Amazon Inventory Management Guide

Amazon inventory management is the process of tracking and organising the products you sell on the Amazon marketplace. Inventory management keeps track of your stock levels, incoming shipments, and product orders so you have all the data you need in one place.  

Amazon sellers can use Amazon FBA, which is Amazon’s in-house fulfilment service, or handle their own fulfillment. Amazon FBA has some built-in inventory management features, but many brands opt to also use external inventory software. Third-party inventory management platforms offer advanced features that Amazon FBA doesn’t offer, which can be very helpful as you grow your business.  

Regardless of the products you sell or the size of your business, you need a reliable inventory management system that works with Amazon. Inventory management helps you provide great customer service while keeping costs in check. Here’s why Amazon inventory management is so essential.  

Prevents stockouts 

Inventory management ensures that your business has the inventory you need, when you need it. An effective system uses consumer data and predictive analytics to help you forecast upcoming demand levels. This way, you can prepare for busy periods and avoid stockouts for in-demand products.  

Stockouts often result in lost sales and can be very costly. Consumers might turn to your competitors to meet their needs. It was estimated that inventory distortion (having too much stock or not enough stock) cost businesses about $1.77 trillion in 2023, highlighting just how expensive stockouts can be. Inventory management helps prevent this problem to keep your customers happy.  

Keep storage fees down 

If you’re using Amazon FBA for your inventory management, you’ll need to pay storage fees. Storage costs start at $0.78 per cubic foot, per month, with lower bulk rates available for oversized products. Amazon also charges extra fees for aged inventory. This means the longer your products are sitting in Amazon’s warehouses, the more you’ll pay per cubic foot.  

These storage fees can quickly add up with high inventory volumes. If you’re storing excess product you don’t need, you could be costing your business hundreds or even thousands of extra dollars each year.  

Inventory management helps you avoid these excess fees by helping you plan for slow periods. With effective planning, you won’t order more product than you need, reducing the amount of costly overstock sitting in storage. Inventory management can also help you identify which products are unlikely to meet sales targets, so you can remove them from storage as needed.  

Operate more efficiently 

Effective inventory management helps you operate your business more efficiently. With clear inventory data available, you can identify the most effective times to restock, cut back on unnecessary costs, and remove roadblocks from your operations. This ultimately helps your business operate more profitably while providing excellent service for your customers.  

Improve your Amazon rankings 

Amazon has strict requirements for its suppliers when it comes to inventory management. Each supplier is scored on the Amazon Inventory Performance Index (IPI). Suppliers with high IPI scores are more likely to have their products featured prominently in Amazon’s search functions.  

Having an inventory management system in place can help you increase your IPI score, which results in better brand visibility. Your IPI score is based on the past three months of inventory levels and sales.  

Keeping excess inventory on hand or frequently running out of stock could harm your IPI score, while maintaining accurate inventory levels can increase it. Amazon has also recently implemented low stock fees, so you could be financially penalised for stockouts as well.  

Increase data accuracy 

Effective inventory management platforms will give you access to real-time data. This gives you a more accurate look at what you have in stock at any given moment.  

This increased data accuracy can help you avoid shipping errors and product losses. Having accurate data on hand can also help you make more informed decisions about your businesses’ future.

There are many challenges that come with managing your Amazon inventory, particularly as your business grows and you expand your product line. Here are some of the most common challenges with Amazon inventory management and how to address them.  

Stockouts 

Running out of inventory leaves customers frustrated and can hurt your IPI score. Amazon prefers to promote businesses that consistently have products available. Running out of stock just one time could penalise your account for weeks or months afterward, making it more difficult for customers to find your products.  

Stockouts can sneak up on you quickly if you’re not careful. For example, if you don’t order enough product in pre winter, you could find yourself out of stock by the time the holiday season runs around. Stockouts can also happen when launching new or limited-edition products, as it can be difficult to estimate demand for these items ahead of time.  

To prevent stockouts, evaluate your sales data thoroughly when launching new products and stock your inventory accordingly. If a product is selling faster than expected, try raising the price to slow sales until you get a chance to restock.  

Capacity limits 

In 2023, Amazon implemented new storage capacity limits for FBA sellers. These new capacity limits gave Amazon sellers more space and flexibility than they had under the previous system.  

However, sellers will still need to be aware of these capacity limits and manage their inventory accordingly. For high-volume businesses, this means timing your inventory reorders perfectly to ensure you have enough stock without going over your limits. Using an advanced demand planning tool can help you navigate these challenges.  

Sellers can view their current capacity limit and forecasted capacity limits for the next two months in their FBA dashboard. High-volume businesses can also request increased capacity limits to meet demand.  

Costly fees 

Amazon FBA services come with several different fees. All sellers need to pay seller’s fees to use the system, as well as referral fees for each product sold. When using Amazon FBA, you’ll also need to pay storage and fulfilment costs.  

For many businesses, the cost of these fees is a worthwhile expense. Selling on Amazon exposes your products to a large audience and can help boost your sales significantly. However, as these fees keep increasing, they can start to interfere with your budget. For example, Amazon may charge you additional fees for aged inventory storage or for not having enough inventory to meet demand.  

An inventory management tool can help you plan effectively to avoid these unnecessary fees. You’ll need to find a middle ground to ensure you’re meeting demand without incurring unnecessary additional costs.  

Stranded inventory 

Stranded inventory happens when you have inventory stored by Amazon FBA that isn’t connected to a current product listing. You’ll still be charged for storage, but customers won’t be able to purchase the product. Not only is this costly, but it can negatively affect your IPI score if it isn’t remedied.  

Your inventory may become stranded without your knowledge if there is an unexpected listing error. This could happen as a result of missing information, pricing issues, or other issues that cause Amazon to pause or remove the listings.  

When this happens, you’ll need to re-attach the product to a live listing. On your Inventory Dashboard, there is a tab labeled “Fix Stranded Inventory”, which will identify all your current stranded listings.  

You won’t get any notifications if your listings are stranded, so you’ll need to check this tab regularly. Proactively removing your stranded inventory from storage will help you avoid excess fees and ensure that your audience has access to your products.  

In some cases, you’ll be able to fix your stranded inventory automatically by using “Edit Automatic Action Settings”, which can force Amazon to relist your inventory automatically. In other instances, you may need to manually relist your products or remove them from the warehouse.  

Outdated listings 

The Amazon marketplace moves fast, and to keep up, you’ll need to update your listings on a regular basis to ensure they remain accurate. In particular, you’ll need to adjust the pricing for each listing to keep things competitive and ensure that costs are consistent across your entire digital ecosystem. If you have a Professional Seller account, Amazon’s Automate Pricing tool can handle repricing for you.  

You’ll also need to make sure your listings are updated with optimal keywords. Having high-traffic keywords in your product titles and descriptions can give your listings more visibility in Amazon search results.  

Keyword trends change on a regular basis. You’ll need to conduct keyword research to identify new high-traffic keywords that are relevant to your products and implement them in your listings.  

Failing to update your product listings on a regular basis can make your products difficult to find, giving your competitors a chance to surpass you. As a result, your inventory could end up sitting in storage for an extended period of time, resulting in hefty additional storage fees.  

When you set up your Amazon FBA seller account, you’ll get access to the FBA Inventory dashboard.  

The first step is to upload your products to the catalog. You can upload new products or search for existing products in Amazon’s library. Once you’ve created your listings, you’ll see them in the Amazon inventory management section. You can use the “Shipment” tab to send your products to Amazon for fulfillment.  

On the Inventory Overview page, you’ll see your IPI score. Amazon will also highlight which products should be restocked soon, as well as any excess inventory that needs to be addressed.  

These built-in inventory management features are helpful as you build up your seller profile. However, this platform does have some limitations. For example, its inventory planning features are very limited. This can make it difficult to plan for demand fluctuations, especially if you’re new to selling on Amazon.  

Additionally, if you’re selling your products on other e-commerce platforms too, you won’t be able to manage that inventory on Amazon. This means you’ll need two separate inventory management systems, which can create confusion.  

Using a third-party software platform that integrates with Amazon can help solve these problems. Third-party inventory management platforms have more advanced inventory management features, giving you a more accurate picture of your current inventory levels. Some inventory management platforms also have features to help with manufacturing, purchasing, and sales.

An efficient inventory management system is key for success on Amazon. So, what to adopt to overcome the limitations that Amazon FBA’s inventory management tools present?  

Unleashed offers advanced inventory management tools to take your Amazon strategy to the next level. Unleashed helps you identify the perfect stock levels for each product, set up automated reordering, and track inventory levels across multiple Amazon warehouses. Additionally, Unleashed integrates seamlessly with Amazon FBA and with other e-commerce channels, making it your one-stop inventory management platform. Check out the Unleashed integration with Amazon.

Got a question about the integration? Contact us or start a free trial to see it for yourself.