Having a suitable eCommerce inventory management solution is vital for businesses that want to delight their customers and rise above the competition. People tend to spend months making plans and figuring out costs but don’t give enough traction to their inventory management. Retailers who are looking to build a profitable, sustainable, and scalable business, in the long run, can’t afford to neglect it since it is one of the eCommerce best practices.
Learning how to manage inventory is crucial for any business - small or large. It reduces time, and costs, prevents waste, and creates customer focus because it gives people the items they want. Unfortunately, a lot of eCommerce businesses still lack knowledge in inventory management solutions. Some of the biggest companies in the world have caved in by not using the proper systems and techniques.
What is inventory management?
Simply put, inventory management involves sourcing, storing, and selling stock. It means knowing how much stock you have, where to keep it, how long to keep it for, and how much it should sell at. It’s an important name in eCommerce terminology, but it sometimes doesn’t get the attention it deserves.
Benefits of inventory management
Inventory control provides you with the answers to the following questions:
- When should I re-order? For instance, you must know when stock is running low. Finding yourself in a position where you can’t deliver the products your customers seek is unpleasant and can cost you customer loyalty. Compare it to your weekly grocery shopping; you don’t wait until the last bottle of milk gets emptied. You restock it on time.
- How much should I re-order? Suppose you own an online shop and you’re selling gym wear. Pink women’s leggings have been selling much more than you predicted. Therefore, you need to order some more. On the other hand, you wouldn’t benefit from ordering too much and ending up piling pink leggings in your warehouse.
- How many more should I order? Let’s stick to the example of the leggings. If the pink leggings are selling well, will the matching pink top sell well too? Proper inventory tracking can help with the success of new products and increase eCommerce revenue.
- How long can stock stay in (or out) the warehouse? Although this seems quite obvious, you don’t want your products to end up unsold and unaccounted for.
How to choose the right inventory management software?
A significant number of small businesses still use manual methods to manage their inventory, making them more vulnerable to mistakes. On the other hand, those who use software tools are much more likely to avoid human errors. Still, choosing the correct inventory management software can be a daunting task. Several things should be considered, including your company’s size, the nature of your business, specific needs, and challenges. That’s why we advise you to ask the following questions before making the final choice:
- How many users will require access?
- Will the software allow for scalability as the company grows?
- Can this software integrate with other systems?
- Does it allow for customized reporting?
- Am I allowed to audit the history of my inventory?
- Do I need to access the software from multiple devices?
- What’s the quality of technical support during troubleshooting?
In other words, you’re looking for software that can analyze data in real-time, consider seasonality, take understocking and overstocking into account, and make adjustments for where the product is in its lifecycle. Some tools make an excellent solution for blockchain based eCommerce platforms.
Types of auditing
Auditing means making sure you’re regularly checking how much stock you have. It’s important to do manual auditing even if you’re using suitable software. There are three main ways to do this:
- A full audit involves counting all your stock a couple of times a year. Truth be told, it can be tedious and time-consuming.
- Cycle counting is also known as a partial audit. It involves counting items throughout the year.
- Spot checking is done by randomly comparing the number of a particular item to the numbers of the item in your software.
There are also additional types of auditing that might work best for you. These include:
- First in First out, also known as FIFO, is a method that focuses on selling older stock before anything else, ensuring the natural flow of goods. It reduces the likelihood of needing to conduct massive clear-out sales, and keeps things fresh.
- Setting Par levels essentially means keeping safety stock. It helps order, structure, and assign priority to your items, making sure you always have a minimum amount of stock for each item. It’s usually set up using the following formula: add weekly inventory use and safety stock, and then divide the sum by deliveries per week. We also suggest you keep 20%-30% of the weekly inventory and use it as a safety stock.
- ABC management system helps you to categorize products from least to most valuable. It’s conducted by marking each product with an A, B, or C mark. These three letters represent categories. Category A should be a highly valued product (provides 80% of revenue, 20% of the stock), category B is for regular products (provides 15% revenue, 30% of the stock), and category C is for low-valued products (provides 5% of revenue, 50% of the stock).
Inventory management practices
Specific techniques can make your customers happy and increase ecommerce revenue. To help your stock go a bit further, we suggest you also implement the following few practices:
- Keep an inventory of your safety stock. It’s almost mandatory to have a safety stock if you don’t want to find yourself in unexpected and unpleasant situations. We can all recall those recent cases of panic shopping due to pandemics. By having an inventory of safety stock, you’re less likely to miss out on sales.
- Balance your inventory. To balance your inventory essentially means to prevent overstocking and understocking. You don’t want to have a pile of wasted goods, but you also don’t want to let down your customers by putting the out-of-stock sign on their favorite product.
- Look at the past purchases to predict your future stock. This method allows you to understand which products sell the best and enables you to make correct predictions when re-ordering. It can be done as often as you like.
- Use the kitting technique. You may have heard of this method since it allows you to get rid of any excess stock at a pretty good price. It’s done by giving your customers special offers, such as “buy two, get one for free.”
- Be clever with your storage. You can’t neglect the physical storage of items. Whether you keep your items in a warehouse or a spare room, they must be easy to locate. That way, you’ll be able to pick them and send them to your customers easily.
Having a good eCommerce inventory management solution goes a long way in helping you stay organized and make accurate plans for the future. By combining the different tools and techniques we mentioned above, you’ll make sure to keep on top of your inventory and increase both profit and customer satisfaction. If you already own an online business, you may want to look back and recall your previous challenges. Keep in mind that it’s always a good time to think of ways to improve your company and ensure its steady growth by allowing new opportunities.