inventory management

Inventory Management 101

To some business owners, the supply chain management process is probably the most tedious part of the whole Amazon FBA experience. The reason for that is because it does not bring direct growth to the business in terms of sales, is repetitive to some part, and requires consistency and customer care.

That’s not what the Amazon coaches and consultants portray on social media. Rather, they portray an image where you would only focus on certain aspects like product development and marketing, and eventually you’ll get your passive income.

And yes, although this is achievable, usually the process is not so quick and not so easy. Unless you invest in someone doing the whole brand management for you. 

Usually, this is the typical path of an Amazon Seller and their reasoning:

  1. They get the idea that they want to do FBA on Amazon 
  2. They do the research for a certain industry and product and go ahead and create their Seller Central account
  3. They decide what product they are going to go with, calculate the margins, and make the order without paying too much attention to the quantity 
  4. While the product arrives they do all the branding, setup of the Seller Central, the listings, and many more things. Basically, everything related to their product/ brand being present on Amazon and driving traffic to there. 
  5. The product arrives, they launch it and the journey begins

Well, for some sellers the problems start very soon. And they may come from the place they have expected the least – sales of their own products. There are many examples of sellers focusing so much on the growth side of the business that they completely forget about reordering or maintaining relationships with their suppliers.

If their products are not in Amazon’s warehouses in time, they are in for a surprise. The momentum they gathered from the launch phase is gone, and it usually takes months for them to recover from this setback. Additionally, the relationships they’ve gained with the customers are forever gone. BSR starts to cool down and the honeymoon period they get from Amazon starts to expire.

All of this is easily avoidable and below are some basic information that will help sellers do that. First of all, you’ve got to understand what managing the inventory means. So…

What is Inventory Management?

Inventory management is the practice of planning the buying, storing, and selling of products to ensure the right type and amount of stock is available without holding excess. When we say products we mean both raw materials and finished goods.

The primary purpose of inventory management is to ensure there are enough goods to meet demand without creating excess inventory.

The benefits of strong inventory management are:

  • Better Inventory Accuracy
  • Reduced Risk of Overselling
  • Cost Saving
  • Avoiding Stockouts and Excess Stock 
  • More Organized Warehouse
  • Better Customer Experience

One measurement of good inventory management is inventory turnover. An inventory turnover reflects how often stock is sold in a period. A business does not want more stock than sales. Poor inventory turnover can lead to deadstock or unsold stock. Later that affects the IPI (Inventory Performance Index) and the BSR (Best Sellers Rank).

Most businesses maintain stock across multiple channels as well as in multiple locations. From a product perspective, the importance of inventory management lies in understanding what stock you have on hand, where it is in your warehouse and how much it’s coming in and out. 

Inventory management systems and software are a great way to track this because they provide you with a dashboard of pretty much everything. 

This is especially important when you are a bit further in the seller’s journey and have loads of SKUs that have to be tracked.

By taking care of the operations and the supply chain management you will have clear visibility of your business. That, in turn, will help you:

  • Reduce costs
  • Optimize fulfillment
  • Provide better customer service
  • Prevent product loss

How to become better at inventory management?

By tracking, acting, receiving feedback, and reiterating. Like everything else in life or business.

In inventory management, KPIs (key performance indicators) are metrics that help you monitor and make decisions about your stock. They matter because they offer information about sales, costs, turnover, etc. By discovering problem areas you can start adjusting your steps and track their improvement.

Some metrics that will help you achieve your KPIs are:

  • Sales KPIs
  • Receiving KPIs
  • Operational KPIs
  • Employee KPIs 

How do stock levels influence sales on Amazon?

Having good inventory management will help you with your Amazon account health. Amazon regularly reviews the performance of all sellers and notifies them when they are off-target. The goal of this is to give you the opportunity to improve your performance before it affects your possibility to sell.

What can cause your poor performance?

  • Bad Customer Service Performance
  • Not following Amazon policies
  • Bad shipping performance
  • Low IPI score

To maintain good account health, address all policy violations in a timely manner. Make sure you have overall compliance with Amazon’s terms, policies, and applicable laws to avoid account deactivation.

A good inventory management system and making sure all your products are on time will give you a chance to scale your business.

Here at AMZ Operations, we understand the importance of supply chain management. We take care of the inventory using top-of-the-line software and manual tracking which give us the assurance that everything is running smoothly.

We want to relieve the sellers of having to spend time on tasks related to tracking, ordering, fulfilling, stocking, etc. The business owner’s time is the most important asset, and that’s what is going to propel the Brand on Amazon, not the fulfillment of the everyday, mundane, operative tasks.

If lack of time or focus sounds like the missing piece that’s causing your business not to grow, or you simply want more time for you, your family or hobbies, please schedule a call with us to find out how we can help.

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