Amazon's Updated Policy for Unfulfillable FBA Inventory (UK, EU)

Amazon has recently announced an update to its FBA inventory management policy, for sellers in the UK and EU, aiming to free up warehouse space and reduce storage costs. 

Let's examine what this means for Amazon sellers and how to prepare for this upcoming change.

The Policy Update: Key Changes

Amazon is adjusting its timeline for managing unfulfillable inventory. Here's what's changing:

Current Policy

Until now, Amazon has given sellers 30 days to either remove or set up an automated removal process for dealing with unfulfillable stock.

Updated Policy

Effective September 16, 2024, this 30-day period will be reduced to 23 days. If you haven’t enabled an automated removal process to handle unfulfillable inventory, Amazon will automatically take action after the 23-day notice period, disposing of or donating the inventory.

How This Helps or Affects Sellers

This policy update is part of Amazon's ongoing efforts to optimize warehouse space and potentially reduce storage fees for sellers. Here’s what it means for you:

1. Adjusted Timeline

You’ll have a slightly shorter window to make decisions about your unfulfillable inventory. To avoid disposal, you can either manually create a removal order or enable automated settings to have your unfulfillable inventory refurbished, relisted as used, liquidated, or returned to a designated address automatically.

If no action is taken within the 23-day window, the inventory will be disposed of, and the disposal order can’t be canceled.

2. Inventory Management

This change encourages more proactive inventory management practices. For example, enabling liquidation allows sellers to recover some value from unsellable products, while removal ensures the items are sent back or disposed of without incurring long-term storage costs.

3. Potential Cost Implications

Faster turnover of unfulfillable inventory could affect storage fees and inventory value.

Impact on Storage Fees

• Better Space Utilization: With a faster turnover, you can ensure that your storage space is used more efficiently for items that are likely to generate revenue. This improves overall inventory management and reduces the cost of storing unproductive stock.
• Avoidance of Long-Term Storage Fees: Amazon charges additional fees for inventory that sits in its fulfillment centers for extended periods. By removing unfulfillable inventory more quickly, you can avoid these long-term storage fees.

Impact on Inventory Value

• Avoiding Additional Damage: Unfulfilled items that are left in storage for too long may suffer further damage or become obsolete, reducing their resale value. By removing these items sooner, you can preserve the value of your inventory and potentially recoup some value through liquidation or returns.
• Avoiding Depreciation: Products that are unsellable for a long time might face price depreciation. Acting quickly allows you to either return them for possible refurbishment or sell them at a discount before their value decreases further.
• Better Cash Flow: Clearing out unfulfillable inventory enables you to reinvest that capital into more productive inventory. This improves cash flow and allows you to invest in more profitable products.

Implementation Timeline

• Announcement Date: September 3, 2024
• Effective Date: September 16, 2024

This timeline gives sellers approximately two weeks to review and adjust their inventory management strategies as needed.

Available Options for Unfulfillable Inventory

Amazon continues to offer sellers several options for handling unfulfillable inventory:

1. Liquidate: Recover some value from your inventory through Amazon's liquidation partners.
2. Refurbishment: Consider using refurbishment services to restore eligible unsellable inventory for resale. To learn more, visit the FBA Repackaging and Refurbishment Services page for detailed information.
3. Grade and Resell: Automatically grade and relist enrolled ASINs as "Used" through the Grade and Resell program. To learn more about this option, visit the FBA Grade and Resell page for additional details.
4. Return: Have your inventory sent back to your return address or a third-party freight forwarder.
5. Dispose: Allow Amazon to dispose of or donate the inventory.

Each option has its considerations, and the best choice will depend on your specific business needs and the nature of your products.

Proactive Inventory Management

To effectively manage your unfulfillable inventory under this updated policy, Amazon recommends the following:

1. Manual Removal Orders: Actively manage your unfulfillable inventory by creating removal orders as needed.
2. Automated Settings: Configure automated rules, such as liquidate, refurbishment, Grade and Resell, remove, or dispose, for handling unfulfillable inventory to ensure consistent management.
3. Improve Packaging to Reduce Unsellable Inventory: It may be beneficial to collaborate with your inspection company and suppliers if you are experiencing a high rate of unfulfillable products. This issue could stem from inadequate packaging, either at the product level or with the shipping cartons themselves.
4. Investigate 3PL Handling Issues: It’s also worth investigating whether unfulfillable inventory is linked to issues within your 3PL provider’s handling, though this is less likely. Many 3PL companies take extensive precautions to protect your products from damage and theft, helping to minimize unfulfillable inventory. They often offer clients transparent reporting and advanced technology, providing better control over inventory levels and reducing the risk of inventory shrinkage.

Amazon's Sustainability Efforts

Amazon emphasizes its commitment to sustainability in the EU market. When a disposal order is created, Amazon pledges to donate or recycle as much as possible, aligning with circular economy principles.

For more information on Amazon's sustainability initiatives, visit their official sustainability page.

Recommended Actions for Sellers

1. Review Current Settings: Check your automated unfulfillable settings in Seller Central.
2. Assess Your Strategy: Evaluate whether to liquidate, return, or allow disposal for different types of inventory.
3. Conduct Regular Inventory Status Checks: Catch inventory issues early by regularly reviewing Amazon’s disposal order emails and the Inventory Adjustment Report in your Seller Account. Amazon also frequently sends removal order notifications, often under the subject line “Required removals: First notification” or “Automated unfulfillable removal notification,” so keeping a close eye on these communications will help you avoid potential complications.
4. Consider Automation: Explore setting up automated rules for handling unfulfillable inventory if you haven't already.
5. Refine Inventory Planning: Take advantage of this policy update to improve your inventory management approach. If you haven’t already, consider working closely with your suppliers to address packaging issues and reduce the occurrence of unfulfillable products. Additionally, assess your 3PL provider’s handling procedures to help mitigate damage and ensure tighter control over your inventory.

Potential Effects on FBA Operations

Here’s a breakdown of how the updated unfulfillable inventory policy might impact your FBA operations:

Increased Frequency of Inventory Removal

• The policy now requires removal of unfulfillable inventory within 23 days, shortened from the previous 30 days. You should anticipate more frequent handling of your unfulfilled inventory, regardless of its destination. This could lead to higher labor costs, depending on how the 3PL charges for these tasks.
• Both removal and disposal requests come with fees, which can add up if you frequently experience unfulfillable inventory due to damage, spoilage, or defect.

Enhanced Transparency and Reporting Needs

• Improved reporting and tracking systems might be required to stay on top of inventory statuses. Sellers may benefit from using inventory management systems like SoStocked that have a metric that allows you to track pending removals.
• You may also want to team up with SellerAssist by Carbon6 to help you navigate Amazon’s policy updates and optimize your FBA strategy. Our team of Amazon experts can help you:
  • Fine-tune your inventory management processes
  • Set up effective automated rules for unfulfillable inventory
  • Analyze the impact of policy changes on your business
  • Develop strategies to optimize costs and maximize efficiency

Stay ahead of policy changes and keep your Amazon business thriving with expert support.

Inventory Management Focus

• Enhance your inventory planning approach to minimize unfulfillable products. This involves improving packaging and collaborating with your suppliers or inventory inspection service providers to address issues at the source.

Increased Monitoring of Inventory Handling

• The adjusted timeline may encourage more frequent inventory status reviews. In addition, you may need to work with your 3PL to review and possibly adjust their handling practices to ensure they always take precautions to avoid damage and theft.