Amazon FBA Inventory Turns & Storage Limits


There has been some discussion, and before there ends up being any misconception or undue fear or uncertainty (FUD Factor – Fear Uncertainty Doubt), here is the exact Amazon Policy and how it might affect people.

There are important things to point out, they review sellers every 6 months, and they don’t plan on any more restrictions this year.  No penalties, no fees.

6.7 Inventory Storage Limit

Questions and Answers

What are Inventory Storage Limits?

An Inventory Storage Limit is the amount of inventory units that may be maintained within Amazon fulfillment centers by certain FBA sellers.

Why are you implementing Inventory Storage Limits?

FBA has become very popular and grown very fast. In order to meet our commitment to providing a world-class shipping and customer service program, as well as ensuring that customers are able to get the products they are most interested in, we have set inventory limits for new FBA sellers and existing FBA sellers who have large quantities of inventory with low overall inventory turnover.

How do you determine which sellers are given an Inventory Storage Limit?

Two types of sellers are receiving Inventory Storage Limits:

  • New sellers whose first shipment of inventory is received at the fulfillment center after August 2, 2011
  • Existing FBA sellers who have large quantities of inventory with low overall inventory turnover.

While we appreciate the selection new FBA sellers bring to the platform, we will limit or even close the registration of, or shipment creation process for, new FBA sellers to ensure that our capacity does not become constrained and that sellers who have already been using FBA will be able to continue sending their inventory to Amazon fulfillment centers. Existing sellers have received an Inventory Storage Limit if they have more than 5,000 Standard-Size Units in inventory (or 500 Oversize Units in inventory) and average more than 26 weeks of cover for that inventory.

How do I find out if I have been given an Inventory Storage Limit?

All sellers given an Inventory Storage Limit will receive an e-mail from FBA informing them of their Inventory Storage Limit and a Performance Notification in their Seller Account.

If I am not subject to an Inventory Storage Limit today, will I receive one in the future?

We will evaluate sellers’ performances every six months and adjust who should have an Inventory Storage Limit. We do not anticipate creating any additional Inventory Storage Limits for the remainder of 2011.

Will sellers receiving an Inventory Storage Limit be given separate Inventory Storage Limit amounts for Standard-Size and Oversize Units?

Yes. Inventory is tracked separately for these types of inventory, and sellers may be given an Inventory Storage Limit for either or both of these types of inventory.

Are there category-level Inventory Storage Limits (such as limits on the amount of inventory of a particular product type)?

No. In 2011 there will be no category-level Inventory Storage Limits.

How will I know what my Inventory Storage Limit is, and how my current inventory level compares to that limit?

For sellers who have an Inventory Storage Limit, the Inventory Storage Monitor will show their current inventory level and their storage limit. This will not be viewable until Inventory Storage Limits are effective (August 2 for new FBA sellers, August 30 for existing FBA sellers). Once available, the Inventory Storage Monitor will be viewable in several places in your Seller Account, including on your Amazon-Fulfilled Inventory page. The Inventory Storage Monitor will not be displayed to FBA sellers that do not have an Inventory Storage Limit.

How do you determine my current inventory level? If I request a removal, will I have more room to send new items to the fulfillment centers?

In determining your current inventory level, the Inventory Storage Monitor takes into account the following:

Current inventory in the fulfillment centers

+

Shipments that have been created but have not yet arrived

Any processed removal orders


=

Current inventory level

This level is updated every twenty-four hours. Removing unproductive inventory can help you free up space for higher-demand inventory, as can closing out open shipments you will not be sending to FBA. It may take up to twenty-four hours for your inventory level to be updated.

What will happen if I try to create a shipment for a quantity above my Inventory Storage Limit?

When your current inventory level reaches your Inventory Storage Limit, you will not be able to create a new inbound shipment to a fulfillment center until your inventory level drops below your Inventory Storage Limit through any of the following events:

  • Enough of your inventory sells.
  • You request to have enough of your inventory returned to you.
  • You request to have enough of your inventory disposed of.

Note: When you submit a removal request (return or disposal), the Inventory Storage Monitor won’t reflect the decrease in your inventory until your request has been processed, typically the following day.
If for any reason your inventory level exceeds your Inventory Storage Limit, we will notify you by e-mail that you must reduce your inventory to below your Inventory Storage Limit.

How can sellers have their Inventory Storage Limits removed?

Sellers who were given an Inventory Storage Limit can have the Inventory Storage Limit removed by achieving and maintaining a certain inventory performance threshold.

What is the current inventory performance threshold that must be met to have an Inventory Storage Limit removed?

Currently, that performance threshold is set as an annualized inventory turnover rate of 4.0 or greater for two consecutive months. An annualized turnover of 4.0 is the equivalent of maintaining 13 or fewer weeks of cover. We calculate annualized inventory turnover by multiplying monthly unit sales by 12 and dividing by average inventory quantity at month end for the past 12 months.

Annualized inventory turnover  =

Monthly unit sales x 12


Average inventory quantity at month end for the past 12 months

Sellers given Inventory Storage Limits in 2011 will not have their performance evaluated until early 2012.

If an FBA seller’s returns put them over their Inventory Storage Limit, will they be penalized?

No. If the FBA seller exceeds its Inventory Storage Limit as the result of returns, there will be no “penalty”; however, the return will count toward the seller’s inventory total, and the seller will not be able to create a new inbound shipment to a fulfillment center until the inventory level decreases below the Inventory Storage Limit.

If I have an Inventory Storage Limit, will it decrease in the future?

Inventory Storage Limits are based on a seller’s inventory level and inventory turnover rate. We will be reviewing Inventory Storage Limits again in early 2012.

What if my Inventory Storage Limit is less than my current inventory level, will there be a penalty?

No. We don’t want to penalize sellers; we only want to ensure we have capacity for products that customers want, as demonstrated by inventory turnover rates.
However, you will not be able to create a new inbound shipment to a fulfillment center until your inventory level drops below your Inventory Reserve amount through one of the following events:

  • Enough of your inventory sells.
  • You request to have enough of your inventory returned to you.
  • You request to have enough of your inventory disposed of.

Can I pay for a higher Inventory Storage Limit?

No. Our focus is ensuring space for inventory customers want, as demonstrated by inventory turnover rates.

 

======================================================

 

Amazon FBA Storage Fees are highly subsidized by sales.
Anyone that has looked at the rates, realize that the storage is very very cheap,
much cheaper than you getting your own storage unit.

So to keep the rates reasonable, and to keep the amount of storage optimized, this is the best way to accomplish that goal, without raising the rates.
If the inventory is moving well (a smart business use of the storage space), then no limitations.

If you inventory is slow moving (just sitting there and not moving, taking up precious space), then Amazon FBA will give you a limit on the amount of space, so you can either just keep the size down, or remove the slow-moving inventory and use the space for better moving inventory, and then get the limitation removed.

If you have been reading many of the stories of people on here, many have very high inventory turn rates, and have a lean-n-mean inventory.

My hero has always been G (name edited to protect her), I bet her Inventory Turns is 12!!!
I think her Inventory stays around 800 or so, but she sells a large percentage every month and keeps replenishing.   She is a model of efficiency.
(G, I hope you don’t mind me picking on you!!)

For the people that have been concentrating on the slow-moving books, or freebies that they can collect, they likely will have some concern, if they get over 5,000 units.

If you have an Inventory under 5,000, then this does not affect you at all, at this time.
And I suspect that a pretty high percentage of the people on this group, is well under 5,000 units in Inventory.   And, if you are doing things right, the more you send to the warehouse, the more that sells, and the harder it becomes in increasing your inventory.  That is the ideal scenario, and keeps your Inventory Turns high.

I hope this helps.

About FBARocks Bob Willey

My name is Bob Willey and I own Bob's Neat Books & Bob's Neat Stuff & SellerCoaching.com ***** We've been selling on Amazon using FBA since June of 2008, and on Amazon since 2005. We are mostly FBA and we use FBA to sell practically anything! When it comes to selling on Amazon using FBA, we don't discriminate. The only requirement is that the items are profitable! We sell toys, games, books, and media items such as DVDs, CDs, even VHS tapes! We've also been selling on eBay since 1998 with over 11,000 feedbacks (100% Positive)!! Have been an eBay Trading Assistant for over 9 years. Also sell some Media items on eBay. ***** I also provide Seller Coaching services, designed to be one-on-one via Skype video, to target your exact needs, not generalized training, but specifically what YOU need. http://Facebook.com/SellerCoaching ***** I also moderate the YahooGroup FBAForum (see link below): http://finance.groups.yahoo.com/group/FBAForum ***** My background is varied, as I owned a computer consulting business for 28 years, and a Brick-n-mortar Auction House for 5 years with a weekly auction filling a 15,000 sq ft building. Plus I have done over 150 Estate Appraisals. OK, I enjoy STUFF.... ***** http://SellerCoaching.com
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