Guide to Amazon Inventory Management for Sellers: Tips and Tools

Amazon Inventory management is one of the most critical aspects of running a successful Amazon business. Striking the right balance between too much and too little stock can boost sales, cut costs, and help maintain the health of your seller metrics. Poor inventory management on Amazon, however, can lead to stockouts, higher fees, and ultimately, a drop in rankings on Amazon’s search results. This guide will cover everything from essential Amazon inventory management strategies to Amazon FBA capacity limits, including practical tips and software solutions to help businesses optimize their inventory flow. 

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Why is Inventory Management Critical for Amazon Sellers?

In the fast-paced world of e-commerce, customer expectations are at an all-time high. About 68% of U.S. consumers expect products to arrive within zero to three days, and nearly half are willing to pay more for faster shipping. This demand for speed and reliability means that constantly running out of stock or overstocking can quickly hurt your reputation and sales. Effective inventory management ensures you have enough stock to meet demand without overloading Amazon’s warehouses, which can cause storage fees to add up.

Amazon Inventory management is about finding the right balance between supply and demand, staying competitive, and avoiding unnecessary costs. For Amazon sellers, a strong inventory strategy can protect profits and provide a solid foundation for growth.

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Key Components of successfully navigating Amazon Inventory Management

The key components of successfully navigating Amazon Inventory Management are as follows: 

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Understanding FBA Capacity Limits

As of March 1, 2023, Amazon introduced the FBA capacity limit system, replacing previous weekly restock and quarterly storage limits. This monthly limit gives sellers more control over inventory levels and allows them to plan for up to three months with estimates. Capacity limits vary by storage type, such as standard-size or oversized items, and are influenced by the seller’s Inventory Performance Index (IPI) score. Higher IPI scores can lead to higher capacity limits.

If you find your capacity insufficient, Amazon allows you to request more space by bidding a “reservation fee” against other sellers. These fees can be offset by inventory sales, meaning you may not pay anything extra if your items sell through quickly.

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Keeping a Safety Stock of 60 Days

To avoid stockouts and minimize overstock, aim to maintain a 60-day inventory supply. This buffer can help you navigate unexpected demand fluctuations or supply delays. It is important to regularly monitor Amazon’s reports and tools like the Inventory Performance Dashboard to adjust stock levels in real-time.

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Avoid Overstocking

Too much inventory can increase storage fees and reduce your IPI score. Amazon favors items that move quickly, so if you’re carrying excess stock, consider running promotions or discounts to boost sales. Lowering prices, using advertising strategically, or creating removal orders can prevent storage fees and keep your IPI score strong.

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Avoid Stranded Inventory

Stranded inventory occurs when products stored at Amazon aren’t available for purchase, typically because they’re not linked to an active listing. This issue can cause unwanted storage fees. Check Amazon’s Fix Stranded Inventory tool regularly to address any issues as they arise.

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Utilize Inventory Management Software

Using dedicated Amazon inventory management software can help automate forecasting, set reorder points, and avoid stockouts. Jungle Scout’s Inventory Manager, for example, analyzes sales trends and projects how much inventory you’ll need, which helps to avoid overstocking or running out of stock.

Watch the video below to learn how inventory status can impact your Amazon advertising: 

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What is the inventory fee in amazon?

Amazon charges various inventory fees as part of its Fulfillment by Amazon (FBA) service, which include costs for storage and handling of products in its fulfillment centers. These fees can significantly impact a seller's bottom line, so understanding them is crucial for effective inventory management.

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Inventory Management Tips to Improve Your FBA Performance

To optimize your Amazon FBA performance and maintain a healthy inventory flow, it’s essential to adopt proactive strategies that address common challenges in stock management. From building strong supplier relationships to using Amazon’s advanced tools, these tips can help you avoid pitfalls like overstocking, stranded inventory, and seasonal disruptions, ensuring smooth operations and sustained growth.

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Tip #1: Develop Strong Relationships with Suppliers

Building relationships with suppliers can give you a competitive advantage when it comes to stock management. Suppliers who trust your business may prioritize your orders, which can help meet demand and avoid delays. Regular communication can also help businesses understand lead times and prepare for any supply chain disruptions.

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Tip #2: Use Promotions Strategically

If a product is overstocked, running discounts or promotions can help clear out excess inventory. Raising keyword bids for advertising campaigns can also help boost visibility. Businesses can also offer coupons or buy-one-get-one deals to increase sales and prevent long-term storage fees.

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Tip #3: Pause Advertising When Running Low on Inventory

It may be tempting to keep ads running at all times, but it’s best to pause campaigns when stock is low. Advertising a product that’s about to sell out can lead to poor customer experiences and negative reviews. Once the stock is replenished, advertising campaigns can then resume to keep the product visible.

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Tip #4: Prepare for Seasonal Demand

Amazon’s fulfillment centers accept temperature-sensitive items like gummies and chocolates only from mid-October to mid-April due to summer heat risks. It is good practice to plan by storing these items at third-party centers or fulfilling them yourself if you’re a Merchant Fulfilled Network (MFN) seller.

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Tip #5: Use Amazon’s Inventory Tools

Amazon FBA Inventory management Tool combines features from older inventory management tools to provide insights on metrics like restock rates, excess inventory, and stranded items. This tool is a great resource for staying on top of inventory performance.

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Conclusion

Effective Amazon inventory management is the backbone of a thriving Amazon business, ensuring the right balance between supply and demand while optimizing costs and enhancing customer satisfaction. By understanding and navigating FBA capacity limits, maintaining a strategic safety stock, avoiding overstock and stranded inventory, and leveraging inventory management software, sellers can streamline their operations and boost performance. Coupled with proactive supplier relationships, strategic promotions, and careful preparation for seasonal demand, these strategies can safeguard your profits, improve your IPI score, and set the stage for sustainable growth on Amazon.

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FAQ

What happens if I exceed my FBA capacity limit?

If you exceed your Amazon FBA capacity limit, Amazon may prevent you from sending additional inventory to its fulfillment centers. Monitor your capacity usage and, if necessary, request additional capacity with a reservation fee to avoid interruptions.

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How does the new low-inventory-level fee work?

Effective April 1, 2024, Amazon introduced a low-inventory-level fee for standard-sized products with low inventory relative to customer demand. If a product’s supply is below 28 days (both short- and long-term), the fee applies to units shipped, added on top of FBA fulfillment fees.

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Can I advertise products in inbound inventory status?

It can be risky to advertise inbound inventory. If a shopper sees a delayed delivery estimate, your conversion rate may drop. Disabling the "in-stock head start" feature and holding ads until items are available for prime shipping can optimize ad performance.

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How can I avoid long-term storage fees?

To avoid long-term storage fees, monitor inventory levels closely. Use Amazon’s FBA Inventory Tool to track aging stock and consider running promotions or removal orders for items stored over 271 days, as these will incur surcharges if they remain unsold.

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AMZ Pathfinder is a solutions provider for ecommerce businesses selling on Amazon. They help businesses achieve Amazon success and offer top-notch services to make your catalog stand out in the crowded marketplace, including:

• Sponsored Products Advertising 
• Amazon DSP 
• Full Account Management 
• Supply Chain Management
• Google Ads or TikTok advertising to channel qualified paid traffic to Amazon

Interested in Receiving Expert Advice? You can find out more about AMZ Pathfinder on their website, or book a call with a member of AMZ Pathfinder’s expert team: Contact Us - AMZ Pathfinder. 

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