Purchase orders might be one of the most underrated parts of selling on Amazon. But if your POs aren’t accurate, you’ll likely end up overstocked on slow movers or stocked out on bestsellers. Both of which spell trouble.
And unfortunately, Amazon’s new lower restock limits make it even harder for sellers to place purchase orders that can meet this channel’s demand (without incurring unnecessary fees).
So, here’s what you need to know before placing your next Amazon PO. Plus, how to make sure every purchase order for this channel is spot on.
Like purchase orders for other channels, Amazon POs are an official contract to buy products from your supplier that you will then sell (in this case, on Amazon).
As such, there’s no special purchase order template. The primary difference is how you fill out this template for Amazon.
That’s because it’s not enough to calculate your economic order quantity. If you sell via Fulfilled by Amazon (FBA), you also need to factor in your Amazon restock limits (AKA, the total number of items you can house at an Amazon fulfillment center at one time).
However, this limit does not always agree with your EOQ. For instance, your limit might be notably less than your optimal restock quantity. (Sadly, many merchants are finding this to be the case.)
My company paid Amazon ~$4 million dollars in the last 12 months and we've been selling on Amazon for over a decade.
I have no idea what they're doing right now.
And neither do they.
— molson (@Molson_Hart) November 16, 2022
|Amazon restock limits do not impact sellers that use Fulfill by Merchant (FBM). In this case, you can fill out your next PO per usual and include what you’ll need to meet demand on Amazon.
But why do FBA sellers need to factor in restock limits? Because you’re likely sending this inventory directly to an Amazon distribution center to avoid holding costs on units that are only passing through your warehouse.
However, say this new shipment plus whatever is currently housed at an FBA fulfillment center surpasses your restock limit.
Then, you’ll find your inventory has nowhere to go (yep, Amazon might just not take it, and you’ll need to pay to send it back to your warehouse), or you’ll get slapped with hefty overage fees. Either way, you’ll feel the hit in your profit margins.
|🤿 Dive deeper: A complete guide to restock limits.
As you know, placing accurate Amazon purchase orders can be complicated. And at times, downright confusing.
Luckily, there are 5 ways to streamline your Amazon PO process and avoid the most common pain points.
Let’s start with the obvious one: You need to know your restock limits to avoid them.
But how do you check your Amazon restock limits?
Restock limits are updated on the 3rd full week of each month, based on your Inventory Performance Index. FBA sellers can check their new limits using their Capacity Monitor in Amazon Seller Central or the corresponding email notification.
But keep in mind: If your restock limit is 100 units, you can’t just order 100 units on your next PO and call it a day. You must also factor in your current inventory levels at all your Amazon fulfillment centers.
For example, say you currently have 60 units in stock at Amazon. And based on your current inventory velocity, you expect to sell 40 units via that channel before your next purchase order arrives.
In this case, you can safely order up to 80 units without exceeding your Amazon restock limit:
100 unit restock limit – (60 current units – 40 units that will sell) = you can restock no more than 80 units
|Cogsy’s multi-location support feature gives you a real-time view of your inventory levels by location. So, you can see exactly how many units you have at Amazon. Try for free.
It’s one thing to order the right amount of inventory for Amazon. It’s another thing to have it show up at the right time.
That’s where calculating (and re-calculating) your order lead time comes in. To do this, use the following formula:
order lead time = [delivery date – order entry date]
But keep in mind that every vendor will have a different lead time. And your order lead time will vary whenever something kinks along your supply chain (think: bad weather, clogged ports, labor shortages).
So, your best bet is to re-calculate your lead times at least once a quarter.
Alternatively, Cogsy can calculate your order lead time for you. That’s because Cogsy’s vendor management feature houses all your vendor data in one place (including your preferred vendors and lead times by SKU).
Then, whenever you’re running low, the tool will send you a replenish alert, letting you know it’s the perfect time to place your next purchase order.
This way, you always place your Amazon purchase orders at the perfect time. And you’re not scrambling to redirect a shipment that arrived too early (needlessly expensive), canceling orders that aren’t urgent (risky and could lead to stockouts), or just eating the overage fees (bad for your bottom line).
Minimum order quantity (MOQ) refers to the smallest number of units your brand must buy from your vendor per purchase order.
But here’s where it gets tricky. Every vendor has its own MOQs – for each product. And often, vendors aren’t willing to negotiate down their minimum order quantities because it preserves their business’ viability.
So, if the minimum order quantity is wildly higher than your Amazon restock level, you have a problem. You’ll either need to place a purchase order that meets the MOQ (and figure out where to send those extra units) or find another supplier.
What happens if you simply submit a purchase order that doesn’t meet your vendor’s MOQ? Frankly, they just won’t bother fulfilling it.
That said, finding and vetting a new vendor can sometimes take months and cost thousands. So, it’s typically cheaper to stay where you’re at and figure out where to send those extra units.
Cogsy can help with this. With it, you can add multiple shipments to a single purchase order.
Meaning, you can choose to restock your Amazon fulfillment center and maybe your ShipBob 3PL at the same time. Cogsy’ll then give you personalized restock recommendations encompassing everything you need to meet demand at those locations.
Even better? Cogsy’ll then clarify in the fine print that you want to send part of that order to your FBA facility and the rest to ShipBob.
This way, you order enough inventory to meet your vendor’s MOQ, and all your locations end up fully stocked (without overstocking any of your warehouses or exceeding your restock limits).
Order consolidation is when multiple orders are combined and shipped as one. This can make the purchase order process more streamlined and a lot cheaper.
For instance, say your Amazon fulfillment center’s only a few miles from your ShipBob location. Merging those shipments and sending them to your ShipBob location might make sense in this scenario. This way, you can save on shipping costs.
Then, once that inventory has arrived, you can sort out what needs to be transferred to Amazon. You can even send this inventory as smaller, more frequent shipments, so you’re only restocking what will absolutely sell. While not always ideal, this strategy gives FBA merchants much more inventory control.
If you choose this route, you can use Cogsy’s mult-location support feature to calculate how much inventory to transfer to Amazon and when. The tool will even track this inventory while in transit to prevent phantom stock from creeping up.
|🧠 Keep in mind
|If a consolidated order exceeds your allotted restock limit, sending that shipment straight to an FBA facility could cause issues (read: incur fees). So, it’s best practice to send consolidated shipments to another location, then move what you’ll need for Amazon.
The purchase order process can take weeks, depending on how many SKUs you need to reorder. And its costs $506.52 per PO on the high end.
Those numbers assume there are no silly mistakes (like not meeting your supplier’s MOQ) that require additional back-and-forth and processing to fix.
So, needless to say, the faster, more cost-effective, and more accurate you can make your purchase orders, the better. That’s where purchase order software comes in.
And not to brag, but as a top-rated end-to-end purchasing tool for Amazon and Shopify brands, that’s kind of our specialty.
But don’t just take our word for it – Adapt Naturals said Cogsy’s purchase order workflow “made [their] purchasing procedures faster, more efficient, and more accurate.”
Partnering with Cogsy is the smartest way to streamline your PO workflow and bypass bottlenecks in the supply chain. Here’s how it works.
Cogsy tracks your inventory levels in real-time. When you start running low, we’ll send you friendly replenish alerts, letting you know it’s time to restock.
These alerts are personalized to each SKU’s reorder point. That way, you always get these alerts with enough time to place your next purchase order and get that shipment before a stockout.
Say goodbye to guessing what inventory needs to be on your next purchase order.
Cogsy’s Amazon integration helps you build smart inventory plans that consider your restock limit. When it’s time to place a purchase order, you’ll get handy restock recommendations based on these plans.
Even better, these recommendations safeguard against potential human errors (like overestimating your inventory needs).
How exactly? By outlining what to order, how much, and where to send that inventory so you only invest in stock that will turn a profit.
Cogsy houses all your important vendor need-to-knows (like contact info and contracts) in one place.
Work with multiple vendors? Coordinate your preferred vendors to clarify who provides what SKU.
Every time you add items to your purchase orders, Cogsy will use these preferences to auto-fill the corresponding supplier information. That way, you always place orders with your most reliable supply chain partners.
Managing multiple purchase orders is… a lot. Luckily, with Cogsy, you can add multiple shipments to one PO. That way, you can procure all the inventory you need while placing fewer POs.
Even better, you’ll get a bird’s eye view of where all your open purchase orders currently stand, from draft to delivery. So, you know what inventory is on its way and where it’s at.
Monitor stock levels, track replenishment needs, and forecast demand holistically or for an individual warehouse. So, you can stock up accordingly.
Cogsy’ll even recommend when it’s more cost-effective to transfer inventory from one location to another – rather than place another PO. That way, you can easily keep all your distribution centers (even your FBA fulfillment facilities) optimally stocked.
Best part? Cogsy tracks your in-transit stock in real-time. So, you’ll always know where your inventory is – even when it’s traveling to, from, or between locations.
Are you an Amazon merchant looking for a better way to manage your POs? Try Cogsy free for 14 days!
Yes, Amazon accepts purchase orders from businesses that use their platform. Any retailer with an Amazon account can create and submit purchase orders rather than procuring inventory from a traditional vendor.
Typically, yes — your normal PO process will also work for Amazon. However, if you use Amazon’s fulfillment services, you’ll want to factor in your Amazon restock limits to avoid overage fees.
Amazon restock limits are the maximum number of units a Fulfilled by Amazon (FBA) seller can have at an Amazon warehouse at a given time.
Even though Amazon has nearly 200 fulfillment centers worldwide, they don’t have limitless storage space to offer. Restock limits help ensure that whatever products you send to Amazon are likely to sell rather than sitting around and turning into dead stock.