Inventory management can be difficult, even for sellers who are experienced. Obviously if you have no products in stock to sell, you won’t be making any money. Alternatively, if you have too much of a product that doesn’t sell well, you could end up spending a lot of money on storage fees if you’re using FBA. Therefore, it’s argued in the Amazon selling community that inventory management is the most important system to have in place.
There’s a lot more to inventory management then just counting how many products you have and plugging those numbers into your Seller Central account. You also need to do some sales forecasting, understand order volume and cash flow, account for how long it will take to get your products from your manufacturer to Amazon, etc.
Running out of stock can put sellers into dire straits, even if stock is on the way. Going out of stock can have serious repercussions including losing sales and lost income. When your listing on Amazon goes out of stock, it will lose ranking for keywords and it will not show up in search results. After getting more stock, it can be difficult to regain this lost ground. You can use giveaways and Amazon Sponsored Product Listings, but the listing will have poor sales history from going out of stock. Hence, inventory management is really important to keep you from having to deal with more problems than necessary!
Too much inventory can be detrimental too, so it’s important to carefully forecast demand for your products. Having products sitting around that aren’t selling will end up costing you money, rather than making you money. This is the opposite of what you want to happen! If you are using FBA, Amazon will perform an inventory cleanup, where they will charge long-term storage fees for products that have been sitting in its warehouses for more than 180 days. Every cubic foot used will cost you $3.45 for inventory that’s been there 181-365 days, and $6.90 per cubic foot for inventory that’s been there over 365 days. This can start to add up quickly, no matter the size of your products, and is money you probably can’t afford to waste! Good inventory management practices should be keeping your stock levels at just the right amount that products are coming in from your manufacturer and going out to fulfill orders at a fairly even pace to avoid having too much stock in warehouses or running out completely.
But I’m sure you want to know how to keep from having too much or too little inventory, right? Here are a few tips to figure that out!
Sales Forecasting for Inventory Management
There are tools out there that can be used for sales forecasting. One easy-to-use and feel tool is the Amazon Sales Estimator. Simply enter the Best Seller’s Rank Number, Amazon Marketplace, and the Amazon Product Category to see the estimated number of sales per month. There are other tools available at a price, so do some research and pick the one that makes the most sense for your business needs. It is important to remember when a tool is giving you an estimate rather than actual numbers.
This forecasting can help you know when you should be placing orders to get more stock from your manufacturer. Lead time, or the number of days between placing your order with the manufacturer and when the order is ready to be sent, is important to factor into how long it will take your stock to get to Amazon’s warehouse(s). Most manufacturers in China usually have a 30-day turnaround time, so if it takes an additional 30 days to get your shipment to the US and through customs, that’s two months (60 days) you need to take into account when doing your inventory management planning. Having a solid understanding of the lead time your manufacturer needs will be very helpful to planning your orders.
Using Inventory Management to Prepare for Peak Shopping Times
We’re obviously right in the midst of the holiday shopping season right now…
So hopefully you’re managing your inventory well in order to account for the higher-than-normal demand. Of course, the winter holiday shopping season isn’t the only time of year that sellers may experience high demand. Depending on your product offerings, you may experience spikes in sales at other times of the year as well. For example, if you sell items that are seasonal for summer, you may see high sales closer to summer and throughout the summer season as people have more of need for your products. The best way to account for these spikes and plan your inventory management accordingly is to look at your sales history, or you are a newer seller and don’t have that available, think about when your products are most likely to be bought and used by customers to account for spikes in sales.
What you should take away from this is that inventory management is something you shouldn’t ignore and hope it sorts itself out. It requires careful planning if you don’t want to run out of stock and eat into your income. Many of the problems caused by poor inventory management can be easily avoided by being proactive and having a good system in place that helps you track everything seamlessly. You have great products customers want to buy, so make sure they are in stock and ready to be purchased!