5 Tips to Optimize Your Inventory Replenishment Process

A critical piece of running a large-scale Amazon operation is taking an always-on approach to knowing your business’s inventory position. To avoid being faced with limited storage access or inventory storage overage fees, it is imperative to know what items to restock and the appropriate times to do so.

As a result, you can avoid going out of stock, understand when to discontinue an item or dispose of stale inventory, and realize when you are noncompetitive on an item. In this post, we have compiled five quick tips to help you optimize your inventory replenishment process.

1. Consider Your Entire Supply Chain

When tackling inventory management, it is important to take a step back and look at the bigger picture. By taking your entire supply chain into consideration, you are proactively preventing leakage across other key areas of your business. Ask yourself the following questions:

• Are you receiving the maximum amount of value from your manufacturers and suppliers? How frequently are you checking in on these relationships?
• Is your shipping and fulfillment strategy optimized? Are these costs eating into your profits?
• Are you allocating your resources properly across your priority areas or is one facet getting undervalued or completely ignored?
• When scouting for new products to add to your catalog, are you doing competitive and market research? Is there a consumer need for the product? Does it fill a gap in your selection?

Inventory plays such a significant role in the overall supply chain, as it controls the balance of supply and demand and is often a business’s most vital and costly asset. With a sound inventory management process in place, you can more effectively strike a proper balance between fulfilling customer demand and maintaining ample inventory.

4. Utilize Repricing Software to Help Move Inventory

No two products in your catalog will have the same exact supply and demand patterns, so be sure to avoid treating all SKUs the same. Familiarize yourself with the items that generate profit and apply the 80/20 rule to identify which items to concentrate on. If 20% of your inventory drives 80% of your profit, you need to understand which stage of its life cycle each SKU is in to apply the proper strategy. 

Establishing a dynamic pricing strategy and utilizing repricing software can help you outpace your competitors and move through slow-moving or stagnant inventory. To liquidate the inventory, prepare to go down to competitive floor prices. 

By pricing competitively with the market, or lower than your competitors, you can effectively generate capital to reinvest in new inventory or recoup any long-term storage fees spent on the slow-moving inventory. For example, you can discount prices at specific increments, such as 30%, and then continue to discount if the product is still not selling.

5. Check in on Your Suppliers Regularly

To ensure a low cost of goods sold (COGS), you need to establish periodic, effective, and structured negotiation meetings with your suppliers to ensure ongoing profitability and healthy performance. Make sure to monitor the following aspects of your supplier relationships:

• Various lead times; Are your suppliers adhering to their estimated or promised dates for product delivery?
• Are they frequently changing their minimum and maximum order quantities?
• Are the products in good condition when they arrive?

Be sure to discuss the possibility of volume discount pricing with each supplier. Sometimes there are no direct discounts provided upfront, but your supplier may be willing to give the discount as a kickback or credit note. By asking about establishing Terms of Trade, you can compensate for defective product issues that may arise and ensure that you are receiving value from your suppliers as your business scales.

Final Thoughts

In order to maximize the return on your inventory investment, you need to have a true understanding of and 360-degree view into all of the variables that impact your profitability. Inventory management is only one piece of this puzzle — you also need to consider shipping costs, the cost of goods sold, operating costs, advertising spend, costs associated with returns, and more.

By regularly monitoring your inventory on Amazon, you will be able to extract the inventory performance insights and take the appropriate actions to allow you to outperform the competition and maintain healthy profit margins.