Inventory Cover, Reorder Timing and Cash Flow for Amazon FBA Sellers

For a solo FBA seller, inventory is the largest use of cash and the easiest place to lose sales. Order too late and you stock out, lose rank and pay to win it back. Order too early and cash sits in cartons for months. The goal is a date: the day an order has to leave the factory so stock arrives just before you need it.

Days of cover

Days of cover tells you how long current stock will last at the current sales rate.

Days of cover = units available / average units sold per day

Use a recent average, such as the last 14 or 30 days, and adjust for known seasonality. Count stock you can actually sell: units available at Amazon, plus units already in transit to Amazon if they will be received in time.

Illustrative example. You have 900 sellable units and sell an average of 18 per day. Days of cover = 50.

Lead time, honestly measured

Lead time is everything between deciding to order and units being sellable:

• Production time at the factory.
• Freight from factory to port, and port to warehouse.
• Customs clearance.
• Inbound to Amazon and receiving time.

Measure each from your last few orders, not from quotes. Receiving at Amazon can take noticeably longer at busy times of year.

Illustrative lead time: 25 days production + 30 days freight and customs + 10 days inbound and receiving = 65 days.

Safety stock

Sales and lead times both vary. Safety stock is the buffer that covers that variation. A simple starting point is a fixed number of days of sales, such as 14 to 21 days, adjusted for how reliable your supplier and freight have been.

Reorder point and order date

Reorder point (in days) = lead time + safety stock days

In the example, 65 + 15 = 80 days. You have 50 days of cover, which is already below the reorder point: the order should have been placed 30 days ago. That is a common and uncomfortable discovery, and it is why this calculation is worth automating or at least scheduling.

To find the order date going forward:

Order date = today + (days of cover - reorder point)

If the result is in the past, the order is late and you need to consider faster freight, a split shipment or temporarily reducing advertising to slow sales.

How much to order

Order enough to cover the period until the next order, plus safety stock, minus what you already have and what is on the way. Supplier minimum order quantities often force a larger batch. When they do, the extra units are cash you are choosing to lock up; it is worth knowing how many days of extra cover you are buying with that cash.

Low-stock costs on Amazon

Running low is not only a lost-sales problem. Amazon has introduced inventory-related fees that can apply when stock levels relative to sales are low for standard-size products. The specifics, exemptions and thresholds are set by Amazon and have changed over time, so check the current rules on Amazon's fees pages and in Seller Central rather than relying on a summary.

Cash flow: why profit and cash diverge

Profit is recorded when you sell. Cash leaves when you pay the factory, often with a deposit at order and a balance before shipment. With a 65-day lead time, you may pay for stock two to three months before it sells, and then wait for Amazon's disbursement cycle after it sells.

A simple cash view for each order:

• Deposit date and amount.
• Balance date and amount.
• Freight and duties dates and amounts.
• Expected first sale date.
• Expected date the batch's sales have repaid its cost.

When several orders overlap, these dates tell you whether the business can fund growth from its own cash, or whether a growth month is about to become a tight month. The U.S. Small Business Administration's guide to managing finances is a good general reference for cash-flow planning.

Connect inventory to advertising

Inventory and ads are linked. When cover drops below lead time, aggressive advertising accelerates a stock-out. When cover is high and cash is tight, advertising can help turn stock into cash, as long as it stays within your margin limits. See setting an ad budget around margin.

A weekly inventory check

• Days of cover per product.
• Reorder point per product, with current lead time.
• Order date per product, flagged if within 14 days or past.
• Open orders with next payment dates.

How Sollo Central helps

Sollo Central's purchasing area tracks FBA stock, days of cover, lead time, the reorder gap, factory orders, supplier balances and landed cost, and highlights the date an order needs to leave. When cover is getting close to lead time, it raises the issue in your daily pulse alongside profit and ads so you can decide with the full picture.