As an Amazon seller, are you afraid to hear about Amazon’s new policy? Any changes that Amazon makes to its business procedures could affect Amazon sellers a great deal.
This year Amazon is introducing a new capacity management policy. Its main intent is to merge Amazon restock limits and storage limits into FBA capacity limits.
This new policy took effect on March 1, 2023, and will have some impact on Amazon sellers. This blog is meant to introduce this new policy, and analyze how this policy will ultimately affect Amazon sellers.
Contents
What is Amazon New Capacity Management System
As stated earlier, Amazon is implementing a new capacity management system. As an Amazon seller, you should be as informed about these changes as possible. Here are some of their key features that you should take into account.
Single month-long FBA capacity limit
A key issue for most Amazon sellers is the weekly restock limits. This makes it difficult for sellers to estimate how much inventory is needed to procure and manufacture. With the new FBA capacity limits, you will be able to resolve these issues.
The new capacity management system offers a single monthly limit to determine how much inventory sellers can send to Amazon and store at Amazon. This makes the whole process easier.
The opportunity to request a higher limit
Amazon’s new feature will allow sellers to request additional capacity. This request is based on a specific reservation fee. You should take into account that these requests are objectively granted.
These conditions usually start with the highest reservation fee per cubic feet. This will continue until all the capacity under this program has been given out.
Should additional capacity be granted, a seller could offset reservation fees by earning performance credits from sales that they earned with the use of the extra capacity.
Estimated capacity limits to help sellers plan three months in advance
Aside from a capacity limit for an oncoming month, Amazon also provides the limits for the next two months. This will ultimately help sellers plan their product’s transport in advance. This feature will also show how much space and labor is expected for the estimated services.
FBA capacity limits in volume to better reflect capacity usage
Amazon will set capacity limits in volume. This will also include the measurement of seller’s inventory usage. This will better represent the capacity that seller’s products use. While some sellers prefer to plan in units, Amazon has taken this into account as well. The company will still show inventory in units and provide estimates on how many units are in a seller’s capacity limit permit.
FBA Capacity Limits V.S FBA Restock Limits & FBA Storage Limits
As stated earlier, Amazon will be releasing a new storage management service. What are the differences between the new policy and the old one? Let’s take a look at their key differences.
FBA Capacity Limits
As an Amazon seller, it is imperative that you know the new FBA capacity limits. This is because these changes could affect your business in the long run.
These changes will directly affect all Amazon sellers and took effect on March 1st, 2023. Amazon sellers’ shipments will be measured by volume, and Whether it is in-stock inventory or in-transit inventory, it will take up your stock capacity. Checks will be done every month.
If your shipment is over the limit, Amazon has the right to charge you an excess storage fee, and you need to pay the fee. Meanwhile, you can’t set up a new shipping plan.
As an Amazon seller, you must want to know what will affect FBA capacity limits:
- Historical and projected sales
- The time of shipment arrived in the Amazon warehouse
- IPI score
- The Amazon warehouse’s ability to accept and store inventory
IPI score is also an important factor that will affect your FBA capacity limits. According to old Amazon guidelines, it will implement storage volume limits with an IPI lower than 400. Even if a 400 score is no longer a threshold for FBA capacity limits, you still need to improve your IPI to increase capacity.
FBA Restock Limits & FBA Storage Limits
Before the new FBA capacity limit took place on March 1, 2023, Amazon utilized the old capacity management system, which includes FBA restock limits and FBA storage limits.
The FBA restock limits are meant for all Amazon sellers, while the FBA storage limits are directed at sellers with low IPI.
As for FBA storage limits, should a seller suffer from low IPI, Amazon has the right to restrict and assign higher storage fees. If the seller gets an IpI that is lower than 400, Amazon will then impose inventory limits
When it comes to metrics, Amazon utilizes quantity for FBA restock limits, and volume for FBA storage limits. If a seller wants to calculate FBA restock limits, the seller should calculate both the transit inventory and the in stock inventory. FBA storage limits on the other hand merely calculates the in stock inventory.
Amazon checks these limits at a specific time. FBA restock limits are checked on a weekly basis. FBA storage limits are checked every quarter.
If the seller’s inventory is over the limit, the penalty differs for both FBA restock limits, and FBA storage limits. Should a seller violate FBA restock limits, the seller will be prohibited from setting up a shipping plan.
On the other hand, should a seller violate FBA storage limits, the seller will also not be able to set up a shipping plan. The seller will also be charged an excess storage fee.
The Differences Between FBA Capacity Limits and FBA Restock Limits & FBA Storage Limits
With Amazon’s new storage capacity management policy, Amazon sellers will need to be more aware of these changes because they will inevitably affect how sellers conduct their business. Here are the key differences between FBA capacity limits which took effect on March 1, 2023 and the FBA restock limits & FBA storage limits.
| New Amazon capacity management system (FBA capacity limits) | Old Amazon capacity management system (FBA restock limits) | Old Amazon capacity management system (FBA storage limits) | |
| Suitable for | All Amazon sellers | All Amazon sellers | Low IPI: Amazon can restrict inventory storage and assign higher storage fees. If IPI is lower than 400, you will get inventory limits |
| Metrics | Volume | Quantity | Volume |
| Calculate | In transit inventory + in stock inventory | In transit inventory + in stock inventory | In stock inventory |
| Frequency | Every month | Every week | Every quarter |
| Over the limits | If it exceeds the limit, Amazon will charge an excess storage fee and Amazon sellers can’t set up shipping plan. | Amazon sellers can’t set up shipping plan | If it exceeds the limit, Amazon will charge an excess storage fee and Amazon sellers can’t set up shipping plan. |
| Effects Factors | Historical and projected sales; the time of shipment arrived in Amazon warehouse; IPI score; The Amazon warehouse’s ability to accept and store inventory | Historical and projected sales; the time of shipment arrived in Amazon warehouse; IPI score; The Amazon warehouse’s ability to accept inventory | Historical and projected sales; Amazon warehouse’s ability to store inventory;IPI score |
How Amazon New Restock Limits Affect Amazon Sellers
As Amazon releases its new capacity management policy there will be some changes in how Amazon does things. As an Amazon seller, you should be aware of these changes. Here are some key effects that Amazon sellers should be aware of.
Have More Control But Need to Pay More Money
Amazon sellers can request additional capacity, which brings more control to their Amazon business. However, they will need to bid for additional capacity, and maybe even need to pay more money.
According to new FBA capacity limit rules, Amazon will allow sellers to go beyond the allocated warehouse space by bidding them for more, even if Amazon doesn’t recognize it is bidding. Amazon will allocate the extra capacity to the highest bid first. This prompts all the Amazon sellers to spend more money in order to increase their capacity limits.
For additional capacity, you could request up to 20% of your initial limit or 2,000 cubic feet, or at least whichever is greater.
When it comes to allocating extra capacity to sellers, Amazon follows a set system. Amazon will usually start with the highest reservation fee, and will continue in this order until all allocated capacity has been granted.
Please take note, if there are too many sellers applying for additional capacity, and Amazon’s inventory capacity is insufficient, some sellers with low bids will fail to apply.
Harder to Calculate How many Items to Send Amazon
As an Amazon seller you should be aware that the new changes in policy could really affect how you conduct your business. This is especially true when it comes to calculating how many items to send to Amazon. Things could get really complex in the long run.
For example, in March, you can send 1000 items to Amazon, but your shipments don’t arrive at the Amazon warehouse in March. In April, Amazon reassessed your capacity limits, you can only send 900 items to Amazon in this month. Therefore, your all shipments can’t be received by Amazon.
FAQ about FBA Capacity Limits
Now that you know about the key aspects of the new Amazon capacity management system, you will at least be more informed. However, there are also some lesser known facts about the new policy that you should know about. Here are seven facts that you should be aware of.
How to Find FBA Capacity Limits on Amazon
If you want to find the FBA capacity limits for Amazon, you should know how to use the capacity monitor tool. This will allow you to keep tabs of the FBA capacity limit.
- Open the FBA sellers central
- Open either the Inventory performance page or the sent to Amazon page.
- Open the main menu, in the seller’s central, hover over inventory then click dashboard FBA inventory or inventory planning.
- Go to the top menu of the FBA dashboard, hover over inventory then click inventory performance.
- To view more details, you should click the FBA capacity monitor. Through this view, you’ll be given access to different storage types, current capacity usage, and the estimated limits for the next three months.
- You will be given seven storage options which are standard size, oversize, extra-large, apparel, footwear, aerosol or flammable.
- On the lower left corner of the tool, you will be shown a chart that shows your current capacity usage, which shows how many shipments are open and how many are on hand.
- The table to the right will show the limits for the next three months. This will include the total capacity limit, initial FBA capacity limit and any additional capacity given by the capacity manager.
How to Request Additional Capacity
If your shipment requires additional capacity, the process is relatively easy. Just follow these key steps.
Step 1: Request additional capacity
- You should notify Amazon of the exact size of the warehouse capacity that you want to increase.
- Fill up the fees you should pay for the additional capacity.
- Please be reminded that sellers are allowed to submit up to 5 applications per month. Which is up to 20% of the initial capacity limit or 2,000 feet per month. This usually depends on which one is greater.
Step 2: You will be sent an Amazon notification on whether your application has been approved.
- Please be aware that approvals take around three to four days.
- When it comes to approvals, this will usually depend on the number of sellers that apply for additional inventory. If there is insufficient warehouse space, and a large number of applicants, priority will be given to the highest bidders for additional capacity.
Step 3: After you get approval for the additional capacity, you can then pay for it.
Is IPI 400 still an important threshold
Not really, IPI could no longer be considered a necessary threshold. However, it is still an important factor that will inevitably affect your stock limits.
That being said, as an Amazon seller, you will need to improve your IPI score limit. Here are some ways to do so.
- Sell or reduce your inventory size
If you are overstocked with supplies, you should sell or reduce your inventory. Remember that excess inventory is based on what you need to restock, on a 90-day period.
Anything over that limit will be considered excess inventory. There are some ways you could increase your chances of selling or reducing your inventory size. You could lower your prices, liquidate, and aggressively advertise.
- Improve your sell-through rate
You should take into account that the FBA sell-through rate also follows a 90-day metric. Your sale-through rate is determined based on the number of units sold and by what you have in your storage over that same 90-day period.
When it comes to improving your sell-through rate, you will need to find a balance between having a 0 sell-through rate, and 100. Overall, you want your sell-through rate to be as high as possible, without actually running out of stock on your inventory.
- Stay in stock
When it comes to IPI scores, Amazon looks at the number of days you were in stock at FBA over the past 30 days. They do so to determine your FBA in-stock rate. Please take note that this will only apply to replenishable products.
Can Dangerous Goods Request Additional Capacity By Capacity Manager
No. You cannot request additional capacity for dangerous goods. Here are some dangerous goods to take note of.
They are lithium batteries and magnetized materials. Lithium batteries include power banks, battery chargers, and cameras.
Magnetized materials include speakers, headphones , light meters, magnetic decals, small tools and toys.
- Toxic substances
- Corrosive substances
- Oxidizers
- Organic peroxides
- Flammable solids
Can Each European Site Request Additional Capacity Five Times A Month
No, European sites count as one site. This counts in countries such as France, Germany, Italy, The Netherlands, Spain, Sweden, and Poland. This is with the exception of the UK. Due to Brexit, the UK was counted as a site of its own, and can request its own additional capacity five times a month.
Can I Request Inventory Additional Capacity for May in March
Yes, according to new policies Amazon sellers have the option to apply for additional capacity for any month in the next three months. Sellers could also submit up to five applications per month.
How Much Difference Will There Be Between The Estimated Capacity Limits and The Actual Capacity Limits
If you are wondering if there will be any difference between the estimated capacity limits and the actual capacity limits, Amazon’s claim is that there will be little difference.
However, you should remember that months may differ in sales volume, especially during the holiday season. There is also the 2-3 month inventory forecast that could change policies if Amazon experiences space or labor shortages in the long run.
Conclusion
On March 1 2023, Amazon implemented a new rule on their restock limits. These FBA capacity limits will most likely affect a good number of Amazon sellers. Inventory management will most likely become more difficult. If you have any questions about capacity limits, our professional team will help you solve capacity limits and make your business run smoother.