The Importance of Amazon Inventory Optimization in a Marketing Plan

October 12, 2022

From lowering your storage costs to maximizing profits, we go over the importance of inventory management. Learn more in this post.

Amazon FBA sellers need to optimize various aspects of their business if they want to maximize revenue and be successful. One factor to consider is inventory optimization. Optimizing your inventory is beneficial for your bottom line, but it’s also important for your marketing plan.

If your inventory management strategy is optimized, you can get more sales. If you’re missing optimization opportunities, you’re also missing out on sales. This is a scenario that no Amazon seller wants to find themselves in.

In this post, we’ll dive deeper into inventory management, why it's important, and how it can improve your Amazon FBA business. We’ll also tell you how Mayan’s analytics platform and our advertising optimization tools can bring your business to the next level. Schedule a call with the Mayan team today to find out how we can help you with inventory management and other Amazon seller challenges or read on to learn more about inventory management optimization.

What is Inventory Management?

First, let’s talk about what inventory management is and how it affects your business. Simply put, inventory is the stock of products for sale that your business owns. Inventory management is making sure you track your inventory and customer demand to ensure you can fulfill orders without delay. Inventory management should be optimized to ensure you have enough stock to meet any level of demand, but not so much stock that it costs you excess money to store your products.

In either direction, inefficient inventory management strategies can cause issues for an Amazon seller. If you have excess stock, you deal with dead stock, storage costs, spoilage, and more. If you don’t have enough stock, you can’t fulfill orders, and your customer service suffers. You also lose out on sales. With a good inventory management plan, you can avoid many of these pitfalls.

But how does inventory management work and what problems does it solve? What makes a good inventory management strategy? Let’s dive a little deeper.

How Does it Work?

Amazon FBA in a nutshell - as an Amazon FBA Seller, you send your products to Amazon's warehouses. Amazon stores your products, and once an order is placed, they take care of getting it to the customer. They also take care of any returns, refunds, and other aspects.

If you’re an Amazon FBA seller, inventory management is already handled and automated to an extent. Signing up as an FBA seller gives you access to Amazon’s inventory management system, automating order fulfillments with direct shipment to Amazon warehouses. Amazon will then store your products until an order is placed. Amazon also takes care of packing, shipping, tracking, and other aspects of the delivery process. They also handle returns, refunds, and other aspects of the customer service process.

This is an ideal system for Amazon sellers, but you can further fine-tune inventory management with the right software and tools. If you want to further manage your Amazon inventory and optimize your inventory management, you need an in-depth strategy and a platform that can help you. Of course, fine-tuning your strategy is easier said than done, but it’s important. 

So, why exactly is this important? We’re glad you asked.

Why is it Important?

When you’re properly managing your inventory, you’ll always be able to meet the demand of your customers without overstocking. Inventory management requires you to get an overview of your supply chain so you can optimize certain aspects to maximize efficiency and revenue.

All businesses need to ensure they have products on hand and that they can fulfill customer orders. But without inventory management in place, you risk inventory mismanagement and several obstacles that could cause issues for your business.

Inventory management strategy is important because it helps you:

  • Keep the right inventory levels
  • Reduce spoilage
  • Lower storage costs
  • Improve delivery
  • Maximize profits
  • Improve customer experience

As you can see, these are all crucial to running an Amazon FBA business smoothly. Again, Amazon may automate some of these processes already, but once your business grows and you start selling more products, you’ll have to implement an inventory management strategy to ensure you’re not losing out on money from storage costs and other unnecessary expenses. Let’s take a closer look at some of the benefits of good inventory management:

Keep the Right Inventory Levels

One of the keys to good inventory management is ensuring you maintain the right inventory levels. This means you shouldn’t have excess inventory. It also means that you shouldn’t have low stock for your items. You need to strike a happy medium that keeps you well-stocked for customer demand without costing you excess dollars in storage costs. 

Excess inventory can quickly cost you a lot of money. It increases storage costs, causes you to have obsolete or spoiled inventory, and may cause you to incur additional fees. Amazon will consider your products to be excess inventory if you have over 90 days' worth of supply, if one unit or more is aged over 90 days, or if there are better ROI opportunities available. Having a good inventory management strategy will provide you with the necessary tools to avoid excess inventory problems. A good way to manage excess inventory is by increasing your sell-through rate. Products that are sold quickly and that are popular on Amazon are the best candidates for high sell-through rates. With the right data and analytics, you can quickly identify which products are your high sell-through products and push them to the forefront of your advertising and selling strategy.

The other issue to consider when you’re trying to maintain ideal inventory levels is avoiding low stock. If you don’t have the stock to meet customer demand, you can be losing out on a lot of potential sales. It also puts less customer trust in your Amazon business when they can’t buy the products you should have available for purchase. 

It may take some time and research to find the ideal stock to meet your customer demand. As always, demand for your product is likely going to vary throughout the year and depending on countless other external factors. You may need to adjust inventory to meet increased seasonal demand or there may be other things that can cause a spike in demand that needs to be met. On the flip side, sometimes customer demand will drop, so you need to make sure your strategy has contingencies for the unexpected. 

Finally, you should have a plan for stranded inventory and dead stock. This inventory is being stored in your warehouse but there is no product listing for it online. These products cost you money for no reason. Don’t let stock just sit there when it could be sold. Make sure you’re tracking and identifying any stranded inventory so you can list them for sale and get them out of the warehouse.

Reduce Spoilage

There are a variety of inventory items that may expire or pass a sell-by date if they go unsold. This unsold inventory can turn into spoilage, causing you to lose out on money for storage along with the cost of the goods.

If you’re tracking and managing your inventory, you can catch spoilage before it happens and still make a profit off these items. By running promotions or special sales, you can get these items out of your warehouse and clear them out before they become a total loss. You can also push these sales and promotions with your advertising campaigns to encourage quick buys.

As you optimize your inventory strategies, you can reduce spoilage so you don’t have to put your items on sale or discount them to prevent losing out on revenue.

Lower Storage Costs

Storage costs can quickly add up when your products remain sitting in the warehouse. Optimizing your inventory management can ensure you keep storage costs low and that you don’t have to get rid of as much inventory. It’s imperative to track your inventory so you know how much it’s costing you.

With the right tracking software, you can see your stock, the levels of inventory that can meet typical demand, the age of units in your inventory, and much more. Without inventory tracking, you’re working in the dark. You’ll have to pay unnecessary storage fees for inventory you don’t need. With the right inventory management software, you can also learn what items sell the fastest. This way you can prioritize those items and keep them in stock instead of stocking items that end up costing you money in the long run. Data-driven inventory management is the key to keeping your warehouse levels stable to meet demand without constantly having excess units.

Improve Delivery

Keeping a properly stocked inventory can improve delivery times, reducing customer frustrations and getting stock out of the warehouse faster. Optimizing inventory can help to make deliveries more efficient overall since there won’t be downtime between the order and pickup. If you’re short on stock, deliveries won’t go out on time. Or, you may have to make more deliveries than necessary because you don’t have enough for all your orders and another delivery has to be made once you restock. Also, keeping the proper stock can offset returns and exchange problems. If a customer order quickly needs to be replaced, having units in stock will be essential to meeting this demand.

Maximize Profits

Of course, all of these optimizations work to better your bottom line. When things are running smoothly, your profits will increase and your ROI will improve. Spoilage, excess inventory, shortages, dead stock, and all of these problems all cut into your revenue. But when you have your inventory optimized, you can ensure these processes are streamlined and that you make as much money as possible from your Amazon FBA business.

If you’re an Amazon FBA seller, you didn’t get into this industry to hold stock in warehouses. You entered this industry to sell products and sell them quickly. With the right tools and software, you can do this. Inventory management is essential for several reasons, but maximizing profits and making more money are among the most important reasons.

Better Customer Experience

Finally, inventory management is important because it provides a much better experience for your customers. When a customer places an order on your Amazon store, the last thing they want to see is that you’re out of stock or that they’ll have to wait several weeks for their order to arrive. Meeting their demand and providing the right amount of inventory ensures that your customers can always get their products quickly from your store. This helps build trust and customer loyalty.

If customers know they can continually return to your store to get their products, then you know that your inventory management strategy is working. This is especially the case for sellers that have products that need to be bought on a regular basis. Matching demand will make it possible for customers to subscribe and continually buy from your store. However, if your inventory management isn’t optimized, then your customers will have a bad experience and they won’t be able to get the things they need. Make sure your customers know that your store is one that they can come to time and time again.

How to Work it Into Your Marketing Strategy

Amazon sellers have more than just inventory management to consider. You also need to have a plan to market your business. So, how does your marketing strategy relate to inventory management optimization? Well, you have to consider that you’re building a brand and trying to increase brand awareness for your Amazon store. It’s difficult to build a brand if you don’t have inventory meeting the demand of your customers. The catch of inventory management is that your customers shouldn’t notice that you optimize your inventory. Customers aren’t visiting your store and admiring your ability to keep things in stock. For Amazon sellers, this is just expected. If you’re doing your inventory management right, customers won’t know you’re doing anything at all.

Your brand should always have the items they need when they need them. Once you’ve established that you can always provide products for customers, you can focus on brand and marketing strategy.

Inventory management can help your marketing on a deeper level as well. When you see which products are selling best, you can make sure to promote them and spend your ad dollars there. Optimizing your ad spend according to inventory demand is a crucial skill for Amazon FBA sellers.

In short, without an inventory management strategy in place, you won’t have a detailed idea of which items sell best, which sell the fastest, and which need a bump in advertising to move. When you have in-depth analytics about your inventory, you can leverage that information to create better ad campaigns while also establishing which products are most important for your brand and to your customers. 

Effective inventory management practices will help customers discover your brand, encourage them to spread the word, and turn them into loyal customers. A good inventory management strategy can also be scalable, allowing you to increase the reach of your operation without running into inventory management challenges and obstacles.

Save Time and Grow Your Business With Mayan

If you’re looking to save time with inventory management, Amazon advertising, and marketing, Mayan can help. Our advanced analytics software for Amazon sellers provides you with tools that give you a clear and simple path for growing your business. Our centralized dashboard provides you with every metric you need in one intuitive place. You can easily see monthly, daily, and even hourly metrics for your inventory levels, revenue, and much more. Using Mayan will help you learn more about your brand and identify inventory management opportunities that will help you optimize inventory levels and maximize your revenue. 

If you’re interested in seeing what Mayan can do for your Amazon FBA business, sign up today. We’re excited to show you our platform and run an audit to show you the opportunities our platform can provide. Once we’re aligned on your goals, we can get started bringing your business to the next level. Ready to see how Mayan can help?

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