Inventory is the lifeblood of your Amazon business. It’s how you make money, and it can also be how you lose money. The trick is to make sure that you’re using inventory to make decisions in your business rather than letting it control your business decisions. This post will cover a few different ways that inventory can be used to manage your Amazon business.
The new Way to Use Inventory
Inventory management at its most basic is a system of passive records. Of course, it’s important to get this organised. But to leave it at that is to miss a lot of critical insights into your consmers. IInventory isn’t just a record of widgets sitting in warehouses. In fact, it is a system of engagement with customers. It’s more than just a record: it tells a story about each customer and the interactions you have with them over time.
Inventory reconciliation can be one of the most challenging parts of managing your Amazon business, but it doesn’t have to be! You can use inventory reports to avoid shortages or out-of-stock products, improve order fulfillment times, and make better decisions about how to grow your business.
In this article, we’ll give you some tips on how to use inventory reports to actually see customer trends.
You need a place where you aggregate data
You need a place where you can aggregate data.
This sounds like a no-brainer, but it’s actually the root issue with inventory management.
You need to think about how your product is going to be sold, how you will get it out the door, and how your inventory system needs to support all of these things.
The best way to do this is by thinking about how your inventory system will support each of these things individually. Then, once you’ve figured that out, you can start combining them together.
Looking for inventory clues
When you’re looking to identify the root cause of your inventory gaps and ways to solve them, it’s important to consider the inventory clues you’ll find in your product data.
First of all, when you look at current orders and sales for a particular SKU (stock keeping unit), you can see if there are any patterns that might indicate an upcoming gap. If a product is selling well and will soon be out of stock, it’s time to order more from your supplier or manufacturer. This is especially true if your costs per unit are going down as well—that means you’ll earn more profit by ordering more units!
Next up: customer insights! While analyzing customer data may sound like an overwhelming task because of how much information is available with Amazon Fulfillment API tools like Seller Central Reports and Vendor Central Reports, we’ve got some simple tips for getting started on this fun project that could lead to some big improvements in your business strategy:
3 Key Data points to look for
There are three key data points you need to look for:
- Date received to date bought by consumer
- Accounts receivable ageing by product
- Market sizing.
This is how you get the size of your market. The first step is to identify what product or service you are selling, then using that as a benchmark to find out how many people are buying it. This can be done either through surveys and interviews with potential customers or by looking at sales data from your current customer base.
Then, you can use this information to find out how much each of your customers are spending on your product or service. This can help you get a sense of how big your market is and what kind of potential there is for growth. Once you have this data, it becomes much easier to make financial projections about future sales and profits.
The Magic of Aged Accounts Receivable
Aged accounts receivable (A/R) is the term used to describe the amount of time that passes between when you sell a product and when your customer pays you for it. For example, if a customer buys an item from your store and doesn’t pay within two weeks, the A/R would be calculated as 2 weeks. The longer the period of time before payment comes in, the higher your A/R will be.
When calculating your average age of accounts receivable, use only items that are currently invoiced and not yet paid as this will not have an effect on cash flow but may have an impact on future collections efforts (more on this later). This calculation is also known as days sales outstanding or DSO.
A high DSO can cause financial stress for many businesses because it increases liquidity needs and affects cash flow—both critical metrics for any company looking to grow its business. In fact, according to research conducted by Dun & Bradstreet Corp., companies with higher DSOs tend to lose more money than those with healthy ones!
How do we use inventory to Downturn proof business?
- Understand the Customer Experience
- Don’t get trapped in me focus
Don’t get trapped in me focus. If you are a seller on Amazon, the customer is king (or queen). And if there is one thing that I have learned from speaking with hundreds of sellers over the past few months, it’s this: You cannot know everything about your customers or even how they use your product. But you can ask them questions to find out!
How do we use inventory to Downturn proof business?
Customer Research (not keyword research) is the new differentiator
You can no longer rely on keyword research to determine product or category quality. Instead, you need to talk with your customers and find out what they want.
If you want to get ahead of the competition, then you need to learn from your customers. Talk with them, ask them questions and find out: What are their needs? How do they use my product? And what makes it stand out from competitors?
Avoiding out of stock
- Try to avoid situations where your inventory is sold out.
- If you are having problems with inventory levels, consider the following:
- Analyse supply and demand. Look at macro economic indicators that can affect supplies, such as: – Weather conditions (extreme heat or cold) – Government regulations (trade tariffs) – Currency exchange rates (prices may shift due to changes in cost of imports/exports)
– Social media trends (for example, if a new product becomes popular, it can increase demand for that item) – Ensuing demand for a product (if your business sells food or clothing, for example, then you may need to stock up on this inventory when you see sales increasing)
– Seasonal demands (for example, if your business sells Christmas decorations and you notice that sales are slow during the summer months) Then, look at micro economic indicators that can affect supplies (such as price increases), such as: – Cost of labour – Cost of materials – Availability of skilled workers
– Availability of raw materials – Demand for competing products – Global economic trends (for example, if their is a downturn in the economy, it could impact your business)
By using inventory to help you make decisions, you can make better decisions that will help you grow your business and reduce risks. Going out of stock hurts your revenue and profits. Excess stock hurts your cashflow. In a recession, that could be enough to bankrupt your business. So there has never been a more important time to get good at this skill!