Staying on top of your Amazon inventory can be overwhelming for a lot of Amazon sellers. It's like you either have too much inventory sitting in a warehouse accruing storage fees, or you are constantly running out of inventory and missing out on sales and losing best sellers ranking.
Neither of these scenarios are ideal and can affect your IPI score negatively. Having an IPI score over 400 gives you benefits like:
- granting you additional storage capacity in Amazon fulfillment centers;
- lowering your storage costs;
- and increases the number of products you can sell on Amazon with two-day shipping.
That's why it's important to keep an eye on your IPI and work towards increasing it as much as you can.
Thanks to sellerboard for providing this helpful information today! I hope you enjoy 🙂
How You Can Increase Your Amazon IPI Score
There are some things that you can do to raise and maintain your Amazon IPI score so that you can have the benefits mentioned above.
Here is a quick list of things you can do to increase your IPI score.
Maintain Adequate Stock Levels: Ensure that you always have enough inventory to meet customer demand without excessive overstocking.
Avoid Running Out Of Stock (Stockouts): Stockouts occur when you run out of inventory for a particular product causing a drop in keyword rank and BSR.
Optimize Inventory Performance: Improve your inventory turnover rate by focusing on products with higher demand and reducing inventory holding periods.
Minimize Excess and Long-Term Storage: Regularly review your inventory and identify products that are not selling well.
Improve Inventory Accuracy: Maintain accurate inventory records by regularly updating product listings, quantities, and variations.
Optimize Product Listing Quality: Ensure that your product listings are accurate, complete, and optimized for search.
Streamline Operations and Shipping: Efficiently manage your order fulfillment and shipping processes to minimize delays and errors.
Monitor and Act on IPI Insights: Regularly check your IPI score and the associated insights provided by Amazon.
The Two Most Common Inventory Issues Amazon Sellers Run Into
As an Amazon seller, you will likely run into these two inventory issues at some point. They are a normal part of selling on Amazon. Sure, you want to avoid them if you can, but if not, you can just take care of them as they come up.
Out Of Stock Inventory
The first issue is running out of inventory. Insufficient inventory management practices often cause this.
When you run out of inventory you:
- lose sales and profits
- lose your best seller ranking
- get your sponsored product ads disqualified
- lose SEO
- lose the buy box
No seller wants to experience those things. That's why it's so important to stay on top of your inventory management.
Later in this post, we will share eight things sellerboard can do to help you reduce your chances of running out of stock.
On the opposite end of running OUT of inventory, we have EXCESS inventory and overstock. It may not seem like a big deal, but holding excess inventory ties up valuable capital and warehouse space.
Excess Invenotyr can lead to:
- increased storage fees
- decreased cash flow
- overall reduced profitability
- increased competition
8 Tips For Optimizing Amazon Inventory Management
Since we don't want you to struggle with either of these two inventory issues, let's take a look at how you can better manage your inventory so that you always have the right products in stock at the right time.
Create Long Lasting Relationships With Your Suppliers
Suppliers play a vital role in the success of your business, and you can also help their business grow. To maintain healthy relationships with your suppliers, pay your bills on time, treat them respectfully, communicate regularly and constructively, and build goodwill by referring business.
Positive interactions with the key players in your supply chain not only ensure that you get the right products on time but also help you anticipate any manufacturing or shipment issues and keep track of lead time to avoid stockouts and overstocking
Lead time – is the time it takes for a product to be manufactured and delivered to Amazon’s warehouse.
Keep a close eye on supplier lead times and factor them into your restocking schedule. If lead times become longer than usual, adjust your ordering cycle accordingly to prevent stockouts.
🦾How sellerboard can help:
- keep track of your lead times
- know exactly when to reorder
- estimate the number of “Days of stock left” and “Days until next order” for each product
Monitor Your Sell-Through Rate
Your FBA sell-through rate refers to the number of products you sell in relation to your stock. The goal is to maintain an optimal balance between the amount of inventory you receive and the amount you sell.
The optimal sell-through rate for an Amazon seller can vary depending on various factors, such as the product category, seasonality, and competition. In general, a healthy sell-through rate is around 10-20%. This means that you are consistently selling a significant portion of your inventory within a given period. However, it's important to note that the ideal sell-through rate can differ based on individual business goals and circumstances. Monitoring your sell-through rate and comparing it to industry benchmarks can help you gauge the performance of your inventory management and make necessary adjustments to optimize your sales.
To achieve this balance, use sales forecasting methods or review past order quantities to estimate demand accurately.
🦾How sellerboard can help:
- Estimate demand accurately by analyzing your product sales trends;
- Choose any product from your listings and get a comprehensive picture of it’s sales history, as well as any other KPIs of your choice.
Quickly Restock Popular Products
To meet customer demand while avoiding excessive storage costs, it's important to keep a close eye on your sales and plan accordingly. By using sales forecasting methods and analyzing historical data, you can anticipate your inventory needs throughout the year.
It's also helpful to monitor the days of supply for your top-selling products and replenish your stock in a timely manner. This will prevent lost sales and improve profitability and growth potential by keeping popular products in stock.
Here are some tips to help you expedite the restocking process:
🚨 Set up inventory alerts: Utilize inventory management tools or Amazon's replenishment alerts to receive notifications when your stock levels reach a certain threshold. This allows you to proactively restock before running out.
📈 Forecast demand accurately: Use sales data, market trends, and seasonality patterns to forecast the demand for your popular products. This enables you to anticipate restocking needs and place orders in a timely manner.
📦 Consider FBA (Fulfillment by Amazon): Utilizing Amazon's FBA service can expedite the restocking process. By sending your inventory to Amazon's fulfillment centers in advance, you can benefit from their fast shipping and efficient order processing.
🕒 Implement just-in-time inventory management: Adopt a lean inventory management approach where you order inventory to arrive just in time to meet demand. This helps minimize excess stock while ensuring you have enough to fulfill orders promptly.
🚚 Expedite shipping methods: If possible, explore expedited shipping options offered by your suppliers or freight forwarders. This can reduce transit times and accelerate the restocking process.
By implementing these strategies, you can restock popular products quickly and efficiently, ensuring a steady supply to meet customer demand and maximize your sales potential on Amazon.
🦾How sellerboard can help:
- Set up automated inventory alerts.
- Calculate adjusted sales velocity;
- Forecast reorder times;
- Account for seasonality and projected monthly growth;
The adjusted sales velocity is the average number of units sold per day. This number is adjusted by the “weight” entered per period.
Seasonality refers to fluctuations in your sales caused by external factors and occur on a predictable schedule around the same time every year. If you turn on this option, your future sales will be forecasted, taking into account the specified coefficients. You can use sellerboard default coefficients or change them based on your experience.
Additionally, you can project a monthly growth rate in %, which will also be included in the forecast.
Keep An Eye On Your Margins
Maintaining healthy sales margins is a crucial indicator of a business's success. To ensure that your profits are in good health, you must track all your operating costs, fees, and indirect expenses.
While Amazon Seller Central provides tools and reports to track your direct fees and some indirect expenses, it may only cover some of them comprehensively.
Within Seller Central, you can access reports that provide insights into your direct fees, such as referral fees, fulfillment fees, and advertising costs. These reports help you understand the costs directly associated with selling on Amazon.
However, when it comes to tracking indirect expenses, such as marketing expenses, software subscriptions, packaging materials, or other operational costs that Amazon does not directly charge, Seller Central may not offer specific tools or reports.
To effectively track and manage these indirect expenses, it is recommended to utilize external accounting software or spreadsheets. By integrating your Amazon sales data with your accounting system, you can keep a detailed record of all expenses associated with your Amazon business, including both direct fees and indirect expenses.
🦾How sellerboard can help:
- Get a complete understanding of all factors that affect profit margins;
- Manage cost of goods by batch, period or marketplace;
- Account for one-time and recurring indirect expenses.
Plan For The Unexpected (Analyze and Forecast)
Sometimes Amazon sellers face obstacles that can disrupt the smooth flow of operations. For instance, you may encounter issues such as supplier delays, shipping delays, customs delays, and FBA warehouse delays.
The COVID pandemic serves as a perfect example of such disruptions, as it resulted in manufacturing and supply chain disruptions that made it difficult for 53% of U.S. consumers to find products online from March 2020.
To mitigate such issues, it's advisable to order backup units, just in case something happens along your supply chain. You can store extra units in your warehouse or use a third-party storage/fulfillment center. This will help you maintain stock in FBA without worry, or even fulfill orders using FBM if there's a delay.
However, it's important to note that this strategy is only recommended if you can accurately predict the demand for your product as well as order and store additional units. You shouldn't order extra units if you're short on capital or storage space.
🦾How sellerboard can help:
- Create a FBA buffer. When calculating the time to reorder and the recommended amount to reorder, sellerboard will ensure your stock doesn't fall below this buffer.
Reduce aging and excess inventory to increase your profitability
Mark down products or create special deals to liquidate aging inventory or overstock products. While you may be selling products for less than you envisioned, this will help you avoid sunk costs of continuing to stock the products in your storage facility.
🏷️ Some ideas of special deals that might help you start:
- Run promotions;
- Use coupon codes;
- Try buy-one-get-one deals;
- Offer steep discounts.
🏷️ Lowering your price is an effective way to accelerate sales for slow-moving inventory. While you may take a slight loss in the sale price, it could be less than what you would owe in long-term storage fees if the units continue to sit in storage.
☝️ Raise your keyword bids if you are running ads for your products. By targeting specific keywords, you can increase your chances of getting in front of more customers and moving the product. This strategy, combined with lowering your price, is a surefire way to move stale inventory.
↩️ Creating a removal order is also an option if you have another place to store inventory other than Amazon. You can do this by creating a removal order in Seller Central and having the inventory sent to you before getting hit with large storage fees. Amazon may also run promotions where they will remove the inventory for free.
❌ Liquidation is usually a last resort, but if all other efforts fail, you can try to sell your remaining inventory in bulk at a large discount. This will allow you to regain some capital that can be reinvested into a better-selling product.
🤲 Another option is to donate the inventory to charity organizations or non-profits such as Goodwill. You can often write off the donated inventory on your taxes to compensate for the losses.
No matter what strategy you choose, it's important to take action to move your excess inventory. This will free up space in your warehouse and help avoid unnecessary storage fees, keeping your business healthy and profitable.
🦾How sellerboard can help:
- Optimize PPC bidding to reach a higher ACoS
Lower The Demand If You Are Running Low On Inventory
To maintain your in-stock rate and improve your IPI score, consider raising the price and temporarily pausing advertising campaigns if you are running low on inventory. This will help manage the demand and prevent running out of stock, which can negatively impact your rankings and sales. It is better to slow down sales slightly than completely run out of stock.
Once you replenish your FBA inventory to a healthy level, you can resume your normal price points and advertising campaigns to drive sales.
⚠️ It is generally advisable not to pause your campaigns since Amazon tends to favor keywords and campaigns that run consistently over a longer duration rather than shorter periods.
Choose The Right Inventory Management System
Here are some key considerations to help you make the right choice:
📈 Scalability: Ensure that the system can accommodate your growing business needs and handle increasing inventory volumes.
🔗 Integration: Look for a system that seamlessly integrates with Amazon Seller Central and other essential tools you use for inventory management, such as order management systems or shipping software.
⚙️ Automation: Consider a system that offers automation features like inventory tracking, replenishment alerts, and order synchronization to streamline your operations and minimize manual tasks.
🔴 Live data: Look for a system that provides real-time visibility into your inventory levels, sales, and other crucial metrics, allowing you to make informed decisions.
🔮 Forecasting capabilities: Find a system that offers robust demand forecasting features to help you predict future inventory needs accurately and avoid stockouts or overstocking.
📊 Reporting and analytics: Choose a system that provides comprehensive reporting and analytics tools to gain insights into your inventory performance, sales trends, and profitability.
🤖 User-friendly interface: Consider a system that is easy to navigate and user-friendly, as it will save you time and reduce the learning curve for you and your team.
By carefully evaluating these factors and understanding your specific inventory management requirements, you can select an inventory management system that best fits your business needs on Amazon.
🦾How sellerboard can help:
Firstly, it offers scalability, allowing sellers to handle their growing inventory volumes effortlessly. Secondly, it seamlessly integrates with sellers' Amazon accounts, ensuring a seamless flow of data. Moreover, sellerboard's inventory module provides powerful automation features such as inventory tracking, replenishment alerts, and purchase order management, reducing manual efforts and saving time.
Additionally, the Inventory module offers robust sales forecasting capabilities and provides reorder quantity recommendations, allowing sellers to avoid stockouts and overstocking. Lastly, it delivers in-depth profit and inventory analytics, empowering sellers to make informed decisions based on comprehensive data.
If you would like to learn more about the sellerboard Inventory module, check out these instructional videos:
🎥 Inventory planner overview
🎥 Purchase orders overview
We are happy to partner with sellerboard and hope this article helped you see how important inventory management is and how sellerboard can help you stay on top of these important tasks!