Amazon FBA Inventory Planning Tutorial: Strategies, Alerts, and Capacity Insights

November 22, 2024 FBA

Did you know that Amazon will give you a penalty if your products are out of FBA?

Yes, your entire account sales rank (SEO ranking) will drop the next day. And total loss of revenue can go up to 70%.

How can AMZing Marketing Agency help you prevent this? Keep reading our solution below....

Amazon FBA (Fulfillment by Amazon) is a game-changing solution for e-commerce sellers looking to leverage Amazon’s massive logistics network. However, one of the most critical aspects of managing an FBA business is inventory planning.

Without a solid plan, you risk running out of stock, incurring storage fees, or losing sales opportunities. In this guide, we'll explore inventory planning best practices, how to set up alerts to prevent stockouts, and insights into Amazon's FBA capacity limits.

Why is it Extremely Important To Have a Good Inventory Planning for Amazon FBA

Inventory planning ensures you maintain the optimal amount of stock to meet demand while minimizing costs. Here’s why it’s crucial:

1. Avoid Stockouts: Running out of stock not only halts sales but can also hurt your product’s ranking on Amazon, affecting your long-term visibility.

2. Optimize Cash Flow: Overstocking ties up your capital in unsold products, while understocking leaves potential revenue on the table.

3. Reduce Storage Fees: Amazon charges monthly storage fees and additional long-term storage fees for inventory stored for more than 365 days. Proper planning minimizes these expenses.

4. Enhance Customer Satisfaction: Meeting demand ensures timely order fulfillment, improving customer reviews and ratings.

Key Steps for Effective FBA Inventory Planning

1. Analyze Sales Data
Use Amazon's inventory performance dashboard to review historical sales data. Identify trends, seasonality, and product demand fluctuations to forecast future sales accurately.

2. Implement Demand Forecasting
Use tools like Amazon’s Demand Forecast feature or third-party software like Jungle Scout or Helium 10 to predict future inventory needs. Consider factors like sales velocity, market trends, and promotional campaigns.

3. Establish Reorder Points
Calculate reorder points to ensure you replenish stock before running out. A basic formula is:

Reorder Point=(Average Daily Sales×Lead Time)+Safety Stock\text{Reorder Point} = (\text{Average Daily Sales} \times \text{Lead Time}) + \text{Safety Stock}Reorder Point=(Average Daily Sales×Lead Time)+Safety Stock

Safety stock is the buffer inventory kept to cover unexpected demand surges or delays in supply.

4. Monitor Inventory Performance Index (IPI)
Amazon uses the Inventory Performance Index (IPI) to measure how well you manage your inventory. A score above 400 ensures you avoid restrictions and maximize FBA storage capacity.

5. Plan for Seasonality
Adjust your inventory levels for seasonal peaks, such as holidays or special sales events like Black Friday and Prime Day.

Some winter products (hockey items, ice skating etc..) only sell very well from November until February

And summer products such as barbecue items, fishing lures, allergy products will sell like crazy from May until August.

How to Set Up Alerts and Notifications in Amazon to Prevent Stockouts

Amazon provides built-in tools to help sellers stay on top of their inventory. Setting up alerts and notifications is very helpful for preventing stockouts.

Step-by-Step Guide to Setting Up Inventory Alerts at Amazon

Access Inventory Management
- Log in to your Amazon Seller Central account.
- Navigate to the Inventory Planning section under the “Inventory” tab.
Find the Set Replenishment Alerts Option

1. Select the product

2. Click on the button with the three dots (at the far right of the product)

3. A drop down menu will show

4. Select "Set Replenishment Alerts"

5. It will redirect you to the Set Replenishment Alerts screen

Set the Lowest Alter Quantity Here:
Amazon will notify you by email when the item reaches the alert quantity

Set Up Restock Recommendations
Use Amazon’s Restock Inventory Tool to receive recommendations on when and how much to replenish.

1. Go to the Inventory Planning dashboard.

2. Check the “Restock Inventory” section for specific product-level recommendations.

Integrate with Third-Party Tools
For more advanced features, use third-party inventory management tools.

Contact AMZing Marketing for a list of trusted third party inventory management tools here

These tools integrate with Amazon and offer customizable alerts, real-time stock updates, and automated restocking calculations.

Enable Email Alerts
Set up email notifications to receive updates about inventory thresholds, restock suggestions, and potential stockouts directly in your inbox.

Benefits of Alerts and Notifications

· Real-time updates on stock levels.

· Proactive restocking to prevent sales disruptions.

· Improved cash flow management by avoiding overstocking.

Amazon FBA Capacity Limits Explained

Amazon imposes storage limits to manage its vast logistics network effectively. As an FBA seller, it’s essential to understand these capacity limits and plan your inventory accordingly.

Key Terms to Know

1. Storage Type: Amazon divides storage into four types: standard-size, oversize, clothing, and footwear. Each category has specific limits.

2. Storage Volume Limit: Measured in cubic feet, this limit is based on your IPI score and selling history.

3. ASIN-Level Limits: Some products may have specific restrictions based on demand, size, or category.

What is Maximum FBA Capacity?

Amazon does not publicly disclose a universal maximum storage capacity because it varies by seller and storage type. However, sellers with a high IPI score (above 400) typically enjoy more generous limits.

Pro Tips for Managing Capacity

1. Maximize IPI Score: Avoid overstocking or understocking, fix stranded inventory, and improve sell-through rates to maintain a high IPI score.

2. Use Amazon’s Storage Monitor: This tool, available in Seller Central, displays your storage usage and limits.

3. Consider Multi-Channel Fulfillment (MCF): If FBA storage is tight, use MCF to fulfill orders from other sales channels while leveraging Amazon’s logistics.

Best Practices to Prevent Running Out of FBA Stock

1. Leverage Safety Stock
Maintain a buffer stock to cover unexpected spikes in demand or supplier delays.

2. Diversify Suppliers
Relying on a single supplier can be risky. Work with multiple suppliers to mitigate disruptions.

3. Monitor Lead Times
Keep track of your suppliers’ production and shipping times to avoid delays.

4. Use Just-In-Time (JIT) Inventory
This strategy minimizes storage costs by replenishing inventory only as needed. Ensure your supply chain is reliable before implementing JIT.

5. Utilize Backup Fulfillment Methods
If you run out of FBA stock, switch to FBM (Fulfilled by Merchant) temporarily to keep sales going.

The Role of Technology in Inventory Planning

Modern inventory planning heavily relies on technology. Amazon provides tools like Restock Inventory, Inventory Health, and FBA Reports to help sellers manage stock efficiently.

Additionally, third-party tools like offer advanced analytics, demand forecasting, and automation features.

Hire AMZing Marketing Agency for FBA Management

Effective inventory planning is the cornerstone of a successful Amazon FBA business. By understanding your sales patterns, setting up proactive alerts, and adhering to Amazon’s capacity limits, you can maintain a steady flow of stock, maximize sales, and minimize costs.

Leveraging Amazon’s tools and integrating third-party solutions ensures you stay ahead in the competitive marketplace.

Need More Advice about inventory management? Contact AMZing Marketing

Remember, the key to FBA success is not just selling but doing so efficiently. Start implementing these strategies today to transform your inventory management and scale your Amazon business.

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