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Never go out of stock (OOS) - Some useful advice on inventory management for Amazon businesses

Kennedell Amoo-Gottfried
June 7, 2022
September 16, 2022
Never go out of stock

Very few things are worse for an Amazon seller than to be in peak season with customer demand white hot for a specific product, only to not be able to fulfill it and capitalize on that sale because the item is out of stock. 

While the exact amount of revenue you can miss out on can vary depending on a number of factors - including margins, shipping costs, delivery time, etc. - there is no doubt that you are leaving money on the table. Not only that, but they will have to look elsewhere, likely with a competitor, where they can potentially explore their catalog instead of yours, and be left with  a sour taste left in their mouth.

You also risk missing out on winning the buy-box, negatively effecting your Inventory Performance Index and getting pushed down on Amazon’s rankings, which will have a longer-term effect on your sales.

This is what can happen if you do not keep a keen eye on your inventory management. The good news is that once you know how, it is quite straightforward to keep things in top shape. 

So how do I avoid OOS?

Track your data

This should go without saying, but you would be surprised how many sellers don’t, or only look at it during peak seasons rather than following the trendlines year-round. 

Obviously, if you don’t have a good enough awareness of how well your products are going, you will be caught by surprise if sales suddenly spike, or at busy holidays season, or you may even end up allocating too many resources to underperforming products at the expense of your real money makers. 

There are plenty of tools out there today that allow you keep track of key performance indicators like the amount of orders you get in through each sales channel to gain a better idea of how often certain items need to be reordered and how many units you need on hand at any given time. 

This is something that should be a regular feature in your operations, not just an occasional business exercise, otherwise you risk seeing isolated spikes or dips in demand as indicative of overall sales volume, which will almost certainly affect how you order stock. 

If you take the average sales you make on a daily basis - easily calculated by taking monthly sales and dividing it by 30 - and multiply it by the amount of time it takes your supplier or vendor to get products to you (lead time), you can find out how much you need to make sure you have in stock for each product.

In simple terms, you can use the following calculation: 

Average daily sales x Lead time = Reorder Quantity (i.e. you need to reorder when you hit this quantity)

Keep in mind that this tends to work mainly for regular times throughout the year, not necessarily during peak holiday season - you would need to look back at historical data to determine your order levels, and you should probably order a bit over that to not lose out on sales.    

You can still plan for a bit of extra headroom throughout the year, however, with some safety stock in case you do come across unexpected spikes in demand that you could not necessarily prepare for, or in case your supplier runs into unexpected issues getting inventory to you and ready to ship. 

The calculation for safety stock is similar to that of reorders, except you subtract the reorder level from your maximum levels as follows: 

(Maximum daily sales x Maximum lead time) - (Average daily sales x Average lead time) = Safety stock. 

Pick your supplier and third-party logistics provider (3PL) well

The people making your products and the people shipping them to your customers are two of the most important relationships you have as an e-commerce business, and you need to make sure you make the right choices according to your needs. 

A good supplier will get inventory to your distribution center on time, and a good 3PL will fulfill orders promptly and even reimburse you if they make mistakes. You can find a list of potential 3PLs here.  

What if I’m about to run out?

If you find yourself in a position where you know you’re getting dangerously close to being out of stock, there are still steps you can take to slow it down. This can sometimes  mean slowing down your sales, but you won’t be faced with not having anything on your shelves: 

  • Hold your promotions: If you’ve got a special deal going on, put it on pause. Getting that sales velocity is not worth stripping your shelves of inventory. Besides, if you’re about to run out of stock anyways, you might as well maximize the revenue from the stock you have. 
  • Production time: Change the production time the buyer sees on the listing so that the buyer expects a few more days until their delivery arrives, giving you time to restock.
  • Temporarily hike prices: Simple supply and demand, if you have the price higher, demand will fall. The obvious drawback here is that customers may assume that the price change is permanent and develop a preference for your competitor. 
  • Flip on Holiday Settings: You can turn on Holiday Settings on seller central, which will hide your listings for three days, giving you time to fulfill existing orders while you get replenished.

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Threecolts acquires, launches, and grows eCommerce software & services, and owns other stellar businesses including Old Street Media, HotShp, SellerBench, Tactical Arbitrage, Bindwise, RefundSniper, ChannelReply, and FeedbackWhiz.

Old Street Media supports businesses with their advertising, inventory management, and other eCommerce services. We collaborate with over 4000 brands and have generated $600M in sales in the past year.

Reach out to HotShp for help with product titles, descriptions, bullet points, social posts, and blog posts.

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If you are more interested in the #1 Amazon Arbitrage software, try TacticalArbitrage. With over 6,000 users, TacticalArbitrage will help you discover profitable products to resell on Amazon.

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RefundSniper is an international Amazon reimbursement service that runs audits on both Vendor Central and Seller Central. Find out how much you are owed by Amazon today.

If you're looking for a way to streamline multi-platform ecommerce support, ChannelReply has you covered. Cut your customer response time in half by having all your customer information in one hub. 

FeedbackWhiz is an Amazon sellers management software that helps merchants scale their business by automating email campaigns, improving seller feedback, getting more product reviews, monitoring listings, and analyzing profit and accounting data.

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