In this video, I will show you the best Amazon inventory management strategies, when to order inventory, how to avoid running out of stock, and how to reduce your storage fees with Amazon. Manage your Amazon inventory the right way so you don't get stuck with too much or too little inventory when your next freight shipment is on its way!
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7 Ways To Improve Your Amazon Inventory Management - Audio file |
7 Ways To Improve Your Amazon Inventory Management - Video transcript |
Hey guys and welcome back to my channel. Today I would like to go over 7 ways to improve your Amazon inventory management, so be sure to watch all the way through so you don't miss any of the important details as we do have a lot to cover.
Now, before I hop into this video, if you are new to this channel you're going to want to subscribe as I talk about the best ways to make a full time income with Amazon FBA and always get straight to the point.
So please consider subscribing and turning on your post notifications if you like channels that don’t waste your valuable time, with that said let's get right into this video.
Now, according to Statista, half of Amazon’s sales were from third-party sellers. Selling on Amazon can be very rewarding, but it is not an easy task, especially once you start selling in volume. As your orders increase, so will your inventory needs. To be successful, you must have a solid inventory management strategy.
In this video, I will cover seven tips to improve your Amazon inventory management. But first, let me explain why good inventory management is so important for Amazon sellers.
First, you want to attract shoppers and make sales, so if you constantly run out of stock, your customers will shop with your competitors. Second you want to reduce inventory costs, having too much inventory ties up your money in unsold goods and added storage costs.
You also want to reduce inventory losses, if you constantly monitor your inventory levels, you can reduce losses from mismanaged storage, receiving errors, and employee theft.
Another reason is to reduce spoilage, because if you sell perishable items, inventory management helps you track sell-by dates and avoid losses due to spoiled or unsellable goods.
Now, nearly half of small businesses don’t have a good inventory management system in place, but it’s easy to get tighter control over your Amazon inventory, and here’s how.
So tip number 1 is to use Amazon inventory management software such as Jungle Scout. Now, what is Jungle Scout inventory Manager?
This inventory manager helps Amazon FBA sellers manage their inventory levels efficiently, allowing them to make informed decisions, and mitigate risks such as overordering, underordering, long-term storage fees, and high product costs.
It also calculates your inventory needs, predicts FBA sales and profits, helps you avoid storage fees, and prevents costly stockouts, all so sellers can focus on other crucial elements of their business.
Jungle Scout’s Inventory Manager uses advanced-demand forecasting technology to help you run the back end of your Amazon FBA business.
It marks each of your products as Reorder Now, Reorder Soon, Overstock, and In Stock, then calculates the date when you should place the order, as well as the quantity. It also estimates costs and profits.
Let’s go over some of the metrics the Inventory Manager displays. It shows the status of your current inventory levels. How many units you currently have at Amazon. How many units you currently have on the way to Amazon. And the total value of your available inventory.
It also shows the potential profitability of your available inventory. The actual sales in dollars your current inventory could earn. And the average number of sales per day for each product.
How many days it takes for your product to be manufactured, shipped, and delivered to an Amazon fulfillment center is another metric it shows just as how many days remaining until you run out of stock and the latest date to reorder your products, in order to avoid a stockout.
As you can see, the inventory Manager has a ton of functions to help any and all sellers, from those just getting started to those on their thousand product.
Now, check out these benefits if you use inventory software. Know your stock status. Are you understocked, overstocked, out of stock, or just right? Based on your lead times and sales, Inventory Manager updates you on your stock’s status for each individual product.
You can plan your inventory. Inventory Manager predicts the date you’ll need to reorder your product, helping you to prepare and budget accordingly.
It will also prevent stockouts. Running out of stock can kill your Amazon FBA product’s status. You can lose your position in Amazon’s search results, and any products your customers had in their cart will vanish. An inventory Manager lets you know far in advance when it’s time to reorder, keeping your product right where it belongs!
It will also stop you from over ordering. Overordering can result in the loss of start capital that could be earmarked for other business needs. The software estimates exactly how many units you’ll need to stay in stock. With this knowledge, you can use your extra dollars to invest in new products.
You can also reduce your costs by avoiding storage fees. Too much stock could result in costly Amazon storage fees. With an inventory manager, you can predict how much inventory you’ll need, and exactly how much to carry within Amazon’s fulfillment network.
I love the fact that you can predict future costs. Once you know how many units of inventory you’ll need to purchase, the software also tells you what it will cost. That way, you can save and budget for the upcoming purchase.
While sales analytics shows you what you’ve made and are currently making with your products, this tool gives estimates on future profits thanks to the Reorder Profit, Inventory Level Revenue, and Profit columns.
Taking into account your daily sales average, it will show you how many days you have remaining until you’re out of inventory. This prevents you from stock shortages, protecting your product’s position on Amazon’s search engines.
As you can see, using inventory management software has many benefits so I left a link for you in the description if you want to find out more.
Now, let’s move on to tip number 2 which is to know your inventory turnover rate. How fast you sell through your Amazon inventory is commonly called your inventory turnover rate. To figure out your inventory turnover rate, you need to know, on average, how fast your products sell on Amazon.
With this information, you can estimate how much stock you need to order to maintain stock levels between inventory shipments. It also helps you avoid over-buying or under-buying when you reorder stock.
As a general rule, Amazon sellers who import goods target a 3-month inventory turnover rate, meaning you expect to sell through an order of stock in 3 months.
A better way to predict your inventory turnover rate and reorder needs is to use a forecasting tool that tracks your products daily sales trends as I already mentioned before.
Tip number 3 is to understand your supply chain lead times. Your supply chain refers to inventory movement from initial sourcing to arrival in your warehouse. Lead time is the time it takes for stock to arrive once ordered.
By understanding your supply chain and lead times, you can identify the who, what, where, and when involved in sourcing, receiving and storing your Amazon inventory.
To keep your supply chain running smoothly, stay on top of your suppliers’ manufacturing and delivery schedules and have contingencies in place for worst-case scenarios.
This is particularly important if you use overseas suppliers since shipping delays can take weeks to resolve. Make sure you hold some inventory in reserve to cover unexpected delays along your supply chain if sourcing goods overseas.
Plan for seasonal sales fluctuations is tip number 4. Seasonal demand and holiday shopping affect inventory because of peaks in customer demand and extended supplier turn-times. It’s crucial to know which items will be fast-moving when, and which products are slow movers during certain times of the year.
It’s important to forecast your inventory levels at least a couple of months in advance. You’ll want to increase ordered quantities of goods in high demand during peak sales cycles and decrease your orders on products that are out of season.
It’s also important to consider suppliers’ extended turnaround times for stock ordered during peak season. This helps you place orders with time allowed for delays due to seasonal demand and other factors such as weather. Maintaining open communication with your suppliers also helps you avoid unexpected delays and others late shipment issues.
Now, before we move on with tip number 5. As you can see, there are a lot of steps involved in building an Amazon business. And I wouldn't recommend piecing together everything by simply watching videos on YouTube. This is why I suggest investing your time in a great free training that can guide you through this process.
I recommend this training because this is the best training on the market and one that I have personally gone through. They walk you through every aspect of what it takes to start, grow and scale your Amazon business.
This training will build off of what I talk about inside my videos so I left a link for you in the description and if you're serious about selling on Amazon I encourage you to check it out!
Now, let’s move on with tip number 5 which is to consider dropshipping as an alternative to stocking inventory. With dropshipping, your product manufacturer maintains the inventory and ships merchandise directly to customers on your behalf when you make a sale.
Dropshipping is less risky since you don’t have to purchase stock up-front that may or may not sell. Plus with drop shipping, you don’t need to pay for storage space.
It’s critical that you choose your dropshipping suppliers wisely so you can be profitable in the end. Many charge added fees which makes your cost of goods higher than a typical retail markup.
Also, be sure your dropshipping supplier is Amazon-compliant. They must ship as promised and report inventory levels, so you don’t sell items when they’re out of stock.
Now, since dropship orders are out of sellers’ direct control, Amazon maintains a strict drop shipping policy. If it’s not closely followed, you risk having your seller account suspended.
Moving on to tip number 6, be strategic with promotions and sales. Promotions like sale prices or free shipping offers are effective was to grow your Amazon business. But a sales spike due to a hot promotion can drain your stock before your next delivery and leave you with backorders, angry customers, and a lower Amazon ranking.
One way to prevent this is to set a threshold for a set number of promoted items in your inventory. Once that number is hit, you can remove the promotion and sell remaining stock at a higher price to avoid running out completely.
Or, if you plan to sell out completely, be sure to set a threshold amount that covers four hours of promotional sales. Four hours is the key here because Amazon takes up to four hours to remove a promotion once you stop it. This gives you enough stock to cover sales that come in once you stop the promotion.
Another way to hold a successful promotion is to order a reserve of the promoted products from your supplier with a future ship date. If your promotion is successful and you need the stock shipment fast, you can contact the supplier to move up the ship date. But if the promotion lags, you can cancel or extend the ship date of the restock order to avoid being overstocked.
The last tip I want to give you is to slow down demand for your inventory when needed; A good Amazon promotion can get your products flying out of the warehouse which is a great thing. But if you’re unable to meet buyer demands with adequate supply, you risk losing customers to competitors, plus face lower rankings on Amazon.
If you notice that you’re running low on stock during a promotion or anytime, consider increasing your prices and stopping any advertising campaigns to slow down demand. These measures may slow your sales in the short term, but that’s better than hitting zero stock levels for an extended period of time.
Now, it takes time to earn a good reputation as an Amazon seller, and you can’t afford to lose your reputation or hard-earned rankings because of poor inventory management. Use the 7 tips I gave you as a guideline to keep your stock at manageable levels and stay competitive on Amazon.
Thanks for watching and please make sure to watch the next videos with more Amazon FBA tips that will show up right about now.
