Amazon Aged Inventory: What You Need to Know

Imagine you have a lot of stock, but as time goes by some of the items remain unsold incurring storage fees which in turn negatively affect your profit margin.

On a positive note, easy fixes to this problem can be found.

By implementing some effective inventory management techniques, you will be able to deal with the problem of aged inventory, maximize sales, and increase the profitability of the online platform.

So let’s delve into understanding the aged inventory and strategies that can help you to fix the inventory aging on Amazon.

Quick Guide

What is Inventory Aging on Amazon?

What is the Problem with Inventory Aging on Amazon

How Does Amazon Inventory Aging Affect IPI

How Can You Avoid the Aged Inventory Surcharge

Amazon Aged Inventory Surcharge Fees

6 Effective Strategies to Fix Inventory Aging on Amazon

Conclusion

What is Inventory Aging on Amazon?

Inventory aging, previously referred to as the long-term storage fee, gives challenges for businesses, particularly those operating within Amazon’s ecosystem.

These issues arise when inventory units remain stored in Amazon’s fulfillment network for 181 days or longer. The aged inventory surcharge, assessed on the 15th day of each month, is an additional fee imposed alongside the monthly inventory storage fee.

The problem with inventory aging extends beyond financial implications. It can adversely affect your performance metrics on Amazon, such as your listing’s sales rank and Inventory Performance Index (IPI) score.

At the end of the day, it is all about understanding which products are too unsold costing you money in storage fees and hampering your cash flow. In addition to knowing when to price, promote, and replenish inventory, you can optimize your inventory turnover and maximize profits by understanding inventory aging.

What is the Problem with Inventory Aging on Amazon?

Inventory aging is the main challenge for businesses that sell on Amazon. Amazon can charge you aged inventory fees and penalties if you create stocks of older opportunities.

It can also cause lower sales ranks and reduce your IPI scores. This confirms that it is necessary to control inventory levels continually and minimize the occurrence of these risks to preserve the sales performance on Amazon.

Additional read: Top 8 Amazon Inventory Management Tools for Your eCommerce Business

How Does Amazon Inventory Aging Affect IPI

Inventory aging can have a significant impact on a seller’s Inventory Performance Index (IPI). The IPI is a comprehensive metric that covers diverse aspects of inventory management, like, maintaining proper inventory levels, dealing with listing problems fast, and having essential products readily available. Hence the duration of inventory has a great impact on the IPI of a seller.

There are two primary ways in which inventory aging affects the IPI score.

Firstly, older inventory is more prone to becoming obsolete, leading to increased write-offs. Secondly, aging inventory tends to have higher days of supply, which slows down sales velocity. Both factors contribute to a lower IPI score.

Amazon imposes a minimum IPI score limit and negative thresholds of falling below this level result in a storage restriction being imposed on the seller’s account, and their inventory levels must improve.

You will need to implement strategies including managing inventory levels of not more than two to three months’ worth of inventory in the fulfillment centers to restrict the impacts of inventory on Amazon.

Nonetheless, maintaining this balance becomes a little complicated because of other factors such as manufacturing lead times, shipping durations, and warehouse processing time.

How Can You Avoid the Aged Inventory Surcharge

The key to avoiding the aged inventory surcharge is to manage old stock proactively. Various strategies can be employed to get rid of older inventory before the next inventory cleanup date.

One option is to sell through Amazon Outlet at a minimum discount rate of 20% to dispose off outdated items. This way Amazon Outlet promotion will help in getting rid of aged stock more effectively.

Alternatively, sellers can submit a removal or disposal order for inventories before the clean-up date. These inventories won’t have an aged inventory surcharge even if they are not removed physically before the cleanup date.

The deadline for submitting the removal orders is 11:59 p.m. (PT) on the fourteenth day of each month. This method helps sellers deal with aged inventory and avoid further surcharges efficiently.

Amazon Aged Inventory Surcharge Fees

The Amazon aged inventory surcharge fee is charged monthly, typically between the 18th and 22nd of each month.

Before 15, 2024
Inventory Assessment Date | Items aged 181-210 days | Items aged 211-240 days | Items aged 241-270 days | Items aged 271-300 days | Items aged 301-330 days | Items aged 331-365 days | Items aged 365 days or more
Monthly (every 15th of the month) | $0.50 per cubic foot (excluding certain items) | $1.00 per cubic foot (excluding certain items) | $1.50 per cubic foot (excluding certain items) | $3.80 per cubic foot | $4.00 per cubic foot | $4.20 per cubic foot | $6.90 per cubic foot or $0.15 per unit, whichever is greater

February 15, 2024, and after
Inventory Assessment Date | Items aged 181-210 days | Items aged 211-240 days | Items aged 241-270 days | Items aged 271-300 days | Items aged 301-330 days | Items aged 331-365 days | Items aged 365 days or more
Monthly (every 15th of the month) | $0.50 per cubic foot (excluding certain items) | $1.00 per cubic foot (excluding certain items) | $1.50 per cubic foot (excluding certain items) | $5.45 per cubic foot | $5.70 per cubic foot | $5.90 per cubic foot | $6.90 per cubic foot or $0.15 per unit, whichever is greater

6 Effective Strategies to Fix Inventory Aging on Amazon

Here are six effective strategies that will help you to fix the inventory aging on Amazon. Let’s dive in.

1.Analyze Inventory Turnover Rates

Analyzing inventory turnover rates involves understanding how quickly products are moving off the shelves. The calculation of the sales turnover rate is done by dividing the COGS by the average inventory value.

A high turnover rate indicates that products are selling quickly, while a low turnover rate suggests that products are sitting in storage for too long. By identifying slow-moving items, you can take specific measures to counter inventory aging.

2.Implement Strategic Inventory Planning

Strategic inventory planning involves a process of improving stock levels by demand focus and sales patterns. You should take into account factors such as seasonality, trends, and product life cycles when planning inventory levels.

On the other hand, stock can be minimized by suppliers through balancing supply and demand which would help in eliminating excess inventory and therefore reduce the risk of aging stock.

3.Forecast Demand

Forecasting of demand is a process of looking into the future and estimating the sales volume of each product. You can use sales history, market trends, and customer feedback to provide a forecast for the demands that will be derived.

This is accomplished by being aware of future demand variations, which helps you handle your inventory levels accordingly and prevent either overstocking or understocking issues that lead to inventory aging.

4.Use Amazon’s Inventory Age and Health Reports

Through inventory age and health reports, Amazon offers you the chance to explore details, such as the state and condition of the stock at hand. The reports provide information on old stocks and reveal items whose movement is slow and need additional attention.

This is possible by periodically reading these reports and using them as a tool to deal with inventory aging problems in advance, which permits you to take appropriate measures and eventually improve your inventory management.

Also read: How to Leverage Amazon Inventory Reports

5.Optimize Product Listings and Visibility

Inventory aging is one of the biggest problems in retail nowadays, thus optimizing a listing and its visibility is a must to increase sales and make your products popular. It should be a priority for you to perfect product titles, descriptions, and images, as well as keyword optimization as a step to increase product visibility and draw more customers.

Furthermore, the marketing approach including advertising and promotion approaches is critical in increasing product visibility as well as boosting sales growth through slow-moving goods.

6.Promote Products to Increase Slow-Moving Inventory Sales

Marketing discounts, sale offers or products, and targeted marketing campaigns not only stimulate demand but are also capable of boosting sales for unsold inventories.

By utilizing Amazon’s advertising tools, you can promote markdown products or clearance items and also use external marketing channels that will make customers buy the products. You can effectively achieve this by offering incentives and doing promotions to help reduce inventory aging and overall enhance sales performance.

Conclusion

Taking into account and dealing with the aged inventory issue on Amazon is crucial for sellers who aspire to hold a competitive advantage and make higher profits. The aged inventory involves additional fees and penalties. It also adversely affects your performance metrics, for instance, sales rank, and Inventory Performance Index (IPI).

Eventually, you have to realize that building and maintaining your inventory demands strong attention and a proactive approach in the Amazon marketplace, where sellers are always fighting for their share.