Amazon recently introduced a new tool called the Minimum Inventory Level Metric for sellers who use FBA to help manage their inventory better, deliver products faster, and avoid a new fee for having too little stock. This tool uses advanced technology to figure out how many units a product seller should keep in Amazon’s storage.
If sellers keep their inventory above the recommended level, they not only meet customer needs but also get products to customers faster by using nearby Amazon fulfilment centres.
In this post, we will discover everything you should know about the recently announced Minimum Inventory Level Metric for Amazon FBA sellers.
If you are looking for immediate help to streamline your Amazon inventory management, feel free to contact us at eMarspro or talk with an expert Amazon consultant at +1-682-472-4939.
What is the New Minimum Inventory Level Metric Announced by Amazon for FBA Sellers
Let’s explore the details and understand how this metric works, its implications, and its integration with other critical tools and metrics.
Historical Days of Supply and Low-Inventory-Level Fee
Starting April 1, 2024, a low-inventory-level fee will be enforced when both the long-term historical days of supply (last 90 days) and short-term historical days of supply (last 30 days) fall below 28 days (4 weeks). Sellers can access their historical days of supply on the FBA Inventory page. Amazon intended to encourage sellers to maintain sufficient inventory levels to meet customer demand effectively.
For example, if a FBA seller’s product has a historical days-of-supply average of 25 days over the last 90 days and 20 days over the last 30 days, they would incur the low-inventory-level fee since both metrics are below the 28-day threshold.
Inventory Performance Index (IPI) Integration
Efficient inventory management involves striking a balance between excess inventory and avoiding stockouts. The Minimum Inventory Level positively contributes to the seller’s IPI score, reflecting their ability to reduce excess inventory, address stranded listings, and improve sales performance. The Inventory Performance dashboard will be updated to showcase the impact of the Minimum Inventory Level on the seller’s IPI score.
Imagine you sell stylish sunglasses. If the Minimum Inventory Level suggests keeping a certain amount in stock, and you follow that advice, it not only helps you avoid having too many sunglasses lying around (which might not sell), but it also makes sure you don’t miss out on sales because you ran out.
Amazon plans to update the Inventory Performance dashboard to highlight how well you’re doing with the Minimum Inventory Level, making it easier for you to see the positive impact on your overall performance.
Capacity Limits and Strategic Inventory Management
Sellers’ capacity limits are based on their IPI score, expected sales, the capacity of the delivery centre, and the time it takes to ship an item. Sticking to the Minimum Inventory Level makes sure that sellers have enough stock to escape the low-inventory-level fee. It also stresses how important it is not to use up space for extra stock. A seller who has a high IPI score and makes sure their inventory levels are in line with the Minimum Inventory Level can sell as much as they can without having to pay extra fees.
Restock Recommendations and Continuous Support
Amazon’s restocking recommendations continue to play a vital role in helping sellers maintain the Minimum Inventory Level. Sellers receive specific recommendations for ship-by dates and replenishment quantities for upcoming shipments, ensuring a seamless and strategic approach to inventory replenishment.
Suppose you’re selling cool tech gadgets on Amazon, and your newest item is becoming a hit. Amazon, using smart technology, looks at how much you’ve sold before, what you currently have in stock, and predicts how much people will want to buy.
On your seller dashboard, you get a suggestion about how many more gadgets to send to Amazon’s storage and when to send them. This is super helpful because it helps you make sure you have enough to sell without having too much. For example, if it says to send 200 gadgets by a certain date, it’s because Amazon thinks a lot of people will want to buy them around that time – maybe because of holidays or special promotions.
These suggestions aren’t just random numbers; they’re like a plan to help you do well on Amazon. They show that Amazon is working with you, using information to make sure you have what you need to sell without any problems.
Impacts on FBA Seller of New Minimum-Inventory Level Metric
FBA sellers have several beneficial implications for their operations and overall success on the platform, such as;
Strategic Inventory Planning
FBA sellers now have a data-driven metric to guide their inventory planning effectively.
Advanced machine learning models analyze demand forecasts, providing sellers with precise recommendations for maintaining optimal inventory levels.
Enhanced Delivery Speeds
Sellers can capitalize on faster delivery speeds by maintaining inventory above the Minimum Inventory Level. Strategically placed products in local fulfilment centres enable quicker customer distribution, contributing to a better overall shopping experience.
Avoidance of Low-Inventory-Level Fee
The metric serves as a preventive measure against the recently announced low-inventory-level fee. Sellers can minimize the risk of fees by aligning their inventory levels with the recommended Minimum Inventory Level, ensuring they meet customer demand consistently.
Improved Sales Performance
On average, sellers adhering to the Minimum Inventory Level experience a 15% increase in sales over four weeks. This underscores the metric’s positive impact on driving sales, potentially leading to increased revenue and business growth.
Optimization of Fulfillment Center Distribution
Maintaining inventory above the Minimum Inventory Level enables products to be strategically distributed across local fulfilment centres. This optimization minimizes shipping distances, contributing to faster delivery times and enhanced customer satisfaction.
Integration with Other Metrics
The Minimum Inventory Level metric works alongside other crucial metrics like Historical Days of Supply, Inventory Performance Index (IPI), capacity limits, and restock recommendations. Sellers can adopt a holistic approach to inventory management, aligning various metrics to achieve optimal results.
Enhance Inventory Performance Index (IPI)
Efficient inventory management positively contributes to the seller’s IPI score.
Maintaining the Minimum Inventory Level can result in an improved IPI, reflecting positively on the overall health of the seller’s account.
Proactive Inventory Management
Sellers are encouraged to proactively engage with tools like restock recommendations and the Inventory Performance Dashboard to maximize the benefits of the Minimum Inventory Level metric. It gives a more strategic and proactive approach to inventory management, aligning with the dynamic nature of eCommerce.
What eMarspro Can Do
Effectively managing your inventory on Amazon requires time, skill and experience. eMarspro makes it simple for you.
How We Do it
At eMarspro, we’ve distilled the complexity of Amazon inventory management into straightforward, actionable steps.
We utilize advanced tools and inventory management softwares that go beyond conventional methods, ensuring your inventory is not just managed but optimized for peak performance.
No one-size-fits-all solutions here. Our Amazon consulting experts craft personalized, result-driven strategies to maintain your Amazon seller account health.
Wrap-Up
In conclusion, the recently introduced Minimum Inventory Level Metric for FBA sellers brings significant benefits. It helps avoid fees, boosts sales, improves delivery speeds, and encourages proactive inventory management. This tool empowers sellers to navigate Amazon’s fulfilment system more effectively, enhancing their overall performance on the platform.
