What Is Ecommerce Inventory Management? Do You Need It?

E-commerce inventory management is a crucial factor contributing to your business’s success. It is responsible for your company’s smooth cash flow and making customers satisfied. 

Ensuring you don’t run out of inventory is a fundamental concern that you should adhere to for effectively running your e-commerce business. Additionally, you shouldn’t have surplus inventory in your warehouse that can’t be sold for a long time, resulting in revenue loss. 

You can lose significant sales and potential customers if you have little inventory. On the other side, excessive inventory can result in deferred stock that you later have to sell at low prices. Both scenarios are killing factors for your business. 

You need an authentic and credible system of inventory management to overcome these problematic business issues. This article will help you recognize the significance of an effective e-commerce inventory management system and the different strategies you can opt for inventory management for e-commerce. 

What is E-commerce Inventory Management?

In e-commerce inventory management, you have to source, store, track and ship your products. If you are working with effective e-commerce inventory management, you can easily track the flow of items from the supplier to the end customer. 

After properly analyzing your sales and cash flow, you can forecast the demand for your offered goods and services to remain competitive. Customer satisfaction is greatly dependent on the product availability of your business. If the customer wants to purchase the product and finds it out of stock, they would hardly return to buy it again. 

Sales Channel Inventory Management 

If you plan to sell across multiple e-commerce platforms, you should choose different strategies. Let’s explore this phenomenon:  

• Amazon Inventory Management

Amazon is the leading global e-commerce marketplace. Conducting business in such a competitive marketplace isn’t easy unless you work with powerful e-commerce strategies. 

Amazon sellers must ensure that their inventory management system is optimized and upgraded for smooth business operations. If you are managing multiple Amazon businesses, Amazon inventory management will deal with the smooth flow of goods and services across every business area. 

You need an experienced team to handle Amazon inventory management who can provide you with accurate inventory forecasts, decrease inventory costs, and manage your inventory across all stores and warehouses. 

• Walmart Inventory Management 

Walmart is another e-commerce giant having own inventory guidelines and practices. Inventory management at Walmart requires working with Walmart fulfillment services and confirming you have enough stock to meet customer orders. 

• Shopify Inventory Management 

It relates to handling inventory on your DTC websites. Working with an established and effective Shopify inventory management system permits you to prevent stock out, avoid surplus inventory, and manage orders. 

• Retail Inventory Management

It relates to the inventory management of physical stores and what way they are used to manage inventory levels. A populated retail store needs to check out its inventory requirements and reorder the stock to be finished soon. 

Organized inventory within retail stores can drive more traffic, resulting in increasing sales and enhancing customer satisfaction. 

• Multichannel Inventory Management 

It involves handling inventory management across multiple sales channels, including e-commerce, retail, wholesale, etc. If your business is expanded on a large scale, you must have a multichannel e-commerce inventory management system. 

If you are selling through Amazon, you can either manage inventory on your own or use the Fulfillment by Amazon (FBA) service. Managing your inventory through Amazon FBA can enable you to decrease inventory costs and bring into line inventory levels. 

Selling at Walmart means working with Walmart Fulfillment Services to manage your inventory levels. However, if you plan to sell products through Shopify, you are more likely to manage inventory yourself or get involved in a partnership with the logistics company. 

Working with an organized inventory management system reduces your inventory costs, increases profitability, and scales your e-commerce business. 

Best E-commerce Inventory Management Practices

If you want to scale your e-commerce business, one of the most prominent and valuable strategies is to opt for the best e-commerce inventory management practices. 

Let’s look at these helpful e-commerce inventory management practices and strategies.  

• Inventory turnover ratio 

If you know when to replenish your stock levels, you will always remain forward of the competition. Inventory turnover relates to the rate at which your brand replaces inventory at any specific sales period. 

The formula for Inventory turnover ratio: 

“Inventory turnover ratio: Sold goods cost / Average inventory for selected sales period”

The resulting number can be used for forecasting, managing inventory, sales, and marketing. In addition, your store performance can be easily highlighted by calculating this number. 

If your inventory turnover ratio is low, it indicates a weakening of sales or a reduction in demand for your e-commerce products. Conversely, the high value of the inventory turnover ratio indicates the high demand for your products. 

• Avoiding just-in-time inventory 

As the name suggests, just-in-time inventory relates to ordering the item after the customer has placed the order. It’s a perfect solution to reduce inventory costs, lower inventory levels, and foster efficiency. E-commerce startups can use this technique to reduce operational costs and increase profits. 

It looks like a perfect solution for business, but it is defenseless to supply and demand shocks. 

Supply shock occurs when the supplier of your demanded products cannot provide the required materials due to economic or market uncertainty. It can negatively impact your business scenarios, leaving you in substantial danger. 

Demand shock occurs when there is a sudden increase in your product demand, and you cannot handle increased demand, resulting in product delays, dissatisfied customers, and revenue loss. COVID-19 is filled with multiple supply and demand shocks that significantly disrupted supply chain management worldwide. 

• Planning your seasonal inventory 

The demand for your products may not be seamless every time. Many e-commerce sellers find a certain peak in their sales within a specific time, like Black Friday, Christmas, etc. To become successful in generating huge sales, you have to examine the seasonal peaks and drops. 

If you are unable to plan for the stock in advance, you may have surplus inventory having no demand or out of stock for demanded products. 

Seasonal timelines are prime intervals for e-commerce businesses to increase their sales and profits. Therefore, planning for the event will surge your return on investment during seasonal periods. 

• Third-party logistics inventory management 

Managing the inventory is challenging for large-scale eCommerce businesses, and any error can drastically impact the business’s performance. 

One way to eradicate this issue is to outsource inventory from a third-party logistics provider. Your 3PL partner will handle all the supply chain and logistics processes. 

Ensure that your logistics and supply chain partner handles your e-commerce inventory management effectively. Their effectiveness is responsible for your business scaling and future growth opportunities. 

FAQs

What is eCommerce inventory management?

In e-commerce inventory management, you have to source, store, track and ship your products. If you are working with effective e-commerce inventory management, you can easily track and monitor the flow of items from the supplier to the end customer. 

What are the 4 types of inventory management?

Four types of inventory management are: 

• Raw materials 
• Work in process 
• MRO goods 
• Finished goods 

How do online businesses manage inventory?

• Keeping safety stock of inventory 
• Avoiding over and under stocking 
• Sales forecasting technique 
• Conducting regular audits