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What are the 5 essential tips for FBA sellers to optimize their inventory management?

This guest blog is written by Blair Forrest, chief marketing officer at AMZ Prep, a Riverbend Consulting partner.

As an FBA seller, it’s important to have a well-organized inventory management system.

Managing inventory can be challenging, but optimizing it is critical to the success of your FBA business.

In this article, we provide you with five essential tips that help optimize your inventory management and ensure your FBA business runs smoothly.

Key points:

  • Understanding sales velocity is crucial for effective inventory management
  • Setting reorder points can help you avoid stock-outs and ensure that you always have enough inventory on hand
  • Tracking inventory levels regularly can help you identify any potential issues with your inventory management system
  • Utilizing Amazon’s inventory management tools and outsourcing inventory management can help you optimize your inventory storage

Getting started

Effective inventory management is critical to the success of any FBA seller. By optimizing your inventory management, you can avoid stock-outs, reduce storage costs, and improve your bottom line.

What are the 5 essential tips for FBA sellers to optimize their inventory management?


1. Understand your sales velocity

Sales velocity is the rate at which your products sell. Understanding your sales velocity is crucial for effective inventory management. By analyzing your sales data, you can determine which products are selling quickly and which ones are not. This information can help you make informed decisions about when to reorder products and how much to order.

To calculate sales velocity, you need to know how many units of a product you sell per day or per week. Use this formula:

Sales Velocity = (Number of Units Sold / Time Period)

What are the 5 essential tips for FBA sellers to optimize their inventory management?
A great visualization of the sales velocity equation

For example, if you sell 100 units of a product in a month, your sales velocity would be:

Sales Velocity = (100 / 30) = 3.33 units per day

Understanding your sales velocity can help you determine which products you should reorder and when.

2. Set reorder points

Once you understand your sales velocity, you can set reorder points for each product. A reorder point is the inventory level at which you should place a new order to ensure that you have enough stock to meet customer demand. By setting reorder points, you can avoid stock-outs and ensure that you always have enough inventory on hand.

To set reorder points, you need to consider several factors, including lead time, safety stock, and demand variability. Lead time is the time it takes for a supplier to deliver an order.

Safety stock is the extra inventory you keep on hand to protect against unexpected demand fluctuations or delays in delivery. Demand variability is the degree to which customer demand fluctuates.

To calculate your reorder point, use this formula:

Reorder Point = (Average Daily Sales x Lead Time) + Safety Stock

For example, if your average daily sales are 10 units, your lead time is 7 days, and your safety stock is 20 units, your reorder point would be:

Reorder Point = (10 x 7) + 20 = 90 units

By setting reorder points for each product, you ensure you always have enough inventory on hand to meet customer demand.

3. Track your inventory levels

Tracking your inventory levels is an essential aspect of effective inventory management for FBA sellers. By keeping track of your inventory levels, you can ensure there is always enough stock to meet customer demand without overstocking and incurring unnecessary storage fees.

There are several ways FBA sellers can track their inventory levels, including using inventory management software or spreadsheets. These tools can help you keep track of your inventory levels, sales velocity, and reorder points.

The best inventory management tools:

  • Brightpearl: Best for the omnichannel merchant selling on Amazon
  • Sellbrite: Straightforward and simple for small businesses
  • Orderhive: Crazy advanced tracking for the detail-oriented entrepreneur
  • QuickBooks Commerce: Solid, trusted solution for a small business

One important consideration when tracking inventory levels is the frequency at which you do it. The frequency will depend on your sales volume.

If you have a high volume of sales, you may want to track your inventory levels daily to ensure that you always have enough inventory on hand. On the other hand, if your sales volume is lower, tracking your inventory levels weekly may be sufficient.

When tracking your inventory levels, it’s also important to be aware of any trends or patterns in your sales data. For example, if you notice that a particular product sells more during a certain time of year, you may want to adjust your inventory levels accordingly.

Additionally, if you notice that a product is not selling as well as expected, consider reducing its inventory levels or promoting it to increase sales.

By tracking inventory levels regularly, you optimize your inventory storage and reduce storage costs by avoiding overstocking. It also helps you identify slow-moving or stagnant products and take action to improve sales.

What are the 5 essential tips for FBA sellers to optimize their inventory management?
Jungle Scout’s inventory management system

4. Utilize Amazon’s inventory management tools

Amazon provides FBA sellers with a variety of inventory management tools. These tools optimize your inventory storage and reduce storage fees. For example, Amazon’s FBA Inventory Age report helps identify which products have been in Amazon’s warehouse for too long. By identifying these products, you can take action to reduce their inventory levels or promote them to increase sales.

Another useful tool is the FBA Multi-Channel Fulfillment tool. It allows you to fulfill orders from other channels, such as your own website, using your FBA inventory. This tool helps reduce the need to store inventory in multiple locations.

Also, Amazon provides an Inventory Health Report. It helps identify potential inventory issues, such as stranded or excess inventory.

5. Outsource your inventory management

If managing your inventory is too time-consuming or complex, you may want to consider outsourcing it. Inventory management outsourcing frees up your time to focus on other aspects of your FBA business. Additionally, outsourcing provides access to expert inventory management services that optimize your inventory storage while reducing storage fees.

There are many companies that specialize in Amazon inventory management.

These companies can handle all aspects of your inventory management, from setting reorder points to tracking inventory levels to managing returns.

Wrapping up

Effective inventory management is critical to the success of any FBA business. By following these five essential tips, you can optimize your inventory management and ensure that your FBA business runs smoothly.

Remember to understand your sales velocity, set reorder points, track your inventory levels regularly, utilize Amazon’s inventory management tools, and outsource your inventory management if necessary.

FAQs

What is sales velocity, and why is it important for FBA sellers?

Sales velocity is the rate at which your products sell. Understanding your sales velocity is crucial for effective inventory management. By analyzing your sales data, you can determine which products are selling quickly and which ones are not. This information can help you make informed decisions about when to reorder products and how much to order.

What are reorder points, and how can they help FBA sellers?

Reorder points are the inventory level at which you should place a new order to ensure that you have enough stock to meet customer demand. By setting reorder points, you can avoid stock-outs and ensure that you always have enough inventory on hand.

How can FBA sellers track their inventory levels?

FBA sellers can track their inventory levels using inventory management software or spreadsheets. They should track their inventory levels daily or weekly, depending on the volume of their sales.

What are some of Amazon’s inventory management tools?

Amazon provides FBA sellers with a variety of inventory management tools, including the FBA Inventory Age report, the FBA Multi-Channel Fulfillment tool, and the Inventory Health Report.

Should FBA sellers consider outsourcing their inventory management?

If managing inventory is too time-consuming or complex, FBA sellers may want to consider outsourcing it. Outsourcing can free up their time to focus on other aspects of their FBA business and provide access to expert inventory management services.

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