Amazon Inventory Management: Ultimate Guide & Top Tools

Feeling overwhelmed by endless stock and sales data? Amazon inventory management can make or break your success on the platform. In this guide, you’ll learn how to track, optimize, and fulfill your products efficiently, while discovering the top tools to keep your Amazon business running smoothly.

What Is Amazon Inventory Management?

Managing inventory on Amazon means keeping careful track of stock levels, restocking products when needed, and making sure items are always available for customers. Sellers must balance having enough inventory to meet demand without holding too much, which can lead to extra costs. 

This process is essential for running a smooth and successful business on the platform, and it can be especially challenging for new sellers who are still learning how to manage their inventory effectively.

Why Is Amazon Inventory Management Important?

Now that you know what Amazon inventory management is, it’s important to understand why managing your stock effectively can make a significant difference for your business:

• Stock optimization: Maintaining the right stock levels at the right time helps prevent stockouts and overstock, saving storage costs and ensuring product availability. Proper management also avoids dead stock, which ties up capital and space, and reduces the need to liquidate unsold or outdated items at a loss.
• Reducing storage costs: Efficient inventory control lowers expenses because Amazon charges fees for storing items, particularly during peak seasons or for products held over 181 days.
• Data-driven decision-making: Inventory systems provide valuable insights into sales trends, customer preferences, and product performance, enabling informed decisions on reordering, discontinuing slow-moving items, or launching new products.

Types Of Amazon Inventory Management

Megaficus will show you the main types of Amazon inventory management in the table below, so you can quickly understand each method and its purpose:

Type	Description	Examples
Fulfillment Methods	Determines how products are stored and shipped to customers.	FBA (Fulfillment by Amazon), FBM (Fulfillment by Merchant), Dropshipping
Inventory Strategies	Guides how sellers track, organize, and move their inventory.	Just-in-Time (JIT), ABC Analysis, FIFO / LIFO, Bulk Shipments
Optimization Techniques	Helps balance stock levels, storage costs, and order frequency.	EOQ (Economic Order Quantity), MOQ (Minimum Order Quantity)

How Does Amazon Inventory Management Work?

When you use Amazon’s FBA (Fulfillment by Amazon) service, you gain access to an advanced inventory management system powered by machine learning. The system takes multiple factors into account, including the cost of goods sold, shipment times, and Amazon’s data. 

Your Inventory Performance Index (IPI) score is an important part of evaluating how effectively you handle your stock. The IPI score depends on actions such as restocking popular items promptly, maintaining healthy inventory levels, resolving listing issues, and continually improving performance to minimize storage costs.

To check your Inventory Performance Index (IPI) on Amazon, you go to Inventory → Inventory Performance in your Amazon Seller Central account.

A high IPI score on Amazon typically refers to a score of 400 or above. This score helps you qualify for benefits like lower storage fees, more storage space in fulfillment centers, and faster shipping options.

How To Manage Amazon Inventory Effectively

Follow Megaficus’s tips below to learn practical ways to manage your Amazon inventory effectively and keep your stock running smoothly.

Timely Restock of Popular Inventory

You should check your inventory levels daily or weekly to track sales velocity. Use data like sell-through rate (units sold per day/week) to identify top-selling items. For example, if a product sells 50 units per day, restock when inventory falls below a 3-5 day supply. When stock is running low, place a restock order immediately with your supplier. 

To safeguard against supply chain delays, maintain a buffer stock of 10-20% of your average monthly sales either with your supplier or in your warehouse. This buffer ensures you’re not at risk of running out of stock.

Key KPIs to monitor:

• Sell-through rate
• Days of inventory remaining
• Restock lead time
• Buffer stock levels

Amazon provides tools like the Inventory Performance dashboard to track inventory levels and send alerts when stock falls below a set threshold. For example, if a product sells 20 units per day and your current stock is 50 units, you’ll need to restock in 2 to 3 days to avoid stockouts.

Maintain Strong Supplier Relationships

Use email, messaging apps like WhatsApp or WeChat, and supplier portals to communicate clearly with your suppliers. By sharing your order schedules, demand forecasts, and updates, you ensure that suppliers can prioritize your shipments. This continuous communication helps reduce delays and stockouts, while also fostering strong, mutually beneficial partnerships.

Avoid Excess Stock & Fees

Amazon considers your product as excess inventory if it has more than 90 days of supply, or at least one unit has been in the fulfillment center for over 90 days. Slow-moving inventory negatively affects your IPI score, reduces your storage capacity, and generates both monthly and long-term storage fees.

Managing Low Inventory Levels And Sell-Through Rate

Amazon charges a low-level inventory fee when your stock falls below a certain threshold, which can lead to stockouts and missed sales. The fee applies when your inventory has less than 7 days of stock based on your average daily sales.

For example, if a product sells 15 units per day and you have only 50 units left, you have just 3-4 days of stock, which could trigger the low-level inventory fee.

So, how to prevent Low-Level inventory fees?

• Use Amazon’s Inventory Forecasting Tools: These tools can send alerts when stock is running low or falls below a set threshold, helping sellers restock in time before running out. For example, if a product sells 10 units per day, you can set an alert for 30 units. When the stock hits this level, Amazon will notify you to reorder.
• Maintain Optimal Inventory Levels: Aim to keep enough stock to cover your sales for at least 7-14 days, depending on your sales cycle. For instance, if you know a product sells 15 units per day, keep at least 105-210 units on hand to prevent stockouts and avoid triggering the low-level inventory fee.
• Monitor Your Sell-Through Rate (STR): A healthy STR typically falls between 3 to 7. If your STR is high, you’ll need to replenish stock quickly. For example, if a product sells 20 units per day and has a STR of 7, you know you need to restock before 7 days to avoid running out of stock.

Spoilage

If you sell perishable or time-sensitive products, such as fresh food, dietary supplements, or skincare items with expiration dates, effective inventory management is crucial. Failing to monitor stock can lead to expired products, resulting in financial loss and unhappy customers. 

To prevent waste and protect your revenue, it’s crucial to manage spoilage by effectively tracking expiration dates and responding to potential stockouts, all of which are detailed in the following sections:

• Track expiration dates: Implement an inventory management system (such as TradeGecko, NetSuite, or Zoho Inventory) to track expiration dates for each product.
• Implement the FIFO  (First-In, First-Out) method: This is particularly crucial for perishable products. By applying FIFO, you ensure that products with earlier expiration dates are sold first, preventing situations where new stock is left unsold while older stock expires.
• Run promotions for near-expiry items: Offer discounts or run limited-time promotions to encourage quick sales. For example, if a vitamin bottle set to expire in two weeks is not selling well, offer a “clearance” discount and emphasize its limited availability. 
• Address lost orders due to expired stock: If customers attempt to order products that have already expired, take immediate action using Amazon tools:
  • Use Inventory Performance Dashboard to monitor expiration dates and track products nearing expiry.
  • If expired stock is about to ship, notify customers immediately through Amazon’s Buyer-Seller Messaging Service, offering them a refund or a replacement.
  • You can also offer a discount or promotional code for future purchases to retain the customer.

Use Amazon FBA To Simplify Inventory Management

Amazon FBA is ideal for sellers who want to offload logistics and focus more on growing their business. By using FBA, Amazon handles storage, packing, and shipping of your products, which frees up your time and reduces operational complexity. FBA also ensures you stay updated with inventory status and any potential issues.

However, relying on FBA can come with common challenges:

• Stockouts: If FBA inventory isn’t replenished in time, you risk running out of stock and losing sales.
• Storage fees: Excess inventory may incur long-term storage fees, cutting into profits.
• Mismanagement of stock levels: Inaccurate inventory forecasting can result in either excess stock or insufficient stock, both of which can harm your business.

To prevent these issues, maintain a consistent inventory flow and use Amazon’s Inventory Performance Dashboard to monitor stock levels regularly, ensuring timely restocking and avoiding unnecessary storage costs.

Best Amazon Inventory Management Software

Here are 7 of the best Amazon inventory management tools that can help you track stock efficiently, streamline operations, and prevent common inventory issues:

Software	Key Features	Best For
Skubana	Integrates inventory, orders, and analyticsAutomates restocking and demand planning.	Medium to large e-commerce brands
Linnworks	Multi-channel inventory and order management.Supports automation and reporting.	Sellers on multiple marketplaces
Veeqo	Centralized inventory management.Syncs stock across marketplaces.	Small to medium e-commerce stores
Forecastly	Demand forecasting and inventory replenishment.Minimizes stockouts and overstock.	Sellers needing precise forecasting
Brightpearl	Inventory, order, and accounting management.Real-time reporting and analytics.	Retailers with complex operations
Zoho Inventory	Cloud-based inventory tracking.Automates sales and purchase orders.	Small to medium businesses
SellerActive	Multi-channel inventory and order management. Automates repricing and order routing.	Sellers managing multiple marketplaces

Frequently Asked Questions (FAQ) About Amazon Inventory Management