Why Effective Amazon Inventory Planning Is Essential… but Elusive - Episode 222

INTERVIEW WITH CHELSEA COHEN

DESCRIPTION

In today’s podcast, we are talking with Chelsea Cohen about inventory planning for Amazon. We are discussing inventory management and how brands can improve their current situation, addressing the Shippageddon and its aftermath, and sharing some tools as well as advice that can help you deal with shipping fees.

Make sure you tune in to find out more!

Chelsea Cohen is an Amazon inventory management expert and the Co-Founder of SoStocked.com, an Amazon inventory management software that is going into the multi-channel space as well as the cash flow and profit optimization space within the next year. Chelsea is also an Amazon seller, speaker and consultant whose regular clients include 7 and 8-figure sellers.

“Logistics flexibility is having the foresight to set up plan B and plan C.”

— Chelsea Cohen

KEY TAKEAWAYS

We’re in the midst of a Shippageddon, and if your inventory is stuck on a boat, there’s nothing you can do. However, you can change the entire way you operate your logistics.
Logistics flexibility is essential - having the foresight to set up plan B and plan C. Don’t put everything on a boat or truck and trust Amazon to get it there on time.
In terms of sellers over-ordering inventory in an attempt to get ahead of shortages, Chelsea has two tips that would give the seller flexibility in terms of cash flow:
- Tip: use flexible inventory process
- Tip: get flexible payment terms
FBA Aggregators manage inventory in various ways:
- Some are still using spreadsheets, others are using smart inventory systems.
- Some are focusing on optimization across the supply chain trying to get into a lower fee tier.

There could be substantial cost savings if a whole catalog is moved to a lower fee tier.
- There are new minimums that are coming into freight forwarding - the carton minimum will be charged even if the actual weight/size is much lower.
- Amazon is reducing restock limits, so many brands are routing through 3PLs and the costs really stack up here - optimizing cartons is important
- There are free tools for optimizing pallets and containers, linked below.

Due to issues with FBA shipments, some brands are reverting back to their own warehouses:
- Since it’s an expensive endeavor, some brands that can afford it are setting up FBM systems.
- Some brands are partnering up to share the costs of setting up their own warehouses.

Stockouts are a problem for brands - they affect not only your organic sales, but your advertising metrics like ROAS. Usually people think of the lost sales during a stockout or post-stockout costs, but there are pre-stockout costs, e.g. marketing costs that are spent ahead of stockout.
- Inventory-minded marketing - being conscious of inventory whenever you’re doing marketing, but also informing marketing based on levels of inventory.
- Inventory timeline - a tool showing a run-rate of your inventory to see when you’ll run OOS.
There are mistakes brands are making with their inventory planning due to having forecasting systems for store sales, but not for online. In-store sales are not the same as real-time, online sales. With online sales you have to look at trends and competitors.

The KPIs that brands should be tracking to ensure their inventory planning is on track, and all of these should be shared with the marketing team:

Sell-through rate - number one metric for Amazon; Amazon looks at 90 days of your sales and then divides that with the amount of inventory kept at FBA over the same period. This is the most important metric in the IPI score and every other metric points back to this one.
Stockout risk report including the past stockouts - seeing what items are potential stock-out risks and exposing potential problems within your supply chain
Slow sellers report - a range of sales per day that tells marketing to push sales for that item; also shows if a product should be liquidated
Overstock report - shows slow sellers, liquidations and also best sellers,

One thing that Chelsea’s changed her mind about is the importance of teams, systems and trust in other people, especially for entrepreneurs.
In the world of ecommerce Chelsea is excited about optimization and profit recovery across the supply chain. Businesses that focus on that will be able to scale successfully, to get the profit back by getting smarter about the shipping fees.