Inventory management involves the systematic approach of placing orders, monitoring the movement of goods, and securely storing products with the goal of meeting demand in an efficient manner. Managing your inventory on Amazon is a critical component of operating a thriving business. Effective inventory management can assist you in monitoring your inventory levels, reducing waste and surplus inventory, and guaranteeing that you have products available to sell at all times. While managing your inventory is vital for your business, it is also the most tedious and challenging task, especially for new sellers. Inventory management is all about achieving the right balance between having too little or too much stock. In this blog, we’ll help you understand the basics of Amazon inventory management, its importance, frequent issues, and how to best utilize your inventory for maximum efficiency.
Why is Amazon Inventory Management Important?
Customers these days demand prompt inventory management and expect quick delivery when shopping online. A recent study showed that a majority of U.S. consumers (68%) expect their purchased items to arrive within zero to three days, while 47% are willing to pay extra for faster shipping. Delayed product restocking is not acceptable to online shoppers, and most (70%) would be dissatisfied if their order arrived late. Running out of stock frequently can result in your customers turning to your competitors, which can harm your business’s reputation and decrease your search engine ranking. On the other hand, overstocking can tie up your business’s capital and lead to long-term storage fees if you use FBA. As an Amazon seller, there are multiple factors that impact your inventory management. These factors include the manufacturing and shipping times of your supplier, customs delays, FBA storage capacity and fees, and the sell-through rate.
Common Amazon Inventory Management Issues
There are numerous issues you will encounter while selling on the Amazon marketplace. Some of the most common inventory management issues are:
1. Excess inventory
If your product contains more than 90 days of supply or has at least one unit that is older than 90 days, Amazon regards it as excessive inventory. This can result in additional expenses related to storage, handling, and potential losses if the excess inventory needs to be sold off or discounted. For sellers who utilize Amazon’s fulfillment center, carrying excess inventory for a long time may result in additional fees such as an aged inventory surcharge added to monthly storage fees. To check your excess inventory status, log in to your Seller Central account, and go to Inventory > Inventory Planning > Inventory Performance Index. If you scroll down this dashboard, you will find details for each KPI, and by clicking on fixing the issue, you’ll be able to get a list of all the SKUs/ASINs that have excess inventory.
2. Running out of stock
Running out of products can have a detrimental effect on your sales and the ranking of your listing. It is imperial to ensure that you have enough stock to meet demand. Preventing running out of stock is a must, and if necessary, it may be wise to slow down sales by reducing advertising and increasing the sales price. If your products remain out of stock for a prolonged period, it can harm your Best Sellers Rank and organic keyword ranking. Amazon prioritizes products that remain consistently available. Therefore, if your products are frequently unavailable, you may face penalties, and it may be challenging for you to regain your lost ranking.
3. Stranded inventory
Stranded inventory refers to the inventory stored in Amazon’s warehouse that is no longer connected to an active listing on Amazon. It’s sellable but not purchasable because no customer can actually buy it. When you have stranded inventory, you may still incur monthly storage fees for each unit, even if your products are not available for purchase. Also, you won’t be able to send in extra stock for ASINs that are stranded. Luckily, you can check if any of your listings are stranded by going to Inventory > Stranded Inventory.
4. Aged Inventory/Long Storage Fee
Amazon conducts a monthly assessment of its entire fulfillment network around the 18th of each month. During this assessment, the age of each seller’s stored inventory is calculated. The inventory age is calculated from the day it arrives at FBA warehouses. If any inventory has been stored in a fulfillment center for more than 271 days, it will be subject to an aged inventory surcharge in addition to the usual monthly storage fees. Moreover, Amazon will continue to charge the aged inventory surcharge for units stored for longer than 365 days. If you go to Inventory > Inventory Planning > Inventory Planning Performance > Excess Inventory, you can see how old your inventory is for each ASIN. 
How to Effectively Manage Amazon Inventory?
While managing your inventory can be challenging, here are a few tips that will help you stay ahead of your competition and manage your inventory effectively,
Communicate with your suppliers.
It’s important to have open communication with your suppliers to make sure you always have the products your customers want in stock. Understanding the lead times in your supply chain can also help you avoid running out of stock. Take the time to accurately estimate how long it takes to manufacture, ship, and deliver your products to Amazon.
Reduce excess inventory
To move slow-moving inventory, there are several strategies that you can implement. One way is to run promotions such as coupon codes, buy-one-get-one deals, or steep discounts. This can help to accelerate sales, even if it means taking a slight loss in the sale price. Another effective approach is to raise your bids on targeted keywords in your ads in conjunction with lowering your price. If you have another place to store your inventory, you can create a removal order in Seller Central and have the inventory sent to you before getting hit with large storage fees. If all else fails, you may consider liquidating the inventory in bulk at a large discount or donating the products to charity organizations.
Plan for the unexpected.
Sometimes things don’t go as planned. You may encounter delays with your supplier, shipping, customs, FBA warehouse, and other issues. If possible, it’s wise to purchase additional units as a precaution in case any unexpected disruptions occur in your supply chain. You may consider keeping surplus units in your own storage facility or outsourcing to a third-party storage and fulfillment center. In case of any unforeseen delays, you can rest assured that you have inventory in FBA or even fulfill orders through FBM.
Keep Track of Your Inventory Levels
One critical factor in managing inventory on Amazon is to keep track of your stock levels. To achieve this, it is important to conduct routine reviews and make necessary updates. You can also use demand forecasting and set reorder points to manage your inventory effectively. To ensure a smooth flow of sales and avoid any potential overstocking or stockouts, it’s recommended to maintain a stock of around 60 days at all times. You can make use of Amazon’s inventory reports and monitor your sell-through rate to forecast your sales volume.
Conclusion:
Accurately and efficiently managing your inventory is no easy task, as there are different factors that influence your inventory management. However, if you take into consideration all the tips we shared in this blog, you’ll be able to plan appropriately. Ensure you are utilizing Amazon Tools and Reports, as well as third-party software, to keep track of any necessary changes. If you’ve hit a roadblock, you’re not sure if the strategy you selected is the right one, or you’re having difficulties managing your inventory, reach out to our team of experts.
If you have any further queries or require assistance on your Amazon journey, feel free to reach out to the BellaVix Team. We are always here to help.
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