Managing Amazon Inventory To Maximize Profits
Sync 3 Things To Scale Profits Without Stocking Out
Hey there, Chelsea Cohen from SoStocked.com.
I want to share how you can scale up your Amazon orders. And it has nothing to do with the typical launching, reviews, or ranking strategies gurus share.
Sellers talk a lot about scaling. But personally chatting with hundreds of 7 & 8-figure Amazon businesses over the past year, I discovered something CRUCIAL was missing.
This missing “scaling” link has to do with an inventory planning technique I use in my own Amazon business.
Stick with me because I have a free downloadable Amazon Inventory Scaling Planner to help you with this.
By the end of this post, you’ll know how to use the Amazon Inventory Planner and how to implement my inventory planning technique into your business.
You’ll get your systems working together so that you can stop struggling between running out of inventory and running out of cash.
Even if you’re just one person running your Amazon business, you’ll want to make sure you do this.
So let’s get into it. 🙂
In this guide to Managing Amazon Inventory, we’ll take a look at:
The Weak Amazon Scaling Link
I work one-on-one with hundreds of businesses regarding their Amazon inventory planning everyday.
Our company SoStocked.com is an Amazon inventory management software that allows me to have daily inventory conversations with Amazon sellers in the private label space, the wholesale space, and the retail arbitrage space.
One of the topics that keeps coming up is how much inventory management affects the bottom line and how much it affects cash flow.
Where I’m finding most Amazon sellers misstep, is in mismanaging their Amazon inventory.
It’s the weak link to scaling.
However the weak link is more specific than that when I dig deeper into conversations with sellers.
So what’s the real weak link (problem) and missing link (solution) to scaling?
It’s not what most people talk about in the Amazon space:
- Hiring VAs
The main issue is that sellers are trying to manage their Amazon inventory independent of their marketing.
And it’s why properly managing Amazon inventory is such an important piece of the scaling conversation.
Scaling with inventory management doesn’t get talked about enough.
I want to change that.
So I’ve worked hard to solve that scaling problem for myself and other sellers. I’ll talk more about this missing scaling link / inventory technique later.
The Missing Amazon Scaling Link
Managing Amazon inventory can be a nightmare, so I understand why sellers tend to avoid talking about it.
It can seem like a lot of guessing which leads to stressing.
So instead of proactively “inventory planning”, sellers tend to react last minute based on gut feel rather than good data.
In reality, inventory management becomes an afterthought to scaling.
As an Amazon seller myself, I get it.
I know how hard managing Amazon inventory can be. I had to learn inventory the hard way over the past five years.
There just weren’t any Amazon inventory gurus out there teaching me this stuff.
And, while I don’t love the word “guru”, I would love to be your “go-to” whenever you have any Amazon inventory related questions.
I believe inventory management is exciting and essential to scaling an Amazon business. I mean, it’s impossible to market and scale if you’re always stocking out.
It’s time to shift the conversation around scaling. It’s time to start bringing managing Amazon inventory and marketing together to truly scale your orders.
We’ll do it with my technique (the missing link) I call, “inventory syncing”.
Stick with me because I have a free downloadable Amazon Inventory Planner to help you with syncing everything up.
Sync Up Amazon Inventory
Marketing tends to be the most focused area for Amazon sellers. Everyone’s talking about the next marketing hack, keywords, ranking, reviews, listing, launching etc…
However, inventory planning and cash flow planning aren’t generally a part of that conversation.
Whenever I talk to sponsored ad agencies, they do one of two things:
They’ll either be brilliant by putting inventory planning into their overall strategy when working with a client.
Or they won’t. The agency will do their PPC magic and run their clients right into a stock out.
You start to realize how vital inventory planning is to marketing planning and cash flow planning because you know how much stock outs impact rankings and revenue.
In order for the best marketing plans to blossom, you’ll need to sync your inventory and cash flow to support all of it.
Marketing > Inventory > Cash Flow. Sync Up To Scale Up.
It’s either Sync or Flail, as I like to say.
Scale Up Amazon Inventory
The Amazon Inventory Scaling Planner that I have created shows the elements and workflow and how the systems need to be organized to scale your business and scale it appropriately.
Your marketing team isn’t going to like to hear this but, your marketing plan is beholden to the inventory team and would require their permission or approval of the marketing plan.
If you don’t have the inventory to fulfill the plan, a good plan can become a bad one pretty fast.
Let me show you how that could be.
There are many times when a seller has told me how he needed to cancel a Lightning Deal because he just didn’t have enough inventory to execute on the scheduled Lightning Deal due to lack of inventory planning.
Another common mistake is not planning far enough in advance or thoroughly enough. For example, remembering the big red letter holidays such as Valentine’s Day, and then forgetting things like Mother’s Day and Father’s Day.
What ends up happening, is they then quickly throw together an email campaign for 20% off, and send it out on their email list for Mother’s Day.
But the next month, they’re pumping the brakes, turning off ads and slowing down sales – forget Father’s Day altogether – because they’re running out of stock.
So they just gave away a product at a 20% discount that they couldn’t afford. And they would have been better off not having a Mother’s Day sale at all because they wouldn’t have lost out on a 20% discount and would have avoided a stock out.
There are many examples of sellers putting themselves into stock outs because they didn’t properly plan to see whether their inventory levels could afford the market tactics – and there they get into trouble.
A smart marketing idea is not that smart in the end if it causes you to lose profit on discount sales, stocking out, and expensive air shipments.
That’s why your inventory, marketing and cash flow need to be synced.
But ain’t nobody got time for that manual stuff. I know I didn’t. So I built a software to make managing Amazon inventory easier.
Managing Amazon Inventory With Tools
Let’s be real. Managing Amazon inventory, planning and forecasting are a nightmare. I did it in spreadsheets and software that just didn’t work for five painful years.
So I created SoStocked.com . An Amazon Inventory Syncing™ software that enables sellers to accurately manage and forecast their inventory.
We do that by syncing up your inventory levels, past sales, and future marketing data. Sync up systems. Scale up orders. Stay in stock.™
Some of the features include:
- Inventory Sync: Know exactly where your inventory sits.
- Sales Sync: Factor in past sales dips, spikes, and seasonality
- Marketing Sync: Factor in your future marketing plans.
- Shipments Sync: Track & follow-up on POs and shipments.
- Cash Flow Sync Coming Soon: Coordinate your logistics for optimal cash flow and profit.
Whether you use our software or not, know that the right software makes things easier for you when it comes to managing Amazon inventory.
Here are some tips for selecting software to manage Amazon inventory:
- A good inventory management software should be fully customizable.
- You should be able to understand exactly what goes into the software algorithm. Big red flag if the software company won’t tell you or can’t explain it to you.
- You should be able to adjust your inventory calculations on a SKU level. One size fits all algorithms just don’t work.
- An inventory software should be able to provide you forecasts for both orders and transfers, keeping track of not just your FBA inventory but also your warehouse inventory.
- And, most importantly, an inventory management software should allow you to build your marketing plans into your inventory planning. Most inventory software doesn’t do this, which is why many sellers go back to the archaic work of using spreadsheets.
- A good inventory management software allows you to move out of inventory reacting and into true inventory planning.
Process To Manage Amazon Inventory
The workflow that we’ll discuss is one that is coordinated across your teams in order to help you to truly and smoothly scale.
It takes a more long-term and very comprehensive marketing plan vetted out by inventory and cash flow teams.
If you’ve got 60 days of lead time, you want to look to 120 or maybe even 150 days out to look at the key sales events you want to include within your marketing plan.
You are not only building to scale but you are building with the intent that you’re going to do better than you did last holiday season and better in this period than the last. It is the result of having a concrete plan and workflow.
You’re not just using the past numbers, but you’re actually using future planning and marketing that you can control.
The first thing you’ll need to do is to start out with some short term marketing plans.
It could include a plan for the increase in your PPC sales by approximately 20%. But you might send that plan to your inventory team, and they might tell you that you can only afford to increase it by 15% and can plan for an increase to the 20% target on your next inventory order.
Having a clear marketing plan and discussing it with your inventory team will help you to order enough inventory to execute the plans that you’re actually hoping to achieve.
Of course, you’ll then want to sync up your marketing plan and inventory.
Marketing & Managing Inventory
As I mentioned, your inventory team should be looking at your marketing plans to see if they are feasible or not.
SoStocked.com, our Amazon inventory management software is unique in that you can plot out and sync up your inventory and marketing into an Inventory Timeline.
You could also go through all the work of manually creating an inventory timeline in a spreadsheet for each SKU in each marketplace.
Whatever tool you decide to use, a timeline will be immensely helpful in envisioning your marketing plan as it relates to inventory and your logistics, helping you turn your marketing plans into inventory plans.
In order to do this, you will need to know your daily velocity as well as any seasonal increases in velocity. You’ll have to layout any holiday sales and Lightning Deals you have planned.
A lot of the inventory management software on the market these days don’t give you the ability to build marketing plans into your calculation, which has generally been a big reason why smart Amazon sellers continually revert back to spreadsheets… Sellers shared this feedback with us so we designed SoStocked.com to factor your future marketing plans into your forecasting.
What other softwares do is simply look at your past sales to determine what you should order in the future, yet they don’t afford much in the way of customizing for your future marketing plans, which keeps you from laying out a full picture of your inventory needs. It doesn’t give you the ability to actually plan anything out.
Sync up your inventory, sales velocity and future marketing plans using SoStocked.com to make managing Amazon inventory easier.
The essential flow and system that you should develop is to send your marketing plan to the inventory team and get them to vet your marketing plan to prevent you from running yourself into a stock out. It usually happens when marketing markets without the coordination of the inventory team.
If marketing and inventory don’t work hand in hand, it will cost you a lot of money. It will cost you when it comes to lost rankings, lost revenue, ad spend, discount coupon sales, and expensive air freight.
It is important that a marketing plan is built in advance and then sent to the inventory team to see what is possible and what needs to be adjusted. It generally boils down on what inventory is on hand or can be gotten and what needs to be ordered to fulfill the gap in order to envision the marketing plan and see the marketing plan to fruition.
Pro Tip: If you have Amazon IPI limits, SoStocked.com pulls in your restock limits daily so you can automatically factor that into your forecasts and reordering.
Cash Flow & Managing Inventory
After you have revised your marketing plan in coordination with the inventory team’s insight, the next step is to send it to your accounting team. They will be the ones to look into the cash flow and analyze the plan based on cash flow projections. If the cash is not available to place the inventory orders, the marketing and inventory plans cannot be executed.
Common questions for the accounting team to ask are:
- What are the projected sales based on the current plan?
- What’s the projected profit for that time and when will income be realized?
- What is the current cash on hand?
- What additional credit is available that can be used if needed?
From that, they can determine which orders can be afforded in the inventory plan. They can either sign off of the plan or work with the inventory & marketing teams to determine which orders to delay, decrease, or cancel based on what is best for the company’s profit, revenue, and growth.
A good example is if you’ve got a very slow-moving product with a high MOQ, you might not want to order it if it means you can’t afford to pay to keep your best sellers in stock. The accounting team will look into this and adjust the inventory plan and marketing plan as needed and send it all back to the inventory team for verification. The inventory team will then make sure it is all correct and workable.
The accounting team’s main job is to make sure that it has the funds to cover everything and not stock out. It must do its best to fulfill the marketing plan as laid out wherever possible as a good, solid marketing.
However, it must uphold a role in the checks and balances of marketing, inventory, and accounting to ensure that the marketing plans are realistic enough so that capital is not unnecessarily tied up. At times, the marketing team may have to go to bat for their plan to show accounting how they realistically plan to move the inventory quickly so that it doesn’t cause problems down the road for all teams. Any botched planning will eventually get back to all teams and negatively affect each one of them, so it is important that they all work together.
Once accounting is done and inventory has signed off on any revisions, the marketing team will be able to execute the combined and finalized plan. The marketing, inventory, and account teams should all get a copy of the revised, final plan so that everyone is working off the same playbook.
No one team is more important than the other, as they are all vital in helping to make sure that they can support the marketing plan. A dropped ball on any team ripples into problems for the other teams so working together really is the key to scaling smoothly and successfully. Sync or flail.
Here are some things that could possibly happen if your teams don’t work with each other:
- The accountant doesn’t get a loan on time and so can’t fund an order.
- The inventory team doesn’t properly account for enough inventory to fulfill the marketing plan.
- The marketer markets without talking to the inventory team, resulting in inventory stocking out.
If teams don’t communicate well and don’t work together, it will slit the throat of the entire business. All three teams must work together. In this way, the marketing plan is vetted by inventory and accounting to be able to truly scale.
Sync Up. Scale Up. Stay In Stock.
I started this article because I see a continuous pattern in businesses in the physical products space where there is a lot of focus on marketing. Successful businesses are often very smart in terms of marketing. But then they become narrowly focused and very marketing-minded yet not inventory or cash flow minded. It is the main reason why we built SoStocked.com to help Amazon sellers.
We recognized that good inventory management is the difference between scaling and flailing and there is nothing that can slit your throat faster as an inventory-based business than having bad inventory management.
It is vital to be able to use a system of inventory planning that allows you to sync up your marketing with inventory forecasting. And it is vital for you to get all of your teams working together. Even if you’re one person running your business, you need to take the time to vet all these things out fully well in advance.
The whole goal is for you to know and use the cheat sheet that we’ve provided here to really get an idea of the flow and start to truly scale. By making your entire company work seamlessly together, you can stop struggling between running out of inventory or cash simply because your teams haven’t been communicating.
So I hope this was helpful and I’m interested to hear what you have to say about any personal experiences. If you’ve had any tips, I’d be very excited to hear those as well.
Go ahead and comment below and let me know and I look forward to providing another article for you very soon.
If you’re interested in finding out more about our inventory software you can visit us at SoStocked.com.