Inventory management is crucial in managing product inventory on Amazon’s Vendor Central platform. Vendors must understand the process and best practices of inventory management to ensure efficient operations, minimize stock issues, and maintain a positive customer experience. This article will provide a comprehensive overview of how inventory management works on Vendor Central, covering essential aspects such as purchase orders, shipments, stock availability, forecasting, inventory stock updates, and the impact of chargebacks.

Purchase Orders: 

As a vendor, Amazon will send you purchase orders (POs) indicating the quantities of products they want to order from you. These POs are generated based on sales forecasts, inventory levels, and customer demand. When selling products on Amazon, understanding the purchase order process is essential for suppliers. A purchase order is a formal request from Amazon to a supplier to procure goods. Amazon generates purchase orders based on factors like customer demand, inventory levels, sales forecasts, and contractual agreements. These purchase orders contain crucial information such as product details, quantities required, unit prices, delivery address, and any specific instructions or terms.

• Supplier Confirmation and Acceptance: Upon receiving a purchase order, suppliers should carefully review the details to ensure accuracy. If there are any discrepancies or clarifications needed, it’s important to communicate with Amazon’s purchasing team. Once satisfied with the terms and conditions, suppliers can confirm their acceptance of the purchase order.
• Shipments: Once you have the required inventory ready, you need to prepare the shipments according to Amazon’s guidelines. This involves labeling each unit with Amazon’s unique barcode (FNSKU) and packing them securely.
• ASN Creation: After packing your products, you generate an Advanced Shipment Notification (ASN) in Vendor Central. This provides Amazon with information about the contents of your shipment, such as the number of cartons, units per carton, and the carrier used for shipping.
• Shipment Verification: Upon receiving your shipment, Amazon performs a verification process to ensure that the contents match the provided ASNs. They check the quantity, condition, and compliance of the products.

Stock Availability: 

The Vendor’s responsible for ensuring sufficient stock is available to fulfill the POs received. We need to regularly monitor inventory levels to avoid stockouts or overstocking. To review the inventory levels on Vendor Central, we need to keep a close eye on the inventory dashboard here This dashboard provides comprehensive insights into our inventory health on Vendor Central, including the availability of sellable and unsellable units. Sellable inventory on hand represents the number of units available for sale through the vendor platform. These units are in good condition and suitable for customer purchase. On the other hand, unsellable on-hand units refer to inventory that is not in a condition suitable for sale. These units may have been damaged, expired, or deemed unsellable due to quality control issues. Unsellable units are typically designated for disposal rather than being made available for customer purchase. Amazon will take care of disposing of these units. By monitoring both sellable and unsellable inventory on Vendor Central, we can have a clear understanding of the stock available for sale as well as any units that require appropriate disposition to maintain a healthy inventory status. This visibility enables us to make informed decisions regarding inventory management, ensuring a positive customer experience and efficient operations.

Forecasting

Amazon’s new forecasting dashboard offers valuable insights into future purchase orders (POs), enabling sellers to anticipate demand and plan their inventory accordingly. With this dashboard, sellers can now proactively forecast the number of orders they are likely to receive for specific products in the coming weeks. This information empowers sellers to make informed decisions, ensuring they have sufficient units in stock to fulfill anticipated POs.

Inventory Stock Updates:

It is vital to regularly update your inventory status on Vendor Central by promptly adjusting the availability of your products. This proactive approach helps prevent receiving purchase orders (POs) for products that are out of stock (OOS), which could result in chargebacks.  

Chargebacks

This can occur on Vendor Central when a seller fails to accept an order on time or delivers an incomplete shipment. Here’s an overview of how chargebacks work in such situations: Order Acceptance and Timeliness: When a purchase order is issued on Vendor Central, Sellers are expected to accept the order within the specified timeframe. Failure to accept the order within the designated time can result in a chargeback. This chargeback is typically applied as a deduction from the supplier’s payment for that particular order.

• Incomplete Shipments: Seller must ensure that they fulfill the complete order as specified in the purchase order. If a seller fails to deliver the entire quantity or items specified in the purchase order, it is considered an incomplete shipment. In such cases, Amazon may issue a chargeback to the supplier for missing or incomplete items.
• Chargeback Notification and Dispute Process: Upon issuing a chargeback, Amazon notifies the supplier through the appropriate channels, such as the vendor portal or email. The notification provides details regarding the chargeback reason and the amount being deducted from the payment.
• Sellers have the option to dispute the chargeback if they believe it was issued in error. The dispute process typically involves submitting relevant documentation or evidence to support the claim that the chargeback is unwarranted. The specific steps and requirements for disputing chargebacks may vary, and suppliers should refer to the guidelines and instructions provided by Amazon.
• Impact on Payments and Relationship: Chargebacks can have financial implications for suppliers, as the deducted amount affects their payment for the order in question. Additionally, recurring chargebacks due to order acceptance issues or incomplete shipments can negatively impact the supplier’s relationship with Amazon.

To maintain a positive relationship with Amazon and minimize chargebacks, sellers should closely monitor their purchase orders, promptly accept them within the specified timeframes, and ensure accurate and complete order fulfillment.

Operational Performance Dashboard on Vendor Central

The dashboard provides an overview of various performance metrics related to order fulfillment, inventory management, and customer experience. Familiarize yourself with the metrics displayed to understand the health of your operations. Pay attention to metrics such as Order Defect Rate (ODR), Perfect Order Percentage (POP), and On-Time Delivery (OTD). These metrics reflect the accuracy and timeliness of your order processing and fulfillment. A lower ODR and higher POP and OTD percentages indicate better performance.

Mastering inventory management on Vendor Central is key to optimizing your business operations on Amazon’s platform. By understanding and effectively implementing the various processes involved, such as managing purchase orders, preparing shipments, monitoring stock availability, utilizing forecasting tools, and promptly updating inventory status, you can maintain a healthy inventory, fulfill customer orders efficiently, and minimize chargebacks. Regularly reviewing the operational performance dashboard and striving for high metrics will contribute to a successful and fruitful partnership with Amazon. Remember, efficient inventory management is crucial for maintaining a smooth workflow and delivering a positive customer experience, ultimately leading to business growth and success.

If you have additional questions or want us to help you on your Amazon journey, please get in touch with the BellaVix Team.   

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