amazon inventory management

A lot of things can go wrong with Amazon inventory, and these headaches may last for months before everything gets sorted out.

Running out of inventory is a nightmare. No one on Amazon buys products that are out of stock. Your keyword rank, Best Seller rank, and revenue will fall every day your inventory isn’t updated. This gives your competition time to catch up; customers will purchase their products because yours are unavailable, competitors will get more positive reviews, and in the meantime, your company could even receive negative reviews because you ran out of inventory.

Then there’s the opposite of a lack of inventory; over-ordering. When you order more than there’s demand for, your items sit in a warehouse collecting dust and costing you storage fees that could be better used elsewhere; throwing launch party for a new product, expanding marketing campaigns, or developing new upgrades for your product or manufacturing process.

No matter what problems pop up, you and your team will have to deal with them swiftly and efficiently–then put processes in place so they don’t happen again. Here are 3 common problems with Amazon inventory management, and a few ways to solve them.

1. Poor supply chain management

When you aren’t on top of your supply chain management, your product quality and availability suffers.

Supplier mistakes

It’s possible that somewhere down the line, your manufacturer messed up and can’t ship your product on time. This could lead to resentment and an unhealthy relationship, not to mention lost sales.

Inefficiencies in the process

Another issue with your supply chain could be an inefficient process that your suppliers overlook due to complacency. Here’s are questions you need to ask when it comes to your supply chain: How efficient is your operation? How can you improve?

How do you optimise supply chain management?

First, you should work with a supplier that offers transparency. If they won’t tell you the steps of their production process, you won’t be able to help them improve or understand the risk of delays.

“If you don’t know where your raw materials originate from, what locations they will have to pass through, where your distributors are located and where your finished goods will travel, that could be costing you in efficiencies today and will hamper your risk management efforts in the future.” – Chris Kushmaul, 10 Supply Chain Gotchas, and How to Avoid Them

Take a look at your manufacturing process and learn what goes into your product. Give your suppliers a reasonable time period to produce your goods, and measure the time it takes from the moment you contact your supplier to the day that product is out of the warehouse. Find the inefficiencies and remove any unnecessary hurdles to delivery.

Don’t wait to find these inefficiencies until you are out of stock. If you wait too long, you can’t deliver the items on time, which leads to a bad reputation. Businesses are put at risk with even just a few negative reviews on Amazon.

Finally, once you understand the supply chain behind your product, you’ll be able to make informed requests from your supplier. Eliminate any unrealistic expectations for your supplier, and give them enough time to do their job.

2. Running out of stock

Without the supply, there are zero ways for the demand to catch up. You might be running low on stock because of the following reasons:

Sales velocity vs. inventory

Business owners make the mistake of not following their sales velocity. If you’re unfamiliar with sales velocity, it’s the number of units you sell during a given time period (days, weeks, months, quarters, years, or moons). Once you’ve figured out your sales velocity, you can see how many days or weeks you have left before your inventory runs out. For instance, if you have 1,000 units, and you sell 50 units every day, that means you have 20 days until your inventory runs out. If you aren’t careful with your math, you could lose money by not monitoring your sales velocity and inventory.

Not monitoring all sales outlets

In addition to Amazon, your business may work across multiple sales outlets. If you’re not careful, those separate outlets can drain your inventory in an instant. Pay special attention to any sales that are going on. If you have a sale in a physical store, or other ecommerce platform, you run the risk of your Amazon inventory getting depleted as well.

Over-selling

Normally, selling as many items as you can is a good thing, but if there is a shortage of your product and you cannot order more, be sure to ration out your inventory. This means you shouldn’t oversell in any given week, or you may be out-of-stock for months or more.

How can you stop running out of stock?

If needed, stop Pay-Per-Click ads (or other successful marketing campaigns) when you’re running low on stock, since you want to decrease sales. Fewer sales means you have more time to restock. Don’t eliminate successful campaigns altogether, but put them on hold until your inventory is stocked to prevent unhappy visitors.

Adjust prices. Even if you stop marketing, your sales may still increase. Raise your product pricing so you can produce the same revenue stream while your inventory is being restocked.

If you only focus on Amazon, they have Amazon Seller Central where you can get email alerts on your inventory, but this doesn’t work if you sell across multiple channels.

If you sell through multiple channels, operation solutions like Skubana can inform users what your safety stock level is, and constantly monitor/adjust in real-time to ensure you never run out of stock.

3. Incorrect pricing and descriptions

There are times your item may be mispriced, or your descriptions might be wrong. If your pricing is too high, you could miss out on sales. If it’s too low, it’ll cut into your profit margins. Even worse, if your price is so low that you have to reach out to customers to correct it, you’ll get bad reviews for being unprofessional.

If your descriptions are incorrect, or inconsistent across products, it’ll cause confusion for your customers, which can also cost you sales.

How do you synchronise prices and descriptions?

The best way to keep everything uniform is to sync up your prices and descriptions in one dashboard. There are multiple tools that help you do this, and sometimes the seller platforms themselves have this option as well. However, if you want to do it manually, a best practice would be to set prices and descriptions ahead of time in a shared Google Document, and then refer to that each time you upload information into a new platform. Do not write a new one each time.

Other Considerations

Plan for holidays

Sales tend to go up before the holidays, especially when the holiday is a gift-giving one. Look at your calendar to find popular holidays, and if you ship products internationally be aware of international holidays as well. Chinese New Year or Ramadan are popular ones that may influence a bump in orders. Assess whether you need to restock or adjust your product’s price, depending on the holiday.

Shipping costs

Your shipping costs will depend on how quickly you need your inventory stocked. Ocean freight is the cheapest, but also slowest method. Air cargo is more expensive, but can transport your inventory in days instead of months. Air express is the quickest, but also the most expensive way to transport your inventory.

Plan ahead for seasons and sales increases

Every industry has special seasons. If you sell swimming attire, and spring and summer is coming up, you can predict that sales will go up in the next quarter. Restock accordingly. If you’re a new business owner and don’t quite know when sales will increase or decrease, ask other industry leaders for their advice and experience.

Automate Everything

All the issues that could pop up with your Amazon inventory are annoying and time-consuming, but you don’t have to deal with them if you’re proactive about it. One of the best investments you can make is in tools to help you automate your business. It will not only save time, but also headache and frustration.

Forecasting software – These are tools that can help you plan your business moves. Use tools like Skubana to analyse your sales velocity with intuitive analytics, help you manage your inventory, and keep an eye on all of your metrics from one convenient dashboard.

Outsource Amazon Inventory Management – You can either do this through a software program or another business that specialises in Amazon inventory management. It’s hard for one person or team to monitor inventory 24/7, so let software help you do it instead and only pull in a human pair of eyes when needed.

Prevent mistakes, be proactive about your inventory, and keep your operation running smoothly by investing in tools, planning ahead, monitoring your inventory, and working with transparent providers.

This is a guest post by the Skubana team. Skubana is an all-in-one ERP system and operations platform designed for high volume sellers to run and automate their business. By unifying point solutions in one place, sellers can now diagnose what used to take weeks in seconds. It integrates with most e-commerce marketplaces, 3PLs and warehouses, provides profitability and multi-channel inventory management, and compiles all of your marketplaces on a single convenient dashboard. Reach them at info@skubana.com with any questions, or sign up for a 14-day free trial.

Written by EcommerceTips
Patrick Foster, ecommerce coach & entrepreneur.