However, Amazon recently launched a new system to manage FBA storage capacity with the aim of giving sellers more control over their inventory!
Let’s recap the old FBA capacity system and view a breakdown of the new capacity limit so you understand what the new limits are and how to optimise your FBA storage.
Under the old FBA capacity management system, Amazon imposed separate limits on inventory restocking and storage. You had to monitor and manage these limits individually, often resulting in inefficiencies and difficulties in accurately estimating and controlling inventory.
Sellers were also restricted by both storage limits (the amount of space available in fulfilment centres) and restock limits (the number of units that could be sent for replenishment at a given time). These limits were determined by factors like historical sales volume, the number of units sold, and sales performance.
Amazon’s New FBA Capacity Management System
Moving away from the weekly and quarterly storage capacity, Amazon has combined restock limits and storage limits into a single monthly metric called the FBA capacity limit which aims to provide sellers with more control over their FBA inventory capacity.
The FBA capacity limits are determined based on various factors:
- IPI (Inventory Performance Index) score: Amazon evaluates seller performance based on factors like excess inventory, sell-through rates, stranded inventory, and more.
- Sales forecasts: Amazon considers the seller’s sales projections to estimate the required capacity.
- Shipment lead time: The time it takes for sellers to deliver their inventory to the fulfilment centres.
- Fulfilment centre capacity: Amazon’s assessment of available space in the fulfilment centres.
- Historical sales volume: Seller’s past sales performance and demand patterns.
- Seasonal demand: Anticipated increase in sales during peak seasons or holidays.
- Deals and new product additions: Promotional offers or new products that may impact inventory demands.
Capacity limits for the upcoming month are announced on the third full week of each month via the capacity dashboard in Seller Central and email notification. Amazon also provides estimated limits for the upcoming two months to help you plan for the long term.
How to request additional storage capacity
Sellers can also request additional storage capacity through the Capacity Manager. When making a request specify the desired capacity and a reservation fee per cubic foot.
Amazon evaluates and grants these requests based on the available capacity and the reservation fee offered. If a seller’s on-hand inventory exceeds the FBA capacity limit, overage fees apply.
Screenshot from Amazon’s capacity limit increase request
However, you can earn performance credits for every dollar of sales generated using the additional capacity, which can offset up to 100% of the reservation fee.
Amazon ensures that the granted reservation fee will be less than or equal to the maximum fee specified by sellers and matches the lowest fee granted to other sellers for the same period.
This ensures fairness and transparency in the allocation of storage capacity.
Who is subject to capacity limits?
For new professional sellers, you do not have capacity limits as Amazon takes time to measure your inventory performance. You have up to 9 months to establish your sales record so that Amazon can determine what capacity to grant you.
If you have been selling for +9 months you will be subject to capacity limits.
Optimize your FBA Storage Capacity
Looking to optimize your Amazon FBA storage capacity? Here’s how you can do it:
- Cancel unnecessary shipments: assess your inventory needs and cancel any unnecessary shipments to avoid exceeding capacity limits!
- Remove slow-selling inventory: Identify products with low sales velocity and consider removing them from FBA to free up storage space.
- Improve sell-through rates: Optimize product listings, enhance product page content, and consider promotional activities to improve sales performance.
- Offer discounts and ads: Running promotions, offering discounts, or running sponsored ads can help increase sales and improve inventory turnover.
We love this new update as it shows Amazon listens to feedback and continually wants to create a better experience for sellers.
By understanding and leveraging Amazon’s new FBA capacity management system, you can effectively manage inventory, optimize storage capacity, and enhance your overall FBA experience.
Need some help?
Looking to get an in-depth understanding of the new FBA’s capacity management system? You can ask our Amazon experts anything by sending us a message or giving us a call!