Serial Entrepreneur and Dragon Kevin O'Leary talks about his dollars like they are "little soldiers". Every day he sends them out there into the world and expects them to come back every time with more.
Lee Iacocca famously said that he knows he used to over spent double on his marketing. The trick is to figure out which half to cut.
When you spend money on inventory, that doesn't make you money until it sells. If you could take your limited cash and divide it among more opportunities, you are increasing your chances that you can get your army of dollars back more often so they can get back into the fight more frequently.
The principle is the same as compounding interest. The more often you get that money back in your bank to spend on new stock, the more frequently that money can get back out there and earn. Instead of spending a lot on a few SKUs, spend the right amount on many SKUs.
The very first time our founder ran this report and compared it to an purchase order he assembled based on his "gut feel, experience and manual calculations", he saved $2000 off that order and put it into something else.
Forget BSR. Theory and reality aren't always the same. The whole point of the Demand Estimator is to look at your actual sales, not some pretend numbers based on BSR, and give you a real-world estimate on estimated forecasted demand in the future for a given time frame.
- Enter how far back you want to consider for your sales (lets you fine tune to include or exclude periods of time like Q4 which can affect your estimates big time).
- Enter the number of days for the entire life cycle, and how many days of stock you want to keep in FBA.
- The Demand Estimator will calculate the number of units you need to buy, and factors in your current inventory levels and you can specify the maximum quantity per SKU.
- From that, you have an estimate of how many units you need to buy for each SKU.
How to use this screen:
- Type in the individual inputs into the appropriate spots.
- Click the Refresh button to generate the data. (You need to do this again if you change the Display Currency at the top of the screen).
- Click the Export to Excel button to generate an export in Microsoft XLSX format for you and your team to work from.
Let's look at the individual inputs:
- Number of Days History. Starting from today, how many days back do you want to look back. Say it's March, you may want to only enter 60 days to exclude December because Q4 sales aren't the same as Q2 sales. Generally speaking, the larger the time frame the better the detail. The default is 60, which is a pretty decent time frame.
- Minimum Order Quantity. This is the minimum quantity the system will show. This actually has a two-fold functionality:
- First, entering a number higher than 1 means the report will filter anything out that is less than this minimum order quantity. Maybe you only care about 6 or more for case packs.
- Second, if you enter 0, a lot more SKUs will show up. This is because at this point it stops considering your current on hand inventory and shows you the estimated demand even if you have enough inventory on hand.
- ASIN Inventory Limit. This is a single value that applies to all SKUs. At the time we programmed this functionality, a lot of COVID-19 related restrictions were hitting Amazon.ca and many ASINs were restricted to 200 units, then less and less and less until it was like 30 units max. This setting applies to all SKUs, even if you have some SKUs that you can send more than this number in. Down the line we are thinking about making this a Per-SKU setting instead.
- Procurement Cycle Days. This is the number of days between when you submit your order and when you can take receipt of those goods. Today is day 0, tomorrow is day 1, and so on. The default is 10 days.
- Prep Cycle Days. Once you receive your goods, you need to prep and pack it for Amazon FBA. This is the typical number of days it takes you or your prep company to process the goods and get them into the hands of a courier.
- Delivery to Amazon. Enter the typical number of days it takes for the courier to get the products from where they were prepped, to the Amazon FBA FC. From here in Victoria, BC to Ontario, that's usually 7 days, but from a prep centre in Ontario, it's usually next day. The default here is 2 days.
- Receiving at Amazon. Our BFFs at Amazon fulfilment centres tend to take some time to receive your products. In this field, enter the number of days it typically takes AFTER the courier delivers the goods, to when the majority of the goods are received and done going through FBA warehouse transfers. The default is 5 days.
- Total Lead Time. This is a calculated field that summarizes the total number of days it takes from the day you issue an order to when your goods are mostly for sale in Amazon FBA. This adds he number of days from the Procurement Cycle Days, Prep Cycle Days, and Receiving at Amazon.
- Desired Days of Coverage. In addition to your Total Lead Time (getting your products to market), this is the number of days you want to have available for sale in Amazon FBA.
The outputs include:
- Seller SKU. This is your Stock SKU number.
- Product Title. This is your Stock SKU product title as you have it entered on the Inventory Management screen.
- Total Units Sold. This is the total number of units sold in all marketplaces.
- Total Sales. This is the total sales as expressed in the currency of the Display Currency on the top of the screen. Because this take a long time to calculate, it won't automatically refresh when you change the Display Currency. To switch currencies, you first need to select the new Display Currency and then click the Refresh button again.
- Est. Demand. This the arbinon.com forecasted number of single units you are estimated to need to cover sales during the period of time in the Total Lead Time plus Desired Days of Coverage.
- Stock on Hand. This is the Available Balance of stock you have on hand for that SKU.
- Days of Stock. This is a calculation of how many days of inventory you have left based on your sales in the past Number of Days History time frame.
- Seller SKU Units. Each of your Stock Units has a Packaging Unit selection that determines how many units are packaged together, so that if you order dozen case packs but sell singles, you would see the Dozen shown as a 12 here.
- Order This Many. This calculation determines how many units you need, subtracts how many you have on stack, and caps that amount at the ASIN Inventory Limit. From that this field shows the number of units you need to order based on your supplier's order quantity.