FBA Inventory management Tips with Michael Weir

everyone this is Jelena from Amazonia PPC today I have a very special guest with me mr. Michael we're from the inventory boss Oh I listened to his course on inventory management and I thought it was super brilliant gonna wanted to invite him over to our podcast so that he shares some of his wisdom with us Michael thank you for being my guest then it's my pleasure thank you for having me of course can you tell us a little bit more about itself well I am I've been an Amazon seller for just two thousand thirteen before that I was in inventory not information but I was in the Forex I was in the internet marketing happened for over ten years before that I was a civil litigator and I was a bestest famous attorney for a decade or so and that became a real grind and I was looking for a way out and found online marketing and then in 2013 pound Amazon and jumped in with both feet and handled back cents and that's that's how I that's how I got into this business beautiful a lot of people find themselves and I was an FBA and never want to look back at all because they were so successful what were some of the main challenges you faced there's an absent seller which was awesome was that there was so much training I'm part of the sm2 and we all got in and you know found the same products a lot of us but with 220 rupees in different seminars and webinars had learn all the things you need to know to become successful you PPC as you know and listing optimization and SEO and you know later manage that all the cool things that need to builder business and we jumped in with both feet like I said we grew pretty quickly and the next challenge that we had was managing you know three different factories two different ports different you know purchasing times and all of a sudden we realized you know it's it's an online marketing business but boy it's got a kind of a retail component to it a logistics component to it we didn't find any teaching before we couldn't we couldn't go to a webinar seminar or take a course on how to how to manage it we saw all sorts of courses and trainings on how to build our business but nothing taught us how to run it yeah profitably as profitably as you can we found that we were leaving a lot of profits out around the edges just because we would maybe over Twitter sometimes inside our capital and take extra fees you know they were taking our profits or we wouldn't order enough or order on time and we run out of inventory so you go through most people on your podcast no you could you could do all the great launch things giveaways coupons I almost think the people are doing - you don't have enough inventory you right now yeah you're listening vanishes losing ranking we finally did get in for it back in again you know you got to build it back up again you lost your nice momentum and so it was a challenge for us to get that figured out so that we would have a just a smooth running logistics back into our business and so I started looking around for anyone that could teach this to me I couldn't find it so what I did was I kind of stick took a step back and I've got a business degree in finance and I thought man I gotta figure this out and so I started actually I live in a university town and so I went to the local University Bookstore found you can get a college degree in inventory management and supply logistics I bought textbooks and then I talked to professor's and I took I went to the seminar said that nothing to do with Amazon and everything to do with warehouse management logistics and I I put together a system and start showing some of my seller friends and we kind of worked on it and did some trial and error before we know we just called it the system seven step algorithm where we've run our products to these seven steps and we really streamline our operations type it up very well and now we just you don't have any court management problems you just have you know we have a system that lays a foundation for our entire business so we can scale knowing down to the unit what we need or when we need order it how we time our orders all these things so that's that's what came out of all that all that effort and research mm-hmm beautiful you have testing so now what I have is and sir we've tested it and then once we had it figured out you know it was it was first a whole bunch of spreadsheets and we realized later that spreadsheets alone they can just spray cheese alone are difficult to run a large business with because what I say to people it's like a two dimensional tool that you're using to solve a three dimensional puzzle and there's simply dynamic moving parts of an Amazon business that what she really is data and so we went from spreadsheets where we built out a very large database and then we put the programming the spreadsheets on top of that data and we can run queries so we took our seven steps and take them off the spreadsheets into a program put that program on top of a database that we can draw a data from Amazon that's in WS API and now you can run ten products you can run a thousand products and you just you pull the data right out of the database and and the whole system is done a program may not call him for box and inventory boss is the thing that was the final result in in this project and what what what brought this about was once we started doing well and and I would show this just some of my friends and they incorporate it in their business I got asked to speak at different you know seminars and small masterminds and larger masterminds before I knew it I was all over the world talking about in my management and realized that even though a similar or master fight could be about a lot of different things I had sellers bigger businesses in mind coming up to me and said hey this is a pain point for us this is a problem we deal with yeah can you help us okay listen I realize this is a this is such a huge issue that no one really talks about because it's not cool ninja awesome stuff to talk about you know and it's it's it's you know it's it's complex that's difficult and but if you can't if you can take the complexity and you can you can boil it down to something you can put the programmer on a spreadsheet then it's not complex anymore you just have to understand how to lock a product by through seven steps and you're done it's beautiful that someone has systemized this such a complex topic into something that you know regular use all that the user does not so technical technically savvy can actually use and implement in their own systems you mentioned that you wanted to share some wisdom with us today on this episode and I was just interested in hearing what it was well I have what I can do is I can show the seven steps let me share my screen real quick okay so this is the inventory boss and it's our seven step system and the first thing that we that we do is we talked about balance because inventory management is about balance one of the your people that follow you and every Amazon seller knows one of the biggest decisions you can make that will directly impact your bank account it's when you click the button and wire tens of thousands of dollars on the the country and outside of the world and immediately goes uneventful I'm not decision not only trying to bank account the moment but it determines your cash flow in in the future you know did I order enough that I were too much and so the decisions you make are super important and it's all about balance what you want to do is you want to you want to balance between being over stock in a product and and tying up your operating capital and paying excessive storage fees versus running out of stock which will crush your moment on your cap actually when you're listening just disappears so it's it's striking that proper balance that allows you to maintain your cash flow but also preserve your operating Gadwal so that's when the management's about our sense that if our seven step system looks like this we have something called a reorder point there's two reasons why you run out of inventory the first one is you blew it okay for whatever reason you didn't order on time and the second one may get your bird too little based on you know your trends and so the ruler points important it's a simple math form in fact on that page it's that thing and then the second step is to take care to start the clock later that you get from seller central the Amazon API will give you 90 days of data seller central if you never find it will give you two years of sales data which is super important and you want you want to capture your historical data you want to clean it up I'll show you can I teach how to do that I'd build a seasonality index of all your products you can see you know in what months mathematically how well they do and so the next one is learning how to forecast future the man and I show three different ways to forecast future sales and then the next step is you know once you got one order and you can create it sees that a BMX need the forecast you need to add into your forecast manual adjustments for example if you're going to have a light medium or you can do a coupon giveaway or you're going to do you any number of different things that you can plan for you make manual adjustments to the months that you those things so you can build out a really accurate forecast not just based on your trends and seasonality but you know what you intend to do as far as promotions and so manual adjustments are important and then the next is what's called the EO q if anyone Google's new inventory management typically it'll come up with something called the economic order quantity and search and what this does is it it just helps the seller balance the order size and how many times should I buy it a year they use not the cost of the order and the storage fees that are going to implicated by so this is a this is a formula we use just to make sure that you're wearing the right amount and then after the math we have consolidated shipping like I said earlier we had you know different factories different ports and we need to consolidate you know between the factories that were shipping to a single port we will want to consolidate those orders so that we would have the correct container size and you know save our money and maximize you know our container space a horrible thing to do is to say that order that's just a little bit too big or too big for one set this container but the thing is shipping you know multiple cubic meters of air you know for the same price and so consolidated shipping a huge part of this and then warehouse balance a balancing between what you have your warehouse I could be afraid forwarders warehouse versus what you ship into FBA and that's you know as you know hugely important in q4 when Amazon you know quadruples a storage fees and so if you can know what's your feature forecast is gonna be based on these steps then you'll know month come up a feature how much you should be sending in to Amazon and really tighten up your numbers so that year yeah good for fees so those are our seven steps and the first one is about the reorder point the reorder point like I said tells you um when the order based on how much you gonna stop so if you've got 5,000 units in your warehouse and maybe 3,000 units in Amazon yeah when you make another order based on your sales and so that's one of the first things I'm going to teach today and that's something every seller needs to know whether you have one product or a thousand each product needs to have a real one and so um here's how it works there's three steps to reorder the first one is you need to figure out your lead time and lead times really simple I'm a like seventy days and that'll be from the minute you pick up the phone you send the week that this guy's email however you communicate with your factory the minute you send that order to the the minute it becomes available nf being okay not just rides at the port but when it becomes available that's your lead time and so you have to figure out what that is so it's it's you make the call they tell you it's gonna take 30 days to build out your work it's gonna take maybe three days to go to the port it's gonna sit on the port maybe for two or three days it's gonna get on a container ship and it's gonna come over in 20 days over 23 days I'm just gonna go through customs it's gonna sit in the warehouse and it's gonna be shipped to Amazon you calculated all that up and in this example I have seven litres so the first thing is lead time and that's what builds a lead time is all those different variables the next one is you need to figure out what your sales are daily the man um this is what's important about the seasonality of product and knowing when your what months you're ordering for so if you make an order to May that's gonna arrive in September it's gonna be part of your q4 business you need to know what your you know baby man's gonna be during the lead time so so you think one of my data cells want to say it's a hundred a day then you determine what you want for a safety stock a safety stock right now is one of the biggest issues people are having here at the end of February right because of the fertilizers a lot of people run out of enjoyed right now and it's directly related to an unknown event that is chewy not all of their sales so they have a certain amount in storage they got a certain amount of FDA and their sales are going you know just like they normally would but the factories aren't closed and even if the factories are open they can't ship through different provinces to get to the ports it's a some mask um so safety stock is an issue that directly impacts whether you gonna run into business so a lot of people are gonna be paying a lot more attention to safety stock in the future because the coronavirus you know they're gonna figure it out it's gonna run its course but it's gonna come out this is they're saying that this is a this is a flu now that's probably gonna come back every year so a pro tip I would give you is you makin the money in December and cure you make make sure that your order is gonna ship around the in a December first part of January so that is on the boat before the Chinese New Year and on its way protip thing and so safety stock that's what safety stock is how many days of a buffer can I afford not to write on stop I would say an order that you're making close to the Chinese New Year's you don't want fifteen days you know thirty five fifty sixty days so those are the three steps for the river point now we take those three members the seventy a hundred units a day in 15 days of safety sign and we build out a simple formula which is the real point equals your leak times nearly 10 times do daily demand plus your safety stock so let's see what that looks like it hardly ten seventy days or nearly the man is 100 days our safety stock is 15 days about 15 days is actually 15 times 100 so let's it's 70 days times 100 units today plus 15 days of safety stock at 100 units again boils down to 7,000 plus your 1500 is 8500 units so what this tells you is when my combined stock between my what I have in my warehouse or what I have an FBA when the combined value of number of units hits 8500 units you need over and if if you're late then you might run out of sign and so what you want to do is if I here's another pro tip if you're ordering this product around maybe another product maybe you have a factory that's got your really big seller and you're making most your decisions based on a big seller but you guys other units very variations or different products who's getting from that factory that might run out before you ready to make your big order your safety stock you can make that 25 or 30 or 50 days and you really work with a safety stock based on whether it's your big seller with that factory or one time here you're mine so but but whatever that whatever however this for me works dado and you get to 85 kind of unit you need to make more and there's ways of setting up alerts for doing that you can good seller central and there's ways to get flagged when it's time to make an order program so that's the reorder point the first step in our sub system the next the next one is data collection and before you can work with numbers and and what I say the cake of your forecast because you're gonna take numbers from that you get from seller central your historical sense data and you're going to use those numbers to determine your trends and before you before you do that you want to look at you data and say okay there were times when maybe I ran out of stuff or right now we have a coronavirus it's going to cause people to have a dip in their sand that doesn't mean that the trends were we're going down it meant that an outside event an unexpected event caused it dip and so you want to clean up your data and get rid of the dips in science as smooth that data so you can make a pretty good forecast when you so first thing you do is when you get your data it's looking at it make sure there's no outliers if there are and you'll remember what caused them because you know you're in the business say oh yeah that you know we ran out of business or that was a lightning deal we can't factor that into our trend that was an event that we treated and you smooth that out and then once you have your data smooth down then you create what's called a seasonality of X of the seasonality index but it's awesome it's it's it's math but instead of just saying you know we typically sell maybe you know send me you know seventy five percent more in Christmas time you can look and say wow he remembers and when you your forecast it's something that you have to use math and so a seasonality of X not only allows you to look at it if you create a graph with it but you can really see your numbers and you know if I know a lot of people watch show like Shark Tank and different things and the people that era and one thing their interests have been is knowing your numbers and this is a perfect example of really understanding your numbers is building a seasonality of X either for a product by itself or a category of product or a catalog of products in a particular node and understanding the seasonality so that when you're making purchases with your factory for in order to something around for four months that order is supposed to service a month's in the future you'll know based on your seasonality index what you need to order so that's the next step after that we have forecast when you're forecasting we're testing if you should have an it what you're really doing a lot of people think they're forecasting about you know eight nine months it's really doing is trying to figure out that one value what's what's based on my historical demand what's month seventy look like what you know what can I expect and so to do that you start getting into the mathematics down this is where a lot of people they'll try to figure out information and I made this is where I was yeah you go online and you look for you know how they forecast my future sales you open a book and you run something called a simple moving average but when you when you look at it it looks like this and people go huh I haven't seen that in twenty years all right saw that in the seventh grade they see something called the weighted moving average which I mostly used and it looks like this and you know at this point do they go okay and you know exponential smoothing just the name of it sounds scary alright and this is what stops most people most people and this is why no one teaches this stuff because you know people teach to their strengths people people are really good at SEO teach ranking people are really good at you know optimizing listening they teach that or or PPC or all these different things but when you get to this good haha gosh I won today um but you know what I puppy was you know this looks scary but it isn't you know God gave us mathematics but Bill Gates gives us Excel and so we can take what we can take these scary formulas and we can put them in a spreadsheet and not think about him ever again but we need to know what they do right so you can take the simple moving average and it's coming up with numbers based on mathematical formulas that you'll never have to look at again you something note that they exist in what they do so you learn how to forecast future demand based on your historical thing and you put the circle data in there then you run the numbers and then it just spits out the answers for it's not hard once you get past that hump of wow there's a lot of math Bowl oh it's not really that big a deal so that's forecasting the next one is manual adjustments now like I said manual adjustments are important when you are going to control feature event that's for example if you're gonna have coupon giveaways or lighting deals or whatever it's gonna be or if you know that certain thing you're coming that aren't really seasonal for example prime day is a perfect example of an event that's gonna hurts not season it happens every year but it's it's something you have to adjust for because you're not succumbing it's an event and if you're gonna run a whole bunch of my whitey deals or whatever you do you plan for that as a manual adjustment and so if this you know you can adjust somebody in its say I'm going to sell an extra thousand units so you plug that into your order or what a lot of people find out is you know what I'm getting crushed by competition right now I even though the trends up to this point we're in one direction yeah twenty new sellers selling the same thing twenty sellers have been had last month this is becoming you know difficult and you adjust fight percentage you say I think that actually our sales are gonna go down a bit or up a bit based on percentage value say if you know we're gonna be we're gonna be ten percent off so we're gonna do like you know ninety percent of what we would have done or we're gonna be great you know just we just got our pad we just got a patent and we're gonna wipe out thirty guys so we're gonna our sales are going to go up by fifty percent so you add a percentage basis and so you need to be able to have a flexibility in your in your forecasting formula to either adjust by him or by person but the next one is called the EO q the ill q if you like I said if anyone Google seven point management they're typically gonna find the EO q pops up yeah you know Q again is about balance what would a lot of people make the mistake when they're and they're really trying to you know figure out the formulas to make during for manager decisions what they try to do is use the eoq you and I'll explain in a second um and it's a basis for their order sentence which is the wrong thing to do what it does is it just balances it helps you like I said in the beginning everything's about balance it balances the cost of your order you can think your freight forwarders bill versus your your storage fees for that size of order based on your annual numbers so we'll tell you basically how many orders to have in here and the size of your it's pretty constant but it's just kind of it's something that you use once you can make your forecast and you decide what your all your all the things I talked about your your your seasonality and your fence and everything like that let's have your water size then you just make sure it sits in the range that the yogi says is the best most optimal water spots and so how this works again it's you know it's math but it's it's not scary math when you look at this you think oh my gosh I'm sure I flunked that me it's ready but if you look at it all it's asking for is a couple things one it wants to know what's your annual demand for this product what's your order cost you maybe it's forty five hundred bucks to fill a container and put it on the boat and ship it over what's your annual storage cost per unit you know that could be what's your FBA costs and you have to factor the FBA costs for January through September October November December to make sure that you're getting back right and then just plug in the numbers a lot of work now again you know cube looks scary but this is what it looks like in itself it's just a no-brainer once you have the formulas don't only have to do your data which is easy to figure out and it tells you the number so it's really simple now if you recall the like I said this is just a backup this is something if your order comes in at nine thousand based on you know what you want to do you look at the okay yeah that's the buffer that's that's a great balance point and then you move on the your queue is just there to make the they not too big or too little based on what's the most optimal size based on your numbers so there's only two parts left and this is the logistic parts that one is consolidated shipping and that's just a concept of making sure that you're you're stuffing that container as full as you can and you're you're saving is you're making the best choice to have the best value for your shipping costs and if you do a lot of shipping this really adds up so consolidation is a big deal I teach how to do that and then warehouse balancing this is a really big deal you know on the left is you know the dark place where all your your your boxes are scattered throughout LA's you know wherever and then on the right FBA and so the question is at what point and how many do I do I send because your warehouse you should be paying a pallet fee and so you know if you can stack I don't know 18 you know cartons on a pallet and there's 50 boxes and you know 15 that's in a carton you know you've got so many I act - 20 bucks a month or 15 bucks a month based on a pallet size but when you take it over to FBI is you know you're being charged by the cubic foot for the product and so you know it can be ten times as much storage fees to send something FDA you really if you know your numbers then it's a simple thing of knowing how much to send in every month and so all this we have a program that we build that that tells you based on your forecast you know just tell you you know this much then that much this month so I'm a sweatshirt and you monitor to make sure it's right and I'm warehouse balancing is a so much money in just storage fees most people yeah you know when they're when they're sourcing products or they're there to think about the next thing to buy they'll have spreadsheet and this this spreadsheet is it's different for everybody but it basically has the same things how much does it cost how much does it cost to get here what - been descended into FBA on all these things and then they figure out at the end I caught the acid bath the product in the acid it pulled out I made more than 30% that's something to consent and we're a lot of people you know they find themselves a year later into this product well man I thought I'd be making more money um it's typically because the profits are bleeding out around the edges like I said earlier because they're they're running out of stock other but I'm balancing the right house right or yeah they're ordering too much and so many unbalanced because you know we started on that balance is everything in the program yeah you're balancing you know the cost of shipping versus passive storage or or whatever this is where you find your your product through balancing your employ because most people can be profitably Amazon business but if they're if they're admit she steps on the logistic side or the forecasting side the the profits that they expect on a spreadsheet if they're not finding them typically it's it's it's because they're losing it in in the logistics part of their business and so like I said you can take a lot of seminars and learn awesome ninja cool stuff on how to get on the first page how to rank how do all these things but if you don't have a line foundation on how to run the business you know you're not gonna realize the profits that you want to so that's that's where this came about we've got we got our program it's called the internals and you can go to inventory boss calm and I I teach this the whole thing you can learn it in two days IVD 14 days to learn the whole thing you gone through it and I could go a great detail I take I take you by the hand I walk you through the math because you have to understand the math you just don't have this figured out each time and I teach it like I had my mom sitting ice cream and this is how you do it and it's simple its bite-sized and once you're done you really get it and then then you have time to use our software and see how it works upload your information all your data to create a database and run a program against it and see how amazing this truly can be it's part of business and if you ever ever thought about selling your business my gosh if you can say to a prospective buyer that's looking in 20 different businesses Hey look finally looking a lot of different things out there but we playing something we got systems and I can teach you exactly how our system works that's the foundation of our growth we can scale because we know how to run our numbers we can we know our numbers and so if you're selling your business you get this part now of course everyone wants to be as profitable as it can but you can become more profitable on it current business that you have the existing business you have if you just tighten up your logistics in your information so that's what the employ box is the training the software and of course if anyone has any questions they can send me an email and happy did Rick and Michael thank you for being our guest today and for sharing your wisdom about the inventory management I know for sure that you know most of the sellers who have scaled their business up to seven eight even nine figures they all have systems in place and inventory management is one of the most overseen processes that exist on Amazon FBA is a business and a lot of people can actually use this knowledge to improve their systems and make them make make bit more money basically so I'm pretty sure that whoever signs up for this 14 you have a 14-day free trial for anyone who wants to learn about inventory management and then there's the story why use all this knowledge for their own advantage so I was definitely one Rebekah normally recommend it thank you for being our guest is there anything else you'd like to share with our listeners today no saying that any seller regardless of your experience in whether you have just one product or whether you have a thousand you got to get this figured out and true justice sooner you do it the better so a lot of people say well I'd only got two products awesome bake this into the cake of your business right now because you're gonna grow and if if you'll bake this into the cake of your business at the very beginning it it's gonna make all the difference in the world I mean just making a mistake and blowing it in your reorder point or not ordering enough I've seen some and practice so many people said yeah I did it in the early days about 12 in Tori what we do we're gonna we're gonna make an order that's gonna cost by brand but it's gonna cost us another five or six grand putting on airplane ship with a diff DEA and so exactly just to stay in stock people's people spend so much money on express freight that you don't have to you can you can take that extra freight and double the size of your order and put it on a boat and and this once you get this big thing to take your business and it's it's running those those things just don't have I mean events do occur the corona virus is a disaster on a humanitarian level and also frames onset which is a humanitarian level is you know if your income relies on your Amazon profits and your out of inventory yeah it's a big deal and so if you can get this I keep saying but if you get this big indicate your business and just part of the foundation of your business it's gonna change everything forever it the cool thing about this is inventory management doesn't have a shelf life like a lot of strategies and hacks and ninja tactics you know we have a shelf life of yeah maybe six months maybe here and then Amazon yeah they're smarter than we aren't they catch on and they wipe it out this is you're in you're out this will be with you for the balance of your business and it's it's a skill set that can't be taken away from you once you know it you know forever and it's just it's your business so next level you're more of a pro when you you just have your inventory nailed so that's what the importance does it makes makes you the importance and that's what people want that's what they made sure couldn't agree more especially because it's a skill set that you can also it's a mindset you can also apply to your e-commerce website if you have it or other platforms as well so that the predictions are the same you use the numbers whenever they count they come from so basically you can apply the same skill set oh yeah if you've got if you've got a Shopify business or WooCommerce wherever you have you're selling on other platforms your you can take that data and plug it into the program because you'd still bind from the same factory you just selling your sales come from different platforms and so you have the ability to say well on Shopify we sold this many on whatever platform we sold this mean and that here monthly sales so you can still forecast your the entirety of your business not just your Amazon business if you have other other platforms as Emma so we work that into our inventory for sure brilliant Michael thank you for being our guest today and we're looking forward to inviting you over again sometime when some better times come for sellers maybe like my pleasure thank you so much um talk to you soon okay