By Jake Frimmer, ERS Business Analyst Intern

Amazoning Smarter

It is no secret that Amazon has revolutionized the retail industry. They offer unparalleled opportunities for businesses to reach a global customer base. Managing an online retail business differs significantly from managing a traditional brick-and-mortar store. That said, succeeding on Amazon takes more than just listing your products. It requires strategic inventory management to ensure availability, minimize costs, and optimize sales performance.

Effective inventory management is crucial for Amazon’s online stores for several reasons. Keeping products in stock is essential to maintain sales, which can harm rankings and customer loyalty. Timely fulfillment of orders can boost customer satisfaction and loyalty, which are vital for positive reviews and repeat business. One of the critical components of effective inventory management for Amazon sellers is the use of inventory management software. These tools provide real-time tracking of inventory levels, sales data, and demand forecasting. By analyzing this data, retailers can predict future demand and adjust their stocking strategies accordingly, giving them control over their inventory and the ability to plan for the future. It is also important to notes that the seller or manufacturers often have a shared inventory they don’t sell exclusively on Amazon. While Amazon does provide a forecast to appliers, it is only one piece of the larger inventory puzzle.

The Role of Fulfillment by Amazon

Amazon’s Fulfillment by Amazon (FBA) service plays a significant role in helping sellers manage their inventory. FBA allows sellers to store their products in Amazon’s fulfillment centers, where Amazon handles all the storage, packaging, and shipping. This service saves retailers time and effort and gives them access to Amazon’s extensive logistics network, which includes tools and reports that help sellers track inventory and forecast demand. Keeping a close eye on the metrics provided by FBA is fundamental.

Retailer-Supplier Collaboration

Partnership between retailers and their suppliers is essential for mutual success. Maintaining solid relationships with suppliers is a crucial aspect of inventory management. Reliable suppliers ensure timely delivery of products, allowing retailers to replenish their stock as needed. This reliability provides a sense of security, knowing that you can count on your suppliers to keep your inventory stocked. Understanding lead times is also important for planning ahead and staying in stock.

A smart supplier will provide additional insights to the retailer, such as product demographics and trends, and assist in overall business management. This collaboration can lead to better decision-making and a more efficient inventory system.

Think Ahead

A tricky part of demand planning is considering seasonal variations, promotions, lead times and other assortment mix factors. Essentially, suppliers need to become the buyer to help a retailer manage the business. By anticipating spikes and lulls in demand, sellers can ensure they have enough products to meet customer needs during these peak periods. While the retailer is responsible for their entire assortment and all the sku’s, it’s hard for them to manage at a micro level, thus missing opportunities. However, suppliers can be laser focused on their specific business, capitalizing on those opportunities and finding liabilities before they become big problems. They can study inventory throughout the chain to ensure it is balanced across all doors and channels.

With the buyer’s permission, a supplier can utilize Vendor Managed Inventory (VMI) systems to automate the reordering processes, generating purchase orders when inventory levels are predicted to fall below a certain threshold. It offers a win-win benefit for the supplier and retailer. It ensures that multiple resources are optimizing the business. VMI reduces the burden on retailers leads to better stock availability, increased sales, and better customer satisfaction.

Success with ERS

Recently, I observed a meeting with a client who had a pain point regarding their growing Amazon business. They struggled with the management and replenishment of their inventory and realized their current methods needed to be improved as sales were lost due to poor forecasting and order planning. While Amazon provides a lot of data, it is not necessarily in a digestible format to be most effective. This is where visualization tools and reports can help sales and planning teams. They were able to quantify lost sales and decided that it would save a lot of time and money to come to ERS for a solution.

ERS has the capabilities and expertise that most businesses do not have. This includes the infrastructure to support large data lakes, POS data translation from virtually any data source, software curation geared toward inventory management and industry best practices. Of course, a company can spend the time and money to do it themselves, but it will not be as intelligent or intuitive as ERS’s.

The ERS system allows for an accurate and seamless forecasting and reordering process, ensuring that customers can access the products whenever they need them and ultimately reduce lost sales. All a client must do is provide the raw data each week, and the rest is automated. This leaves them significantly more time for the important task of decision-making. The increase in sales and profit margins and massive time savings provide an exceptional ROI, which is why the average engagement with ERS is over 10 years.

In summary, effective inventory management is key to thriving on Amazon. Leveraging tools like inventory management software and FBA, maintaining strong supplier relationships, and preparing for demand fluctuations can help sellers stay competitive. ERS provides the expertise and tools necessary to optimize these processes, ensuring long-term success for our clients.