When you’re just getting started selling on Amazon, you’ll probably have just one SKU and not much inventory to manage. As you grow, however, inventory management is vital. Inventory management is a little bit of an art, and a little bit of a science. You need to learn to balance between those two things.
Here are the rules:
■ Don’t run out.
■ Don’t order too much.
At the beginning, it’s tough to estimate how many units you’re going to sell, so expect to run out once or twice as you get started.
Once you’re up and running, aim to never run out of inventory. You can’t make money while you’re out of inventory, and your rankings will drop. If and when you do run out, and your ranking drops, don’t worry about it. As long as you restock that inventory in a reasonable amount of time, your rankings will quickly climb back to where they were.
Ordering too little inventory may cause you to run out, but if you order too much, your cash is tied up until you sell it all.
To manage your inventory well, you need to know your inventory lead time. This is the time it takes from when you order inventory from your supplier, to the time that inventory is available for sale.
You need to know all the aspects of this process, including:
■ Contacting your supplier and getting the order into their system. It could take 2-3 days or 2-3 weeks before they get your order into production (depending on the product and time of year).
■ Production time, which might include things like packaging.
■ Shipping the products to FBA.
■ Processing once that product arrives at FBA. This can be the same day, within 1-2 days, or more than a week. If you send inventory to FBA at a busy time of the year (such as right around Black Friday or right around Christmas), they can be swamped and overwhelmed.
• Number of units sold per day. This is a pretty easy number to figure out in Amazon, and you can use it to calculate how many days of inventory you have left. For example, if your average sales are 10 units a day and you have 100 units in stock, you have approximately 10 days left of inventory. Just be aware of spikes and dips, which can happen right near Christmas or other holidays.
When you’re ready to place more orders with your supplier, make sure you consider the following:
• Know the quantity discounts that you can get. Often, if you order just a few more units, you’ll see a significant drop in price.
• Consider asking your supplier for a discount every 2-3 times you order. They won’t give you a discount unless you ask for it, so you might as well.
• If you do run out of inventory, and it’s almost inevitable when you’re beginning, take the opportunity to make upgrades and enhancements to your products and/or packaging. This is also a good time to change the photos on your listing (especially to reflect any new packaging).
One of the most profitable things you can do is keep inventory IN STOCK. All the marketing in the world won’t make you any money if you don’t have a product to sell.
1. Log in to your seller central account.
2. Open the “Inventory” drop-down menu and click “Manage FBA Inventory.”
3. Look at the number in the “Fulfillable” column. That’s your current available inventory level.
To see what the other columns refer to, open the “Help” menu at the top right, select “Manage Inventory,” and click “Getting Started.”
■ Try to keep at least two weeks worth of inventory in stock.
■ Ask your supplier for quantity discounts.
■ Based on the supplier’s discounts, you may want to order more inventory to save money…but do NOT over-order inventory that you can’t afford.