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Amazon Inventory Management Problems & Consequences of Poor Inventory Management

Last updated on March 3rd, 2023 at 12:11 pm

Common Challenges for New Amazon FBA Sellers & Their Solutions

Executive Summary

Amazon Inventory Management Problems & Consequences of Poor Inventory Management
1. Amazon Inventory Management: Amazon FBA service manages logistics for sellers. Amazon inventory management refers to the optimization of inventory items sent to fulfillment centers.
2. Inventory Management Systems: These systems track inventory items from procurement to shipping, letting sellers track their inventory at all times. It helps in keeping count of the available products.
3. Inventory Management Problems & Solutions: Time investment, manual errors, overstocking, and incorrect tracking are common problems. IMS software, PAR levels, and automation are solutions to these problems.
4. Consequences of Poor Inventory Management: Buyer dissatisfaction, lower IPI score, stranded inventory, aged inventory surcharge, poor supplier relationships, significant de-ranking, poor In-stock rate, and unaccounted priorities.
5. Mistakes to Avoid: Inventory overload, manual inventory management, maintaining 90 days inventory rather than 60 days, no temporary storage, inappropriate labeling and packing, and desynced order management.

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Beginning operations on Amazon is not suited for ill-prepared sellers. FBA inventory management seems like the moon to new sellers as they know little about managing e-commerce inventory. They panic and overstock items which leads to heavy fines or understock items. Most sellers are unaware of the issues they will face managing Amazon inventory. High spoilage, storage cost, time investment, and other problems frustrate the sellers. We cover the most common Amazon inventory management issues, and our solutions will help you overcome these inventory management challenges. 

Amazon Inventory Management

Efficient inventory management is the key to business success. Amazon is not any different from other businesses in this respect. Therefore, quick inventory turnover and adequate stock are necessary for operating on Amazon. Fluid upstream and downstream of inventory prevents excess item stock. It is essential to adjust the product stock per the demand. Overselling products or overstocking is not a bright idea, as it causes severe losses. FBA is convenient due to its logistical services but can become a headache if inventory is not managed. 

Amazon inventory management is necessary to avoid spoilage and high storage costs. The platform charges a fee to even dispose of your items. Every inventory management action on the platform needs to be perfect. Calculations and extensive research are essential for maintaining a profitable inventory. If seasonality affects your Amazon inventory, you must do more supply chain calculations. Running out of stock will destroy the ranking and rating of your Amazon product listing.

Inventory Management Systems

An inventory management system allows sellers to track inventory from procurement to shipping. It uses statistical analysis and formulas to show Amazon sellers how many units they need in their Amazon inventory at any given time. Moreover, it helps them to streamline inventory management processes. 

With a modern, effective inventory management system, you can be confident in your business decisions. The right software provides critical information about how many units are needed and when to reorder items for maximum efficiency.

Inventory Management Problems & Solutions

Amazon inventory management is extremely challenging and tough for new sellers. You will face frustrating issues that are impossible to solve without external help and IMS software. Below are some of the common Amazon inventory management problems.

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Time Investment & Errors with Manual Tasks

The time spent on manual tasks such as inventory management is a wasted opportunity to focus attention and resources where they are needed most. Many other business areas require your undivided attention, and you can’t afford any distractions when making or confirming sales. Each completed order requires not just entering numbers manually but also checking against changing stock levels throughout the year!

The manual tasks increase the risk of errors, and significant business time is consumed correcting those tasks. You cannot afford to spend half of your day on inventory management. It will prevent you from overseeing other essential parts of your business, such as marketing and customer service. 

Solution? Automation & Digitalization of Inventory Management

Removing human input from inventory management is the best way to save time and minimize errors. Investing in digitization will help your business to decrease its dependence on manual tasks. Software such as Veeqo is perfect for multi-channel inventory management. It ensures your sales on different channels are synchronized, removing any chances of false stock numbers.

Incorrect Tracking

Order management, product sourcing, and shipping management are essential for correctly tracking the items. You must know where your Amazon inventory is all the time. Otherwise, you cannot make business decisions. Incorrect tracking removes your ability to calculate your current stock. As a result, you might suffer from understocking or overstocking. Both outcomes are devastating for Amazon sellers. Out-of-stock ASINs lose a bit of ranking and opportunity to convert potential customers. Accurate inventory tracking is the key to successful inventory management. 

Solution? Real-Time, Automated Inventory Management Software

Electronic, automated inventory management systems show you the location of all your inventory items. It also increases the stock levels when you receive new products in the warehouse while subtracting the products for which orders are already placed. Cross-platform synchronization and consistent tracking minimize the chances of losing inventory items. Amazon FBA sellers usually use low-cost software to keep track of all their inventory items. Adopt automated systems and never lose track of any of your items!

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Out of Stock & Excess Inventory

Going out of stock devastates your best-seller ranking. Potential buyers are frustrated as they view the product listing and find out it is out of stock. Product listings with continuous stock problems keep losing search ranking. Losing potential sales and frustrating buyers is not a good way to operate any business. Most new sellers have suffered from the out-of-stock problem as they were unaware of product demand spikes. Use projections and analytics to avoid going out of stock.

Excess inventory is a worse issue than going out of stock. Amazon charges significant fees if your inventory does not sell after 90 days. Excess items in your inventory will increase your storage expenses. Manage your shipments, and do not send every inventory item to the fulfillment center, as it will decrease your IPI score.

Solution? Set A PAR Level

Periodic automatic replenishment levels are necessary for preventing out-of-stock problems. It indicates that an item needs to be reordered if it goes below a certain threshold. A PAR level of 20 would mean that the item needs to be reordered if only 20 or fewer pieces are left. Setting a PAR level will help you to manage your inventory most efficiently. It would also help you prevent excessive inventory issues.

Product Recalls

In all honesty, product recalls are demotivating for Amazon sellers, but you need to be ready for these recalls as they are a part of the Amazon selling experience. Tracking down recalled products and storing these products may be an issue. You must manage logistics and warehouse space to receive recalled products. 

Solution? Have Enough Space & Logistics

There are no suitable solutions for product recalls. All you can do is store the items and look for the reason behind the recall.

Consequences of Poor Inventory Management

  • Buyer Dissatisfaction
  • Lower IPI Score
  • Stranded Inventory
  • Aged Inventory Surcharge
  • Poor Supplier Relationships
  • Significant De-ranking
  • Poor In-stock Rate
  • Unaccounted Priorities

Mistakes to Avoid

  • Inventory Overload
  • Manual Inventory Management
  • Maintaining 90 Days Inventory Rather than 60 Days
  • No Temporary Storage
  • Inappropriate Labeling and Packing
  • Desynced Order Management

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Successful inventory management will let you capitalize on every opportunity. You will never miss out on a sale or pay a storage fine. Buyers will not leave the product listing with regret and frustration. However, significant preparation and foresight are necessary to avoid inventory problems. You must use projections, software, calculations, and analytics to avoid stock issues. Amazon inventory management challenges are a part of the selling process. Extensive research and preparation will help you to be ready for all the challenges in your way.