Amazon FBA Demand and Inventory Planning
Effective demand and inventory planning is crucial for optimizing stock levels, preventing stockouts, and maximizing profitability, especially in an environment like Amazon FBA Seller Central. Below is a comprehensive guide to building a robust demand and inventory planning process that ensures you always have the right inventory at the right time.
1. Using Historical Orders to Paint a Picture of Demand by FN SKU
The first step in demand planning is understanding past performance. By analyzing historical orders at the FN SKU level, you can identify:
Average daily, weekly, and monthly sales velocity.
Seasonality trends and promotional spikes.
Long-term sales trends (growth, decline, or stability).
By capturing this data, you create a strong foundation for future forecasting.
2. Determining Future Forecast Based on Ad Spend, ROAS, and TACOS Per Item
Past performance is only part of the equation. To project future demand, factor in marketing efforts. Consider:
Ad Spend: The more you spend, the greater the potential demand.
ROAS (Return on Ad Spend): If an item has a high ROAS, increased ad spend will likely drive more sales.
TACOS (Total Advertising Cost of Sale): A lower TACOS indicates organic growth, reducing the need for aggressive ad-driven forecasting.
By tracking these metrics per SKU, you can better predict how demand will shift based on your marketing strategy.
3. Picking a Weekly Velocity Number Per SKU
Once historical demand and future marketing inputs are understood, determine the weekly sales velocity for each SKU. This metric should factor in:
The average units sold per week over the past 30, 60, and 90 days.
Adjustments for upcoming promotions, seasonality, or planned price changes.
Expected uplift from advertising campaigns.
Weekly velocity serves as the primary input for calculating replenishment needs.
4. Determining Safety Stock Levels
Safety stock is essential for mitigating supply chain disruptions. Our standard approach for Amazon inventory levels is:
45-60 days of supply in stock at Amazon.
60-90 days of supply if lead times are longer.
To determine the right safety stock per SKU, calculate:
(Weekly velocity) x (Desired days of stock) = Safety Stock
For example, if a SKU sells 100 units per week and you aim for 60 days of supply, you should maintain 600 units as safety stock.
5. Using the FBA Inventory Report to Refresh Inventory Weekly
Amazon’s FBA Inventory Report provides real-time data on your stock levels. Reviewing this weekly helps:
Monitor available inventory and sales trends.
Identify inventory stuck in reserved or inbound status.
Adjust replenishment plans based on current stock levels.
By keeping this process tight, you ensure that inventory levels remain aligned with demand.
6. Understanding the Different Amazon Inventory Buckets
Amazon’s inventory system consists of different buckets that impact your available stock. Understanding these helps in better planning:
Available: Stock that is on hand and sellable.
Reserved: Inventory temporarily unavailable for sale, split into:
FC Transfer: Moving between fulfillment centers (Sellable).
FC Processing: Being prepped within the warehouse (Sellable).
Customer Reserved: Items held for pending customer orders (Not Sellable but still on hand).
In Transit: Inventory on its way to Amazon, split into:
Working: A shipment has been created but not yet shipped.
In Transit - Shipped: The shipment is closed, and product is on the way or pending pickup.
Receiving: Inventory has arrived at Amazon and is being checked in.
7. Replenishment Planning
Replenishment is a structured process where we:
Review all inventory levels, including available, reserved, and in-transit stock.
Calculate replenishment needs based on weekly velocity and safety stock targets.
Consider pending marketing pushes or planned promotions that may increase demand.
Adjust restocking plans based on lead times and Amazon FBA check-in rates.
Final Thoughts
By following these steps, you ensure your inventory levels are optimized—minimizing excess stock while preventing costly stockouts.
A strong demand and inventory planning process is a game-changer for brands selling on Amazon. By leveraging historical data, incorporating marketing projections, maintaining safety stock, and monitoring FBA reports weekly, you create a system that keeps inventory flowing efficiently. This not only reduces storage fees and lost sales but also improves your overall operational efficiency.
If you're looking for a streamlined way to implement this, Mangrove CPG specializes in optimizing supply chain and inventory strategies for high-growth brands. Let’s build a scalable, data-driven inventory process that supports your growth!
