Amazon inventory management guide for 2022 and benefits of using a system

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High-growth businesses can’t ignore how impactful listing their products on Amazon are for sales, and automated Amazon inventory management is quickly becoming an essential part of any growing ecommerce business. 

According to recent Amazon statistics posted on TechJury, Amazon has 300 million active users, and 197 million people visit Amazon every single month. Almost two-thirds of Americans have purchased something on Amazon, and 95 million Americans have an Amazon Prime Membership. 

Shopping on Amazon fits into today’s consumer’s high expectation for an online shopping experience. 

Consumers want a personalized, seamless shopping experience that ends with a simple check-out process, quick delivery and free shipping. Nine out of ten consumers prioritize retailers that offer convenience and 74% have abandoned shopping carts with complicated check-outs, according to Linnworks research

Retailers aren’t ignoring the popularity of Amazon. In order to reach new sellers during 2021, 52% of retailers surveyed in Linnworks research launched products in online markets and 79% of retailers surveyed are now selling on Amazon. 

The addition of listing products on this massive marketplace means getting products in front of millions of people and a whole new audience. However, there are challenges  that come with selling on the Amazon marketplace when it comes to managing inventory.  

In this article, we explore how an Amazon inventory management system tracks and manages inventory, makes for a more efficient business model, and ultimately results in an improved shopping experience for consumers. We also talk about what to consider when managing Amazon inventory and common challenges many Amazon sellers face. 

What is Amazon inventory management?

Amazon Inventory Management allows businesses to keep track of all of their inventory and orders on the Amazon sales channel through automation. An Amazon inventory management system can make the entire process of managing your inventory more efficient and simpler in many ways – saving money and freeing up more time to focus on other areas of the business.

Automating key business practices with the inventory management system can ensure that inventory across all of the selling platforms, including Amazon, are adjusted once an order is complete. This maintains an accurate listing among all selling channels, which is essential to avoiding issues down the road.

An Amazon inventory management system can help calculate your stock better, reducing the odds of the frustration of excess stock or on the other end – running out of stock (which means loss of sales and revenue). With better supplier management relationships, it may also improve the chances of shortening a supplier lead time, too.

Having an inventory management system also means the ability to forecast sales trends with such an accurate picture of supply and demand. This accurate sales data can allow for more informed business decisions.

Common challenges that Amazon sellers face

Selling on Amazon could potentially allow a seller to grow their business and put their products in front of a whole new audience. However, there are some challenges that Amazon sellers face. 

The right Amazon inventory management software helps some of these issues, though. Here are a few examples of common challenges that Amazon sellers face:

Time investment and errors with manual tasks

Manual tasks needed to manage inventory use up a lot of time – time which can be spent on other areas of the business. To list products or process orders, you may be taking the time to log in and out of your various selling channels. Every time a sale is completed, it may require you to take the time to manually adjust levels on every single platform. Since stock levels fluctuate with supply and demand changing throughout the year, this can make manually keeping track even more difficult. Worse than that, entering numbers manually can result in error. 

Consumer expectations

While more people than ever are shopping online, the expectations for digital consumers has reached an all-time high as well. Almost all (90%) of American shoppers will not wait more than two or three days for an item, and 76% want a store offering a seamless, frictionless service, according to Linnworks research. More than half of consumers have ditched a retailer that could not offer this type of experience. 

Also from Linnworks research: 90% of consumers say they want free delivery even if they have to wait longer for their package. 

Avoid overselling on products

Errors can lead to overselling on products. This can ultimately result in loss of sales and revenue, a negative customer experience and could lead to market suspension.

Prevent stock-outs 

Having enough stock to match demand can be more difficult to maintain than it sounds. If a business doesn’t have a good way to get alerted and track low stock levels, it could result in a stock out

Excess inventory

On the other end of the spectrum, having too much of a product could be a negative, too. Overstocking on products can mean loss of revenue since it’s potentially taking up valuable warehouse space and unnecessary charges. Not having the data and insights needed to forecast demand on Amazon can result in the costly error of overstocking. 

Prepare for product recalls 

While it may not happen all the time, there are instances when a product is recalled. As if this isn’t stressful enough, it could be a challenge to track down impacted products without solid product traceability.

How to manage your Amazon inventory

There are many ways to approach managing Amazon inventory. What works for one person, may not be the solution for the other. Here are some ideas on what works for some Amazon sellers: 

Set safety stock numbers

When it comes to managing inventory, a solid place to start is be establishing a Periodic Automatic Replenishment level, or PAR level. A PAR level is simply the amount of inventory available at any time. This is important because it indicates the lowest stock level that inventory can reach before more of that item should be reordered. An accurate PAR level can help reduce the instance of running out of stock or overselling.

This all depends on how quickly a product is anticipated to sell and the amount of time it will take to get that item back in stock. Lead time is the total time it takes to replenish stock.

In our article on Inventory management techniques, we cover the calculations for establishing reorder point, lead time (expected versus actual), the average variance, your daily sales volume and safety stock.

Plan ahead

As with anything in life, things don’t always go exactly as planned. With business, there are issues that arise that can negatively impact the business. While it may be impossible to predict or avoid, it’s a good idea to have a game plan for common issues that come up. Some potential problems include:

  • Issues with storage including, not being able to accommodate inventory for sale increases, slow moving items using valuable storage space and lack of storage for seasonal sales increase
  • Unanticipated increase in sales 
  • Supply chain challenges such as difficulty getting a product
  • Manufacturer discontinues the product.

Plan how to control your inventory

When it comes to managing inventory, there are methods you can use to approach it. The method a business uses depends on the products they are selling and what works best for them. Here are ways to control your inventory: 

First in First Out (FIFO) 

FIFO means inventory is booked and subsequently dispatched. In addition to reducing obsolete inventory and minimizing product wastage, this practice can also allow for simplification for financial analysis.

First Expired First Out (FEFO)

FEFO means that the products with soonest expiration date are shipped first. This is an important technique for companies that sell perishable items, including food, beverages, cosmetics, and pharmaceuticals. 

Just in Time (JIT)

This method was widely adopted before the pandemic. JIT, also known as lean manufacturing, is the process of ordering and receiving stock as you need it. This method can free up class flow and lower inventory holding costs. There is the additional risk of fulfilling orders on time, especially with the supply chain challenges ecommerce businesses face today.

ABC Analysis

Category A represents high value products with a low frequency of sale. Category B represents items that have a moderate value (lower value than A but higher than C) with a moderate frequency of sales. Category C represents low value products with a high frequency of sales. 

The benefits of an Amazon inventory management system

An automated inventory management system helps business owners grow Amazon sales while improving business performance at the same time.

An Amazon inventory management system helps sellers to manage high volumes of orders in Amazon along with other sales channels in Linnworks. No more missing out on sales or overselling. In addition, ecommerce businesses reach new audiences by expanding business and improving efficiency when it comes to running the business. Linnworks’ Amazon inventory management software integration helps sellers on Amazon grow their business by seamlessly managing their Amazon orders with automation on one central platform. 

Manage inventory with automation 

With Amazon inventory management, sync inventory levels across all sales channels, and create and update listings. Route orders for processing, and process refunds and canceled orders.

Increase efficiency with automation

Update prices within Linnworks to have it synced to Amazon seller accounts or opt for setting specific prices for various channels. You can opt to automate workflows to prioritize Amazon to retain seller status. Avoid manual errors that could lead to overselling.

Improve shipping management

Have the option of connecting to a variety of shipping options with Amazon, including FBA and FBM and keep track of stock movement between warehouses and shipments. Amazon can pick, pack and ship orders with efficiency with Linnworks’ warehouse transfer functionality. There’s also the opportunity to integrate with Amazon Shipping services and print Amazon Shipping labels from Linnworks. The management system takes the guesswork out of shipment status and provides updates. 

In addition to making high-growth and enterprise businesses more efficient, managing Amazon inventory better leads to a better customer experience. And that’s what matters most.