Reduced Inventory Limit Disaster!

Just as the summer heat was starting, Covid cases were dropping and everything was starting to look good again – Amazon threw us a real curve ball with their new inventory storage limits! 

What Amazon FBA inventory limits mean

Here is a recent question on the Amazon Sharks FBA group that really nails what’s going.

Amazon Sharks FBA group sample question

Yes, Amazon have basically changed their storage limits from being ASIN based (i.e. limits for each product you hold at Amazon’s warehouse) to being storage type based! And this means that your storage limits include all ASINs within each storage type, which are split into 4 categories: 

1. Standard size storage 
2. Oversize storage
3. Apparel storage
4. Footwear storage 

Now this by itself wouldn’t be an issue IF Amazon had set reasonable limits but instead many sellers have been hit with a blanket 1,000 unit limit per storage type. 

Again, 1,000 units sounds manageable for most products but don’t forget that this is for all your ASINs. As another Amazon Sharks member has said:

“I’ve had a standard reply from Amazon but no resolution. Seems to me that if we have 10 products in the same category. We have stock limit of 100 each. For me that means restocking weekly and I think Amazon don’t take into account delivery and time in the warehouse so I’m sending smaller quantities on a regular basis.”

So depending on the amount of SKUs you sell via FBA this storage limit is in effect much smaller. 10 SKUs split evenly means just 100 of each, which is tiny! 

How long will the inventory reduction limit last?

Well the good news is that Amazon have assured us that these category based inventory limits will be lifted from July 1^st, but only for sellers that have an Inventory Performance Index (IPI) of 500 or more:

Hi,

Your Inventory Performance Index (IPI) score is 608. Because your IPI score is at or above 500, you will not be subject to storage limitations for standard-size, oversize, clothing or footwear inventory starting 01st July 2021. However, all products are subject to restock quantity limits. For more information, refer to Restock limits by storage type: Frequently asked questions.

Visit the Inventory performance dashboard today to continue improving your IPI score.

The Fulfillment by Amazon team

I’ve written about the Inventory Performance Index in detail before but long story short it’s an Amazon metric that uses multiple factors to “gauge your inventory performance over time” and give you a rating between 0 and 1,000.  

To check your IPI login to Seller Central then click the Inventory tab and select Inventory Planning. 

Then click on Performance and you’ll see your current IPI as well as a little graphic that shows you your “top influencing factors” and whether they’re Poor, Fair, Good, or Excellent. 

Top influencing factors

And there are 4 categories here that directly affect your IPI: 

1. Excess inventory 
2. 90 day sell through rate 
3. Stranded inventory 
4. In stock inventory 

But okay that’s all well and good if the limits are being lifted for July but what do we do in the meantime? 

What are your options as an FBA seller hit with these reduced storage limits? 

Restock your FBA Inventory Regularly

This is really the most straightforward solution. Say you normally sell 20 units a day, so 600 a month, and would usually ship Amazon 1,200+ units at a time – giving you enough stock for 2 months. Well now you might have to send only a months’ worth of stock to Amazon’s fulfilment centres and simply send them shipments more often. 

But one very important point – this doesn’t mean you should be reducing your order size with your supplier! 

If you normally order 2,000 units at a time, don’t cut that in half because you’re sending much less to Amazon! Even if this doesn’t increase your price per unit with the manufacturer it will definitely increase your shipping cost per unit and therefore cut into your margins. 

Especially now where freight charges are still extremely high and show no signs of coming down anytime soon. 

But I know what you’re now thinking, “but Andrew what am I going to do with 1,000 units of additional stock that I can’t send to Amazon?!” 

Two good options for FBA Sellers

You either store it yourself temporarily, which means no additional costs, or you pay storage fees at either an Amazon prep center or better yet simply ask your freight forwarder to store it for you and ship to Amazon when needed. Most good freight forwarders will be more than happy to arrange this for you. If you need a recommendation, then speak to either Woodland Group or Westbound Global. Ryan, the director of Westbound, is an Amazon Sharks member and he has a wealth of knowledge in the fulfilment industry, so you’re in good hands! 

Now of course this will mean extra storage costs but it shouldn’t contribute a lot to your overall product cost and it’s worth it to know you have stock ready to go in the UK when needed. Please don’t be penny smart pound foolish here and save a bit of money in storage fees only to run out of stock and miss out on weeks of sales! 

While this may seem like an easy solution, unfortunately it won’t help in all cases. 

For one thing if you sell very high quantities, say 1,000 units a week, then while in theory you could ship to Amazon weekly, 1,000 units at a time, in practice you could easily run into delays with your stock being unloaded at fulfilment centres. And there’s no easy way around this. It’s hard to guess how long it’ll take and even then it’s not as if you could time it by shipping beforehand as you won’t even be able to create the shipment! 

Similarly, if you have a lot of products on Amazon then it’s going to be very hard to keep them all adequately stocked. 

If you fall into one of these two situations then don’t despair – there are still a few more options that you can try. 

Request an Inventory Limit Increase

You can do this via your account manager (if you have one) or simply through seller support. I’ve been told by a few people that this worked for them but honestly I’m very sceptical. Anyone who has dealt with Amazon seller support knows how inconsistent they are and unless you get very lucky I suspect any request to increase your inventory limits will be met with a generic reply about them being lifted on July 1^st. 

But still, you don’t really lose anything by trying so give it a go. 

If it doesn’t work then one final option is: 

Amazon Seller Fulfilled Prime instead of FBA

I haven’t covered this programme yet on my blog for one simple reason – I’m actually not a huge fan of it! 

Honestly it reminds me too much of the dark eBay days of handling all the postage and packaging yourself. I happily pay Amazon’s FBA fee for them to take care of all of that for me. 

BUT it is a worthwhile option for products that aren’t suitable for FBA – slow moving products or when you don’t have a lot of sales history and can’t send in enough stock to Amazon. 

And in that way it’s a perfect temporary solution to the inventory limit problem so many sellers are now facing. 

There are some eligibility requirements, which you can read more about here: Seller Fulfilled Prime 

If you do go down this route then you can either fulfil the orders yourself or if you want to be completely hands-off there’s still the option of using a fulfilment centre in conjunction with SFP. 

On that note I’m planning to test a few Amazon specific fulfilment centres / prep centres and I’ll have a dedicated blog post on this, as I know it’s something a lot of people are interested in. 

If you’re in the very unfortunate position where shipping stock in regularly isn’t feasible and you also don’t qualify for seller fulfilled prime, then unfortunately there’s not a lot you can do. 

You should of course prioritise your best selling SKUs and you’ll simply have to hope for the best when it comes to the prep centre check in times. 

And it goes without saying that you shouldn’t launch any new products during this time as it’s too risky when you consider the opportunity cost of using up your storage limits. 

One final tip would be to pause / lower your PPC campaigns and rely completely on organic sales. That way you can potentially avoid running out of stock and then even if you do, at least you had more sales at higher margins… 

Any long time blog reader will know that I’m the biggest fan of Amazon you can find. I simply love the private label business model and switching over from eBay has been one of the best business decisions I’ve ever made. But that doesn’t mean I won’t be honest with my blog readers and I have to say that no notice being given for this was unbelievable. 

There should have been at least two weeks to give sellers enough time to plan and manage their stock. The fact that people had shipments that were already on their way and were then rejected because they would’ve pushed them over their inventory limits is ridiculous. 

But at the same time it’s important to always calmly assess such situations and decide the best thing to do for your business. The good news is that it should all be under control by July 01^st. I know a lot of people are dubious about this but the timing fits perfectly, just after Prime Day when a lot of warehouse space will open up, so I’m optimistic. 

If you have any tips or thoughts to share then feel free to comment below or email me directly on help@andrewminalto.com and I’ll personally get back to you.

Otherwise, until next time! 

All the best,

Andrew