Amazon Demand Forecasting: Cheat Sheet for Avoiding Chargebacks

 With Amazon’s Probability Level Demand Forecasting, it’s up to the vendor to take its data and reports to keep track of Amazon’s inventory demand. Each mistake in handling orders is penalized in the form of a chargeback, which can be costly. In the US alone, chargebacks cost US $31 billion in losses, over half of which are shouldered by vendors.

We compiled a list of metrics that Amazon sellers and vendors need to keep an eye on so they can better manage their inventory demand and mitigate chargebacks.

Operational Metrics Affecting Demand Forecasting

Some factors are vital, while others could be peripheral. Some of these metrics may also not be readily available or visible in the Amazon Vendor Central dashboard, such as external market dynamics. These variables are innately under the vendor or Amazon’s control. Some are overseen by Amazon but could be influenced by a vendor’s own setup, such as how the vendor sources its products.

Some of these factors include:

• Vendor lead time (VLT)

• Order type and its impact to frequency and quantity

• Sales performance

• Amazon Standard Identification Number (ASIN) detail page

• Profitability to Amazon

Metrics Affecting Amazon Chargebacks

There are at least 28 possible areas where chargebacks can be incurred if the purchase orders (POs) are not handled correctly. The most common are accuracy in the shipped product, if it was delivered on time, and if it was prepared and packaged according to specifications.

These areas are grouped into six main categories:

• Purchase orders

• Direct fulfillment

• Logistics and transportation process

• Preparation

• Receiving process

• Advanced Shipment Notification (ASN)

Strategies for Mitigating Chargebacks

Here are some strategies you can adopt for using Amazon’s demand forecast and addressing chargebacks:

• Regularly track and compare demand and POs to see the level that Amazon is purchasing.

• Anticipate and ensure operational efficiencies in POs, shipments, and preparation/labeling.

• Regularly communicate with Amazon’s vendor and in-stock managers.

• Use analytics to predict Amazon’s profitability.

Becoming a successful vendor in Amazon is not just about delivering great customer experience. Vendors also need to maintain a proficient and profitable product demand relationship with Amazon. Our cheat sheet is a handy reference of metrics that vendors need to track in order to maintain operational performance and steer clear of chargebacks.

Lingaro Solutions

Lingaro’s demand forecasting capabilities incorporate artificial intelligence (AI) and machine learning (ML) to automate workflows, aggregate isolated datasets, and seamlessly integrate other data sources to deliver bespoke, accurate, and intelligent demand forecasts that will optimize production, inventories, logistics, and finances.

Lingaro also provides supply chain analytics to help businesses gain full visibility across their supply chain, make informed decisions, and achieve operational excellence. By optimizing processes and harnessing cutting-edge technologies, Lingaro delivers tailored AI- and ML-powered solutions that improve key areas in the supply chain — from demand forecasting, logistics networks, and warehousing to inventory management.