What is Buffer Stock and How to Use it
What is Buffer Stock?
Timing orders can be one of the most challenging problems faced by Amazon businesses.
Many sellers tend to replenish their inventory when it's already at a critically low level. Ideally, your shipment should arrive before you run out of stock.
But unexpected circumstances happen all the time, and your shipments are no exception. Natural disasters, manufacturing delays, supply chain mistakes, and other factors can cause your shipments to run late. When this happens, you find yourself without inventory, missing out on sales, and footing the bill for re-ranking costs & expensive air shipments.
This is why it is essential to maintain a buffer stock in your inventory. A buffer stock, also known as safety stock, is a reserve quantity of goods that you can use in case of emergencies to prevent stocking out. Sort of like a false zero alert that triggers you to place an order early.
It's the same principle with the Low Fuel light in your car when you're nearly out of gas. That certain gas amount left in your tank serves as the “buffer” that allows you to drive to the nearest gas station before running out of gas.
Let’s look at how this works.
Buffer Stock can be set in the number of Days of inventory, based on current sales velocity, or in the number of Units.
But Days is highly preferred as your inventory numbers will fluctuate based on your sales velocity.
For example, if you set your Buffer Stock to 300 units and you are selling 10 units a day, your Buffer Stock will be 30 days.
But then your sales start taking off, and suddenly you are selling 30 units per day! 300 units is no longer 30 Days, but just 10 Days of stock!
SoStocked allows you to easily program the number of inventory days or units of buffer stock. The system will predict your future sales, based on your current sales velocity and other forecast settings. Then using those numbers, it will tell you when to place your inventory order to ensure you don’t run out.
With buffer stock acting as your safety net to ensure your business will continue to operate, it will provide you with peace of mind while waiting for your shipment to arrive.
Use the buffer stock feature and avoid stocking out with SoStocked.
Geo-Ranking and Buffer Stocks
The standard rule of thumb is to keep 30 days' of supply at Amazon FBA. Sellers have reported seeing diminished sales and rankings with less than 30 days' of supply.
When your inventory dispersal runs too thin, you'll lose rankings in certain areas where you're low on inventory (geo-ranking). It may be that where your current tools are pinging your products for rankings may be areas that are flush with inventory so you may not see rankings suffer as heavily based on your tool feedback vs your actual sales results. You would have to test rankings in different areas across the marketplace. For example, CA vs NY vs Nebraska. Nebraska may be losing ranking even though CA and NY are fine. The most popular sales states tend to be NY, CA, TX, and FL so likely your rankings will first drop in other areas.
If you suspect this to be the case, you can always do a test by changing your shipping zip code in the upper left of Amazon .com.
Then search the different zip codes and you'll see if your rankings are being affected by low inventory.
You can also download a report that tells you the location of your inventory by fulfillment center. Go to Reports > Fulfillment > Inventory Ledger and download a .csv of the summary view aggregated by fulfillment center.