Inventory management techniques and best practices

Inventory-management systems track products from procurement to shipment. They can help you make critical business decisions such as how many units you need, your optimal inventory levels, when to reorder items, and which products to liquidate or remove.

The right inventory system can give you a realistic picture of what stock you have available to sell and help you run your business efficiently. It can be a manual count and ledger, a spreadsheet, or an automated software solution.

When an inventory-management system works correctly, you know what products you have available at a glance, along with important metrics like available shelf space, the amount of units in stock, and the precise storage location of individual products.

When you effectively manage your inventory, you can enjoy several benefits that boost your business. Here are a few.

Buying the right amount of products at the right time can reduce storage costs and prevent missed sales. You can also improve cash flow by paying suppliers on time and avoiding penalties or fees.

Warehouse storage costs cover rent, utilities, maintenance, security, insurance, labor, equipment, and software. Inventory management optimizes the use of storage space, reduces the risk of stranded or dead inventory, and increases the efficiency of your operations.

Monitoring your inventory to sales ratio can help you understand how quickly inventory is turning into sales, allowing you to make more informed purchasing decisions.

Accurate inventory helps avoid out-of-stock items, overstocks, and misplacements. It also optimizes warehouse layout, storage, and replenishment that helps reduce fulfillment and travel time.

Shipping delays, errors, and out-of-stock products can cause customer dissatisfaction and harm your business’s reputation. Knowing how much inventory you have on hand so you can fulfill orders swiftly helps delight customers.

“Inventory aging” is a term used to describe items in a warehouse that are not selling quickly or at their full retail price. Inventory management can help prevent this by tracking sales velocity, forecasting demand accurately, and improving stock replenishment.

An automatic reordering system can help simplify the inventory tracking process. It can automatically order products as they run low, which avoids the risk of losing track of which products have been ordered and which have not.

Inventory control is the process of ensuring you have the right number of products to fulfill customer orders. Optimizing inventory is necessary for understanding how much product you have at any given moment, when to expect the next shipment, and how to fulfill customer orders quickly. Amazon offers several solutions to get your inventory and fulfillment under control.

Fulfillment by Amazon (FBA) lets you outsource order fulfillment to Amazon. When a customer makes a purchase in the Amazon store, we pick, pack, ship, and handle customer service and returns. Shipping with FBA costs 70% less per unit than comparable premium options offered by other US fulfillment services.

FBA can not only help you lower costs, but it can save you time so you can focus on growing your business. You can also use programs like Subscribe & Save to help to increase sales and secure repeat customers. Or use Buy with Prime to offer the Amazon experience on your other sales channels.

Fulfilled by Merchant offers a suite of Amazon tools that help you save time and money when you fulfill customer orders yourself.

Sync inventory and streamline orders from Amazon and other sales channels. Get great shipping rates and offer customers fast, reliable delivery while enjoying increased account-health protection for delivery-related claims.

Supply Chain by Amazon is a fully automated set of supply chain services that gets products from manufacturers to customers around the world. It’s a complete end-to-end solution that includes programs like FBA and Multi-Channel Fulfillment (MCF). Supply Chain by Amazon keeps products in stock, automates inventory replenishment, provides faster and more reliable shipping, and can significantly lower costs.

Multi-Channel Fulfillment (MCF) lets you outsource fulfillment for orders placed on your own website or other sales channels. With MCF, we use your pooled FBA inventory to provide fast, low-cost, and reliable fulfillment for multiple ecommerce channels.

For sellers who sell across multiple channels and websites, free Amazon inventory management software like Veeqo can sync and track inventory across channels, locations, and FBA. When you make a sale on one channel, Veeqo makes sure your inventory levels are updated across multiple channels, preventing overselling.

Having stock in your inventory is a must for a product-based business. But inventory can also hurt your business if mismanaged. Here are common inventory problems and some ways to avoid them.

Having enough stock to ship out customer orders quickly is a good thing—but having too much inventory can cost you.

Excess inventory can tie up resources and run up storage costs. Aside from incurring unnecessary fees, you may be unable to respond quickly to shifts in customer demand, while aging inventory could force you to liquidate.

On the flip side, it’s essential to have enough inventory in stock to meet customer demand. Low stock levels can hurt your sales and brand reputation. No one likes to order an item only to find it’s out of stock.

The right inventory level for your business may depend on seasonality, sales history, or customer demands. Run a demand-planning analysis to arrive at the optimum inventory level.

Stranded inventory is sellable inventory that may be in a fulfillment center or warehouse but isn’t listed for sale on your site. It hurts your business because it ties up your cash. You paid for the products and are paying for storage, but customers can’t buy.

Stranded inventory leads to lost sales, storage costs, and lost storage capacity. As an Amazon seller, you can easily track and fix stranded inventory through Seller Central.

Some products like food, supplements, and cosmetics have sell-by or expiration dates. When you hold inventory past its sell-by date, your investments go down the drain.

Tracking products through a system can help you avoid spoilage, allowing you to run promotions or discounts on items at risk of spoiling soon.

Achieve profitability, scalability, and sustainability by improving inventory management for your ecommerce business. Here are some tips to help you run your business smoothly and efficiently.

By doing regular audits, you can catch issues before they become an even bigger problem. Regular audits ensure inventory is at the right level.

As a rule of thumb, you should conduct inventory audits at least one to two times a year. If you can audit quarterly, even better.

Cycle counting is a process that requires you to count a small amount of your inventory at a specific time, usually on a set day, without handling the entire stock in one go. It can be a more manageable way to ensure your inventory is accurate and up to date.

Amazon has several inventory-management solutions.

Promote positive interactions with the key players in your supply chain to get the right products on time and anticipate any manufacturing or shipment issues.

Multi-channel inventory systems can help scale your business by making it easier to sell across more channels. Tools automatically sync your sales and inventory so you have more time to expand to new selling websites and reach new customers. This approach also helps avoid overselling and underselling across multiple channels.

Amazon’s Multi-Channel Fulfillment (MCF) has an inventory management system, Listing Mirror, that helps prevent these issues by synchronizing inventory levels across multiple channels.

Ecommerce businesses can reduce the risk of errors and improve inventory accuracy with an automated fulfillment system, like FBA, that automatically updates inventory levels in real time, tracks sales and purchases, and generates accurate reports.

How your business handles returns is as important as fulfilling products you’ve sold.

Reverse logistics moves goods from customers back to the seller or manufacturer. Once an item is received, it can include product repairs and maintenance, refurbishing or remanufacturing defective items, or repackaging products.

When managed properly, reverse logistics can help improve customer satisfaction and build customer loyalty, reduce costs by recycling and reusing material, generate revenue, and improve your brand’s reputation. With FBA, you can make reverse logistics easier by outsourcing customer returns to Amazon.

Avoid sunk costs (money that has already been spent and cannot be recovered) by marking down prices or creating special deals to liquidate aging inventory or overstock products.

Stocking popular products and tracking how many days of supply you have can also help your business stay profitable. Monitor sales and gauge past order quantities to plan how much inventory you need throughout the year. Keep enough backup units to ensure you won’t run out of inventory due to supply chain mishaps.

When the holidays roll around, demand can increase. So look back at sales data from previous years to predict what could be popular in the coming season. With sales data, you’ll know which products to stock up on and which ones might not be worth the extra shelf space.

Also, communicate with suppliers early. Let them know what you expect so they can prepare too. The last thing you want is to place an order and find out it’s delayed because your suppliers were surprised.

If you use FBA, it’s a good idea to start early. To avoid any delays, make sure to send in inventory ahead of time. Also talk with your suppliers early to ensure they can handle your increased needs. And remember to keep an eye on inventory levels in Seller Central so you can adjust when needed.

Sustainable inventory management is all about reducing waste and using resources wisely. You can start by evaluating current inventory levels and identifying items that don’t sell well. Consider donating or recycling those products instead of throwing them away. This not only clears up space, but helps the environment.

Look for ways to improve your supply chain efficiency. For example, you can work closely with suppliers to get smaller, more frequent shipments instead of large orders that might end up as excess stock.

Using eco-friendly packaging can also make a difference. Think about how every decision in your inventory process can reduce your effect on the planet. Embracing these practices strengthens your business and shows customers that you care about sustainability.

When sellers choose to use FBA, they automatically gain access to Amazon’s machine learning-based inventory-management system. This system uses inputs like the cost of goods sold (COGS), shipment time, and other Amazon data to forecast customer demand and set optimum inventory levels.

For FBA sellers, Amazon offers a suite of inventory-management tools right in Seller Central. These tools help ecommerce businesses manage their FBA inventory efficiently and offer faster order fulfillment.

The Inventory Performance Dashboard in Seller Central sends an alert when stock quantities are running low and provides demand planning and forecasting to suggest recommended inventory levels and shipment timelines. The dashboard displays essential inventory information such as sell-through rates, aging stock alerts, and recommended actions to optimize storage.

Inventory performance is a measure of inventory management and replenishment. The Inventory Performance Index (IPI) is a metric for Amazon sellers that measures how efficiently they manage their FBA inventory—like a credit score for inventory efficiency.