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Inventory Management: The FBA Sellers Guide To Maximizing Profits
Inventory management is an important thing that Amazon sellers often overlook because FBA sellers are mainly concerned with revenue growth, units sold, and traffic. But it's worth paying attention to inventory management because it impacts your profit.
Inventory management provides the most significant opportunity for Amazon sellers to save their money. If you know when and how much stock to order, you minimize your losses related to inactive listings or stock out.
As a result, the unwanted consequences are felt even when you are back to selling after you were out of stock. As long as you try to get back your lost Best Seller Ratings, your competitors' sales and reviews are growing.
How to prevent stockouts correctly?
Many sellers are concerned about "how much inventory to order" to prevent out of stock. But the correct way is to understand "when to order inventory".
So, here are a few metrics for calculating the ideal time to order inventory:
- Lead Time: The time it takes to deliver your inventory in Amazon warehouses from your order. Always consider the worst schedule because of customs delays, wire transfer problems, or production delays, affecting lead time. Think about all possible issues and plan the worst schedule.
- Sales Velocity: It is the average number of units that are usually sold per day. It's calculated as the number of units sold divided by the number of days. For example, if you sold 150 units in 15 days, the sales velocity is 10 units per day.
Note that sellers often calculate the sales speed and ignore the days when they are out of stock.
For example, out of those 15 days during 150 units were sold - 5 days, the product was out of stock. The sales velocity will be 15 units per day (150 units divided by 10 days of active sales).
Finally, at SageSeller Inventory manager, we do it automatically. We show you the current status of your products ("In stock", "Reorder", etc.), calculated the days left to stock out, and send you a notification when it's the time to reorder.
How Much Inventory To Order?
The primary advice is making purchases 2 or 3 times more than your lead time. For example, if the lead time is 30 days, you should have stocks for 60-90 days.
How much Inventory Should You Order with Your First Shipment?
Amazon sellers often don't think about a second delivery, which may cause problems in the future.
Remember about the following things:
- How much units will be used for promotional giveaways;
- What is your delivery time from manufacturing to Amazon warehouse;
- Estimate the sales speed based on competitors' analytics.
It's clear that accurate inventory management is the most effective way to save all money you could miss.
Using the SageSellers' Inventory manager, you can easily track stock levels and the next order's time. Thanks to this, you will be one step ahead of your competitors. We have a free month for you, and it's no card required.
Now is the pretty good time to start forecasting your stocks!