Efficient inventory management is the key to success on Amazon. Learn how to optimise your inventory, avoid high fees and increase your profitability.
Jens Vittrup
If you sell products on Amazon, effective inventory management is crucial to your business success. Amazon FBA (Fulfilment by Amazon) allows you to store your products in Amazon’s warehouses, where they pick, pack and ship orders on your behalf. However, to get the most out of this service, you need to understand how to manage your inventory correctly, avoid high storage costs and navigate the various inventory-related concepts and processes.
This guide delves into everything you need to know about Amazon FBA inventory management, from fundamental concepts to advanced strategies. Whether you are a new seller or already have experience with Amazon FBA, this guide will help you optimise your inventory management and potentially reduce your costs.
Amazon FBA inventory management is about monitoring and managing your products stored in Amazon’s fulfilment centres. An effective inventory management strategy ensures you always have sufficient stock to meet demand, while minimising storage costs.
When you use Amazon FBA, Amazon stores your products, handles shipping, customer service and returns. This means you do not have to worry about daily logistics, but it also means you need to pay attention to how your inventory is managed, as poor inventory management can lead to unnecessary costs.
To succeed with Amazon FBA inventory management, it is important to understand key concepts such as inventory turnover, seasonality and storage costs. You should also be familiar with tools like the Inventory Performance Dashboard in Seller Central, which help you monitor and optimise your stock levels.
One of the most important aspects of Amazon FBA inventory management is understanding Amazon storage fees. These fees can have a significant impact on your profitability, so it is essential to be aware of how they are calculated and charged.
Amazon charges two main types of storage fees: monthly storage fees and long-term storage fees. The monthly storage fees depend on the product’s size and the time of year. From January to September, rates are lower, but from October to December (peak season), costs increase significantly to reflect the higher demand for storage space.
How much is the Amazon FBA storage fee? Standard fees vary based on product size and can differ from country to country. For standard-size products, fees are typically lower than for oversized items. The fees are calculated per cubic metre or cubic foot of storage space your products occupy.
Long-term storage fees are charged for products that have been stored in Amazon’s warehouse for more than 365 days. These fees are considerably higher than the monthly fees and can vary depending on the product’s size. Amazon charges long-term storage fees once a month, usually on the 15th of each month.
Amazon Warehousing and Distribution (AWD) is a service that enables sellers to store products in Amazon’s warehouses for longer periods at lower costs compared to standard FBA storage. This is especially useful for sellers with seasonal products or those looking to buy in bulk to secure better prices from suppliers.
With AWD, you can send bulk stock to Amazon, which is then distributed to various fulfilment centres as needed. This can help reduce shipping costs and simplify logistics, especially if you sell across multiple Amazon marketplaces.
AWD is designed to be a complete solution for inventory management and distribution, extending beyond traditional FBA services. It offers greater flexibility and control over your inventory, which can be especially advantageous for sellers with complex supply chains or seasonal product lines. By using AWD, sellers can potentially reduce their overall storage costs and improve supply chain efficiency.
Amazon operates various types of warehouses, each with its specific purpose and functionality. Understanding the differences between these can help you optimise your inventory strategy and shipping process.
Fulfilment Centres (FC) are the main warehouses where most FBA products are stored, picked, packed and shipped. These massive facilities handle millions of products and are strategically located to optimise delivery times.
Sortation Centres (SC) sort packages by destination to streamline the delivery process. These centres receive parcels from fulfilment centres and sort them based on geographic location to speed up delivery.
Delivery Stations are the final stop in Amazon’s logistics chain, where parcels are prepared for final delivery to customers. From here, parcels are distributed to various delivery routes to reach customers.
Amazon also has specialised warehouses, such as Amazon Fresh facilities for groceries and dedicated warehouses for large or unusual items. These specialist sites are equipped to handle specific product types with unique storage requirements.
Amazon introduces capacity limits and restock limits to ensure they can efficiently manage all sellers’ products, especially during periods of high demand. These limits affect how much inventory you can send to Amazon FBA at any given time.
FBA capacity limits determine the maximum amount of inventory you can have in Amazon’s fulfilment centres at any given moment. These limits may vary based on your seller history, IPI score (Inventory Performance Index), and seasonal factors. High-performing sellers with a good IPI score are often granted higher capacity limits.
Amazon restock limits determine how much new stock you can send to Amazon. These limits are updated regularly based on your sales history, current inventory and projected future sales. You can find your current restock limits in Amazon Seller Central under ‘Inventory’ > ‘Inventory Planning’.
How much should I send to Amazon FBA? This depends on several factors, including your sales figures, seasonal trends, supplier lead times and your restock limits. In general, it is best to send enough to cover your expected demand plus a safety buffer, but not so much that you risk incurring unnecessary long-term storage fees.
To check your Amazon FBA inventory limits, log in to your Seller Central account and navigate to ‘Inventory’ > ‘Inventory Planning’. Here, you can see your current capacity and restock limits. You can also view how much of your allocated capacity you are using at present and how much space you have left to send new products.
FNSKU (Fulfilment Network Stock Keeping Unit) and LPN (Licence Plate Number) are important identification methods used in the Amazon FBA process, and it is crucial to understand how they work.
The FNSKU is a unique barcode that Amazon uses to identify and track each individual product in their fulfilment centres. This differs from UPC or EAN, which are standardised product barcodes. FNSKU labels ensure your product is not mixed with similar products from other sellers, even if they share the same UPC.
What is the Amazon FBA label? It is the FNSKU barcode, which must be placed on each product (or its packaging) before it is sent to Amazon’s warehouses. You can generate FNSKU labels via Seller Central. You can either label the products yourself or use Amazon’s labelling service for a fee.
LPN (Licence Plate Number) on Amazon refers to a shipping identification code used to track shipments. The LPN sticker or LPN RR barcode on Amazon is generated when you create a shipment for Amazon FBA. This label is placed on the boxes or pallets containing your products and helps Amazon identify your shipment when it arrives at their warehouses.
It is important to place FNSKU labels correctly on your products to avoid issues when receiving them at Amazon’s fulfilment centres. Here are some guidelines:
For LPN labels on shipping boxes, these should be placed on the outside of the box on a flat surface so they are easily visible to warehouse staff. Each box in your shipment must have its own LPN label.
The Inventory Performance Index (IPI) is a score Amazon uses to measure how efficiently you manage your FBA inventory. This score can have a significant impact on your inventory limits and overall FBA costs, so it is important to understand how it is calculated and how you can improve it.
The IPI score is calculated based on several factors, including inventory turnover rate (how quickly your products sell), stock levels relative to demand, out-of-stock rate and the amount of excess or unsellable inventory. The score is updated weekly and typically ranges from 0 to 1000, with a higher score indicating better inventory management.
A high IPI score offers several advantages. It can grant you higher inventory limits, meaning you can send more stock to Amazon. It can also protect you from potential restrictions during periods of high demand, such as holidays or peak seasons, when Amazon often imposes stricter limits for sellers with a low IPI.
To improve your IPI score, you should focus on keeping your stock levels optimal – neither too high nor too low. You should also work to reduce unsellable inventory and avoid out-of-stock situations for popular products. Regularly monitoring and adjusting your inventory levels can help you maintain a strong IPI score.
Stranded inventory refers to products that are physically present in Amazon’s warehouses but are not active for sale on the marketplace. This can occur for various reasons, and it is important to identify and resolve these issues quickly, as stranded inventory still incurs storage costs but does not generate sales.
What does stranded inventory mean on Amazon? It refers to products that are ‘stranded’ or stuck in a state where they cannot be sold, often due to issues with the product listing or violations of Amazon’s policies. Common causes of stranded inventory include:
How do you fix stranded inventory in Amazon listing error? Start by going to ‘Inventory’ > ‘Manage Inventory’ > ‘Fix stranded inventory’ in Seller Central. Here, you will see a list of all your stranded products and the reasons for their status. Depending on the reason, you can often resolve the problem by:
It is important to resolve stranded inventory issues quickly, as these products continue to accrue storage costs even though they do not generate revenue. Regular monitoring of your inventory can help identify and resolve these issues before they become significant.
Two important concepts in Amazon FBA inventory management are reserved inventory and replenish inventory. Understanding these can help you better plan your restocking and avoid out-of-stock situations.
What does reserved inventory mean on Amazon? Reserved inventory refers to products that have been set aside for specific purposes and are therefore not available for sale. This can include items ordered by customers but not yet shipped, goods set aside for quality control or products awaiting return or disposal.
On your Seller Central account, you can view your reserved inventory by going to ‘Inventory’ > ‘Manage Inventory’ and looking at the ‘Reserved’ column. It is important to monitor your reserved inventory, as a large quantity of reserved stock can affect your ability to fulfil new orders if your available inventory is low.
What is replenish inventory on Amazon? This refers to the process of restocking your Amazon FBA inventory when levels are low. Amazon provides replenishment recommendations based on your historical sales data and anticipated future demand. These recommendations can help you decide when and how much inventory to send to Amazon.
Effectively managing your replenishment can help you avoid out-of-stock situations, which can harm your rankings and result in lost sales. It can also help you avoid excess inventory, which can lead to higher storage costs. Use Amazon’s ‘Restock Inventory’ tool in Seller Central to get recommendations on when and how much to restock.
Unfulfillable inventory refers to products in Amazon’s warehouses that cannot be sold or shipped to customers due to various issues. This can include damaged products, incorrectly labelled goods, expired items or products that do not comply with Amazon’s policies. Unfulfillable inventory can generate unnecessary storage costs, so it is important to manage it effectively.
You can view your unfulfillable inventory in Seller Central by going to ‘Inventory’ > ‘Manage FBA Inventory’ and filtering by ‘Unfulfillable’. Here you can see details for each product marked as unfulfillable and the reason for this status.
Once you have identified your unfulfillable inventory, you have several options for managing it:
How do I destroy Amazon FBA inventory? To destroy inventory, go to ‘Inventory’ > ‘Manage FBA Inventory’, select the relevant products and choose ‘Create removal order’. Then select ‘Dispose of’ as the removal method. Amazon charges a fee for each unit destroyed, but this is typically lower than the return fee.
Effective management of your Amazon FBA inventory is crucial to maximize profitability and minimize storage costs. Here are some strategies and best practices to optimize your Amazon FBA inventory management:
Regularly monitoring your stock levels is essential. Use tools like the Inventory Dashboard in Seller Central to keep track of current inventory levels, sales velocity, and expected out-of-stock dates. Set up automatic alerts for low inventory so you can replenish in time.
Use historical sales data and seasonal patterns to forecast future inventory needs. If your product has seasonal sales peaks, plan your restocking accordingly to avoid out-of-stock situations during peak seasons. Amazon provides sales forecasting tools in Seller Central to assist with this process.
Implementing a just-in-time inventory strategy can help minimize storage costs. This approach involves keeping minimal stock on hand and replenishing frequently based on actual demand. However, this may require reliable suppliers and an efficient supply chain.
How to consolidate Amazon FBA inventory? Consolidating your inventory can help reduce shipping and storage costs. This may include combining multiple product variants into a single shipment or using Amazon’s inventory placement service to consolidate inventory across different fulfillment centers.
There are situations where you need to remove your inventory from Amazon, for example if you want to sell it through other channels, if the product is not selling well, or to avoid long-term storage fees. To remove your inventory, you should:
Amazon charges a fee for each unit returned. The fee size varies depending on the product’s size and weight. It may take several weeks for your inventory to be returned, depending on Amazon’s workload and other factors.
Product clustering is a strategy that can help you optimise your Amazon FBA inventory management and potentially reduce your shipping and storage costs. Let’s explore what it is and how it can benefit your business.
What is product clustering on Amazon FBA? It refers to the practice of organising and sending related products together to Amazon’s fulfilment centres. By grouping products that are often purchased together, or items that are variations of one another (such as different sizes or colours of the same product), you can potentially improve the efficiency of your inventory management.
Product clustering can offer several benefits. Firstly, it can reduce your shipping costs, as you send more products in a single shipment rather than separately. Secondly, it can enhance the customer experience, as related products are more likely to be stored in the same fulfilment centre, which can result in faster delivery times when customers buy multiple items from you.
To implement product clustering effectively, analyse your sales data to identify products frequently bought together. These products should then be grouped in your FBA shipments. You can also use product variation listings on Amazon (for products differing only in attributes such as size or colour) to improve clustering.
It is important to note, however, that Amazon ultimately decides where products are stored within their network of fulfilment centres. But by sending related products together and utilising various Amazon courses and tools, you can increase the chances that they will be stored together.
Proper stocking for Amazon FBA is an essential part of an effective inventory management strategy. It involves planning and preparing your products for shipment to Amazon’s fulfilment centres in a way that complies with Amazon’s requirements and minimises your costs.
Before sending products to Amazon FBA, it is important to understand and follow Amazon’s packing and labelling requirements. These include rules on how products must be packed, which labels must be applied, and how shipping boxes should be labelled. Failure to comply with these requirements can lead to delays, additional fees or even rejection of your shipment.
How do I add inventory to Amazon FBA? The process involves several steps:
It is also a good idea to plan your FBA shipments strategically. This may include sending products ahead of peak seasons to ensure you have enough stock to meet rising demand. It may also mean sending smaller, more frequent shipments to minimise storage costs if your product has a low sales rate.
Efficient stocking for Amazon FBA can help you reduce costs, avoid stock-outs and improve your overall profitability as an Amazon seller.
Amazon charges long-term storage fees for products that have been stored in their fulfilment centres for an extended period. These fees are designed to encourage sellers to keep their inventory levels efficient and prevent Amazon’s warehouses from being used for long-term storage.
Amazon charges long-term storage fees on the 15th of each month for products that have been in their warehouses for more than 365 days. It is important to note that this timeframe is counted from the date the product arrives at Amazon’s fulfilment centre, not the date it was created as a product listing.
Long-term storage fees are considerably higher than standard monthly storage costs and are calculated based on the space your products occupy in the warehouse. The fees vary by product size and may change over time, so it is important to stay updated on Amazon’s current fee structure.
To avoid long-term storage fees, it is important to implement strategies for effective inventory management. This may include monitoring the age of your stock using Amazon’s Inventory Age report, regularly removing slow-moving products, running promotions to boost sales of older stock, and planning your inventory strategically to avoid having products remain in stock for more than a year.
Excess inventory on Amazon can be a challenge for many sellers, as it not only takes up valuable warehouse space but also generates unnecessary storage costs. Fortunately, there are several strategies you can implement to manage and reduce excess stock.
An effective way to reduce excess inventory is to implement promotional strategies. This could include running Lightning Deals, 7-Day Deals or other campaigns through Amazon’s promotions programme. You can also adjust your prices to make products more attractive to customers or use Amazon advertising to increase visibility and drive sales.
Amazon also offers a programme called FBA Liquidations, where you can sell your excess inventory to third-party liquidators at a fraction of the original price. While you may not recover the full value of your products, this can be a better solution than paying ongoing storage costs or having the goods destroyed.
Another option is to use Amazon’s Removal Order process to have your excess inventory returned to you. You can then choose to sell the products through other channels, reuse them or donate them. To create a removal order, go to ‘Inventory’ > ‘Manage FBA Inventory’, select the relevant products and click ‘Create removal order’.
Finally, you can choose to donate your excess stock to charity through Amazon’s FBA Donations programme, available in some markets. This can not only help reduce your inventory but may also offer tax benefits depending on your country’s tax laws.
There are many reasons to remove products from Amazon FBA, such as seasonal changes, product updates or to avoid long-term storage fees. The process for removing products from Amazon FBA is relatively simple, but there are some important factors to consider.
To remove products from Amazon FBA, you need to create a removal order in Seller Central. This can be done by going to ‘Inventory’ > ‘Manage FBA Inventory’, selecting the products you wish to remove and clicking ‘Create removal order’. You will then be asked to choose whether you want the products returned to you or destroyed.
If you choose to have the products returned, you must provide the address where you want them sent. Amazon charges a fee for each unit returned, which varies based on the product’s size and weight. It is important to note that the return process can take several weeks, depending on Amazon’s workload and other factors.
If you choose to have the products destroyed, Amazon will dispose of them responsibly. This also incurs a fee, but it is typically lower than the return fee. Once you have created a removal order, you cannot cancel it, so be certain of your decision before proceeding.
It is also important to note that when products are removed from FBA, their listing will remain active on Amazon if you have chosen to have them returned to you. If you no longer wish to sell the product, you must manually deactivate or delete the product listing.
A seller SKU (Stock Keeping Unit) is a unique identifier that you assign to each product in your Amazon inventory. It serves as an internal reference to help you track and manage your products and is only visible to you, not to customers.
The seller SKU on Amazon FBA is an important part of your inventory management strategy. By using meaningful and consistent SKUs, you can more easily identify and track your products, which is particularly useful if you sell many variants of the same items or have a large inventory.
When you create a new product listing on Amazon, you will be asked to specify a seller SKU. You can use almost any combination of letters, numbers and symbols to create your SKU, as long as it is unique within your account. Many sellers use a system that includes information such as product category, colour, size or other relevant attributes in their SKUs to make them more meaningful and easier to remember.
It is important to note that the seller SKU is different from the FNSKU (Fulfilment Network Stock Keeping Unit), which is the unique identifier Amazon uses to track your products within their fulfilment network. The FNSKU is generated by Amazon based on your seller SKU and other factors, and is printed on the FNSKU label placed on your products.
Good management of your seller SKUs can help streamline your inventory procedures, reduce errors and generally improve the efficiency of your Amazon business. Consider implementing a clear and consistent SKU system, especially if you plan to expand your product range over time.
Effektiv lagerstyring er en af nøglerne til succes på Amazon. Ved at forstå og implementere god praksis for Amazon FBA lagerstyring, kan du reducere dine omkostninger, forbedre din profitabilitet og give dine kunder en bedre oplevelse.
Fra forståelse af Amazon storage fees og kapacitetsgrænser til håndtering af specifikke lagertyper som stranded eller unfulfillable inventory, er der mange aspekter at tage højde for. Det er også vigtigt at være fortrolig med de forskellige værktøjer og rapporter, som Amazon tilbyder for at hjælpe dig med at overvåge og optimere dit lager.
Husk, at effektiv lagerstyring ikke er en engangsopgave, men en kontinuerlig proces. Markedsforhold, kundeefterspørgsel og selv Amazons politikker kan ændre sig over tid, så det er vigtigt at være fleksibel og tilpasse din strategi efter behov.
Ved at prioritere god lagerstyring og bruge de tilgængelige værktøjer og ressourcer, kan du maksimere fordelene ved Amazon FBA og opbygge en mere bæredygtig og profitabel forretning på Amazon.
Hvis du har brug for mere avanceret hjælp med din Amazon FBA lagerstyring, kan du overveje at konsultere med Amazon konsulenter eller udforske vores Amazon kursus for mere detaljeret information og vejledning.
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