Navigating the Changes: A Guide to Amazon's FBA Capacity Limits

_{As an Amazon seller, you're probably well aware of the benefits of using Amazon FBA for inventory storage and order fulfillment. However, like most things in life, it's not all sunshine and rainbows. There are some challenges associated with FBA that many sellers face, including recent fee increases, frustrating restock and storage limits, and the time it takes for inventory to arrive.}

To help ease these challenges, Amazon recently announced a new FBA capacity management system aimed at giving sellers more control over their FBA inventory capacity. Starting March 1, 2023, restock limits and storage limits will be combined into a single monthly metric known as the FBA capacity limit.

Pros vs Cons — Pros and Cons of FBA Capacity Limits

So, how does this new system work? What are the benefits? The downsides? Here is what you need to know:

Pros:

Simplification of the Inventory Management Process: With the new FBA capacity limit, Amazon has streamlined the previous system which relied on two different types of limits, leading to confusion. Now, with the single monthly metric, sellers will have a clearer understanding of their inventory management process.
Increased Lead Time for Inventory Planning: The new system provides sellers with a monthly capacity limit, which will be available in the third full week of each current month. This gives sellers more lead time for better inventory planning.
Flexibility to Request More Storage Capacity: The new FBA Capacity Manager gives sellers the ability to request more storage capacity. They can bid for a higher limit and offset their reservation fee by earning performance credits from sales generated using the extra space.
Improved Inventory Accuracy: The new system measures inventory usage in cubic feet, providing a more accurate estimate of the capacity needed in fulfillment centers and delivery vehicles.
Incentives for Effective Inventory Management: Sellers who use their FBA capacity efficiently and sell through their inventory can earn a performance credit of $0.15 for every dollar of sales generated from the extra space.

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 Cons:

Pay-to-Play Model: Some sellers have expressed concern over the "pay to play" model of the new program, which could negatively impact margins. If a seller wants to bid for additional storage space, they need to be confident that they will sell through their inventory to offset the reservation fee.
Financial Burden for Small Sellers: The reservation fee for additional storage capacity could be a financial burden for small sellers. They will need to be careful when bidding for additional space to ensure that they don't negatively impact their margins.
Uncertainty Around Capacity Limits: The FBA capacity limit is based on various factors such as sales forecasts, shipment lead time, fulfillment center capacity, etc. It can be difficult for sellers to predict what their limit will be from month to month.
Overage Fees for Exceeding Capacity Limits: If a seller's on-hand inventory exceeds their FBA capacity limit, overage fees will apply. This could result in additional costs for sellers who are not efficient with their inventory management.

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Seller Example for FBA Capacity Manager — Example of Seller using FBA Capacity Manager

Overall, the new FBA capacity management system aims to give sellers more control over their FBA inventory capacity and make the storage and order fulfillment process easier and more predictable. Keep an eye out for the new FBA capacity limit, and make sure to factor in any overage fees or additional storage capacity requests when planning your inventory for the month.

For more our initial reaction on the FBA Capacity Limit and Capacity Manager news, check out our breaking news video here:

For Amazon's information about their Capacity Manager, check out their breakdown here.

For a complete breakdown about FBA Capacity Limits, see Amazon's guide in Seller Central.