Amazon inventory management doesn’t sound very sexy. Sadly, it’s not just necessary. It's critical. The great news is this: get this right and you can improve everything you care about as an entrepreneur.

It can actually transform your business. Especially its cash flow and profitability. If those aren't sexy words to you yet, they should be! Cash flow keeps you in business. And profit enables you not only to pay yourself. It creates 100% of the value in your business!


Why it's important to get right Amazon inventory management right
All systems selling products need to manage inventory well. Certainly, that's especially true for physical products. The sheer sales velocity on Amazon makes inventory management particularly critical on Amazon.

It's a classic case of balance sheet management. You can make the same sales with lower working capital. That's less money invested. You can have stronger cashflow. Meaning it's safer. In addition, you can also make more sales. A LOT more sales. AND more profits!

There are HUGE wins to be got from this. Nailing Amazon seller central inventory management is mission critical.
What can go wrong with Amazon inventory management
But what happens if you get it wrong? Why does it matter so much?

Well, there are two big potential pitfalls. The first is having overstock inventory [internal link]. The second is having Amazon out of stock [internal link]. Both have serious consequences.
Overstock inventory means...
If you're overstocked, you'll get a ton of issues.

That's kind of easier to understand than being out of stock but worth listing here.

First of all, you'll end up tying up a lot more cash in inventory than you need. That has many bad effects:

The working capital [kw research then internal link?] needed for a product line shoots up. If you're already importing from abroad, that number may become huge fast .
Cash can crater to low levels.
You may have to borrow more [do kw research then internal link], increasing your costs as you pay interest
It will stop you redeploying that capital to start a new product line
It's not an efficient part of your business. That makes your business as a whole less lendable.
It makes your business less sellable and less desirable.


Being out of stock.
What's badly misunderstood is the danger of being out of stock. The reason is simple. Those losses don't show up in any kind of financial document. Even so, the loss is real. And it's often huge.

Carrying insufficient quantities of inventory on hand [internal link] is worse than it sounds. It can lead to many cash flow issues, including:

Weeks (or months) of zero profit
Zero cashflow from those products while out of stock.
Giving your competitors sales you could have had
Giving your competitors market share which may be hard to regain
Losing Amazon keyword ranking which you may not get back
Lower growth for your business
Lost future value of your business

How to forecast inventory
This is not a quick win if you insist on doing this yourself! That's why I spent so long telling you how important it is. You're either going to end spending a few hours a week on it yourself. Or you'll hire someone competent and pay good money. Or you'll use some high-quality software system. There's no short cut. But

That said, it does depend where you are at with your business growth. The size of your business makes a difference.
How to restock inventory  for Early stage Amazon businesses
Early stage businesses with under $3000 a month in sales may need to do manual stock management. In essence, you're deciding

- when to restock inventory into which part of your supply chain

- how much stock to get or move.
Factors in inventory organization
There are a few important factors in good Amazon inventory management:

inventory organization [int link] and stock tracking
how to forecast sales using historical data [internal link]