Boosting Amazon Purchase Orders: How Agencies Can Help Vendors Get More Orders from Amazon
An insider look at Amazon's automated inventory ordering system and the strategies agencies can use to help vendor clients secure more purchase orders.
Amazon's inventory ordering system is complex, automated, and often opaque to the brands selling through it. This piece draws on insider knowledge from Todd VanderStelt, who previously led Headphones and Textbooks categories at Amazon and implemented the "Hands-off-the-wheel" supply chain automation program, and Andy Thompson, an Amazon Agency specialist.
Part 1: How Amazon Orders Inventory from Vendors
Core Objective
Amazon seeks to maintain sufficient inventory - measured in "weeks of cover" or "days of supply" - to meet customer demand while staying ahead of lead times.
Forecasting and Sales History
Amazon uses multiple forecasts with different confidence levels (P values). The "Mean" forecast represents expected sales, but inventory models rely on P70, P80, and P90 forecasts. P-values indicate the probability demand will fall at or below forecasted units, and target service levels balance multiple factors to determine optimal inventory amounts.
Volatility in demand signals - such as losing the Buy Box - creates forecast unpredictability, making week-to-week changes in Vendor Central forecasts more pronounced.
Legacy Evaluation Metrics
Previously, inventory managers were assessed on inventory turns, working capital deployment, and Fast Track In-Stock rates. Human judgment played a larger role in purchase order decisions before automation took hold.
Automated Decision-Making
Amazon's Supply Chain Optimization Technologies (SCOT) team now uses mathematical models considering:
1. Economic Ordering Modeling (EOM) Measures Amazon's profitability per ASIN after accounting for fulfillment costs and trade spend.
2. Customer In-Stock Value (CIV) Evaluates products beyond individual sales, considering halo effects on other purchases and customer lifetime value.
3. Cost of Overstock Analyzes return policies, price elasticity, and markdown likelihood to assess overstock risks.
Vendor Performance Factors
Amazon factors in order frequency, lead times, fulfillment rates, and lead time volatility. High volatility forces Amazon to maintain elevated inventory levels, though this simultaneously increases overstock risk.
Part 2: Strategies for Agencies to Secure More Purchase Orders
1. Maintain Buy Box Consistency
Agencies should monitor Buy Box ownership relentlessly. Price volatility or lost Buy Box control creates demand signal disruption. Losing profitability triggers a domino effect that reduces inventory purchases.
2. Implement Strict Pricing Policies
- Establish consistent pricing across authorized sellers and distributors
- Prevent unauthorized resellers from competing on Amazon
- Monitor for Minimum Advertised Price (MAP) violations
- Avoid downward pricing spirals that reduce Amazon's margins and purchase orders
3. Control Distribution Channels
- Maintain an authorized seller list
- Standardize contracts with pricing restrictions
- Create "Amazon carveouts" restricting direct-to-Amazon distribution
- Consider product serialization to track inventory leaks
- Monitor global distribution to prevent arbitrage opportunities
4. Emphasize Global Impact
Inventory leaks worldwide can disrupt Amazon performance. Cross-border arbitrage opportunities - such as lower European pricing finding its way to U.S. Amazon - create cascading problems for ordering consistency.
5. Drive Sales Growth
Agencies should maximize demand through:
- Advertising and promotional campaigns
- Content optimization for search visibility
- Review generation programs like Vine
- Brand storefronts and social features
- Off-platform marketing initiatives
Vendors face slimmer margins based on wholesale costs, requiring agencies to understand unit economics and customer lifetime value rather than focusing solely on individual transaction profitability.
6. Build Operational Excellence
Agencies should audit vendor accounts for:
- Purchase Order Confirmation Rates
- Fulfillment Rate percentages
- Average lead times per product
Targets below 95% warrant investigation. Strong operational performance enables agencies to negotiate better annual agreement terms, potentially saving thousands for clients.
7. Strategic Partnership Approach
Rather than providing marketing services exclusively, agencies should:
- Address operational and distribution challenges
- Develop subject matter expertise across channels
- Serve as interpreters of complex automated systems
- Help vendors understand interconnected systems impacting ordering
Agencies extending from traditional digital marketing may lack full channel expertise, limiting their ability to drive results. Success requires comprehensive support across channel management, not merely advertising.
Conclusion
Amazon's automated ordering depends on forecasting accuracy, pricing consistency, operational reliability, and demand growth. Agencies create value by addressing these interconnected factors holistically rather than focusing narrowly on advertising. Long-term client relationships depend on becoming indispensable partners who understand both the marketing and operational dimensions of the Amazon channel.