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3 Problems with Amazon Inventory Management – And Their Solutions

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. In this piece, we look at 3 significant problems you can encounter, and consider how you can address them.

Running out of inventory is a nightmare. No one on Amazon will buy products that are out of stock, because they’re accustomed to convenience. Your keyword rank, Best Seller rank, and revenue will rapidly fall.

Worse, 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

Products don’t disappear from one location and reappear in another. They need to be moved — swiftly, carefully, and efficiently — and kept safe along the way. When you aren’t on top of your supply chain management, your product quality and availability suffers, your buyer arrangements are threatened, and your resources are taxed.

There are two main things you need to watch out for:

Supplier mistakes

Suppliers aren’t unerringly reliable, and enough things can go wrong with the manufacturing process that a small incident can snowball into a complete shutdown. When this happens and suppliers (and their buyers) haven’t adequately prepared for the scenario, it can result in disaster. Relationships between buyers and suppliers can break down through resentment, causing rifts that can take a long time to resolve.

Inefficiencies in the process

That a supply chain is adequately functional doesn’t mean that it’s running optimally. If not periodically reviewed and revised, your supply process might be seriously inefficient, and it’s something that your supplier might not point out or even notice because they’re complacent and don’t really care. Look at every step in the chain: is it working as well as it could?

Now, while you can’t generally do too much about supplier mistakes (after all, they’re outside of your responsiblity), you can take steps to improve your supply chain through making operational changes.

There are two questions you need to ask: how efficient is your operation, and how can you improve?

How do you optimise supply chain management?

First, you should ensure that your supplier 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 won’t be able to deliver the items on time, which will lead to a bad reputation. Businesses are put at risk with nothing more than 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

As noted in the introduction, running out of stock is exceptionally damaging for any business that sells online. Where an offline shopper might be willing to return at a later date, an online shopper will be able to simply go to a different store and find what they’re looking for.

There are several reasons why you may find yourself low on stock, including the following:

Not considering your sales velocity

It’s surprisingly common for a seller to make the mistake of not following their sales velocity. If you’re unfamiliar with sales velocity, it consists of 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 that you’ll have 20 days until your inventory runs out. It might sounds extremely simple and obvious, but the figures aren’t going to be anywhere near that simple, and there’s enough to deal with as a seller that it could easily slip your mind. Carefully monitor your sales velocity or you’ll run into big trouble.

Not monitoring all sales outlets

Sellers aren’t limited to selling on Amazon, so you may also list your products through other sales outlets. This can be a problem if you don’t figure out precisely how to allocate your stock across the multiple sellers.

If you let one of the outlets slip your mind and it sees a significant and unexpected influx of orders, you could see your inventory run dry far sooner than you anticipated. To avoid this, be very careful with the sales you run, and factor in the entirety of your inventory, regardless of outlet.

Getting carried away with sales

Normally, selling as many items as you can is a good thing, but you can move too quickly and run into problems. Which seems more important: to offload your stock as fast as possible, or to avoid the many issues that result from running out entirely?

If you sell 1000 products over the course of a month, the distribution isn’t important: sold in one day or across 30, it’s the same amount of revenue, except the former leaves you with stock issues for the rest of the month.

Not factoring in holidays or seasons

Sales tend to go up at certain times of year, generally around holidays or notable seasonal changes. People want to buy gifts to celebrate occasions, mark the passage of time, and get hold of new items on the market (as well as old ones soon to leave it). Keep an eye on the calendar to make sure you stock up accordingly.

If you ship products internationally (quite common to Amazon), be fully aware of international holidays as well. Chinese New Year and Ramadan are popular ones likely to spike orders.

Forgetting about different shipping types

If a product typically ships with ocean freight, a cheap but slow method of transport, you’ll have more leeway with your stock because you’ll have the option of paying for a faster form of shipping if needed. If it generally ships by air, however, then you’ll find it difficult to save a sale when you unexpectedly run out of the product.

How can you stop running out of stock?

The first thing you should to if you keep running out of stock is take action to decrease your sales velocity. Limit any PPC (Pay Per Click) ads you have running, as well as any other marketing campaigns, and use look ahead to gauge how quickly you can restock. If you can only secure 500 products in the next 30 days, try not to sell more than 450 or so in that time (it’s best to have some kind of buffer).

You can also try adjusting your prices in addition to (or in place of) your marketing changes. Charge more for each product, and you’ll make more money per item while naturally reducing your number of sales. Just be careful not to raise your prices so much that you deter your prospective customers altogether, because they might get the impression that your prices are generally higher than they actually are.

Beyond that, you can use Amazon Seller Central to send you email alerts about your inventory, but this won’t help you much if you sell across multiple channels. If you do use multiple outlets, try an inventory management system such as  Skubana that can identify your safest stock level and adjust your sales configuration in real time to ensure you don’t run out.

3. Incorrect pricing and descriptions

Manually entering and adjusting prices and descriptions for numerous products will invariably produce input errors. You might price an item too high, leading to lost sales, or too low, damaging your profit margins.

You might mess up a vital keyword and see damaged internet and external search traffic. And if you make such a major mistake that you need to reach out to customers to correct it, you’ll earn (and fully deserve) bad reviews.

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, minimising the need to enter things manually and lowering the risk of data input problems.

There are various tools that can help you do this, but if you want to do it manually, you should consider keeping everything in a shared Google Sheets file. With that master file created, you can then take care to make the information there 100% accurate, before using it as a source for uploading information across multiple platforms.

Automate everything

All of these issues that can 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 save time, and protect you from a great deal of frustration.

Try using the following tool types:

Forecasting software helps you to 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.

Amazon inventory management software can monitor and automate your stock processes on a 24/7 basis, requesting human intervention only 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 [email protected] with any questions, or sign up for a 14-day free trial.

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