30 Nov What Happens When I Run Out of Amazon FBA Inventory?
One of the most critical parts of inventory management is calculating the right amount of product units needed in stock. If your stock level dips too low, you are at risk of running out of products. This usually happens when demand for products is higher than expected. The amount of inventory and safety stock is too low to fill all orders.
A stockout situation can happen due to delays in the supply chain, a shortage of working capital, or poor cash flow management.
Running out of stock can have a negative impact on your Amazon listing and account and can impact your future sales. Ultimately, it can mean losing against the competition.
To prevent this, you need a strategy to ensure that you never run out of stock regardless of the circumstances.
Running Out of Amazon FBA Inventory
When you run out of stock, Amazon will automatically remove your listing, marking it as “inactive”. And when you don’t have an active listing, you can’t sell!
If a product is not available for a customer order, four outcomes are possible.
- The Customer backorders. The best option for you is that the customer agrees to wait and purchase later. But that very rarely happens unless you’ve built a very strong brand. As an example, customers will wait for luxury products like Nike sneakers, but they won’t wait for everyday items. Backorders are a good fallback. This means they are still going to wait but actually place the order. The challenge here is that too many backorders can impact your brand image.
- The Customer cancels. Unfortunately, this is one of the most common scenarios. Cancellations are challenging for e-commerce companies, especially if they occur after you’ve received the money from the marketplace. It can be tricky to manage cash flow when you have to send money back to customers.
- The Customer shops elsewhere. If a customer is unhappy with regard to available inventory for purchase, they may be willing to buy from another seller.
Amazon rewards hot selling products, and if your items are out of stock, you will lose the privilege of having your listings even rank on the marketplace. Your customers will also lose trust in your brand, and it may impact their loyalty.
Demand Forecasting
As an Amazon seller, it’s vital to invest in sharpening your sales forecasting. This process is all about anticipating demand so you can determine what products to order, how many of them, and when.
Demand forecasting lets sellers anticipate how much inventory to order and when. You can even leverage reporting and analytics tools to determine the stock level. With these data points, you can plan your stock replenishment cycle to prevent going out of stock.
Knowing where your business is going will help you to plan ahead in terms of inventory, investment and marketing.
With demand forecasting, you can determine the reorder point by going off your sales history, current order quantities, and on-hand quantities.
The Amazon restock inventory tool provides recommendations on products to restock, suggested replenishment quantities, and ship-by dates. Amazon’s restock tool helps you keep track of your inventory levels so you can maximize sales by meeting product demand while avoiding overstocking. It essentially takes the guesswork out of determining turn or the velocity at which sales occur for a particular SKU.
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Every seller needs to achieve some level of flexibility in their inventory management cycle.
Some businesses run into stockouts because of a lack of funds to purchase new inventory. They struggle to ensure they have the working capital available to reinvest in stock and inventory purchases.
This can be particularly challenging when there are time-sensitive opportunities to scale up (like the holidays) but no funds or working capital on hand.
Luckily, a cash advance can solve this problem for you. A cash advance can provide you with an advance based on your future sales revenue.
Access to cash now can help you invest in your business, launch new products, manage inventory, or negotiate better payment terms with supplies.
At Yardline, we help e-commerce businesses like yours get access to working capital. Contact us today and secure the funding you need to optimize your inventory management and thrive.