How do you know how much inventory to order? What if the units you order don’t sell off, and you’re stuck with inventory you have to liquidate? What if the units you order sell out in 20 days and your ranking goes down because you’re out of stock while the manufacturer makes new products?
There is a formula that can help you gauge how much you need to order to balance these two sides. It’s proven itself a hundred times over for me.
Let’s say you ordered 500 units, the minimum order quantity, and are ready to sell them on Amazon. You list them and they sell in 100 days. What you are going to do is take the 500 units, divide it by the days it took to sell, then multiply by 100.
In my example, I’ll actually end up with 500, since 500, multiplied by 100, then divided by 100, is 500 again. So you have a safe number, 500 units, to order again, that will last you another 100 days. If you wanted to add on another 200 or 300 units, that would be fine, but this is the minimum that I go with.
Keep in mind that when you first start selling your product, you won’t know how long it’ll take to completely sell out until it’s all gone. But when you’re out of inventory, your BSR number shoots up and your ranking drops like crazy.
How do you prevent this?
Wait until you’ve sold half of them. Let’s say you ordered 500, sold 250, and have 250 left. Take that 250 sold, divide it by the number of days gone by, let’s say 50, then multiply that by 100. You end up with 500, so you know to get 500 more.
Let me show you how this works with a product that is selling faster and faster.
Let’s say you have 500 units that sell in 10 days. If you stick this in our formula, you end up with 5,000 units to order. This will last you longer than 500 would for a product that is selling quickly.
Now let’s take that 5,000 and say they continued selling 50 times a day. This means it would take 100 days to sell out. So 5,000 units in 100 days, plugged into our formula, means that the next round, I would still order 5,000.
In other words, if the rate of product sales don’t increase, the formula makes sure I order the same amount. But if the sales do increase, the formula makes sure I order more so I can keep selling.
Now, lets say this product did really well, and we sold all 5,000 units in 5 days. This will make my next order 100,000. It accounts for the amount of sales you are getting so you never order too much or too little.
The formula works, and it helps you to keep an even balance on inventory. It’s important to forecast how much you need to buy so you never ever run out. I hope this tip has been helpful for you. Go out there and crush it.
Know your numbers and you can build your business smart.
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