Making sure you stay in stock is KEY to keeping your rank. One of the best strategies is to have buffer stock in a prep warehouse just in case you get low on stock in Amazon. It can be cheaper to store stock outside of Amazon – and it is also cheap to use Amazon shipping rates too.
In this article we cover our top tips for managing your Amazon product inventory.
Tip 1 Restock Time
The production lead time and shipping time for your products will be constantly changing, either because the factory might be very busy, or it might be peak season for shipping in the months leading up to Christmas.
But you can still calculate an estimated restock time which you can use to forecast future orders. Add up the time it takes to manufacture your product, plus the shipping time and some handling time, because Amazon doesn’t always show your product in your account the same day it arrives.
If it takes the factory 33 days to make your product, another 30 days to ship it by sea and you allow seven days of handling time in Amazon, then the total restock time is 70 days. That means it could take over two months to get the product back in stock if you run out.
That’s why you need to constantly monitor your stock levels and sales velocity to prevent stock-outs.
Tip 2 Buffer
Ideally you should always have a minimum of one or two weeks stock inside Amazon.
That way you’re covered if your freight is delayed a few days for some reason or there’s a delay in production. So if you sell 10 units a day, ideally you want around 100 units as your minimum buffer at Amazon’s warehouse.
Tip 3 Sales Velocity
When calculating when you should reorder and also how much to reorder, the critical number is your sales velocity.
This is how many units you’re selling on average per day over the last 3 days, 7 days and 30 days. You need to use an average because sales swing up and down on Amazon.
So if over the last seven days you’ve sold 70 units, your sales velocity would simply be 70 units divided by seven days, or 10 a day.
Tip 4 When Should You Reorder
If I have 1000 units in stock and my sales velocity is 10 a day, I know I have about 100 days of stock available.
1000 units divided by 10 a day gives me my stock days left. We calculated before that the reorder time is about 70 days.
I don’t need to reorder yet, but in about 20 days time I will have enough to cover the restock time and the buffer. We are using days and not numbers to calculate when we should restock.
Our buffer is 100 units. That’s 10 days of stock. It takes 70 days for the factory to make and ship the products into Amazon, at 10 units a day that’s 700 units. So we have to reorder once our stock hits 800 units.
At the moment it’s 1000, so we have 20 days before we need to place the order. Now would be a good time to check with the factory that a total restock time is still 70 days.
Tip 5 Reorder Amount
Okay, so you know that you need to reorder when you’re stock level is equal to your buffer plus restock time. How many units should you reorder?
If you want to keep the minimal amount of stock and cash tied up in inventory then you would reorder your sales velocity times your restock time. In this case your sales velocity is 10 a day and your restock time is 70 days.
So you need to order 700 units to arrive within 70 days to keep your stock at the optimal level.
Tip 6 Seasonality
For any sales velocity calculation or reorder amount, you need to consider seasonality.
If it’s December 20th your sales velocity will be much higher than at other times of the year because it’s the Christmas season. So if you are reordering in January you wouldn’t rely on your sales velocity in late December because products sell 200 to 400% more during Christmas.
Likewise, if your item is related to hiking and camping you would reduce your reorders in the late summer and autumn so that you are not left with a lot of stock during the slow winter season.
Use common sense to determine a reorder in January.
Tip 7 Never Stock Out
To summarize, your reorder date and amount is simply based upon how many you are selling a day times how many days it takes to get the stock back in.
If your sales velocity increases you will need to reorder sooner and more. For example, if you’re now selling 20 a day and it takes 70 days to restock, you’re going to need to place orders of 1400 units each time. Cash cow pro software automatically calculates this for you.