While demand forecast models provide key insights on your business, there is always a level of uncertainty, therefore it is important to evaluate each forecast on a case by case basis and decide how to best apply this data to your business.
Here are some factors to consider when making inventory purchasing decisions:
Supplier lead replenishment time:
Always consider lead replenishment time when deciding when it is time to re-order to ensure your inventory arrives in time to meet demand. Ordering too late could result in stocking out, ordering too early could result in overstocking. If the average lead time for a product is 2 weeks, re-order when you have 3 weeks of supply remaining.
The lead time can also help you make informed decisions on how many units to purchase. If your supplier has a short lead time, you may feel more comfortable ordering smaller quantities more frequently. If the lead time is longer and product demand is relatively stable, consider ordering larger quantities.
Amount of inventory you're comfortable keeping in AFN:
To save on storage costs, reduce the number of damaged inventory, or avoid aged inventory you may feel more comfortable keeping 4 weeks of supply on hand rather than 12 weeks. Conversely, if your sales are consistently high and the costs to acquire your products are low, you may be comfortable ordering more than 12 weeks.
Tip: Download the Inventory Age Report in Amazon to identify how long items in your inventory have been in fulfillment centers and those items subject to upcoming long-term storage fees.
Review the month over month sell-through rate for your products to identify trends in demand. If things are improving consistently you may be more willing to increase supply quantities. Conversely, if you’re starting to see a decline, this could be a result of increased competition and you may want to be more conservative when purchasing.
Similarly, keep an eye on products that experience low traffic or low conversion rates. If you have plans to adjust pricing strategies or optimize your keywords and listings, you may experience an uptick in demand that is not represented in the forecast.
Advertising Goals for the product:
Advertising has a significant impact on product demand when done correctly. Factor in any plans you may have to run promotions, lightning deals, or additional marketing initiatives outside of Amazon to plan for increased demand.
Competition & Seasonality:
These factors can cause product demand to fluctuate frequently and sometimes unexpectedly. Be aware of your competitive positioning and how seasonality impacts demand.