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How to Manage Amazon Overage Fees: Adjust Excess Inventory and Avoid Additional Costs

Updated: Jun 15

How to Manage Amazon Overage Fees

Introduction Amazon's new overage fees for sellers regarding stock are designed to encourage more efficient inventory management and reduce storage costs. It's unusual timing for the e-commerce giant to implement these overage fees, up to 5x the normal storage fees, especially when other major platforms like TikTok Shop, Walmart, Instagram, Facebook, Google, and Bing actively seek to increase their e-commerce market share. This article will explain these fees in detail, provide strategies for sellers to avoid them, and utilize Amazon's inventory management dashboard to optimize their practices. Sellers are facing Amazon's new overage fees, which were implemented in early 2024. To find the breakdown, navigate to Payments > FBA Fees to view the new breakdown. These fees are significantly higher than the normal storage fees, and they present a substantial challenge for sellers who budget based on Amazon's previous fee structure. Amazon offers Amazon Warehousing & Distribution (AWD) as a warehouse storage solution through third-party warehouses rather than FBA centers. However, sellers still incur significant, originally unanticipated costs when moving inventory from FBA centers to Amazon AWD-designated storage facilities. This process could further erode profits for sellers who rely on margins of 30% or less to sustain their business in an already highly competitive environment where every dollar counts.

View FBA inventory overage and storage fee breakdown here information *seller central login required. How do I know if I'm subject to the inventory storage overage fee?

If you have a Professional selling account that’s been active in FBA for more than 39 weeks, you are subject to inventory storage limits. If you’ve exceeded your current limits for a given storage type by the end of the day, for any day in a given month, you’ll be subject to the overage fee. This charge will occur even if your inventory was subsequently reduced to a level below your capacity limits allocated for that month.

Why do I have overage fees when I don't have any excess inventory?

If your inventory at a fulfillment center exceeds your capacity limits for a given month, you'll be charged an inventory storage overage fee. 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. For more information about how capacity limits are determined, go to FBA capacity limits.

These new fees will adversely affect sellers who sent inventory to Amazon FBA centers under the old fee rules. While Amazon will bill already shipped stock under the regular fee rules, additionally sellers are not happy they will add extra never seen before overage fees for every seller. Sellers face an additional challenge when moving inventory out of FBA fulfillment centers to send it to an FBA prep center. This process incurs an extra charge of $1-$5 per box, depending on size and weight, forcing many to liquidate inventory to avoid these overage fees.

This situation likely arises from the influx of sellers sending inventory to Amazon and the resulting lack of storage space. While this change encourages better inventory management, existing sellers were not informed of any extra fees beyond long-term storage fees under the previous rules. It remains unclear whether Amazon will support existing sellers by running deals on all products that cause overage charges or offering relief to those unaware of the upcoming fees. These fees could significantly impact small businesses and Amazon sellers, potentially driving them out of business due to the lack of profit after paying Amazon's standard fees, regular storage fees and FBA, referral fees and advertising cost structure.

These new overage fees significantly impact sellers who rely on their profits to replenish stock and sustain their businesses on Amazon's platform. Under the original FBA seller rules, these fees did not exist, helping sellers to use their profits for growth.

Broadwave Agency: Helping Clients Understand Amazon's Overage Fees & Helping Brands Set Up Streamlined Storage and Reputable Prep Warehouses across the United States Amazon sellers are now charged a monthly fee for any inventory that exceeds their storage limits. Overage and underage fees make it hard to balance the new changes. Let Broadwave Agency help your brand with Amazon overage and storage fees. Storage can be the make-or-break criteria of a successful brand. If you overpay on storage, you will find it hard to be profitable. This fee is based on the volume of excess inventory and is intended to incentivize sellers to manage their inventory more efficiently. The fees vary depending on the time of year and the size of the excess inventory.

Impact on Sellers These new overage fees can significantly affect sellers' profitability, especially for those with large amounts of excess inventory. Sellers must carefully monitor inventory levels and adjust their stocking practices to avoid these additional costs.

How to Manage Amazon Overage Fees

Image source Amazon

How to Manage Amazon Overage Fees: Strategies to Avoid Overage Fees

  1. Implement Just-in-Time (JIT) Inventory Management: By using JIT inventory management, sellers can minimize excess inventory and reduce the risk of incurring overage fees. This approach involves ordering inventory only when it is needed, thus reducing the need for excess storage.

  2. Utilize Amazon's FBA Inventory Management Tools: Amazon offers a range of tools and reports to help sellers manage their inventory more effectively. Sellers should use these tools to track their inventory levels and make informed decisions about when to restock.

  3. Optimize Product Mix: Sellers should analyze their sales data to identify which products are selling well and which are not. By focusing on their best-selling products, sellers can reduce the risk of excess inventory and minimize overage fees.

  4. Monitor Inventory Levels Regularly: Sellers must monitor their inventory levels regularly and adjust their stocking practices accordingly. By keeping a close eye on their inventory, sellers can avoid stockouts and minimize the risk of incurring overage fees.

The Importance of Efficient Inventory Management

Efficient FBA inventory management is crucial for Amazon sellers for several reasons. Firstly, it helps reduce storage costs, as excess inventory can lead to higher fees and tie up capital that could be used elsewhere in the business. Secondly, it ensures that popular products are always in stock, reducing the risk of losing sales due to stockouts. Finally, efficient FBA inventory management can improve customer satisfaction by ensuring that orders are fulfilled quickly and accurately.

How to Determine Optimal Inventory Levels

Determining the optimal inventory levels for your products can be challenging but is essential for avoiding overage fees. When calculating optimal inventory levels, sellers should consider factors such as demand trends, lead times, and sales velocity. Using tools such as Amazon's Inventory Performance Index (IPI) can help sellers track their inventory performance and make informed decisions about stocking levels.

New FBA Capacity Management Features

A Single, Month-Long FBA Capacity Limit

Amazon has introduced a new FBA capacity limit structure to address sellers' feedback regarding the challenges of planning inventory due to weekly restock limits. This change aims to simplify FBA inventory management by providing a single monthly limit for how much inventory sellers can send to and store at Amazon. The capacity limits for the upcoming month will be announced in the third week of each month via the Capacity Monitor in Seller Central and an email notification. This new system will consider both the inventory on hand in Amazon's fulfillment centers and shipments that sellers have created but have not yet arrived. As a result, most sellers will have access to greater capacity volumes than before.

Estimated Capacity Limits to Help Sellers Plan Three Months in Advance

In addition to the monthly capacity limit, Amazon will provide estimated limits for the following two months to help sellers plan over a longer time horizon. These estimates will be based on Amazon's space and labor availability forecast. However, these estimates may vary based on sellers' efficiency in using their capacity, as measured by the Inventory Performance Index (IPI) score.

The Opportunity to Request a Higher Limit

Amazon's new Capacity Manager allows sellers to request additional capacity by paying a reservation fee. Requests are granted objectively, starting with the highest reservation fee per cubic foot until all available capacity under this program has been allocated. Sellers can offset their reservation fees by earning performance credits from the sales generated using the extra capacity. These performance credits are designed to offset up to 100% of the reservation fee, ensuring that sellers do not pay for the additional capacity if their products sell through.

FBA Capacity Limits in Volume to Better Reflect Capacity Usage

Amazon will now set capacity limits and measure sellers' inventory usage in cubic feet (rather than the number of units), better reflecting the actual capacity of sellers' products used in Amazon's fulfillment centers and transportation vehicles. While sellers prefer to plan in units, Amazon will continue to show inventory usage in units, estimating how many units specific cubic volume capacity limits are likely to permit.

Strategies for Managing Seasonal Inventory

Seasonal inventory management can be particularly challenging for sellers, as demand for certain products can fluctuate significantly throughout the year. To avoid overage fees, sellers should plan ahead for seasonal fluctuations and adjust their stocking levels accordingly. They can also consider using Amazon's seasonal storage fee program, which offers reduced fees for storing seasonal inventory during off-peak times.

Utilizing Amazon's FBA Program to Manage Inventory

Amazon's Fulfillment by Amazon (FBA) program can be a valuable tool for managing inventory efficiently. By using FBA, sellers can outsource storage and fulfillment to Amazon, reducing the need for their own storage space and streamlining the fulfillment process. FBA also offers benefits such as faster shipping and access to Amazon's customer service, which can help improve customer satisfaction. In Summary These changes aim to give sellers more control over their inventory management while limiting unproductive space use. The new FBA capacity management system considers sellers' IPI scores, sales forecasts for their ASINs, shipment lead time, and fulfillment center capacity to ensure efficient resource use. Sellers can start using the new system by visiting the FBA Dashboard on Seller Central to view the capacity limits that will take effect on March 1 and the estimated limits. Amazon's new overage fees for sellers regarding stock are a significant change that requires sellers to rethink their inventory management practices. Implementing the strategies outlined in this article can help sellers avoid these fees and optimize their inventory management practices for greater efficiency and profitability.


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