Are Amazon's New FBA Capacity Limits Really Simplified?
Amazon is introducing new "simplified" FBA capacity limits, replacing the previous weekly restock limit and quarterly storage limit with a single monthly capacity limit per storage type, effective March 1, 2023.
Amazon_News
Effective March 1, 2023, we're replacing the weekly restock limit and quarterly storage limit with a single monthly capacity limit per storage type to give you more predictability and control over your inventory.
Based on your feedback, this new capacity management system will provide the following improvements:
- A single, month-long FBA capacity limit. You've told us that having weekly restock limits can make it difficult for you to plan how much inventory to procure and manufacture and that navigating two sets of limits that are measured differently, storage limits and restock limits, can be confusing. FBA capacity limits will resolve these pain points by offering a single monthly limit to determine how much inventory you can send to and store at Amazon. Capacity limits for the upcoming month will be announced in the third full week of each month via the Capacity Monitor in Seller Central and an email notification. To learn more, go to FBA capacity limits.
- Estimated capacity limits to help you plan three months in advance. In addition to your upcoming monthly capacity limit, we'll provide estimated limits for the following two months to help you plan. Estimates may vary up or down based on how efficiently you are using capacity, as measured by your Inventory Performance Index (IPI) score, and how much space and labor we have available to support you.
- The opportunity to request a higher limit. With our new Capacity Manager, you can request additional capacity based on a reservation fee that you specify. Requests are granted objectively, starting with the highest reservation fee per cubic foot until all capacity available under this program has been allocated. When your request is granted, the reservation fee is offset by performance credits that you earn from the sales you generate using the extra capacity. Performance credits are designed to offset up to 100% of your reservation fee, so you don't pay for the capacity as long as your products sell through. Our goal is to provide you with more control over how much space you can have while limiting unproductive use. We've piloted this feature with certain US sellers, and we're excited to expand it so all sellers can request higher FBA capacity limits. To learn more, go to Capacity Manager.
- FBA capacity limits in volume (vs. units) to better reflect your capacity usage. We'll set capacity limits and measure your inventory usage by volume, which better represents the capacity that your products use. We know many sellers prefer to plan in units, so we'll continue to show inventory usage in units and provide an estimate of how many units your capacity limits permit. Like restock limits today, capacity limits consider inventory that is on-hand in Amazon's fulfillment centers and shipments you’ve created that have not yet arrived.
Like storage limits today, overage fees will apply if your on-hand inventory in Amazon's fulfillment centers, not including open shipments, exceeds your capacity limit. Overage fees are calculated based on the highest estimated or confirmed limit that we provided for the given period. Overage fees help prevent excessive inventory levels and shouldn't affect sellers who maintain healthy inventory levels. To learn more, go to FBA inventory storage overage fees.
Your FBA capacity limit is influenced by your IPI score, as well as other factors such as sales forecasts for your ASINs, shipment lead time, and fulfillment center capacity. You can view your capacity limit that will take effect on March 1, as well as your estimated limits, in the FBA dashboard.
Marketplace Pulse took a deep dive into the new capacity limits and found it may not be so simple after all.
Joe
Now, Amazon will allow sellers to go beyond the allocated warehouse space by bidding for more. “If you have FBA capacity limits but could use more capacity for products that you expect to be popular with customers, you can request an increase to your capacity limits,” read Amazon’s Capacity Manager help page. “In your request, specify the following: How much additional capacity you want for the specified period (up to 20% of your initial limit or 2,000 cubic feet, whichever is greater) and maximum reservation fee that you’d be willing to pay for the extra capacity.”...
...Amazon will allocate extra capacity to sellers with the highest bid first. “Our criteria for granting requests is completely objective. We start with the highest reservation fee and continue in this order until all allocated capacity has been granted. The capacity granted will be available to you for the entire period specified. This additional capacity may also be available to you for up to one month before the requested so you can create shipments to send inventory to Amazon’s fulfillment centers so it can be pre-positioned in our network during the period you requested.”...
...Typically, auctions are solutions for supply and demand mismatch. Uber, famously, charges riders more when there aren’t enough drivers on the road. Amazon’s cloud hosting service, AWS, allows users to bid for unused capacity due to low demand and thus pay less. Here, Amazon will charge more because it itself restricts supply by imposing inventory limits.
These changes will allow sellers to get extra space and thus generate more sales when they can forecast better than Amazon’s limits system. They do give more control back to sellers. However, they add more complexity and will likely lead to sellers losing even more margin to fees.
What do you think of the new monthly Amazon FBA capacity limits? Let us know in the comments below!
