Sustainability, profitability, scalability can all be easily achieved just by focusing on one aspect of your business — improving inventory management for e-commerce. This guide details everything you need to know, from challenges to methods to implement pitch-perfect e-commerce inventory management.
In today’s digital era, the landscape of commerce is evolving at a rapid pace. For businesses aspiring to expand and thrive, establishing an online presence has become more crucial than ever.
E-commerce platforms offer a vast and accessible marketplace, enabling companies to reach a global audience and connect with customers beyond geographical boundaries.
As businesses embark on this digital journey to grow their reach and enhance sales, effective e-commerce inventory management can’t be overlooked.
This article dives into the significance of streamlined e-commerce inventory management, exploring key strategies and tools that empower businesses to navigate the online marketplace seamlessly.
According to Katana’s data, revenue from sales orders generated from e-commerce platforms increased by 46%. While sales from other sources decreased by 2% when comparing 2021 to 2022. Indicating that e-commerce selling is gaining more traction:
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Inventory management for e-commerce involves overseeing and controlling the order, storage, and use of products that are sold online.
There isn’t much of a differentiation between inventory management and managing e-commerce inventory, other than e-commerce focuses exclusively on the products you sell over the internet. Perfecting your e-commerce inventory management allows businesses to improve their efficiency and reduce operational costs. Given how globalized the world is nowadays, e-commerce inventory management is important because, if done properly, it will help you:
By accurately optimizing your inventory management for e-commerce, you can better understand your logistics and analytics.
You can then use this information to get complete inventory control, maintain ideal stock levels, and make more accurate predictions on inventory demand.
Good inventory management for e-commerce allows businesses to set precise reorder points to avoid:
It will also help you improve your supply chain management by understanding when you need to order products and how much. If you’re selling inventory across different sales channels, online and offline, proper e-commerce inventory management means you know exactly where your products are at any given time.
If you use a specific e-commerce platform and want to learn more about e-commerce inventory management focused on that platform, be sure to check out the following articles below:
Poor e-commerce inventory management can severely disrupt your business.
First, if there’s an issue with your inventory levels, you can’t get products to customers by the time they originally expected. Or your order fulfillment rate will fall below what is needed to meet demand. Regardless of the problem, all of this will damage your business’ reputation and drive away customers and even suppliers.
With that said, here are the benefits of improving your inventory management for e-commerce.
First impressions are everything.
According to Bain and Company, a 5% increase in customer retention accounts for at least a 25% profit increase. Establishing loyal customers is critical for success — after all, customer retention is cheaper than customer acquisition. Having your inventory management for e-commerce fully optimized will help you avoid delays and long lead times, leaving customers satisfied and giving them the confidence to shop with you again.
As already touched on in the article, improved inventory control helps you and your managers see when to restock items or determine which items are actually costing you money.
Improving your inventory management for e-commerce will optimize how you handle all your different inventory types, including:
All of this will assist you in identifying your bestselling products and your not-so-great ones — allowing you to increase inventory levels of good stock and take measures against the bad stock, such as selling them at a discount or liquidating items altogether.
Inventory management stands as the pivotal element of your e-commerce operations, influencing not only your day-to-day functioning but also the long-term sustainability of your business.
Mastering the flow of items through your business and across the supply chain unlocks critical insights. These insights empower you to refine various facets of your operation, such as:
By embracing these principles, your e-commerce business can navigate the complexities of inventory management, leading to improved operational efficiency and heightened customer satisfaction.
Now you have some theory under your belt, it’s time to start optimizing your e-commerce inventory.
To do this, we’re going to set out some common challenges manufacturers face when looking to improve inventory management in e-commerce. These challenges will help you understand the areas of your business you need to focus on to optimize inventory handling. After that, we’ll lay out some methods you can follow to address these issues.
In the beginning, it was probably an advantageous opportunity to set up your e-commerce business with a platform such as Shopify, WooCommerce, or BigCommerce, for example. While these platforms have an e-commerce order management system, they lack more advanced inventory tracking features. The sooner you implement an external e-commerce inventory management system, the quicker you can reduce costs related to:
In short, these obstacles make business growth risky and difficult to manage — even more so when considering further customizing your e-commerce channels, for example, using headless e-commerce platforms to manage multiple shop fronts with a single back-end system. While headless e-commerce platforms have many advantages, these are rendered obsolete without a software system that supports managing your inventory and omnichannel orders.
Suppose you don’t understand your inventory requirements or your customers’ shopping habits. In that case, you’re in danger of heading into a scenario where you can’t meet demand or you’ve overestimated how much stock you actually need.
It might sound like a good idea to have your shelves fully stocked and waiting to be sold. But, every second an item spends in your warehouse diminishes the profit margin for that product. Not only do you risk increasing carrying costs, but your chances of storing dead stock increase, too. According to a report by Celect and Coresight Research, a mindboggling $300 billion in revenue is lost due to markdowns.
Sometimes, miscommunication that could have easily been avoided between suppliers, warehouses, factory workers, or retailers can lead to big problems.
If you want your supply chain running as smooth as silk, you’ll need to figure out how to make your business transparent. This way, your sales department or retailers know whether they can make fulfillable commitments. According to a 2017 report on global supply chain resilience from the Business Continuity Institute, 69% of respondents said they do not have full visibility of their supply chains.
It is a capital mistake to theorize before one has data.
— Sherlock Holmes
If you plan to grow your e-commerce business, you’re going to need to find a way to uncover and track data about your inventory movements, such as:
Finding the answers to these questions alone will be a great start to boosting profits, supporting growth, and catering to your customers’ needs.
Keeping safety stock gives you a buffer when something unexpected happens, like an issue with your supply chain or a sudden surge of orders.
Safety stock means you can keep fulfilling orders as you top up your inventory levels. However, the amount of safety stock you should keep depends on several factors. You can use the following formula to calculate how much safety stock your business should be holding:
Safety stock = (Max daily usage x max lead time in days) – (average daily usage x average lead time in days)
You identify products that have been loitering for too long in your inventory — what do you do?
It might be tough to admit this, but it comes to a point where you might have to consider cutting your losses. Though, that doesn’t mean you should throw everything out the window. One technique you can implement is kitting your products.
This is where you bundle your slow-moving or dead stock with an item that is selling well so you can offload the products and recuperate some of your costs.
This is an essential process step for a spring clean and a method of optimizing your inventory handling.
The purpose of performing demand planning is to make future sales and stock level requirements a little less uncertain. To do this, look into historical sales data and identify past trends to make a prediction on what you’ll need for the coming period. You can use PEST analysis to make these estimations by looking into the following factors:
In e-commerce inventory management, storage and routing involve optimizing how and where products are stored and the paths they take from storage to customer. Key strategies include:
Rethinking how your warehouse, factory, e-commerce inventory, and physical store locations are laid out will help you improve inventory management, minimize costs, and maximize value for the customer by reducing waste.
Reorder point is an essential tool for managing inventory and improving operational efficiency.
By using a reorder point system, businesses can always have the right amount of stock on hand to meet customer demand. This leads to lower costs, increased profits, and happier customers. You can calculate your ideal reorder point with the following formula:
Reorder point = (Average daily usage x average lead time in days) + safety stock
ABC analysis is an inventory management technique that helps organizations better manage their high-value inventory.
In particular, it allows managers to use their stock management resources more efficiently. The ABC inventory system works by dividing all the items in a company’s inventory into three categories:
Items in category A are the most important, and those in category C are the least important.
By managing the items in category A, companies can improve their availability and reduce losses and costs. The ABC inventory system is a great tool for improving inventory management. By using it, organizations can make sure that their most important items are always available when they need them.
This improves overall business efficiency and helps to reduce losses and costs.
When you conduct a stocktake, you’ll compare your physical stock with your records to identify any discrepancies that might exist.
This will help you to identify any areas where you may need to improve your inventory management practices. You can then take steps to address these discrepancies and improve your overall inventory management. A stocktake is also a good way to identify any damaged or expired products.
This information can help you decide whether or not to continue stocking these products. Damaged or expired products can be costly and can take up valuable space in your inventory, so it is important to make decisions about these products based on the data from your stocktake.
Katana Cloud Inventory empowers users to optimize their inventory management for e-commerce effortlessly.
It does this by giving you real-time data on sales, production, and inventory so you can make important business decisions and scale your company. Katana has all the necessary inventory management tools you need to streamline your e-commerce stock management.
Integrating Katana and your favorite e-commerce platform not only allows you to improve your inventory management but also equips you with features for:
Katana makes inventory management a breeze for e-commerce sellers by connecting all your business tools and acting as a central source of truth.
There are a lot of industry-specific phrases, terms, and abbreviations that get thrown around constantly. It’s necessary to understand these to fully grasp all the concepts talked about. Here you’ll find some of the common terms used in the industry:
Inventory management in e-commerce refers to the process of overseeing and controlling the ordering, storing, and use of a company’s inventory. This includes the management of raw materials, components, and finished products, as well as warehousing and processing of such items.
It’s a crucial part of e-commerce as it helps in maintaining the right balance of stock, avoiding both surplus and stockouts and ensuring that orders are fulfilled efficiently.
Managing stock inventory in e-commerce typically involves several key steps:
Tracking inventory for e-commerce can be done through:
The inventory-based model of e-commerce is a business model where the e-commerce company owns and manages the inventory of the products they sell.
In this model, the company purchases goods in bulk from manufacturers or suppliers, stores them in a warehouse, and then sells them directly to customers. This model offers greater control over inventory, quality of products, and supply chain management but also involves higher risk and investment in terms of stock management and warehousing costs.
This article will help you become a BigCommerce inventory management expert. You’ll learn about BigCommerce inventory features, how to activate tracking, steps to optimize your stock management, and the best native software for managing inventory as a manufacturer.
WooCommerce barcode inventory helps automate and optimize your business’s inventory management. But which plugin is the best for manufacturers?
An easy way to take control of your inventory is through a Shopify barcode scanner app. Here’s a guide to the different software available to help you take barcode scanning to the next level as a Shopify merchant.
