No More Stockouts! Proven Inventory Management Strategies During Peak Season
Last updated on December 11th, 2023 at 11:09 am
Peak seasons, especially during holidays, are the season to be jolly for Amazon businesses. According to the 2022 Seasonal Amazon Advertising Report by JungleScout, 22% of all annual ad spend on Amazon occurs in November and December, as nearly 67% of consumers choose to shop on Amazon for holiday gifts.
But with this much surge in sales, the season to be jolly is equally a challenging season for sellers. Various challenges are faced by Amazon shop owners during these times, such as online traffic surges, mismanaged shipping and delivery expectations, and increased competition and price wars.
Among these, a common ground is effectively managing your inventory. A higher volume of checkouts means exerting more effort to have enough stock to avoid inventory issues, such as stockouts, excess inventory, stranded inventory, and aged inventory.
Why is inventory management important for Amazon FBA sellers?
Inventory management involves the procedures and tasks occurring from the attainment of inventory, in this case, the product(s), to its sale to the end customer. Managing your inventory is systematic monitoring and storage of goods to fulfill customer requirements promptly and effectively. In other words, inventory management is an essential pillar for any Amazon FBA seller.
Maintaining your inventory, especially during peak season, is mainly necessary for your business for many reasons. How your products get delivered to your customers results from how you strategize your inventories.
Customers prioritize the convenience of fast deliveries. If you have too little inventory or if the item is out-of-stock, deliveries take more time to get to your customers. If there is too much stock, you might face issues with your capacity limits and storage fees, leaving you with accumulated costs. Excessive stock will also negatively affect your Inventory Performance Index (IPI).
What is the Inventory Performance Index (IPI), and how does it affect Amazon sellers?
A seller’s account health is the lifeline of any Amazon business. One important aspect of it is the Inventory Performance Index (IPI)—an important metric that evaluates the efficiency of your inventory management.
IPI is a number between 0 to 1000. Keeping this at a high level, preferably above 400, by optimizing your inventory will help you reduce lost sales and operational costs.
Three factors contribute to your IPI score:
- Excess inventory – causes extra storage costs
- In-stock inventory – causes stockouts and lost sales
- Stranded inventory – items available for purchase and delivery but are not in an active listing
You may easily view your IPI score on Amazon through your Seller Central Dashboard by visiting the Inventory section and then click on Inventory Dashboard. Your IPI score should show in the top left corner of your screen as a graph.
If your IPI is at risk, you may want to look into the common inventory management issues affecting your IPI score.
Common Inventory Management Problems
- Stockouts. A stockout happens if you are in an empty inventory. Running out of stock leads to various repercussions. Your profits are promptly impacted, and recovering from this setback can be challenging, prompting many sellers to take preventive measures.
- Overstock. If your products are out-of-stock, excessive inventory is not the answer and can equally hurt your business. Overstocking uses up your resources and makes you pay unnecessary storage costs.
- Stranded Inventory. Stranded inventory refers to merchandise stored in a fulfillment center or warehouse not listed for sale on your platform. This situation is detrimental to your business as it locks up your funds. Read more about stranded inventory and its repercussions here.
- Aged Inventory. Aged inventory pertains to items that have remained unsold in storage for a long time.
Best Practices to Manage Your Inventory on Amazon
Managing your inventory might seem like a lot, but it is definitely worth exerting effort to. It will make selling easier and optimize your business in many ways.
Here are some strategies you can use to optimize your Amazon inventory management:
1. Communicate and build good relationships with your suppliers
Your suppliers’ manufacturing and shipping times are a vital factor in managing your inventory. This is why it is crucial that you maintain a good relationship and often communicate your processes with them.
Your supply chain and what happens before the items get delivered to you can sometimes be out of your hands. Hence, how you negotiate deals and ensure a steady supply of goods from the distributors should not be overlooked.
2. Keep an eye on your sell-through rate
The sell-through rate is a measure of how well you are balancing your inventory levels and sales. Amazon sellers can access updated information daily through their Seller Central Dashboard. Whether you utilize FBA (Fulfillment by Amazon) services or not, a high sell-through rate indicates that you stock popular and swiftly selling items.
An outstanding sell-through rate surpasses 7, signifying that you’re selling seven times the number of units you have in stock, on average. Conversely, if your sell-through rate is below 1, you are overstocking your inventory.
3. Restock in-demand products
Logically, you would want to avoid overstocking on products that do not sell well and to restock more popular items to meet the customer demand, especially during year-end holidays.
Regularly replenishing in-demand products enables sellers to optimize their sales opportunities and establish a firm foothold in their specific market segment.
To effectively do this, you will need to monitor your sales so you can plan on stocking your inventory and avoid running out of items.
4. Reduce excess inventory
As mentioned, overstocking incurs storage costs in fulfillment centers and will add to your operational costs. Reducing excess inventory, especially those that have low sell-through rates, should be done to maximize your resources and achieve financial stability.
A product is considered an excess inventory according to these measures set by Amazon:
- If a unit in your inventory is at least 90 days old
- If at least one unit has 90 days’ worth of supply
- The cost associated with holding your inventory without taking any action is higher than the cost of taking action
5. Run promotions
The best way to avoid spoilage and aging inventory is to run promotions to boost sales and free up inventory space. You may offer deals/discounts, coupons, or BOGO (buy-one-get-one) deals.
However,your promotional activities might cost you more than you intended and might not generate sales as initially perceived. Even then, it is better than incurring extra storage fees.
6. Liquidate your inventory
When things get worse, then liquidating your inventory might be your last resort. Liquidation is when you sell excess or low-selling products in bulk and with a large discount.
Liquidating your inventory will save you from being charged Amazon storage fees and penalties and will help you free up space for your fulfillment centers, which you can replace with high-selling products.
Use Amazon inventory management tools and software
Sellers on Amazon can handle their inventory using tools available on Seller Central, which serves as the online platform for managing Amazon products, listings, marketing campaigns, fulfillment, and various other aspects of their business.
With the tools provided in Seller Central alone, you can access important data points and sales data regarding the inventory of all your Amazon listings. The tools in the Seller Central can help you:
- View active, inactive, and suppressed listings
- Add products to inventory
- Edit product listings and photos
- Change quantity on hand
- Change pricing
- See seller fees for each product
- View Fulfillment by Amazon (FBA) or merchant-fulfilled stock levels
- Track FBA shipments at every stage
- Generate reports
- Receive personalized recommendations and opportunities
There are already too many challenges to face in making your Amazon business successful, and poor inventory systems should not be one of them. Using inventory management software to optimize your inventory task is extremely helpful.
Here are some of the most popular software and how you can use them to improve your inventory management:
1. SoStocked – SoStocked is an Amazon inventory management software specializing in managing and forecasting inventory. This software factors in elements such as seasonality, past stockouts, past sales, and future marketing plans, which makes it highly accurate.
2. Seller Labs – This software is an inventory and financial management software that helps in managing negative feedback and is known to show only relevant data. The software also provides its users with out-of-stock notifications to help them replenish their FBA inventory in time.
3. Veeqo – Veeqo is an unified inventory management solution designed for retailers who operate on multiple sales platforms, including Amazon. It is known for its user-friendly interface, which optimizes processes such as managing shipping labels, orders, and inventory from one platform.
Aside from these, other software worth looking into are Flxpoint, Skubana, Expandly, Linnworks, and SKULabs. You should consider these options and see what works for your goals and management style.
Know how Seller Candy Can help in Inventory Management
Save yourself from the troubles of managing your inventory and let the team of experts on Seller Candy do the work for you! With the right set of tools and strategies, your Amazon business will surely run smoothly for you.
Experience effortless inventory control and be provided with customized reports that will help you optimize your supply chain processes with Seller Candy.
Connect with us here to know more about our services.
Ben Smith is the Head of Partnerships of Seller Candy. He started working in the e-commerce space in 2016 and has been hooked ever since. In the years since then, he learned the ins and outs of what it takes to build a successful Amazon brand. With his past experience as an Amazon Account Manager and Seller, he became passionate about helping Amazon Sellers and Agencies scale their business and achieve their goals. Today, he leads the Seller Candy Partnerships team, and he spends his days chatting with businesses of all sizes to solve their Seller Central woes so they can get back to growing their business.
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