During the last few months, people have turned to online shopping more than ever. If you are required to stay indoors, it only makes sense to have your essential items delivered to you. This sudden surge of online orders has forced sellers to adapt as well. Additionally, sites like Amazon have placed restrictions on the kinds of goods that can be delivered. So, how does this affect inventory management?
For several weeks, Amazon FBA warehouses restricted products that
There are two major factors that have put inventory management to the test: non-essential item restrictions and shipping expenses.
Non-essential item restrictions
did not fall into one of the following categories:
- • Baby
- • Health & Household
- • Beauty & Personal Care (including personal care appliances)
- • Grocery
- • Industrial & Scientific
- • Pet Supplies
There was no warning before Amazon made the restrictions announcement, likely because sellers would be frantic to stock their inventory. In response, some sellers made the shift from FBA to FBM and other temporary fulfillment services while others simply went out of stock. Switching your fulfillment service temporarily is costly and time consuming — the upfront registration costs of new fulfillment services, especially temporary arrangements, are usually not worth it.
While pandemics are rare, it may be a worthwhile investment to expand your inventory into essential categories.
Shipping expenses
One noticeable effect of global travel bans is the increased cost of air shipping. Commercial flights often carry cargo and other goods, acting as a carrier. The demand for goods keeps rising while the supply of flights drops, creating high costs for air shipping. The only planes available are dedicated cargo planes and a handful of commercial planes still willing to transport goods.
Shipping is an international process, and as countries recover from COVID-19 at different rates, it may be a good time to look at alternative options. If you play your cards right, you can find great success shipping by sea.
A benefit of shipping by sea is the reduced cost, but the trade off is in the time. Planes take about a week to deliver shipments whereas ships can take over a month. Savvy sellers must strike a balance in this unfolding pandemic. Being on top of your inventory management game is more important than ever.
Planning your inventory for the near future
- 1. Order as large of a batch as you can afford.
Sea shipping makes you think long term, but efficient inventory management can lead to savings. Take advantage of the lower shipping costs and order as much as you can. Consider the amount of time it will take for your products to arrive by sea. If it takes anywhere from 35 to 45 days for your new inventory to arrive, you’ll need product to cover that entire duration. Make sure your orders are large enough to keep you in stock between shipments. -
- 2. Order small batches via air to keep you in stock.
Sending inventory by air is expensive, but going out of stock can cost you much more. If you go out of stock, your organic rankings will start to plummet and soon your listing will be at the bottom of all the searches in which you’re indexed. Many sellers will go out of stock. So if you’re able to keep air shipments coming while your larger sea stock is in transit, you may have an edge on your competition. - 3. Reassess your finances.
You have to spend money to make money! By making larger orders and shipping them by sea, you will reduce your cost per product significantly. The ever-adapting marketplace highlights why you need to plan your funds appropriately. - Current conditions are constantly changing so it’s important to collect as much data as possible, so that you can make quick and well-informed decisions. You should be keeping tabs on your daily inventory, sales projections, shipping times, and cut off dates. inventory management amazon covid
Keep track of your inventory daily
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Amazon already does this for you, but it doesn’t hurt to double check the information they provide. You will get alerts and estimations telling you how long your inventory is going to last and how many you should restock.
You can also check up on your overall inventory performance and health — through metrics tracking your management of product demand and spending on storage fees.
Make predictions based on sales averages every few days.
This is what Amazon does in the inventory dashboard, however, if you start doing your own calculations you may find that your predictions are different. This might be a result of how Amazon calculates averages that don’t account for sudden spikes and drops in sales.
It’s best to make several predictions to compare side by side with Amazon’s numbers. Keeping close track of sales averages for your last seven days, two weeks, and last 30 days is a good rule of thumb. Closely monitoring these numbers should enable you to avoid getting caught off guard and going out of stock.
Plan ahead based on the shipping times
Timing is everything, especially with unpredictable shipping and loading times. At any given time, you should be aware of how long you will stay in stock for any given SKU, as well as how long it will take to restock, if necessary. For this purpose, you should have a spreadsheet that keeps track of the following data in regards to each of your inventory shipments:
Date of order – The date you have made an order to your supplier
Date of shipping – The date your supplier has finished production and handed of the batch to be shipped
Check in date – The date your inventory has reached your FBA warehouse
Loading date – The date the first items from your batch have become available to be sold
Order quantity – The number of units/items you order to be manufactured
Shipping method – whether the shipment was made by standard/express air or by sea
From this data you can extrapolate the following information:
Manufacturing time
The time it took for your supplier to arrive to the designated FBA warehouse
Shipping time
The time it took for your shipment to arrive to the designated FBA warehouse
Loading time
The time it took for your inventory to be available for sale after being checked in
Keeping track of these factors gives you a better idea of how long it takes your manufacturer to produce a certain order size, as well as how long it takes for the inventory to arrive and to load. The duration might differ throughout the year. Tracking as much information as possible enables you to make more confident predictions on the timing of future shipments.
Paying attention to important dates and cut offs
While the non-essential items ban was sudden, Amazon usually gives warnings. Most notably, the cut off points for important sales dates such as: Prime day, Black Friday, and holiday seasons. Amazon issues a notice that reads, “if you don’t get your inventory check-in by this date we cannot guarantee that your inventory will be available for sale by this date/season.”
This isn’t strictly relevant to the current situation, but is generally important to keep in mind since it’s something that can impact your calculations if you fail to plan for it. Luckily, these cut off points are fairly predictable, so they shouldn’t blindside you.
Pandemics that force everyone indoors are, fortunately, an uncommon occurrence. Amazon sellers are all too familiar with rapid changes in the market and the need for adaptability. Spending a few minutes each day tracking your numbers will help you thrive during uncertain times. Making informed decisions for your business can be the difference between success and failure.
