{"id":1531523,"date":"2023-12-24T09:31:24","date_gmt":"2023-12-24T14:31:24","guid":{"rendered":"https:\/\/www.practicalecommerce.com\/?p=1531523"},"modified":"2023-12-24T10:59:11","modified_gmt":"2023-12-24T15:59:11","slug":"new-fba-tool-points-to-future-of-inventory-management","status":"publish","type":"post","link":"https:\/\/www.practicalecommerce.com\/new-fba-tool-points-to-future-of-inventory-management","title":{"rendered":"New FBA Tool Points to Future of Inventory Management"},"content":{"rendered":"<p>Fulfillment by Amazon announced this month a new low-inventory-level fee and, separately, an AI tool to help merchants avoid that fee.<\/p>\n<p>The announcements offer a glimpse of what&#8217;s coming for retail inventory management.<\/p>\n<h3>Low-inventory Fee<\/h3>\n<p>FBA&#8217;s <a class=\"editor-rtfLink\" href=\"https:\/\/sellercentral.amazon.com\/help\/hub\/reference\/external\/GV43F6S76Y9DHYRH\" target=\"_blank\" rel=\"noopener\">low-inventory-level fee<\/a> takes effect on April 1, 2024.<\/p>\n<p>The fee affects &#8220;standard-sized products with consistently low inventory levels relative to customer demand.&#8221;<\/p>\n<p>Amazon noted that these products affect FBA&#8217;s distribution capabilities and shipping costs, adding that the fee will &#8220;only apply when a product&#8217;s inventory levels relative to historical demand (known as historical days of supply) is below 28 days&#8221; for both short-term (last 30 days) and long-term (90 days) metrics.<\/p>\n<p>The fees vary based on the product size and historical days of supply: 0-14 days, 14-21 days, and 21-28 days.<\/p>\n<p>New sellers and new products receive exemptions for six months or a year.<\/p>\n<p>To minimize or avoid the low-inventory-level fee, sellers can send additional units, ensuring the short-term historical days of supply exceed 28 days.<\/p>\n<h3>Minimum Inventory<\/h3>\n<p>FBA also <a class=\"editor-rtfLink\" href=\"https:\/\/sellercentral.amazon.com\/seller-forums\/discussions\/t\/1aa7614a-5542-4529-abe1-ddf452681630\" target=\"_blank\" rel=\"noopener\">announced<\/a> that beginning on April 1, 2024, it would provide a new metric to help sellers maintain the <a href=\"https:\/\/www.practicalecommerce.com\/save-money-on-inventory-with-eoq\">proper level of inventory<\/a> to both maximize sales and, seemingly, avoid the fee.<\/p>\n<p>The new minimum inventory metric uses, unsurprisingly, machine learning and artificial intelligence models to forecast demand and replenishment.<\/p>\n<p>Thus the metric is a recommendation to sellers for the minimum number of units they should keep in Amazon&#8217;s fulfillment centers.<\/p>\n<p>Maintaining this recommended level will presumably help meet customer demand and offer faster delivery time since FBA will warehouse the items in distribution centers closer to the sellers&#8217; likely customers.<\/p>\n<p>I have seen firsthand how predictive inventory management can help a company. I worked a few years ago for a regional, omnichannel farm and ranch retailer that implemented a machine learning model for its purchasing and inventory management. The model resulted in lowering inventory by roughly $2 million. It also boosted sales because it had the right products at the right time.<\/p>\n<p>The minimum-inventory-level metric will join Amazon&#8217;s other inventory monitoring indicators, including:<\/p>\n<ul>\n<li>Historical days of supply,<\/li>\n<li>Inventory Performance Index,<\/li>\n<li>Capacity limits,<\/li>\n<li>Restock recommendations.<\/li>\n<\/ul>\n<h3>Inventory AI<\/h3>\n<p>Taken together, Amazon&#8217;s low-inventory-level fee and minimum-inventory-level metric offer a preview of what could be coming to other ecommerce platforms and marketplaces.<\/p>\n<p>Let&#8217;s consider three implications.<\/p>\n<p>First, Amazon is confirming what most large merchants already know: Inventory levels impact shipping costs. SMBs can apply Amazon&#8217;s methods to consider <a href=\"https:\/\/www.practicalecommerce.com\/how-to-reduce-parcel-dim-weights\">shipping costs<\/a> when they decide what to buy.<\/p>\n<p>Second, the new minimum-inventory-level metric provides FBA sellers with a target that optimizes sales. Many excellent software tools do this now, but the cost can be relatively expensive for smaller brands. The new metric is evidence of available, cost-effective computing power. If Amazon can offer AI-powered sales forecasting, presumably so can Shopify and many other ecommerce platforms.<\/p>\n<p>Third, look for even small sellers to improve purchasing and <a href=\"https:\/\/www.practicalecommerce.com\/argentina-suppliers-fuel-palermo-house\">supply chain management<\/a>, as Shopify and others roll out their own AI-driven predictive inventory tools.<\/p>\n<p>These improvements likely produce higher profits from lower shipping and inventory-carry costs since businesses would know with more certainty which products could sell in the next 90 days.<\/p>\n<p>In short, AI will impact ecommerce and retailing. Amazon&#8217;s model for optimal inventory is likely among the first of many.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Amazon&#8217;s new minimum inventory fee and AI tool foretell industry-wide optimization models.<\/p>\n","protected":false},"author":391,"featured_media":1531548,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_wp_rev_ctl_limit":""},"categories":[58313],"tags":[],"class_list":["post-1531523","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-inventory",""],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v25.2 (Yoast SEO v25.2) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>New FBA Tool Points to Future of Inventory Management - Practical Ecommerce<\/title>\n<meta name=\"description\" content=\"Amazon&#039;s new minimum inventory fee and AI tool foretell industry-wide optimization models.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.practicalecommerce.com\/new-fba-tool-points-to-future-of-inventory-management\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"New FBA Tool Points to Future of Inventory Management\" \/>\n<meta property=\"og:description\" content=\"Amazon&#039;s new minimum inventory fee and AI tool foretell industry-wide optimization models.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.practicalecommerce.com\/new-fba-tool-points-to-future-of-inventory-management\" \/>\n<meta property=\"og:site_name\" content=\"Practical Ecommerce\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/practicalecommerce\" \/>\n<meta property=\"article:published_time\" content=\"2023-12-24T14:31:24+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-12-24T15:59:11+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.practicalecommerce.com\/wp-content\/uploads\/2023\/12\/New-FBA-Tool-Points-to-Future-of-Inventory-Management.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"360\" \/>\n\t<meta property=\"og:image:height\" content=\"240\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Armando Roggio\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@ecommerceboy\" \/>\n<meta name=\"twitter:site\" content=\"@practicalecomm\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Armando Roggio\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"NewsArticle\",\"@id\":\"https:\/\/www.practicalecommerce.com\/new-fba-tool-points-to-future-of-inventory-management#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.practicalecommerce.com\/new-fba-tool-points-to-future-of-inventory-management\"},\"author\":{\"name\":\"Armando Roggio\",\"@id\":\"https:\/\/www.practicalecommerce.com\/#\/schema\/person\/357c476238d0b5e19bd0a0bfacefe722\"},\"headline\":\"New FBA Tool Points to Future of Inventory Management\",\"datePublished\":\"2023-12-24T14:31:24+00:00\",\"dateModified\":\"2023-12-24T15:59:11+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.practicalecommerce.com\/new-fba-tool-points-to-future-of-inventory-management\"},\"wordCount\":537,\"publisher\":{\"@id\":\"https:\/\/www.practicalecommerce.com\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.practicalecommerce.com\/new-fba-tool-points-to-future-of-inventory-management#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.practicalecommerce.com\/wp-content\/uploads\/2023\/12\/New-FBA-Tool-Points-to-Future-of-Inventory-Management.jpg\",\"articleSection\":[\"Inventory\"],\"inLanguage\":\"en-US\",\"copyrightYear\":\"2023\",\"copyrightHolder\":{\"@id\":\"https:\/\/www.practicalecommerce.com\/#organization\"}},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.practicalecommerce.com\/new-fba-tool-points-to-future-of-inventory-management\",\"url\":\"https:\/\/www.practicalecommerce.com\/new-fba-tool-points-to-future-of-inventory-management\",\"name\":\"New FBA Tool Points to Future of Inventory Management - 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