You can also increase keyword bids in your active ads to acquire new customers. The solution to overstocking begins with reducing your pricing in the short term, coupled with sales promotions. A poor IPI score will lead to Amazon reducing your inventory storage limits and charging you long-term storage fees. Your IPI score is a 12-week rolling average used by Amazon to determine how well your inventory is performing. Overstocking not only causes you to incur an opportunity cost - due to the blocked cash not being available for other direct revenue-generating activities - but also affects your IPI (Inventory Performance Index) score with Amazon. A 2020 report showed that retailers worldwide lost about $626 billion annually due to overstocking. Even if you're shipping orders through the Fulfilled by Merchant (FBM) mode, your capital can still be tied up storing slow-moving inventory. It's equally worse to face a situation where your inventory is not moving and you're still paying storage costs, especially if you're getting your products Fulfilled by Amazon (FBA). To better tackle this issue, it's best to move from manual and Excel-based forecasting to an intelligent inventory forecasting tool that smartly identifies the market trends to help you prepare for sudden order influx. You can also temporarily increase the prices of your product - to bring down the sales velocity until you have things in better control. The first step to tackle this problem is to get your sales velocity in control by pausing active ads and marketing campaigns. The longer your products stay out of stock, the more damage your business incurs. If you let additional sales channels slip out of your mind, you stand the risk of unexpected inventory depletion and stock-outs. Lack of monitoring of sales outlets: Your products are also likely to be listed on platforms other than Amazon. Not factoring in potential spikes in sales can lead to your business losing out on additional revenue during those crucial times of the year. Poor forecasting: Your products don't sell uniformly throughout the year, owing to the holiday seasons and periodic sales like the Amazon Prime Day. If you aren't tracking your sales numbers, then it's very easy to run into an inventory stock-out. It is an indicator of the number of days or weeks you have left before your inventory runs out. ![]() Not tracking your sales velocity: Sales velocity is the number of units you sell during a given time period. Setting accurate timelines is easier with an AI-powered automation tool, to minimize uncertainty and human errors. To avoid delivery delays, set realistic lead times after taking into account all the factors governing the manufacturing and shipping processes. Try to establish an effective and transparent communication channel with your suppliers and partners to leverage their help in identifying existing gaps in the process. ![]() There can be persistent inefficiencies in your procurement process, which would come to light only when it's too late. The absence of glaring issues doesn't mean everything is optimized. What you need to do next is identify whether your supply chain is operating as well as it can. If you falter on properly researching when choosing suppliers, you might end up with sub-par products or delayed delivery, or both. After all, your business hinges on the quality of your products. Though they're outside your sphere of control, suppliers are crucial to the success of your business. Your supply chain begins at your suppliers.
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