This blog was updated on February 27, 2024.
Last year, Amazon launched a new Capacity Manager designed to provide brands with more visibility and control over capacity limits. The goal was to make it easier to plan and manage Amazon Inventory and Orders.
Originally, Amazon developed a system to manage capacity for FBA by scoring sellers based on inventory management. Sellers receive capacity allocations for the next three months, determined by projected sales and past inventory performance. However, this method disadvantaged sellers who had previously underperformed, limiting their capacity for launching new products or campaigns. To address this, Amazon’s FBA team introduced a new tool. This tool allows sellers to demonstrate the potential value of additional capacity objectively, applying economic principles to streamline the process and alleviate the burden of manual capacity requests.
This article discusses the main features of Amazon’s Capacity Manager system and how brands can use them to streamline inventory management.
Feature #1: One Monthly FBA Capacity Limit
One of the challenges with the previous capacity management system was navigating storage and restock limits, which are measured differently. Weekly limits also make planning how much inventory to procure and manufacture difficult. The new Capacity Manager resolves these pain points by offering a single monthly limit to determine how much inventory brands 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. Like restock limits, capacity limits consider inventory on-hand in fulfillment centers, as well as shipments sellers have created that have not yet arrived.
Feature #2: Estimated Three-Month Capacity Limits
In addition to the monthly capacity limit, Amazon will also provide estimated limits for the following two months to help brands plan over a longer time frame. Amazon will calculate these estimates based on how much storage space and labor it expects to have. However, these may vary based on how efficiently brands have used their capacity in the previous months.
Feature #3: The Opportunity to Request a Higher Limit
One of the most important features of Capacity Manager is the ability to request additional capacity based on a specified reservation fee. Amazon will grant requests objectively, starting with the highest reservation fee per cubic foot until all capacity available has been allocated.
The Reservation Fee
The reservation fee is the amount per cubic foot of capacity requested that you would pay at the end of the specified period if your request is granted and you generate no sales during the period. When you submit your request for more capacity, you specify the maximum reservation fee that you are willing to pay to reserve the additional space. Your request may be granted at the amount that you specify or at a lower amount. Reservation fees are charged after the end of the specified period. For example, if you were granted additional capacity for October 1 through October 31, reservation fees, if any, would be charged in early November.
Capacity Manager Performance Credits
All brands that are granted additional capacity and generate sales using that capacity will get performance credits. These are earned at a rate of $0.15 for every dollar of sales that you generate using the additional capacity. To calculate sales generated using additional capacity, Amazon considers sales on units that were shipped between the start and end date of the period for ASINs in the storage type for the limit increase (for example, US standard-size storage), prorated by the percentage of your total limit that the additional capacity represents. Granted requests for additional capacity that you have early access to are excluded from this calculation. With enough sales, your performance credits can offset up to 100% of your reservation fee, meaning that you would pay no additional fees for the extra capacity.
Feature #4: FBA Capacity Limits in Volume
Amazon will set capacity limits and measure inventory usage in cubic feet (vs. number of units). This will better represent the capacity that products use in fulfillment centers and transportation vehicles. Amazon will also show inventory usage in units, providing an estimate of how many units specific cubic volume capacity limits are likely to permit. Overage fees will apply if a brand’s on-hand inventory in fulfillment centers (not including open shipments) exceeds its capacity limit. Amazon determines capacity limits based on a number of factors, including:
- Current Inventory Performance Index (IPI) score
- Sales forecasts for your ASINs
- Shipment lead time
- Amazon fulfillment center capacity
- Historical sales volume
- Seasonal and peak selling periods for your products
How to Request a Capacity Increase
As discussed, brands can use the Capacity Manager to request an increase in capacity limits. Here’s how it works:
- Tell Amazon how much additional capacity you want and when you want it. You can request limit increases in monthly increments for any future period that contains a capacity limit or estimated capacity Amazon permits you to request up to 20% of your initial capacity limit or 2,000 cubic feet, whichever is greater.
- Set the maximum reservation fee that you’re willing to pay for the extra capacity. You can offset this fee with performance credits earned from sales generated using the additional No upfront payment is required.
- Amazon will assess fulfillment center capacity regularly (typically twice per week) and grant requests as capacity is available. Amazon grants requests with the highest reservation fee per cubic foot first and continues in this order until all available capacity has been allocated. If your request is granted, the capacity will be available to you for the entire period that you specified.
- If your request is granted, your capacity limit will increase in the Capacity Monitor. When the specified period starts, you’ll earn a $0.15 performance credit for every dollar of sales that you generate using additional Amazon designed this credit to give you the opportunity to offset 100% of the reservation fee (as long as you sell the inventory).
Channel Key Takeaway
Sales and inventory forecasting can be a challenging part of selling on Amazon. Your goal is to sell as much as possible, but you can only sell as much inventory as you have in Amazon’s fulfillment centers. If you don’t have enough inventory to meet customer demand, you will miss out on sales. However, if you have too much inventory, you’ll accumulate storage fees that will eat into your margin. Sales and inventory forecasting is about finding the happy medium. Amazon’s new Capacity Manager gives you greater control over your fulfillment center capacity limits, which helps make inventory planning easier and more accurate.
