Manage Your Amazon Purchase Orders with Demand Forecasting
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The document provides an overview of demand forecasting for managing Amazon purchase orders, detailing key factors that impact purchase quantities, such as product cost, vendor lead time, and stock availability. It outlines the importance of accurate forecasting, the effects of improper forecasting, and the types and timing of purchase orders, including regular and reactive orders. Additionally, it discusses the new Amazon probability level forecast and strategic suggestions for vendors to enhance their sales and inventory management.
Manage Your Amazon Purchase Orders with Demand Forecasting
- 1. Successfully Manage Your Amazon Purchase Orders Using the New Probability Demand Forecasting
- 2. Today’s Logistics ● Session Recording & Slides Will Be Sent Out ● Submit Questions to Our Panelists ● Resources Available as Handouts ● Join in the Poll Question! Analicia Santaella Webinar Coordinator
- 3. Overview Founded in 2007 Google Premier Partner 400+ Active Retail Clients Top 50 Fastest Growing Company San Diego D E L I V E R I N G L A S T I N G R E S U L T S F O R O U R C L I E N T S Solutions Retail-focused PPC & Shopping Amazon Sales Acceleration Facebook Performance Marketing Creative Services About CPC Strategy
- 4. Today’s Speaker Eric Kauss Manager, Vendor Operations
- 5. Today’s Agenda ● Introduction to Demand Forecasting ● Adverse Effects of Improper Forecasting ● Applicable Practices to Efficiently Prepare for Amazon POs ● Effectively Using the Forecasting Tool to enhance your AMS/AMG efforts
- 6. Introduction to & Importance of Demand Forecasting
- 7. Why Proper Demand Forecasting Is Crucial Expanding Product Offering Content + Product Setup Amazon Operational Efficiency Purchase Order Management Warehouse Efficiencies Advertising / Marketing Efforts Increased Sales Growth
- 8. Product Cost to Amazon (Vendor-Controlled) • Product Cost will inversely affect purchase quantity due impact on Amazon profitability • Amazon’s selection works in their favor • Amazon will also allow a 3P Reseller to win the Buy Box based on profitability Vendor Lead Time – VLT (Vendor-Controlled) Order Types - MOQ, Pallet Size, Refrigeration, etc. (Vendor-Controlled) MOQ (Minimum Order Quantity), pallet sizes, freight cost, refrigeration requirements etc. will impact the quantity & frequency they want to purchase from you as well as the freight costs related to each type. Product Sourcing (Amazon-Controlled; Vendor-Influenced) Can Amazon procure this item from other sources, such as other distributors or retailers you might be selling to? Amazon Profitability (Amazon-Controlled) All of the factors above affect profitability of the product & profitability of your offer relative to other distributors. Demand Forecast - Direct Factors
- 9. • Product Cost to Amazon (Vendor-Controlled) • Vendor Lead Time – VLT (Vendor-Controlled) • Order Types - MOQ, Pallet Size, Refrigeration, etc. (Vendor-Controlled) • Product Sourcing (Amazon-Controlled; Vendor-Influenced) • Amazon Profitability (Amazon-Controlled) Demand Forecast - Direct Factors
- 10. Traffic to ASIN’s Page (Vendor Controlled) Driving traffic back to a detail page sends a positive signal to Amazon that demand for the product is increasing, which their forecast accounts. This includes driving traffic through Amazon advertising (AMS / AMG), as well as external sources (Google, Facebook, Influencers, etc.). Promotions (Vendor Controlled) Promotions should be input at least 4 weeks in advance for Amazon’s Forecast to account for them. Vendor Lead Time (VLT) is an important factor here and should be used to make promotion is in place well ahead of time. Stock Availability (Vendor Controlled) A product’s historical in-stock rate will impact Amazon’s confidence in being in-stock in the future. Product Setup (Vendor Controlled) Providing accurate, detailed information during NIS (New Item Setup) allows Amazon to match your product to similar items, and use current demand / sales from those similar items to estimate demand / sales for your product as soon as it’s launched. Sales Price (Amazon Controlled) Demand Forecast - Indirect Factors
- 11. • Traffic to ASIN’s Page (Vendor Controlled) • Promotions (Vendor Controlled) • Stock Availability (Vendor Controlled) • Product Setup (Vendor Controlled) • Sales Price (Amazon Controlled) Demand Forecast - Indirect Factors
- 12. Sales Performance History Amazon’s Demand Forecast is most closely tied to this metric - they want to accurately predict how many units of a product customers will buy in the future. Past performance influences future demand. Seasonality For items that are seasonal in nature, be sure have inventory on hand to meet demand 2-6 weeks prior to when you feel sales will begin to accelerate. This will allow Amazon to analyze your VLT (Vendor Lead Time), compare the forecasts, and input historical data which should lead to PO being issued prior to sales accelerating. Demand Forecast - Market Factors
- 13. Indirect Market Factors - • Sales Performance History • Seasonality Demand Forecast - Market Factors Market Factors
- 14. Types and Timing of Purchase Orders Regular Purchase Order Run Amazon for most categories issues purchase orders on late Sunday evening or early Monday morning. The quantities ordered are based on the demand that is being created and your level of acceptance to the orders received the previous week. Reactive Purchase Orders Amazon continues to read demand on a daily basis and if a significant enough change has occurred to warrant additional purchase orders being issued, they will do so, usually on Wednesday or Thursday. For some vendors with high velocity asins, issuance of a second group of purchase orders within a week is an ongoing process.
- 15. Regular Purchase Order Run • Amazon for most categories issues purchase orders on late Sunday evening or early Monday morning. The quantities ordered are based on the demand that is being created and your level of acceptance to the orders received the previous week. Types and Timing of Purchase Orders Reactive Purchase Orders • Amazon continues to read demand on a daily basis and if a significant enough change has occurred to warrant additional purchase orders being issued, they will do so, usually on Wednesday or Thursday. For some vendors with high velocity asins, issuance of a second group of purchase orders within a week is an ongoing process.
- 16. Navigating Amazon’s Probability Level & Demand Forecast
- 17. Understanding the New Amazon Probability Level (P-Level) Demand Forecast ● Forecast is a rolling 26 week estimate as close as possible to actual customer demand ● Presented in different probability levels giving vendors a choice of how to stock inventory based on risk tolerance ● No longer calculates safety stock into demand ● Continues to use Vendor Lead-Time (VLT) for the calculation of actual purchase order quantities per week ● Does not represent a purchase order forecast
- 18. Interpreting Amazon’s Probability Forecast P70 P80 P90 70% Amazon will purchase the level of demand indicated or less 30% Amazon will purchase more 80% Amazon will purchase the level of demand indicated or less 20% Amazon will purchase more 90% Amazon will purchase the level of demand indicated or less 10% Amazon will purchase more Mean For vendors that need more lead-time to acquire inventory ● 6 weeks or longer ● Key for vendors who manufacturer overseas
- 19. Forecast and Inventory Planning
- 20. Analyzing Self-Service Data & Its Impact on Amazon’s Demand Forecasting
- 21. Key Metrics Impacting Demand Traffic Diagnostic Report ● Fast Track Glance View Rate - Percentage of time an asin is in stock when a glance view (impression) occurred. Goal is to be above 85% ● Percentage of Total Glance Views - At the asin level the percentage of total glance views an asin received for a given period ● Changes in Glance Views (prior period) - Increase or decrease in glance views to the prior period, showing either impact of AMS campaigns or need for Sales Diagnostic Report ● Rep OOS (out of stock) - percentage of time when a customer visits a detail page an the item is not in stock ● Percentage of Shipped COGS - At the asin level the percentage of total shipped COGS for an asin in a given period ● Lost Buy Box - percentage of time when a sales is lost to 3rd party due to price
- 22. Key Metric Traffic Diagnostic
- 23. Key Metric Sales Diagnostic
- 24. ● PO On-Time Accuracy - Percentage of the time a purchase order did not ship on time which causes late delivery and missed sales. Target is below 10% ● Rejected PO Rate - Percentage of rejected asins by the vendor at their discretion. If above 20% for the specific asin over the last 13 weeks a chargeback occurs ● Prep Issues - Product not prepared correctly for immediate shipping capabilities. Target is below 5% ● ASN Accuracy - Percentage of Advance Ship Notices with errors. Target is below 5% Operational Metrics Impacting Demand
- 25. Adverse Effects of Inefficient Demand Forecasting
- 26. True Cost of Stocking Out Lost sales when product is out of stock Loss in organic ranking (result of lost sales velocity) Re-investment in resources to recover ranking True cost of stock outs on Amazon
- 27. Adverse Impact on Marketing Campaigns
- 28. Adverse Impact on Marketing and Profitability
- 29. Potential Actions to Protect Sales
- 30. Purchase Order Vs. Demand Tracking 1. The demand forecast has the previous 13 weeks sales. Compare these to actual purchase orders received for reference point on Amazon ordering patterns 2. Vendor can also begin tracking the demand vs. purchase orders on a weekly basis to verify what level Amazon is purchasing. It is suggested this data be looked at over a two to three-month window for accuracy. 3. Not all asins are the same. One potential strategy is to divide to divide your catalog into top-tier, mid-tier and other to have inventory available for the most critical asins as well identifying asins you are willing to take a risk. 4. Amazon is still expecting a 100% confirmation rate as well on-time shipping accuracy. Under purchasing to demand could potentially impact both areas and create chargebacks if not handled correctly. Strategic Suggestions in Using the Forecast
- 31. Advantages Direct Fulfillment/Dropship 1. Vendor’s inventory acts as a backup for when Amazon is out of stock 2. Ability to expose a vendor’s entire catalog to the Amazon customer 3. Build demand for new products a quicker pace – Historically Amazon will order minimal quantities of new items until demand dictates to order more. By having direct fulfillment backup, if glance views occur as well as actual transactions, demand will build quicker for warehouse orders. 4. Protect Sales – By having direct fulfillment in place a vendor’s products will continue to be available for purchase if Amazon runs out of inventory. This is can occur during high sales velocity periods like holiday as well as during new product launches. Back Up Planning: Direct Fulfillment / Drop-Ship
- 32. A Vendor can potentially increase sales in a safe and possibly more profitable way by using a hybrid approach, which allows sales to occur through both the Vendor Central and Seller Central platforms. The Amazon Hybrid Strategy Allows a Vendor to: • Keep up with demand and avoid inventory stockouts • Access to better product & pricing control • Flexibility you wouldn’t get otherwise as a Vendor-only • Use either 3rd party direct shipping or FBA • New product launches when Amazon 1P does not purchase enough inventory to support a new item Hybrid Approach to Selling on Amazon
- 33. SMALL TEXT STACK TEXT ROW 1 STACK TEXT ROW 2 Schedule Your 1-1 Amazon Strategy Evaluation CPC Strategy’s Amazon Strategy Evaluation is a comprehensive 60-minute analysis and assessment of your Amazon Vendor Central account, advertising programs, product order volume, and profitability metrics. http://bit.ly/AMZ-Demand-Forecast What Now?
- 34. Questions for Today’s Speaker? Eric Kauss Manager, Vendor Operations