ARTICLE
Online or offline, any commercial business needs to be in tight control of its goods. This can be the difference between running a profitable organization and facing financial difficulties.
Given the complexities of selling online, strong eCommerce inventory management is vital to ensure your order fulfilment, reputation, and costs remain in check. Learn how to employ a successful eCommerce inventory system.
eCommerce inventory management is simply the way you look after your stock (the products or goods at the heart of your online business).
The main processes this includes are:
Whatever your industry, applying an efficient method or strategy is important to stay in control of your eCommerce inventory. Without this, you could find your business fails to meet order fulfilments and must take drastic, costly measures to correct them.
Having tight eCommerce inventory control with a reliable system in place to measure and monitor your stock is essential to run a successful operation. eCommerce businesses are increasingly customer-centric, so keeping them happy and ensuring you can meet all orders in a timely, cost-efficient manner is vital.
A good eCommerce inventory system should help your business improve its sales, customer satisfaction levels and employee efficiencies, as well as lowering costs and boosting overall performance. It does this through:
While there are plenty of benefits, some challenges exist around inventory management for an eCommerce business. Understanding these potential obstacles in advance may help you tackle them effectively and limit their impact on your inventory management.
Key eCommerce inventory management challenges can include:
There are various strategies and methods eCommerce firms implement to stay in charge of their stock. The best method of eCommerce inventory control depends on how you operate. Common options include:
A par level is simply the minimum quantity that you must always have in stock. When your inventory levels fall below the par level you know it’s time to order more.
First, you’ll need to do research, and assess sales data to identify items that sell quickest, as par levels vary by product. Most methods involve ordering the minimum number to take you above the par level, so you avoid overstocking and the costs that can involve.
It helps prioritize inventory to order, and provides structure to the ordering process. Be sure to reevaluate your par levels regularly – as the market, sales, and your business evolves they could change.
With the first in, first out (FIFO) method, your oldest stock gets sold first. This is a common strategy for eCommerce businesses that sell perishable goods, but also for retail brands which want to shift clothing before next season.
For an effective FIFO strategy to work, you need organized warehouses, supply chains and order management systems. The focus is on making sure all new products from suppliers enter the back of your storage, so any sold items are taken from the front. It can create a natural flow, which ensures you move the right goods and avoid dead or wasted stock.
To determine which of your products are most and least-valuable, you can use the ABC analysis. This method is based on the 80/20 rule (also known as the Pareto Principle).
To implement it, you need to audit all your products and consider how much you sell, at what price and the quantity you stock. This can segment your inventory into the following three categories:
With this information you can then prioritize everything in band A, so you always have items to sell. Band B is still important but sells more slowly, while products in Band C are generally slow selling or dead stock – you might want to discount these to free up storage space.
Unexpected events can crop up and affect eCommerce businesses at any time. It could be a sudden surge in sales of a specific product, a cash-flow shortfall or slow-moving products taking up too much storage space.
Having a contingency plan for eCommerce inventory mitigates such potential issues and avoids them significantly impacting your operations in advance. An important element is having safety stock for your best-sellers especially, to avoid running out and losing business.
Regularly checking both your stock and eCommerce inventory control methods helps avoid any mistakes and inefficiencies building up. There are generally three methods that can be deployed:
Alongside the method of eCommerce stock management you implement, there are a few other techniques you can apply that may improve the efficiencies of any eCommerce inventory solutions. Consider:
You can manage inventory manually, but it may take a lot more time, labor and money. Almost all modern eCommerce businesses invest in one type of eCommerce management software to automate many processes. This can make scaling up an organization much easier, reduce the risks of inventory errors, and improve general operating efficiencies.
The economic order quantity (EOQ) model is a way to determine the optimal number of items a business needs to buy to reduce inventory costs. This includes cutting storage, shortage and order costs. It’s a formula that assumes demand, holding and ordering costs stay constant, which can be applied best to inventory management for products that are regular sellers – not seasonal items.
It depends on the size of your business and the type of goods being sold. Some warehouses carry out an inventory check every two months, while others may do so every three weeks. If you work with seasonal products, it may be most effective to check your stock before or after the busy periods.
Adobe Commerce, powered by Magento helps save time and labor costs with inventory management by replacing previously manual tasks and reducing the chance of human error.
This holiday, will you have inventory on-hand to meet booming demand?
Discover five key capabilities to prioritize for your next eCommerce platform.
Learn how inventory and order management technology can streamline your business.