Historical Days of Supply Metric
- This metric is crucial in determining the low inventory level fee. It assesses a product’s inventory levels against its actual historical sales data.
- Amazon evaluates both short-term (last 30 days) and long-term (last 90 days) inventory levels. A product is subject to the low inventory level fee if its historical days of supply fall below 28 days.
Fee Calculation and Application
- The fee is applied at the parent-product level, meaning if any parent-product’s historical days of supply is less than 28 days, the low inventory level fee is added to the FBA fulfillment fees.
- It varies based on the product’s size tier and shipping weight, with lower fees for products having 21 to 28 historical days of supply.
Avoidance and Exemptions
- Sellers can avoid the fee by effectively managing their inventory levels both in the short and long term.
- Notably, the fee does not apply to new professional sellers for their first 365 days, new-to-FBA parent-products for the first 180 days, or products that are auto-replenished by Amazon Warehousing and Distribution.
This fee structure is part of Amazon’s broader strategy to ensure a seamless supply chain, urging sellers to align their inventory management practices with customer demand and avoid stockouts.
Strategies to Minimize the Fee
To effectively minimize or avoid Amazon FBA fees, especially those related to low inventory charges, sellers can implement several strategic measures. These strategies not only help in reducing fees but also in optimizing overall inventory management:
1. Inventory Optimization Strategies:
- Maintain a short-term historical supply of over 28 days to prevent low inventory fees.
- Utilize tools like the Inventory Performance Dashboard to monitor inventory levels and receive tailored advice.
- Engage in automatic restocking through Amazon Warehousing and Distribution (AWD) for consistent inventory levels.
2. Cost Reduction Techniques:
- Reduce packaging weight and size to lower shipping costs.
- Bundle products together to minimize picking and packing units.
- Ensure accurate product dimensions to avoid overcharges and optimize borderline sizes and weights.
3. Proactive Management and Planning:
- Regularly audit FBA invoices and file claims for discrepancies.
- Plan for unexpected inventory demands and maintain around 60 days of supply.
- Use smart software platforms like AiHello for automating inventory management, ensuring a proactive approach to maintaining optimal inventory levels.
By employing these strategies, Amazon sellers can significantly reduce the impact of low inventory fees, while also enhancing their inventory management practices.
The Role of Historical Days of Supply
Amazon’s approach to managing inventory through the historical days of supply metric is both strategic and data-driven. This metric is pivotal for Amazon sellers, as it directly influences the low inventory level fee. Here’s a breakdown of how Amazon calculates and utilizes this metric:
1. Historical Days of Supply Calculation:
Short-term and Long-term Analysis: Amazon evaluates inventory levels over two periods: the last 30 days (short-term) and the last 90 days (long-term). This dual-period analysis provides a comprehensive view of inventory trends.
Formula: The metric is determined by dividing the average daily inventory units by the average daily shipped units. This calculation offers a clear picture of how long the current inventory will last based on recent sales velocity.
2. Implementation in Fee Assessment:
Weekly Updates: The latest historical days of supply figure is used to set the fee rate for units shipped within that week. Sellers should note that adding new units to inventory will be reflected in the following week’s calculation.
Parent-Product Level Focus: Calculated at the parent-product level, this metric underscores the importance of maintaining optimal inventory levels across product variations.
Amazon encourages sellers to adopt robust inventory management practices. Regular inventory audits, leveraging an inventory-management system, and syncing inventory across platforms are recommended strategies. Additionally, automating order fulfillment, managing returns efficiently, and reducing excess inventory can further optimize inventory levels and mitigate low inventory fees.
Exemptions and Waivers
Navigating the exemptions and waivers associated with Amazon FBA’s low inventory level fee is crucial for sellers aiming to optimize their operations. Understanding these can significantly reduce unnecessary costs:
1. Exemptions for New Sellers and Products:
New professional sellers and products new to FBA enjoy a grace period exempt from the low inventory level fee. Specifically:
- New sellers are exempt for the first 365 days following their first inventory received date.
- New-to-FBA parent-products are exempt for the initial 180 days.
This grace period is designed to facilitate sellers in adjusting to Amazon’s operational demands without the immediate pressure of additional fees.
2. Amazon Warehousing and Distribution (AWD) Waivers:
Utilizing the auto-replenishment feature through AWD grants sellers waivers for:
- FBA storage-utilization surcharges.
- Low-inventory-level fees.
- Storage overage costs.
These waivers encourage sellers to maintain optimal inventory levels through automated restocking, thus avoiding the fees associated with low inventory.
3. Capacity Limits and Additional Capacity Requests:
New professional sellers are not subject to initial capacity limits, offering flexibility in inventory management.
Sellers have the option to request additional capacity based on a reservation fee, providing an avenue for expansion and scale without the immediate constraint of inventory space limitations.
Understanding and leveraging these exemptions and waivers enable Amazon sellers to navigate the complexities of inventory management more effectively, ensuring a smoother operational flow and potentially lower operational costs.
Optimal Inventory Management Practices
Adopting optimal inventory management practices is pivotal for Amazon sellers to navigate the complexities of Amazon FBA fees while ensuring customer satisfaction and operational efficiency. Here are key strategies to implement:
1. Inventory Management Solutions:
- Fulfillment by Amazon (FBA): Leverage FBA for lower shipping costs and efficient order fulfillment.
- Fulfilled by Merchant & Supply Chain by Amazon: Utilize these tools for syncing inventory and streamlining orders.
- Multi-Channel Fulfillment: Use Veeqo to manage orders across different sales channels seamlessly.
2. Technological Integration:
- Inventory Management Software: Implement software solutions for real-time inventory insights and risk mitigation.
- E-commerce Integrations: Sync your inventory with platforms like Shopify, WooCommerce, and QuickBooks Online for streamlined operations.
3. Strategic Inventory Practices:
- Data-Driven Forecasting: Employ AI-enabled demand forecasting to maintain the minimum inventory level recommended by Amazon.
- Balance Stock Levels: Find the perfect balance between excess inventory and low stock levels to avoid lost sales or high storage fees.
- Supplier Relations: Maintain a strong relationship with suppliers for timely restocking and inventory adjustments.
- These practices empower Amazon sellers to optimize their inventory management, reduce Amazon FBA fees, and enhance overall business performance.
Conclusion
Through this exploration of Amazon’s low inventory level fee and the strategic measures for inventory optimization, Amazon sellers are provided with a comprehensive guide to navigate the complexities of FBA fees. We’ve broken down the critical elements of the fee structure, exemptions, and ways to manage inventory effectively, thereby enlightening sellers on how to reduce fees, enhance operational efficiency, and ensure customer satisfaction. This discourse underscores the significance of maintaining optimal inventory levels, leveraging technology, and adopting strategic inventory management practices to minimize costs and avoid potential pitfalls.
The essence of this guide lies not only in understanding the fee structure but also in empowering sellers with the knowledge and strategies to thrive in Amazon’s competitive market. Embracing these insights will not only help in avoiding unnecessary fees but also in optimizing overall business performance. For those seeking further assistance or looking to deepen their understanding of inventory management within the Amazon FBA framework, Contact Marketlink. Making informed decisions and staying ahead of inventory challenges is critical for success in e-commerce, and with the right approach, Amazon sellers can navigate this landscape with confidence and efficiency.