what's up my friend I hope your day is going well if your Amazon FBA seller let
me ask you why do you need inventory make your think right so today I'm
sharing a video from the power sourcing training course to fully explain the
concept of inventory you're going to tied up a lot of your cash in your
inventory so before you plan I thought this is going to benefit you a lot
understanding the concept of the inventory by the way if you're still
thinking about getting the power sourcing training course I strongly
encourage you to get it and start to tree with me you're going to spend
thousands of dollars in your sourcing my commitment to you is to guide you
protect you and support you through the sourcing process so you can be super
successful with your sourcing save a lot of money so let's start the training
video what's up my friend I hope you're having a great day today we're going to
talk about the concept of an inventory even if you have started to be Amazon
FBA business whether you're selling one product or two products I still want you
to have a solid understanding of inventory if you haven't started the
Amazon fair business this is critical for you to understand because once you
started the Amazon FBA business most of your cash is going to be tied up in the
inventory so it is important for everyone to understand how the inventory
played a role in your business so the question is why do we even need
inventory the answer lies in the business model if you are selling on
Amazon the business model is everything is in stock instant gratification that
is the service level is I have everything in stock right now but if you
think about it if this is a make to order business model you order one I
make you one you don't have to carry inventory that
the service level doesn't have to be 100% right now so the inventory has
direct relationship with the business model you are in once you understand the
business model you're in and that the service level you wanted to provide your
customer now let's look at your supply situation how long you have to wait to
get the supply so on one side of the spectrum is the ideal situation is you
have a consignment inventory meaning you don't have to buy inventory you just pay
them when you sell it but most likely you are going to have Li time you have
to wait meaning you have to wait 10 days 30 days 60 days up to 90 days or even
hundred days to wait for your supply so you wanted to sell your customer right
now but you have to wait to get your inventory this gap between your service
level and Li time is the inventory you have to commit is the cash you have to
commit so this gap is calculated between your service level and your supply Li
time if your service level is now and you have a consignment in the inventory
always in stock that means you have a zero gap but if your service level is I
have it in stock right now but my li time is 90 days the gap is 90 that means
you have to commit that much inventory during this waiting time now let's look
at the cash requirement you know you have to commit inventory for these many
days for example if you have to commit the inventor for sixty days
that means this 60 days of cash are tied into inventory the longer of this gap
the bigger is this gaps a longer of the lead time the bigger of the gap the more
cash is tied into this supply chain you are not going to
get the money out until is sold during this waiting time all the cash are tied
into each one of these waiting time now you know your lis time let's take a look
what type of suppliers you are going to have to put you in this kind of lis type
situation the first one is consignment inventory
meaning you have no cash out what kind of relationship probably your factory is
your partner or is your family you are very lucky you don't need to put out any
cash that is consigned the inventory to you the 10 days Li time supplier most
likely is in u.s. you find a supplier locally they can turn the production
around very quickly then you have a very little money out 30-day inventory mostly
is the Chinese buyer but you're not using ocean freight but your air freedom
in the product if the early time is two weeks your air frating in the product
you know it takes you a month so your total cash commitment for that is only
30 days 60 days inventory you probably still have a Chinese supplier but your
ocean freedom the product 90 day inventory that means you have a Chinese
supplier you are ocean frating the product in but remember there are
inspection delays and there is production delays owing all you have to
commit a 90 day inventory so what is the lesson here the lesson here is the
longer is the Li time the more money you have to put into inventory the time is
money if you are just starting out you are going to realize this very soon that
lead time is money a lot of your money is going to be tied up in the inventory
until you sell the product until you get paid by Amazon now you know Li time is
money reducing Li time is like saving money
I'm going to touch base very quickly what are the ways to reduce Li time yes
in the training video I also talked about ways to reduce lead time my goal is
to have you master the inventory planning because you are going to tied up so much
cash in your inventory so in the detailed inventory planning videos I put
in so much effort to help you understand all the elements that affect your
inventory that you have to understand how to maximize your cash utilization
that's the only way to keep your business afloat anyway I hope you
learned something in this video of the inventory concept make small progress one
brilliant day at a time I look forward to see you next time