Category: Inventory Management

Are you an Amazon seller struggling with stockouts or overstocking? Do you find it challenging to manage your inventory levels effectively? If so, you're not alone. Many sellers face these problems and need help finding a solution.

Amazon is one of the largest e-commerce platforms globally, with millions of sellers trying to profit. However, stock management can be tricky in running an Amazon business. More inventory can lead to overstocking, and having enough can result in stockouts. Both situations can be detrimental to your Amazon business, leading to loss of sales, customer dissatisfaction, and a negative impact on your seller rating.

To avoid these problems, Amazon sellers must learn how to manage their inventory effectively. In this article, we will provide tips on preventing stockouts and overstocking on Amazon, ensuring you never lose out on sales, and improving your seller rating.

Understanding Your Sales Velocity

Sales velocity refers to the rate at which a product is sold over a specific period. It considers the number of units sold and the time it takes to sell them. Essentially, sales velocity measures the speed of sales and how quickly a product moves off the shelves.

Importance of Tracking Sales Velocity

Tracking sales velocity is essential for proper product inventory management on Amazon. Understanding how fast your products are selling can help you determine how much inventory you need. It can also help you identify trends in sales and adjust your inventory levels accordingly. By keeping track of your sales velocity, you can ensure that you always have enough inventory to meet customer demand without overspending on inventory on the shelves.

The Formula For Sales Velocity

 Examining your pipeline, sales cycle, lead nurturing procedures, and average deal size is necessary to determine your sales velocity. 

The following information is necessary for the sales velocity formula:

• How many opportunities do you have in your pipeline? 
• Value of your typical deal size in dollars. 
• Customer conversion rate as a proportion of victories versus. Losses. 
• The average length of the sales cycle in days. 

Multiply the number of opportunities in your sales pipeline by the average deal size, the win rate, and the dollar amount to determine your sales velocity. Divide the outcome by the average number of days in your sales cycle.

Forecasting Sales and Inventory Needs

The role of sales forecasting in inventory management system: Sales forecasting plays a critical role in product inventory management on Amazon. It involves predicting future sales based on historical data, market trends, and other relevant factors. By forecasting sales, sellers can determine the inventory levels they need to maintain to meet customer demand and avoid stockouts or overstocking.

Different Methods of Sales Forecasting

There are various sales forecasting methods, including

1. Historical sales data: This involves analyzing past sales data to identify patterns and trends to help predict future sales.
2. Market research: This involves gathering information about the market, such as customer preferences, competitor analysis, and market trends, to make informed predictions about future sales.
3. Statistical models: Use statistical techniques to analyze historical data and predict future sales based on trends and patterns.
4. Expert opinions: This involves gathering input from experts in the field, such as industry analysts or sales professionals, to make informed predictions about future sales.

How To Use Sales Forecasts To Determine Inventory Needs

Once sales forecasts are calculated, sellers can use them to determine inventory needs. For example, if the sales forecast predicts an increase in sales, the seller may need to increase their inventory levels to meet customer demand. 

Conversely, if the sales forecast predicts a decline, the seller may need to decrease their inventory levels to avoid overstocking. It's essential to regularly review sales forecasts and adjust inventory levels to ensure optimal product inventory management. By using sales forecasts to determine inventory needs, sellers can avoid stockouts and overstocking, optimize their inventory levels, and ensure they always have the right amount of inventory to meet customer demand.

Managing Inventory Levels

Managing inventory levels is essential to supply chain management. It involves setting inventory thresholds, monitoring inventory levels, and implementing strategies to maintain optimal inventory levels. Here are some key points to consider:

1. Setting inventory thresholds: Setting inventory thresholds involves determining the minimum and maximum inventory levels that should be maintained. This can be done by considering demand variability, lead times, and supplier reliability. By setting appropriate inventory thresholds, a business can avoid stockouts and overstocking.
2. Monitoring inventory levels: Monitoring inventory levels is essential to ensure that the inventory stays within the predetermined thresholds. This can be done through product inventory management software, which provides real-time inventory-level updates. A business can take proactive measures to prevent stockouts or overstocking by monitoring inventory levels.
3. Strategies for maintaining optimal inventory levels: Several strategies can be used to maintain optimal inventory levels. These include

• Just-In-Time (JIT) inventory management: This strategy involves maintaining minimal inventory levels and ordering only when there is demand. This can reduce inventory holding costs and minimize the risk of overstocking.
• Economic Order Quantity (EOQ) inventory management: This strategy involves ordering in batches that minimize the total inventory cost, including ordering and holding costs. EOQ can help businesses maintain optimal inventory levels while minimizing costs.
• Safety stock: Safety stock is additional inventory held to mitigate the risk of stockouts. A business can ensure enough inventory to meet unexpected demand or supply disruptions by maintaining safe stock.
• Demand forecasting: Demand forecasting involves predicting future demand for a product or service. By accurately forecasting demand, a business can order the right amount of inventory to maintain optimal inventory levels.

Dealing with Stockouts

A stockout occurs when your Amazon store runs out of inventory of a particular product or service. This can happen for various reasons, such as unexpectedly high demand, supply chain disruptions, or poor inventory management. Dealing with stockouts requires a combination of prevention strategies and effective response plans. Here are some key points to consider:

Causes of Stockouts:

• Unforeseen spikes in demand: Unexpectedly high demand can quickly deplete inventory levels and lead to stockouts.
• Supply chain disruptions: Delays in shipping, production, or delivery can impact inventory levels and lead to stockouts.
• Poor inventory management: Inaccurate forecasting, proper inventory thresholds, and adequate safety stock levels can contribute to stockouts.

What To Do If A Stockout Occurs

If a stockout occurs, it's essential to have a response plan to minimize the impact on customers and business operations. Some steps can be taken include:

• Communicate with customers: Let customers know that the product is temporarily out of stock and provide an estimated time frame for when it will be available again.
• Expedite shipping: Expedite shipping from the supplier to get the product back in stock as soon as possible.
• Offer substitutes: Offer customers alternative products or services that can fulfill their needs.
• Reevaluate product inventory management practices: After a stockout, it's essential to evaluate the causes and take steps to prevent future stockouts.

Avoiding Overstocking

Overstocking occurs when a business needs more inventory of a particular product or service. This can tie up valuable resources, increase holding costs, and lead to obsolescence or spoilage. Avoiding overstocking requires effective product inventory management practices and supply chain planning. Here are some key points to consider:

Causes of Overstocking:

• Inaccurate demand forecasting: Overestimating demand can lead to overstocking and tie up valuable resources.
• Poor inventory management system: Improper inventory thresholds, inadequate safety stock levels, and inefficient ordering processes can all contribute to overstocking.
• Promotions and sales: Offering discounts or running promotions can increase inventory levels if demand does not meet expectations.

What To Do If Overstocking Occurs

If overstocking occurs, it's essential to reduce the excess inventory and prevent it from becoming obsolete or spoiling. Some steps that can be taken include:

• Offer discounts or promotions: Offering discounts or promotions can help move excess inventory and free up valuable resources.
• Liquidate excess inventory: Liquidating excess inventory through clearance sales or auctions can help recover some costs.
• Donate excess inventory: Donating excess inventory to charity or non-profit organizations can help build goodwill and provide tax benefits.
• Reevaluate inventory management practices: After overstocking occurs, it's essential to evaluate the causes and take steps to prevent future overstocking.

Wrapping Up 

Managing inventory on Amazon can be a challenging task for sellers. However, by implementing effective strategies to avoid stockouts and overstocking, businesses can optimize their sales and profitability. By monitoring sales trends, setting up automated alerts for low inventory levels, and forecasting demand accurately, businesses can ensure that they have the right amount of stock at the right time. 

Additionally, leveraging Amazon's FBA program or partnering with third-party logistics providers can help businesses streamline their inventory management processes and reduce the risk of stockouts or overstocking. Ultimately, by taking a proactive approach to the inventory management system on Amazon, businesses can maximize their revenue potential while minimizing costs and risks associated with excess or insufficient stock levels.

Do you have questions about Amazon stockouts and overstocking? Let us know, and we’ll gladly answer them!

The above question might have struck your mind several times if you are an Amazon seller. Effectively managing the inventory is an essential part of becoming a successful seller. By working your list, you can easily avoid significant profit killers: accruing high storage costs because of overstocking and losing sales as the products go out of stock.

Inventory management is the new backbone of the retailer businesses. It is essential to manage your inventory correctly to cut unnecessary costs and streamline your business process.

What is Inventory Management?

Inventory is the number of products a business holds to sell in the marketplace. Ecommerce Inventory management is the process of storing and tracking these products to meet the demands of the customers efficiently. It also includes strategies a business implements to source, process, and store products to prepare them for sale.

Poor Ecommerce inventory management may result in a loss of profits due to a shortage of products or the higher cost of storing overstocked products. However, the results of poor management may not be visible for a few weeks. But things may go out of control when it becomes apparent. Sellers may experience unfulfilled orders, and products may stay out of stock and lose sales, dead stock, spoiled products, or too high storage costs.

Successful ecommerce inventory management is finding the perfect balance between overstocking and shortage. Using the right strategy for your inventory, you can quickly determine how often your list needs restocking to maintain optimal levels.

Why do Amazon Sellers Need Inventory Management?

In this competitive world, customers don't wait for a product to come back in stock. Instead, they immediately start looking for alternatives if they find a product out of stock. As per statistics from JungleScout, 68% of Amazon customers from the United States expect their products to get delivered within the first three days of placing the order. Moreover, almost 50% of them are ready to pay more for faster delivery, and 70% will be upset if their product is not delivered on time.

If the product continuously goes out of delivery, customers will start looking for products from competitors. This way, sellers will lose not only sales but also organic traffic. With more customers preferring other products over yours, your listing's organic ranking will drop gradually.

Here are four reasons why Amazon sellers need to take control of their inventory:

1. Attracting more sales: If the product listing constantly shows out of stock, the potential customer will prefer buying from the competitors, and you will keep losing profit as an Amazon seller.
2. Reducing inventory cost: When the inventory is not managed correctly, it may have too much inventory, and sellers may have to spend more money to store unsold products.
3. Reducing inventory loss: With proper ecommerce inventory management, sellers can reduce losses from inventory mismanagement, damages, spoils, and errors.
4. Reducing product spoilage: If you are selling perishable products, an effective inventory management strategy can help track the sell-by and expiry date of products to avoid spoilage and reduce unsellable products.

While ecommerce inventory management is crucial for every Amazon seller, most small businesses don't have a proper ecommerce inventory management strategy. However, taking inventory control is straightforward and avoids losing profits and extra storage costs.

There are many ways you can manage your Amazon store order and inventory. Here are a few steps you can start with –

Inventory Planning

To design your inventory better, it is generally a smart thought to coordinate your item supply with the average demand. This should be possible through point-by-point gauging and planning. In straightforward terms, you have to guarantee that you aren't sourcing excessively numerous or excessively couple of items. Amazon offers multiple reports that you can use to design your inventory better.

For instance, the Amazon Selling Coach can help distinguish inventory openings in light of your deals and current inventory information. It gives customized proposals to streamline your stock levels. You can likewise see your posting status and points of interest on the oversee inventory page. This page encourages you to deal with inactive/out-of-stock postings to see how good your inventory is and how you can enhance it.

Amazon sellers who provide faster delivery of products usually experience higher conversion rates. With such a massive demand for products, it is ideal for the sellers to maintain an inventory of four-week as it will provide sellers with enough time to:

• Distribute Inventory
• Maintain timely delivery records to provide better customer satisfaction
• Reduce stock shortage and lost sales
• Avoid overstocking of products to save on storage cost

Sourcing Inventory Management

While sourcing abundance inventory may obstruct your cash as a colossal venture and adequate income, sourcing not as much as the required number may build your requesting cost and the danger of coming up short on stock amid crest demand periods.

It is prudent to make it a propensity to analyze the patterns of the past deal time frames and distinguish the future occasions that can influence your supply/demand before submitting the request with your provider. Consider consulting with various Amazon listing services given changing variables, for example, item quality, coordination ability, exchange controls (mainly while sourcing all around), esteem-included administration, and cost.

By maintaining a four-week inventory, sellers get enough time to source new products and restock their merchandise on time before the product goes out of stock.

Inventory Storage

Storing inventory demands special consideration. It is common to harm the items in warehousing tasks. Pack your items well with the goal that the article dealing with does not prompt harm. Ensure you store your inventory in a physically secure place. Ecological conditions, for example, temperature and moistness, additionally affect storage choices for various item classifications. Prepare your staff well to limit inventory administration issues.

Perishable Inventory

The First-in-First-Out component is an effective system to oversee perishable inventory or things with an expiry date. This implies the list obtained first ought to be dispatched first upon accepting a request.

This diminishes the danger of obsolete inventory and limits returns/guarantees for you in light of incidentally sending lapsed items to the clients. You should set up great distribution center administration rehearsals to actualize this system.

For perishable or aging products, you need to create an effective strategy to sell the product before they perish. Sellers can opt for Amazon's Inventory Performance Index, which provides them with recommendations like limited-time promotions and offers to sell these products quickly. Sellers can choose this feature when the stock remains unsold for over 90 days.

Final Thoughts on Inventory Management Solution

Now, you may know the importance and benefits of managing your inventory in the business. To sum up, if you plan to work your list the right way, you must find the perfect partner. Amazon Listing Services offers you the best ecommerce inventory management solutions your business desperately requires. Meanwhile, you can reach us at info@amazonlistingservice.com to find answers to all your queries and pricing details.