Amazon has announced FBA Capacity Limits, a new system to help sellers manage their Fulfilled by Amazon (FBA) inventory capacity. The streamlined system offers new capacity management tools and resources, and will go into effect March 1, 2023.
Amazon’s new FBA capacity management system is designed to give most sellers greater capacity limits, and more visibility and control over capacity limits in order for them to better plan and manage their inventory and supply chain.
What Amazon Experts Have to Say About the New FBA Capacity Management System…
“The new storage limit or capacity manager is a new tool where we are able to request up to 20% more of our initial restock limit or 2,000 cubic feet (whichever is greater) by being willing to pay a reservation fee for the extra capacity if it’s granted by Amazon. For this tool Amazon is measuring total capacity by cubic feet and not by individual product units like we usually see in our standard/oversize/apparel/footwear restock limit.
We previously had to go through a seller support agent or an Amazon rep and build our case to possibly get a storage limit increase. This is super useful considering that at times the restock limit tends to be a little tight, especially in Q4 of every year due to the holiday sales season.
We’ll get performance credits ($0.15 per qualified dollar in sales) which will reduce or even completely offset the reservation fee amount.
We’d have to see how soon they take care of requests since they do it from the highest reservation fee bid to the lowest. We are going to have to be strategic about it and do some forecasting to bid the maximum reservation fee possible.”
– Henry Polanco, Envision Horizons Supply Chain Manager
“I think the biggest thing not being highlighted here is that the bidding is for additional storage requests. Current FBA capacity limits stay based on the IPI score. The seller that has been complaining about storage limits being squeezed now has the ability to request more space. Yes, it is at a cost (the reservation fee), but if they sell through the inventory, those costs should be offset. Sellers now have an opportunity to prove that their forecasting is stronger than Amazon’s limit systems.
These changes are not all rosy and I do have some concerns & questions:
- Will Amazon constrict the current base of storage as a roundabout way of making this more pay to play?
- In the same vein as above, will Amazon lift IPI limits following a successful bid and use of more space? That would seem most fair and should be the case if they view requested capacity increases similar to normal capacity limits.
- This plan is all contingent upon Amazon’s total storage space. With Buy with Prime rolling out does the upward pressure for storage space demands inflate the reservation fee?
- What happens to storage fees if Amazon delays full-inventory check-ins or does a mistaken product takedown? Does the reservation fee stopwatch keep ticking?
- What will this bidding scheme look like in the busy seasons? With naturally higher demand (fees), a mistake in prime shopping season could be very costly for a new business or product launch that is expected to be successful.”
–Todd Piechowski, Envision Horizons VP of Growth
LinkedIn Buzz About the FBA Capacity Management System
New FBA Capacity Management Features
1. A single, month-long FBA capacity limit
FBA capacity limits will offer a single monthly limit to determine how much inventory sellers can send to and store at Amazon, instead of utilizing weekly restock limits and storage limits. Capacity limits for the upcoming month will be announced in the third full week of each month via the Capacity Monitor in Seller Central and an email notification. Capacity limits consider inventory on-hand in Amazon’s fulfillment centers and shipments sellers have created that have not yet arrived. Amazon states that the majority of sellers will now have access to greater capacity volumes than before.
2. Estimated capacity limits to help sellers plan three months in advance
In addition to a capacity limit for the upcoming month, the system will also provide estimated limits for the following two months to help sellers plan over a longer time period.
3. The opportunity to request a higher limit
With our new Capacity Manager, sellers can request additional capacity based on a reservation fee that they specify. Requests are granted objectively, starting with the highest reservation fee per cubic foot until all capacity available under this program has been allocated. When additional capacity is granted, sellers’ reservation fees are offset by earning performance credits from the sales they generate using the extra capacity. Performance credits are designed to offset up to 100% of the reservation fee, so sellers don’t pay for the additional capacity as long as their products sell through.
4. FBA capacity limits in volume to better reflect capacity usage
Amazon will set capacity limits and measure sellers’ inventory usage in cubic feet (vs. number of units), which better represents the capacity sellers’ products use in fulfillment centers and transportation vehicles. Amazon will still continue to also show inventory usage in units, providing an estimate of how many units specific cubic volume capacity limits are likely to permit.
How are FBA Capacity Limits Determined?
FBA capacity limits are influenced by the seller’s IPI score (Inventory Performance Index Score), as well as other factors such as historical sales volume, seasonal and peak selling periods for your products, forecasts for your ASINs, the new selection that you carry, deals that you’ve scheduled, fulfillment center capacity, and shipment lead time.
Sellers will receive one capacity limit for each storage type per month.
- Individual selling accounts have a capacity limit of 15 cubic feet; this limit doesn’t change and is not eligible to be increased.
- New professional selling accounts (active in FBA for less than 39 weeks) don’t receive FBA capacity limits. This allows you to establish your FBA sales record without limits so that we can determine how much capacity your FBA business needs as you grow.
- Professional selling accounts (active in FBA for more than 39 weeks) receive capacity limits based on IPI score and sales performance. Sellers with consistently higher IPI scores receive higher capacity limits, adjusted for sales volume and available capacity. Usage against your FBA capacity limits will consider your inventory on-hand at Amazon and open shipments on the way to our fulfillment centers, calculated in cubic feet.
FBA capacity limits are announced monthly during the week starting the third Monday. You can view updates via the Capacity Monitor and will also receive an email notification. We’ll confirm your limit for the upcoming month, reaffirm or adjust your estimated limit for the following month, and estimate your limit for the month after that.
What Happens If You Exceed Your Capacity Limit?
If you exceed your capacity limits, you’ll be blocked from creating shipments to Amazon, and your account may be charged overage fees. For current rates, go to FBA inventory storage overage fees.
How to Start Using the New FBA Capacity Management System
To start using the new FBA capacity management system, and to view capacity limits which will take effect on March 1, as well as estimated limits, go to the FBA Dashboard on Seller Central (login required).
You can view your capacity limits and capacity usage in the Capacity Monitor at the bottom of the Inventory Performance dashboard and Send To Amazon. Use the tabs to select a storage type. The chart on the left displays your current capacity usage by inventory status and your remaining capacity for creating new shipments. The table on the right displays your estimated capacity limits for the next three months.
How to Request Additional FBA Capacity
- Tell Amazon how much additional capacity you want, and when. Limit increases can be requested in monthly increments for any future period in which you have a capacity limit or estimated capacity limit. You can request up to 20% of your initial capacity limit or 2,000 cubic feet, whichever is greater.
- Set the maximum reservation fee that you’re willing to pay for the extra capacity, if it’s available. The fee can be offset with performance credits earned from sales generated using the additional space. No upfront payment is required.
Important: The reservation fee that you set should reflect your confidence in your ability to sell the inventory and offset the reservation fee with performance credits. If you’re not confident that you can sell the inventory and offset the fee, we recommend that you don’t request the capacity as you’ll be responsible for the remaining balance (your reservation fee minus performance credits).
- We’ll assess fulfillment center capacity regularly (typically twice per week) and grant requests as capacity is available. We grant requests with the highest reservation fee per cubic foot first and continue in this order until all available capacity has been allocated. If your request is granted, the capacity will be available to you for the entire period that you specified.
- If your request is granted, your capacity limit will increase in the Capacity Monitor. When the specified period starts, you’ll earn a $0.15 performance credit for every dollar of sales that you generate using additional capacity. We designed this credit to give you the opportunity to offset 100% of the reservation fee, if you sell the inventory.
Amazon’s Recommendations for Maximizing Your Capacity Limits
- Cancel open shipments that you don’t intend to send Open shipments count towards your total capacity usage, so close them if you no longer plan to send in those items. To view and cancel a shipment, go to Shipping Queue. Click the shipment name and then View shipment or Track shipment to see the shipment details. Then click Cancel shipment or Delete shipment.
- Improve sell-through of your FBA inventory When you increase your sell-through rate you can free up space for new products. We offer recommendations to increase sales on the FBA Inventory page, such as markdowns, outlet deals, advertisements, or updates to product pages.
- Use Multi-Channel Fulfillment to sell your inventory on other sales channels. Multi-Channel Fulfillment lets you use Amazon’s network to fulfill orders from non-Amazon sources, such as your own website. For more information, go to Multi-Channel Fulfillment.
- Remove inventory Create a removal order to reduce the amount of inventory that’s stored in Amazon’s fulfillment centers. To create a removal order, go to FBA Inventory, select the items that you’d like to remove, and click Create removal order from the bulk action drop-down menu. When you create a removal order, you can take advantage of Amazon’s value recovery options like liquidations or donations. You can also have items returned directly to you. Additionally, you can set up automatic removals for aging items or unsellable units. To adjust these options, go to settings, then select Fulfillment by Amazon. Scroll down to Automated unfulfillable settings and Automated fulfillable inventory settings. Use these options to choose how items are sent back to you and to help you keep your inventory fresh for customers and balance your capacity limits.
Important: Removal orders will be reflected in your capacity usage within 24 hours of the order being created, even if the order is still in Pending status. Customer returns will be added back into your capacity usage when the returns are received.
- Follow restock recommendations Make sure you don’t send more inventory than suggested by following the restock recommendations on the Restock Inventory page.
Amazon Inventory Management Software
If you don’t have an agency with a team of account analysts to make inventory recommendations, we suggest subscribing to software with Amazon inventory management tools. Our Amazon analytics and diagnostic platform, myHorizons, provides multiple tools to support you in taking control of your Amazon inventory strategy.
Consider teaming up with an agency like Envision Horizons which can help you navigate the continuously changing eCommerce and Amazon space.
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