Expert

Hi I’m Steven, Founder of My Amazon Guy, a 500+ person Amazon Seller Central agency out of Atlanta, GA. We Growth Hack eCommerce and Marketplaces through PPC, SEO, Design, and Catalog Management.

Optimizing Amazon FBA inventory management empowers you to maintain seamless operations, maximize sales, and deliver exceptional customer satisfaction through consistent product availability and timely shipping.

In our previous blog post about pricing and fees, we already talked about managing FBA inventory in order to keep a seller’s expenses to a minimum. However, this is a topic that deserves its own article. After all, an important rule that our Amazon FBA agency often preaches to sellers is:

Never Go Out of Stock Amazon FBA Inventory Management

Amazon FBA Inventory Management: Inventory Planning

Forecasting demand

Forecasting demand plays a pivotal role in Amazon FBA inventory management, enabling sellers to anticipate customer needs accurately, optimize stock levels, and reduce the risk of stockouts or overstocking.

  • Forecasting demand for FBA products involves a systematic approach that combines historical data, market trends, and other relevant factors. Here’s a concise guide on how to effectively forecast demand for your FBA products:
  • Analyze Historical Data: Examine past sales data, preferably over a significant period, to identify patterns, seasonal fluctuations, and trends.
  • Market Research: Study industry trends, consumer behavior, and market dynamics to understand external factors that might influence demand.
  • Seasonal Patterns: Recognize and account for seasonal variations that can impact demand, such as holidays or specific events.
  • Competitor Analysis: Monitor competitors’ performance and their product demand trends to gain insights into market trends and customer preferences.
  • Sales Channels: If you sell across multiple platforms, consider integrating data from those channels to get a comprehensive demand overview.
  • New Product Launches: When introducing new products, use market research and pre-launch promotions to gauge potential demand.
  • Consumer Feedback: Customer reviews, surveys, and feedback can offer valuable insights into product demand and improvements.
  • Collaboration: Engage with your sales and marketing teams to gather insights from customer interactions and promotional campaigns.
  • Statistical Models: Employ statistical techniques like moving averages, exponential smoothing, or regression analysis to project future demand.
  • Technology: Utilize demand forecasting software or tools that can analyze data and provide accurate predictions.
  • Safety Stock: Factor in safety stock to account for unexpected demand spikes or supply chain disruptions.
  • Adjust and Refine: Regularly review and adjust your forecasts based on new data and changing market conditions.

Learn more about Demand Forecasting by reading another article in our Amazon FBA agency blog

In Seller Central, go to Inventory > Inventory Planning.

Click “Inventory Planning”, then hover your mouse on the “Inventory” tab to prompt the drop-down menu where you can select “Restock Inventory.”

Once on the Restock Inventory page, you can click “Sales Summary” > “View Forecast”.

A pop-up page will appear to show you 40 weeks’ worth of estimated future demand based on a probabilistic forecast model.

Strategies to Capitalize on Increased Demand During Peak Seasons

FBA sellers can employ several strategies to capitalize on increased demand during peak seasons. Here are some key strategies:

Amazon FBA Inventory Management: Inventory Replenishment

Reordering Strategies

Reordering strategies for FBA sellers to replenish inventory can include:

 

  1. Set up automatic reorder rules: Utilize Amazon’s replenishment alerts and inventory planning tools to automatically trigger reorders when inventory levels reach a certain threshold. This can help ensure a continuous supply of stock without the need for manual monitoring.

 

  1. Analyze sales velocity and lead time: Calculate your product’s average daily sales and the time it takes for a new shipment to arrive at Amazon’s fulfillment centers. Based on this data, determine the reorder point that allows for a seamless transition between inventory batches.

 

  1. Implement safety stock: To mitigate the risk of stockouts, maintain a buffer of safety stock. This involves ordering additional units beyond the calculated reorder point to account for unexpected spikes in demand or delayed shipments.

 

  1. Use historical data and trends: Analyze past sales data and seasonal trends to forecast future demand. This can help you anticipate spikes in sales and plan accordingly to avoid stockouts or overstocking.

 

  1. Establish good relationships with suppliers: Maintain open lines of communication with your suppliers to ensure a smooth ordering process. This includes negotiating favorable terms, discussing lead times, and staying updated on any potential disruptions in the supply chain.

 

  1. Consider alternative sourcing options: Explore multiple suppliers or manufacturers to diversify your supply chain and reduce the risk of inventory disruptions. This can help mitigate issues such as production delays or supplier shortages.

 

  1. Utilize inventory management software: Invest in inventory management software that can automate and streamline the reorder process. These tools can provide real-time insights into inventory levels, sales performance, and reorder suggestions.

Vendor management

Creating and maintaining strong relationships with suppliers is crucial for an Amazon FBA seller’s success. A healthy partnership ensures a consistent flow of high-quality products and favorable terms. Here’s how to build those relationships and negotiate terms that benefit both parties:

  1. Communication is Key:
  • Open Dialogue: Maintain transparent and open communication with your suppliers.
  • Regular Updates: Keep them informed about your business growth, plans, and any changes that might impact your orders.
  1. Consistent Orders:
  • Reliable Orders: Place consistent and predictable orders to build trust and reliability.
  • Minimize Fluctuations: Avoid sudden spikes or drops in orders that can disrupt their production schedules.
  1. Timely Payments:
  • Prompt Payment: Pay your invoices on time to establish a reputation as a reliable and trustworthy partner.
  • Negotiate Discounts: Negotiate early payment discounts as an incentive for prompt payments.
  1. Understand Their Business:
  • Market Insights: Understand your supplier’s industry challenges, market trends, and pain points.
  • Mutual Benefits: Look for ways to align your goals and help each other succeed.
  1. Visit Their Facilities:
  • Face-to-Face: If feasible, visit your supplier’s facilities to understand their processes and build a personal connection.
  • Relationship Strengthening: Meeting in person can foster a deeper understanding and trust.
  1. Long-Term Perspective:
  • Partnership Mindset: Approach the relationship as a long-term partnership, not just a transaction.
  • Benefits of Loyalty: Suppliers may offer better terms and prioritize your orders if they view you as a loyal customer.
  1. Collaborative Problem Solving:
  • Address Issues Together: If problems arise, work collaboratively to find solutions rather than placing blame.
  • Win-Win Solutions: Strive for outcomes that benefit both parties.
  1. Negotiating Favorable Terms:
  • Prepare Thoroughly: Research your supplier’s industry standards and competitors to have a strong negotiation position.
  • Value Proposition: Clearly communicate how your business can add value to the supplier’s growth.
  • Leverage Volume: If your order volume is significant, use it as leverage to negotiate better pricing or terms.
  1. Quantity Discounts:
  • Bulk Orders: Commit to larger order quantities in exchange for volume discounts.
  • Tiered Pricing: Negotiate tiered pricing that rewards higher volumes with better unit prices.
  1. Payment Terms:
  • Extended Terms: Request extended payment terms to improve cash flow for your business.
  • Early Payment Discounts: Negotiate discounts for early or upfront payments.
  1. Exclusive Agreements:
  • Exclusivity Benefits: Offer exclusive partnerships to suppliers in exchange for better terms or priority in supply.
  1. Continuous Improvement:
  • Regular Review: Periodically review the terms and performance of your supplier agreements.
  • Feedback Loop: Provide constructive feedback to suppliers on areas for improvement.
  1. Win-Win Approach:
  • Mutually Beneficial: Approach negotiations with the goal of achieving a win-win outcome.
  • Long-Term Value: Focus on building a relationship that benefits both parties over time.

Here are some informative videos from My Amazon Guy about sourcing products.

Can FBA Sellers Use Just-In-Time (Jit) Inventory

Yes, FBA sellers can use Just-in-time (JIT) inventory management. JIT inventory management is a strategy where inventory is ordered and received just in time for production or shipment, reducing the amount of inventory held in stock. 

This approach helps to minimize storage costs and optimize cash flow. FBA sellers can adopt JIT inventory management by closely monitoring their inventory levels and placing orders with suppliers accordingly to ensure timely delivery to Amazon fulfillment centers.

Benefits of JIT for FBA

  1. Cost Reduction: JIT can help reduce inventory costs by minimizing the amount of inventory stored in Amazon’s fulfillment centers. By maintaining a lean inventory, sellers can avoid unnecessary storage fees and reduce the risk of holding obsolete or slow-moving products.

 

  1. Improved Cash Flow: With JIT, sellers can optimize their cash flow by reducing the amount of capital tied up in inventory. By only ordering and storing the necessary inventory levels, sellers can free up funds to invest in other areas of their business.

 

  1. Reduced Lead Time: JIT focuses on delivering products to Amazon’s fulfillment centers just-in-time for customer orders. By minimizing lead time, sellers can improve order fulfillment speed, which can enhance customer satisfaction and potentially lead to higher sales.

 

  1. Enhanced Inventory Turnover: JIT encourages a higher inventory turnover rate, which means products are selling quickly rather than sitting in warehouses. A higher turnover rate can lead to improved profitability and a healthier business.

 

  1. Flexibility and Agility: JIT allows sellers to adapt to changing market demand more effectively. By closely monitoring sales trends and adjusting their inventory levels accordingly, sellers can quickly respond to fluctuations in demand and avoid stockouts or overstock situations.

 

  1. Reduced Risk of Obsolescence: By maintaining a lean inventory, sellers can minimize the risk of holding onto products that become outdated or lose their market appeal. This can help sellers stay competitive and avoid losses associated with obsolete inventory.

Amazon FBA Inventory Management: Inventory Storage and Organization

Can Labeling And Barcoding Help With FBA Inventory Management

Yes, labeling and barcoding are essential for FBA inventory management. They help in the accurate identification and tracking of products throughout the fulfillment process. 

By properly labeling and barcoding your products, you can ensure that they are correctly received, stored, and shipped by Amazon. 

This helps in reducing errors, improving inventory accuracy, and streamlining the overall FBA inventory management process.

Inventory tracking

When it comes to FBA inventory tracking, there are several methods you can use to effectively manage and monitor your inventory. Here are a few commonly used methods:

 

  1. Amazon’s FBA Inventory Reports: Amazon provides various reports to track your FBA inventory. These reports include the Inventory Health Report, which gives you an overview of your inventory’s health and potential issues, and the Reserved Inventory Report, which shows the quantity of your inventory that is reserved for pending orders.

 

  1. FBA Inventory Tools: There are third-party inventory management tools available that can help you track your FBA inventory. These tools often provide more detailed and customizable reports, allowing you to analyze sales data, inventory levels, and other metrics at a SKU level basis. Some popular FBA inventory tools include Jungle Scout, Helium 10, and SellerApp.

 

  1. Manual Spreadsheet Tracking: If you prefer a more hands-on approach, you can track your FBA inventory using manual spreadsheets. This method involves manually updating and recording your inventory levels, sales data, and other relevant information. While it requires more effort, it can be a cost-effective option for smaller sellers.

 

  1. Barcode Scanning Systems: Utilizing barcode scanning systems can streamline the inventory tracking process. By scanning barcodes on your products, you can easily update inventory levels and track sales in real-time. This method can help minimize human errors and improve efficiency.

Amazon FBA Inventory Management: Inventory Health and Performance

Effective Strategies for Monitoring Inventory Health Metrics

Monitoring FBA inventory health metrics is crucial for maintaining a healthy inventory and avoiding any potential issues. Here are some effective strategies for monitoring FBA inventory health metrics:

 

  1. Utilize Amazon’s Inventory Performance Index (IPI): Amazon provides an IPI score that measures your inventory performance. Aim to keep your IPI score above 450 to avoid storage fees and other penalties. Regularly monitor your IPI score and take necessary actions to improve it if needed.

 

  1. Use the FBA Inventory Dashboard: Amazon offers the FBA Inventory Dashboard, which provides insights into your inventory health metrics, such as excess inventory, stranded inventory, and sell-through rates. Regularly review this dashboard to identify any issues and take appropriate actions.

 

  1. Set up replenishment alerts: Configure automatic replenishment alerts in your inventory management system or through Amazon Seller Central. These alerts will notify you when inventory levels reach a certain threshold, allowing you to reorder in a timely manner.

 

  1. Monitor sell-through rates: Keep a close eye on your sell-through rates, which indicate how quickly your inventory is selling. Low sell-through rates may indicate slow-moving or stagnant inventory. Take necessary actions, such as optimizing listings or running promotions, to improve sell-through rates.

 

  1. Analyze inventory health reports: Amazon provides various inventory health reports, such as the Stranded Inventory report, Excess Inventory report, and Inbound Performance report. Regularly analyze these reports to identify any issues and take corrective measures.

 

  1. Use inventory management software: Invest in inventory management software that can integrate with Amazon and provide real-time data on inventory health metrics. These tools can help you track and analyze metrics more efficiently.

 

  1. Conduct regular inventory audits: Perform regular physical inventory audits to ensure accuracy and identify any discrepancies. This will help you identify any stockouts, overstocking, or other inventory issues that need to be addressed.

Managing Aged FBA Inventory