Even giants like Amazon grapple with the same seasonal supply chain woes that small ecommerce businesses do. Despite its best efforts, Amazon hasn’t completely escaped the typical Q4 bottlenecks caused by a surge in orders. Each holiday season for the past three years, Amazon has responded by tweaking its fees and tightening restrictions on its Fulfillment by Amazon (FBA) services to manage the crunch.
This year, the constraints are tougher than ever, with unprecedented FBA capacity limits and inventory appointment restrictions that could seriously challenge sellers. To navigate these turbulent waters and capitalize on the holiday rush, strategic inventory management is more crucial than ever. That’s why we’ve put together a full guide to Amazon’s inventory announcements for the 2024 holiday season, laying out your game plan to a successful season!
Amazon Inventory Announcements: FBA Capacity Limits & Receiving
In order to combat the delays and bottlenecks that come with increased shipping and fulfillment traffic throughout the holiday season, Amazon has announced that they will be significantly reducing the amount of inventory receiving appointments for Q4. At the same time, the marketplace has shared that they will be recalculating and enacting new capacity limits for sellers storing inventory in Amazon FBA warehouses during the 2024 holiday season.
Restricted Inventory Receiving Appointments
In attempts to mitigate shipping delays to customers, Amazon will be greatly restricting the number of available inventory receiving appointments throughout Q4. Amazon fulfillment centers will prioritize receiving inventory in September and October to ensure products are available for the start of the holiday season, especially for events like Prime Big Deals Days and Black Friday. Then, starting in November, the already limited slots will be reduced again for shipments as the focus shifts to processing customer orders.
FBA Inventory Capacity Limits for 2024 Holidays
Amazon has already warned sellers that they may see a decrease in their estimated capacity limits for October and November, although they should still be able to store six months worth of inventory. These limitations will, of course, be set based on Amazon’s calculations, which favor the marketplace.
To stay updated on new capacity limits for your business, check Amazon’s Capacity Monitor. Once your monitor is filled with inventory (either already stored in Amazon warehouses or actively shipping) you will no longer be able to create new shipments. This means that it’s imperative that sellers are strategic with inventory stored in Amazon FBA warehouses, minimizing items that are less likely to sell and maximizing those with a high turnover rate, throughout Q4 to minimize fees and optimize fulfillment strategies.
What does this mean for Amazon sellers?
Together, these new policies mean that Amazon sellers looking to utilize Amazon FBA will have to stock less and send in inventory earlier. It’s imperative that sellers are lean with their inventory, prioritizing fast moving and successful products, to keep storage optimized. At the same time it’s wise to act strategically and early to ensure that inventory is received and processed in time for peak sales.
Amazon’s Holiday Peak Fulfillment Fees 2024
Along with the new Amazon inventory announcements regarding FBA capacity and receiving limits, Amazon has announced the continued use of holiday peak fulfillment fees for Amazon FBA sellers from October 15, 2024 through January 14, 2025. The holiday peak fulfillment fee, first introduced in 2022, applies to items sold in the United States and Canada to cover increased fulfillment and transportation costs during the busy shipping period that comes with the holiday season. Fees are calculated and charged when shipments leave fulfillment centers–meaning if it is shipped within that window the fee will apply.
- Small Standard Items: Sellers can expect an average increase of $0.20 per item.
- Large Standard Items: Sellers can expect an average increase of $0.30 per item.
- Oversize Items: Sellers can expect an average increase of $1.00 per item.
Managing Holiday Inventory Levels
While inventory management is important to Amazon sellers throughout the entire year, it’s especially critical during Q4 and the holiday season. By ensuring that inventory levels are optimized you can ensure that you’re prepared for every potential sale, driving continuous profits throughout one of the busiest seasons. And, as new Amazon FBA inventory delivery and capacity limitations are enacted for Q4, it’s more important than ever to prepare your inventory management strategy to take on new challenges.
Pay attention to your Amazon FBA restock limit
Your Amazon FBA Inventory Limit, or FBA Capacity Limit, is a policy limiting the amount of inventory that you can store at Amazon fulfillment centers. This inventory limit varies from seller to seller and is designed to minimize the amount of products sitting on shelves for an extended period of time. The higher your sell-through rate, the more likely it is that you’ll be able to send a greater amount of inventory to FBA warehouses.
To check your Amazon FBA limit ahead of Q4 and the holiday season, simply:
- Open your Amazon Seller Central Dashboard.
- Open your Inventory menu.
- Click Manage Inventory > Manage FBA shipments.
- At the bottom of the page you’ll find “Storage Volume” and “Restock Limits.” Click “Restock Limits” to see how much storage space is available for different types.
On this same page you’ll also be able to find how much of your allocated inventory storage is currently being used and the maximum amount of inventory you can store for certain time periods (including that Holiday Peak Fulfillment window).
Invest in inventory tracking systems
It may seem obvious, but investing in solid tracking systems can make a world of difference when it comes to optimizing your Amazon FBA inventory levels this holiday season. While Amazon keeps track of how much remaining storage space is available for your business, a dedicated inventory tracking system will give more specific data regarding the sales and remaining inventory for individual products.
An inventory tracking system is also instrumental in helping Amazon sellers forecast the right size for a restock, predict and minimize shelf-time for inventory, reduce warehouse costs, and ensure that you get the right refunds for lost, damaged, or stranded inventory. Not to mention that inventory tracking systems provide the most reliable data to determine the most profitable and fastest moving products–key factors to consider when optimizing your Amazon FBA storage space.
Prioritize fast moving items
In order to avoid exceeding your FBA capacity limits it’s wise to prioritize keeping your fastest moving products in stock. This will ensure that you are continuing to meet customer demand, improve your cash conversion cycle, and secure potential sales without inflating inventory levels unnecessarily. At the same time,
Talk to Your Suppliers
Suppliers are a key part of maintaining healthy inventory levels, especially during peak seasons. By building solid relationships with your suppliers and integrating them into your Amazon FBA inventory management process you can prevent supply chain disruptions and streamline restocks. This type of open communication with suppliers also has the added benefit of potentially improved term negotiations, increasing your cost savings and profitability.
You can ensure that suppliers remain well-informed about inventory levels and lead times by opting for tracking systems that allow direct real-time communication. Many inventory tracking systems with this function can even be set to automatically prompt suppliers when inventory starts getting low, ensuring a quick restock. This will also help you, as the Amazon seller, stay on the same page and adjust quickly if suppliers face any production bottlenecks.
Improve your Inventory Performance Index
Your Inventory Performance Index, also known as your IPI score, is a metric designed to reflect how effectively you’re managing Amazon inventory over time. By improving your IPI score you can boost your FBA restock limits over time.
To improve your IPI score, consider:
- Improving your FBA sell-through rate. Your FBA sell-through rate is calculated as the number of units fulfilled over the past 90 days divided by the number of units on hand within Amazon fulfillment centers in that same period. To improve your sell-through rate, it’s smart to prioritize stocking products that sell quickly.
- (# Units Fulfilled / # Units Available to Fulfill)
- Fixing stranded inventory. Inventory can become stranded in Amazon warehouses for various reasons and could be hurting your IPI score. Check your Seller Central account regularly to resolve any issues that may be stranding inventory.
- Reducing excess inventory. Avoid overstocking and optimize inventory levels. One great tip is to lower prices to sell slow-moving products faster.
- Keeping the most popular products in stock. Plan your shipments using the replenishment quantity and ship date recommendations provided in your Seller Central account. Investing in inventory management software is a great way to help monitor this process and avoid going out of stock on your most popular products.
If your IPI score is above 450, it’s considered healthy on Amazon. By maintaining a high score for a few weeks, you should eventually see an increase in storage space for each storage type.
Ensure supply chain agility
While supply chain agility is important throughout the entire year, it’s absolutely imperative during peak holiday seasons when disruptions are almost guaranteed. By employing a variety of inventory channels for sourcing, storage, and shipping you’ll secure every sale, regardless of circumstances.
Consider multiple fulfillment strategies
Whether you’re worried about storage capacity limitations at Amazon FBA warehouses or increased cost of fulfillment eating into your profit margins, it’s wise to not put all your inventory in one supply chain basket. By relying on one source at any point in the supply chain, a single disruption will have the potential to ruin your holiday sales and cripple cash flow. Dividing your inventory at the storage and shipping stages will help brace your business against the new limits and restrictions for Amazon FBA, as well as other disruptions, like inclement weather.
It’s especially wise for Amazon sellers who primarily depend on Amazon FBA to consider using fulfillment by merchant (FBM) or a third-party logistics (3PL) provider for a percentage of their sales during the holiday season. This will help safeguard your profits against increased fees, reduce bottlenecks that delay order fulfillment, and ensure that you have a safety net of inventory beyond capacity limitations.
Periodic inventory audits
Consider completing an inventory audit ahead of Q4 to ensure that you have a full understanding of your stock before placing orders for more. Even with the best inventory management software, it’s important to do manual auditing too. It can help account for stolen or damaged items, find stranded inventory, and help you to optimize orders.
One of the most frequently used auditing strategies is periodic partial auditing, also known as cycle counting, where you count items at different points throughout the year. This type of auditing helps check against recorded numbers of inventory and measure accuracy.
Safety Stock
In order to ensure that you never unexpectedly run out of stock, many Amazon sellers create a buffer with safety stock. This works by making sure that there is a minimum amount of stock (normally about 20-30% of inventory) for each product to ensure that you never face a sell out again–especially during peak holiday sales.
Key Dates
To ensure that you’re planning ahead to take full advantage of Q4 and the holiday season, make sure that you’re keeping these key dates in mind:
Paying for Q4 Inventory
Navigating inventory management and fulfillment challenges during the busy Q4 period is crucial for all Amazon sellers, especially those who hope to take advantage of Amazon FBA services. By managing and forecasting inventory effectively, improving capacity limits, and ensuring supply chain agility, sellers can continue to maximize success throughout the holiday season while complying with the 2024 Holiday Peak Fulfillment fees and policies. However, implementing these strategies often comes at a cost. In order to afford smart inventory management and fulfillment strategies, Amazon sellers need working capital ahead of Q4 to implement best practices. That’s where Viably comes in.
Viably is a people-first banking and funding experience, designed to help ecommerce sellers grow their business to the best of their ability–in the ways that they know how. With tailor-made funding offers, you have the working capital you need to invest in maximizing holiday sales for your Amazon businesses in your bank account as soon as tomorrow.
