Chapter 5 – Supply Chain & Preparations
Optimizing Inventory Planning and Supply Chain in 2020
2020 has ushered in significant changes in inventory planning and supply chain dynamics, especially in light of unforeseen global events. In the past, assessing lead times and material accessibility was relatively straightforward, but the current landscape demands adaptability and proactive strategies. While uncertainty may be prevalent, there are steps you can take to navigate these challenges effectively.
Early Planning and Communication with Manufacturers
Engaging in early and open communication with your manufacturer is key. Start planning ahead to confirm the availability of raw materials and calculate the cost of goods. It’s crucial to ascertain lead times for your initial shipments into Amazon and align them with your inventory replenishment strategy. This approach allows you to gauge the timing for new product launches and stay ahead of potential inventory shortages.
Ensure Amazon-Compliant Packaging During Production
Efficiency is paramount, so consider modifying your product packaging for Amazon compliance during production itself. Incorporate essential information such as expiration dates, shelf-life details, age restrictions, and UPC/barcodes on the packaging. If you have aspirations of expanding to Amazon’s Global marketplaces, include multi-language packaging with instructions in languages like French, German, Italian, and Spanish. By doing so, you’re setting your business up for smooth international expansion.
Flexibility and Agility
In these uncertain times, be prepared to pivot and remain agile in your supply chain management. Keep a close eye on market trends, shifts in consumer behavior, and any emerging challenges. Adaptability is crucial to maintain a strong competitive edge in a rapidly changing market.
Harness Data and Analytics
Leverage data and analytics tools to gain insights into consumer preferences and demand patterns. Data-driven decision-making will enable you to forecast more accurately and optimize your inventory levels, ultimately reducing the risk of overstock or stockouts.
Collaborate with Partners
Develop strong partnerships with suppliers and manufacturers to foster transparency and build resilience. Transparent communication can lead to better collaboration in mitigating supply chain disruptions.
Embrace Automation and Technology
Automate inventory management processes using software solutions that streamline and enhance inventory control. Investing in technology can boost efficiency and enable real-time tracking, allowing you to make data-backed decisions with ease.
Amazon sellers dealing with temperature-sensitive products like chocolate or candles need to be aware of the “meltables” policy. In April, Amazon removes any meltable products from their warehouses, and these items cannot return until October due to the lack of temperature control at FBA. As such, it’s crucial to plan your inventory and shipments accordingly to avoid disruptions in availability during this period.
When it comes to product packaging, there’s room to save costs while maintaining functionality. You don’t need extravagant packaging; instead, opt for a plain brown box that includes a scannable barcode on the outside. This simplicity is both cost-effective and efficient for FBA handling. If you choose to polybag your products, ensure that all product prep requirements are met to be acceptable at FBA. Properly prepared polybagging can protect your products and streamline the fulfillment process, ensuring they meet Amazon’s standards.
If your brand has a strong presence in the market and aims to venture into the Amazon marketplace, proactively communicate with your distributors to establish clear guidelines. By setting parameters and ironclad online distribution policies, you can safeguard your brand’s reputation and prevent potential resellers from becoming immediate competition. Maintaining strict Minimum Advertised Price (MAP) policies can prove invaluable as your brand gains momentum on Amazon, ensuring price integrity and deterring unauthorized sellers.
To maintain a clean online channel and minimize channel conflict, seek legal resources and consulting partners specialized in Amazon strategy development. Got Suspended? is an exemplary resource that can help you navigate seller account suspensions, account health issues and protect your brand from price degradation and unauthorized distribution post-launch. Working with such partners can provide you with a comprehensive understanding of Amazon’s policies, empowering you to optimize your Amazon presence while preserving brand value.
For brands venturing into the Amazon marketplace, building strong relationships with a warehouse solution partner is vital. Partnering with an independent warehouse allows brands to store domestically manufactured or imported stock, reducing monthly storage expenses typically incurred with Amazon FBA. Moreover, independent warehouse partners often offer competitive fee structures compared to Amazon’s FBA program.
Handling returns efficiently is equally crucial. Amazon provides two options: destroying the product on-site or returning it to the brand. Therefore, having a dedicated place for processing returns is essential. Brands can manage both initial shipments and replenishment orders by utilizing their warehouse partner, which can then distribute products to various Fulfilled by Amazon (FBA) warehouses nationwide.
This strategy proves wise since FBA storage fees are based on product size. By minimizing storage time at FBA warehouses, brands can optimize costs and avoid increased fees for long-term storage beyond 12 months, as stipulated in Amazon’s Long-Term Storage policy. Some brands might opt for established supply chain partners like Flow Spaces, guaranteeing seamless storage and shipping solutions that comply with Amazon’s requirements.
Test Your Supply Chain with Small Orders & Scale As Needed.
When starting your Amazon venture, it’s wise to begin with a small initial shipment. This approach allows you to identify and address any unforeseen issues while minimizing fees as you gradually increase sales velocity. A conservative shipment of approximately 20-50 units should be sufficient initially, followed by a secondary shipment 1-2 weeks later to maintain inventory flow. Once your product has been listed on Amazon for 30 days and you’ve gained insights into demand and sales patterns, subsequent shipments can be better optimized.
For future shipments, plan to include enough inventory to cover approximately 4-6 weeks of expected sales, adjusting for relevant seasonality as needed. As your sales volume grows and you gain a deeper understanding of your product’s demand patterns, consider increasing shipment sizes to ensure a steady supply and prevent stockouts. Keeping a healthy inventory level is vital for maintaining your product’s ranking and visibility on Amazon, ultimately contributing to your success in this competitive marketplace.
Timing is a crucial factor in any successful product launch. While having the luxury of time is ideal, the true necessity lies in choosing the right moment for your launch. Resist the temptation to rush the process solely due to excitement. Instead, take a deliberate approach to examine your product and carefully select the optimal launch timing. Consider how your product aligns with specific events or seasons, such as back-to-school, Valentine’s Day, or Father’s Day. By strategically aligning your launch with these occasions, you can leverage the heightened demand and capture the attention of your target audience at the most opportune time.