Amazon sellers can overlook their inventory levels when they are busy with PPC bids and managing their retail prices. If you are guilty about this, you’ve probably wondered why you can no longer send stocks to Amazon. One reason would be due to your reserved inventory. But what does reserved mean in Amazon FBA?
In this blog, I will explain what reserved means in Amazon FBA, how to find reserved inventory levels, FBA storage limit, things to consider when restocking inventory, how it affects your business and some tips on managing reserved inventory levels.
Read until the end to learn about the different software you can use to help you manage your Amazon inventory better.
What Does Reserved Mean in Amazon FBA?
Reserved status in Amazon FBA means that a stock is being moved to another Amazon warehouse location. It may also mean that the stock is undergoing further processing at a fulfillment center (FC). This may be due to customer orders, fulfillment center transfers, or fulfillment center processing.
Here are the reasons for the Reserved Status in Amazon FBA.
Customer Order – Some of the reserved inventory is used to fulfill several customer orders.
Fulfillment Center Transfer – This status indicates that products are being moved from one warehouse to another in order to bring them closer to customers, allowing for faster delivery. FC Transfer products are available for purchase, but if no other items are available for immediate fulfillment, customers may receive a back-ordered notice with anticipated arrival date.
Transfers can take up to 22-25 days to complete, but in rare cases (such as delays due to COVID-19 limits, weather conditions, etc.), they can take longer and require more investigation.
Fulfillment Center Processing – FC Processing units have been reserved at the fulfillment center for check-in, verification of product validity, weight and dimensions, and other FC processing needs.
Unless there’s a probable problem that needs to be investigated further, this process normally takes two working days on average, but it can take longer if the fulfillment center becomes overburdened with the inventory.
For a short period of time, inventory being processed for transfer to another fulfillment center may appear under both FC Transfer and FC Processing. FC Transfer units are available for purchase, but they won’t be eligible for Prime delivery until they are transferred to destination fulfillment centers.
How to Find Reserved Inventory Levels in Amazon
Here’s a step-by-step guide to checking for your reserved inventory levels on Amazon.
- Log in to your Amazon Seller Central account.
- Go to Reports
- Under Reports, click on Fulfillment
- Go to Inventory and click on Reserved Inventory
The Reserved Inventory report shows the number of reserved units in your inventory in real-time.
Available and Unsellable Quantities do not include reserved inventory. Available Quantity + Unsellable Quantity + Reserved Quantity + Inbound Quantity = the total number of units you have for an SKU in a shipment sent to a fulfillment center or in Amazon fulfillment centers.
What is FBA Inventory Storage Limit?
Inventory storage limitations can be used to effectively manage fulfillment center storage space so that products are received and sent to customers quickly. Storage restrictions are determined for each storage type and are based on volume (measured in cubic feet).
When you expand Storage Volume, your current limits, potential storage limits, and consumption are displayed, which you can see in your Inventory performance dashboard and Shipping Queue.
In 2021, Amazon implemented a Total Storage Level limit system. The new Total Storage Level limits are based on Amazon’s fulfillment centers’ storage capacity for each seller. This means that the storage limit for each seller will be different depending on which fulfillment center their items will be stored.
The change gives Amazon sellers the opportunity to allot more storage space for new ASINs, manage inventory and shipments better, and assess the best number of items to restock for each product.
Storage Limits Criteria
There are two types of seller accounts on Amazon: Individual and Professional Seller accounts.
Individual Seller Account
Ideal for small businesses that have fewer items to sell on Amazon. These are individuals who have less than 40 items per month to sell. It doesn’t have a monthly subscription fee but Amazon has a fee of $0.99 for every item you sell.
This account type has a fixed storage limit of 10 cubic feet that never changes. Individual selling accounts are not entitled to a storage limit increase.
Professional Seller Account
The Professional Seller account, on the other hand, is applicable to those who plan to make significant sales through Amazon. However, there’s a monthly cost of $39.99 per month. In addition to that, there is a referral fee for each item you sell.
The referral fee will either be a set minimum amount or a percentage of the total price, whichever is greater. The minimum fee is $0.30 across categories.
Professional Selling accounts: Storage limits will depend on the following criteria:
- Sellers with an Inventory Performance Index (IPI) of the appropriate threshold or higher on either of two score checks are exempt from storage volume restrictions for standard-size, oversize, footwear, and clothing items.
- New sellers who have been active for less than 26 weeks will not be granted storage limitations or sellers who do not have enough sales data to generate an IPI score for both score check weeks.
- For regular size, large size, apparel, or footwear inventory, professional accounts with storage constraints will have a minimum of 25 cubic feet.
There are several factors that can affect how your storage limits are calculated. This includes the following:
- Your sales volume. This also includes your sales’ seasonality periods.
- Your IPI scores’ historical data
- The available capacity in a fulfillment center
Higher storage limits will be granted to sellers with continuously higher IPI scores, which will be adjusted for sales volume and available capacity. Amazon evaluates both your recent sales volume and seasonal volume from the previous year when setting restrictions for the upcoming quarter.
Where Can Professional Sellers Monitor Their IPI?
Professional account holders can monitor their Inventory Performance Index on the Inventory Performance Dashboard and learn more about the IPI on the IPI Help page.
The dashboard serves as a central focus for optimizing your FBA business, with personalized advice for increasing sales and lowering costs. Based on your current inventory management, your IPI score is updated weekly.
Amazon decides which storage type is applicable for your inventory. The basis for storage type is the characteristics of your items. Sellers are not allowed to adjust the storage type.
Storage limits have six storage types:
- Standard-size – Actual product weighs not more than 20 pounds, the product length should not exceed 18 inches, the width is not more than 14 inches, and the product’s height should not exceed 8 inches.
- Oversize – Anything that exceeds the standard size is considered an oversize.
The FBA inventory age and Inventory Age report can help you understand which category your products will fall under.
If there is no storage type under your Storage Volume, it means that your limit for that storage type is zero.
Dangerous goods storage limit adjustments such as aerosol and flammable are separately handled from other types of storage. You can check out the FBA Dangerous Goods program to learn more about it.
What To Consider When Restocking Inventory in Amazon
The first factor to consider is how long it will take for your inventory to arrive. What is the source of your inventory, and will it be shipped by air, ship, or train? Air, as you might expect, is the quickest mode of transportation.
You may need to consider significant holidays depending on where your inventory ships from, as this can cause delays in receiving your products.
Extra Time Involved
You also need to consider the extra time involved when shipping the products coming from your supplier. For example, if your supplier is from China, then it may take more time before it gets to the U.S.A. It must pass customs inspection and then be carried further to Amazon’s warehouse.
Even so, your shipping courier may be turned away on the planned delivery day for whatever reason Amazon deems appropriate.
To ensure that your products will arrive on time, consider getting a reliable Amazon FBA freight forwarding company. I have been using this logistics company and have partnered with them to help me with my Amazon FBA 7-figure brands.
Don’t forget about certain shopping seasons like Black Friday and holidays like Chinese New Year. These events can result in longer shipping times and can affect your inventory levels.
Keep in mind that your supplier’s lead time may alter, your delivery courier may be unreliable, and independent third-party examination of your goods may take longer than anticipated. So, be prepared for any possible delays to prevent future problems with your stocks.
How Does Reserved Inventory Impact Your Business?
It’s critical to keep an eye on your FBA reserved inventory because it has an impact on your utilization.
As previously stated, many Amazon warehouses are nearing capacity. Therefore they’ve resorted to calculating your reserved inventory against your restock limits to guarantee they don’t overcrowd their facilities.
Here’s an example to better understand it.
For instance, your inventory limit is 1000, and you sold 600 units in the last couple of days. However, Amazon only shipped 200 of those units. This means that the inventory was sold, but 400 units remained unshipped.
In this example, your available maximum ship quantity is calculated as 1000 minus the items you have at FBA that are still unsold. For example, you still have 300 units unsold at FBA, plus 400 unshipped units to customers. This means that you are only allowed to ship in 300 units based on your restock limits because of the 400 units in reserved inventory.
Failure to replenish stock because you’ve reached the maximum storage limitations will increase your stockout risk, affecting your sales and your ranking, IPI score, and restock limits.
Amazon may view your empty inventory as unreliability, and it will not look good on your sales ranking. Aside from that, you miss out on possible sales, thus affecting your overall profit.
Tips on Managing Amazon Reserved Inventory Levels
Here are some tips to help you manage your inventory levels better.
Use Storage Space Accordingly
One of the things that can affect your usage percentage is reserved inventory. A high utilization rate usually indicates that storage is overflowing with pending orders that need to be processed further due to authenticity, sizing, payment issues, slow sellers, stranded items, or excess units that aren’t selling as well as your top sellers.
As a result, Amazon is unlikely to provide you with more storage until your inventory levels have returned to a healthy level.
If you want to know your utilization rate, you can use this formula:
Utilization Quantity ÷ Restock Limit x 100, and you’ll get your Utilization Percentage.
You can find these numbers by:
- In your Inventory Dashboard, open the Inventory Performance tab.
- Click on Restock Limit
- Search for the Restock Limit (Maximum Inventory Level) and Utilization Quantity
You’d like to keep your usage rate at 30% or above in an ideal environment because it implies outstanding sell-through and turnover rates, which improves your storage volume limits and IPI score.
A 30% usage rate indicates that you turn over your product every month, as Amazon should be providing you with three months of storage space. Therefore a 30% utilization rate indicates a monthly turnover.
However, due to Amazon’s sudden reduction in restocking limits, many sellers find themselves maxed out, making it difficult even to maintain an 80 percent -90 percent utilization rate.
However, suppose you were fortunate enough to avoid your restock limits from being reduced too much. In that case, you may have been able to maintain a high utilization percentage by selling through inventory at a fast rate, causing Amazon to award you more storage space so you may sell more through FBA.
Check-in Inventory Faster
The amount of time it takes for your merchandise to arrive at FBA warehouses can cause serious damage to your business, especially when the shipment is slow.
Processing your FBA inventory, receiving it, transporting it to other fulfillment centers, and stocking it for sale might take up to a week. However, due to COVID-19 and warehouse labor constraints, expect a significantly lengthier check-in process.
During that time, customers may still purchase your reserved products, but they may see a message that says “Back-ordered, Due in stock + estimated in-stock date.”
If customers do not receive their orders within one to two days, it may have an impact on your conversion rate, as they will leave your page, resulting in missed sales.
You can use UPS Freight to get your inventory checked in faster. They have a contract with Amazon that allows them to transport goods anytime there is a gap in the timetable.
Due to a gap in the schedule, Amazon must contact UPS Freight and request that any extra stock be sent immediately to complete a transaction. Because of the partnership between the two companies, checking in your FBA inventory becomes faster.
Another option is to ship inventory to Amazon via small parcel delivery (SPD). Because SPD shipments are loose cartons rather than pallets that must be broken down, SPD shipments have a substantially faster check-in time.
You can prevent stocking out and fulfilling orders quickly while keeping your reserved inventory levels low by quickly checking in your inventory.
Create Removal Order
Another way to improve your storage capacity is by creating a removal order. A removal order is when you want inventory removed from an Amazon warehouse. Amazon will return the inventory to your possession, a third-party storage provider, or the manufacturer when you create a removal order. It should not be sent to customers as a gift or as an inventory.
When you create a removal order, you can free up your storage space and use it for better products that will not end up in the reserved inventory list. Amazon will notify you if you need to remove an inventory if it is no longer sellable. Amazon will also recommend removing some inventory if they are affected by future long-term storage fees.
To have your inventory removed from an Amazon fulfillment center, submit a removal order. You can do this by:
- Go to Manage Inventory and click Create a removal order.
- From the Removal Order details page, choose the Method of removal, then on the Return to Address, key in the address where you want the products to be delivered.
- You can either create a removal order ID or let it automatically generate the ID. Then specify the quantity of unfulfillable and fulfillable units that you want to remove from your inventory.
- Review and make sure all details are correct, and then submit the removal order.
Note: The method you use will depend on the condition and type of inventory you wish to remove. You can set an address where you want the inventory returned, or you can request Amazon to dispose of or recycle the products if you don’t want them returned to you.
It’s crucial to understand that while inventory is Reserved, you have no choice but to wait for it to become available or “fulfillable” before removing it. You may only place a removal order with Amazon to have the goods returned to you or your warehouse.
Set up a third-party fulfillment center to prepare for stockouts, especially during busy seasons. Because you’ll be able to move from FBA to FBM right away, having a backup warehouse means that your Amazon resupply limitations aren’t affected.
Amazon’s replenishment limit algorithm recognizes FBM purchases as part of the sales velocity that contributes to restock limit evaluations.
You can even send additional shipments to your warehouse and dispatch orders from there if FBA refuses to accept them. If you have problems putting inventory into FBA, you won’t be trapped and unable to sell or fulfill.
Removal of Unused Shipping Plans
Inbound shipments, like Amazon Reserved inventory, impact your utilization percentage. If your utilization is higher than typical, you may have some unused shipping plans open.
It is best to delete the inbound shipments as soon as possible because Amazon will most likely include them when calculating your sell-through rate. The sell-through rate is the most crucial inventory KPI on Amazon. Unused and open shipments are carried over for the next 90 days as part of your average utilization, which can negatively impact your sell-through rate.
Currently, Amazon does not charge an overutilization fee. However, you can no longer inbound stock if you have reached your restock limit or is above the limit. If you are having trouble deleting your inbound shipment, you can contact Seller Support and ask them to delete them for you.
Are There Tools To Manage Inventory on Amazon?
SoStocked is an inventory management software that helps Amazon sellers manage and forecast inventory easily. SoStocked forecasting feature factors in important things such as past sales, past stockouts, seasonality, and future marketing plans.
Sellers can modify the forecast that they deem fit to their business, whether wholesale or private label. It also has a customizable KPI dashboard to help sellers better understand their inventory levels, track inventory movement, and when it is time to reorder.
For sellers who are selling on at least three or more platforms, Sellbrite might be a good option to use. It is not only available for Amazon sellers but also supports other online channels like eBay, Walmart, BigCommerce, and a lot more. The software allows sellers to avoid stockout and to make sure the products are priced accordingly.
All movements in the inventory are automatically updated in the listings. The software also provides comprehensive reports to help sellers analyze and improve their business.
Similar to Sellbrite, Expandly allows sellers to integrate online platforms such as Amazon, Etsy, and Wish. This allows sellers to manage several sales channels in a single platform. Reports created by the software can help sellers get deep insights into the overall performance of their business. Plus, they have excellent customer support.
Linnworks is a platform that automates order processing, sales management, shipment tracking, inventory control, and financial reporting. Amazon sellers can integrate their e-commerce store and platforms to merge inventory updates.
When there is an order, tracking information is sent automatically through Linnworks. It can help sellers save costs and manage sales channels more efficiently.
Veeqo is another centralized inventory management tool that is ideal for those who are selling on different sales channels, including Amazon. Sellers can manage all shipping labels, inventory, and orders from all of their sales channels using Veeqo. With Veeqo, sellers can have better control over their inventory operations and visibility of stocks.
Veeqo also has a feature where sellers can pick and pack orders using the barcode scanners. The interface is user-friendly, so even new sellers won’t have trouble navigating the platform.
Now that you know how reserved inventory can affect your FBA Inventory limits, you can now properly manage and prevent items from being out of stock. As you know, an empty inventory may hurt your overall ranking on Amazon.
By following the tips above and using one of the Amazon inventory management software, you would be able to manage and track your inventory as well as plan your inbound shipment better. Share your thoughts below in the comment if you have other tips on how to manage reserved inventory in Amazon FBA.