So maybe you’re living the dream of starting an ecommerce business. After months of planning, figuring out costs, and putting in all the work, you’re finally running an ecommerce business. Or maybe you’ve run an ecommerce business for years.
Either way, sometimes, you might not be getting the traction that you need. Knowing the different inventory management methods is essential to maximizing your business.
What is inventory management?
In a nutshell, inventory management is sourcing, storing, and selling stock. Knowing how much stock you have, how much it should sell, where to keep it, and how long you’ll be keeping it.
Understanding how to manage your inventory is crucial when you make an e-commerce website. It prevents waste, cuts costs, and helps you save time. Still, many businesses lack knowledge of inventory management best practices.
In this post, we’ll walk you through some tips to ensure your ecommerce store stays on top of the pack by adapting the right inventory management system:
Here are nine of the most critical inventory management practices for ecommerce businesses:
1. Keep an updated inventory of a safety or emergency stock
You’ll never know when something unexpected happens. That’s why you need a safety stock. There are plenty of reasons why you need this.
Just look at how people went panic buying at the start of the pandemic. Unexpected supply and demand do happen. Keeping an inventory of stock will ensure that you’re prepared for anything.
2. Maintain a balanced inventory
Maintain a balanced inventory by not overstocking and understocking. You don’t need so much stock as you have to liquidate.
In the same way, you don’t want to have too little stock that you have to tell customers that you don’t have the product as it pushes away your target market. Both can lead to loss of profit and bad reviews.
To avoid this, having the right software and managing inventory is essential. Check out these ecommerce tips to help you reach more customers.
3. Use of the kitting technique
Kitting is putting stocks together as a deal. Think about Buy 1 Get 1 deal. It allows you to eliminate any overstocks you might have for a good price.
Similarly, this enhances your average order value, letting your customers know they’re getting a good deal.
4. Compare and study previous purchases
It allows you to create a feedback loop of understanding what stocks work and don’t. It enables you to know which stocks need improving or reducing.
Tracking stock allows you to see which are best-selling products. It also helps you assess yearly trends, which you can do as often as you like.
5. Be practical with the physical storage
You also need to think about the physical storage of your products. Whether you want to keep them in a spacious room in your home or a warehouse, make sure they are easy to locate.
Moreover, storing them in a place where you can easily pack them means the customer will get the item faster. Base your location on sales and trends. Move things if you have to. It allows you to keep up with your stock to deliver excellent customer satisfaction.
6. Take advantage of dropshipping
Dropshipping is helpful to business owners who want to break into the ecommerce world but can’t afford a warehouse and storage space yet.
The whole idea of dropshipping is, as a business owner, you never touch the product. As soon as the customer places the order, you fulfill it from the manufacturer and straight it to them. Dropshipping cuts out the go-betweens.
Still, it comes with a cost.
Manufacturers can provide incentives and bonuses to businesses purchasing or storing their products in bulk. Once the product is shipped to a warehouse, it’s up to the business owner to carry the burden of selling it. Another challenge with dropshipping is the lack of control over the customer experience. Because you can’t personally oversee how the products get to the end-users, you’re entirely dependent on the manufacturer.
7. Implement a scanning system for your inventory
If there’s a process that you can automate in your inventory management practices, then you should jump to that opportunity. So make sure to implement a scanning system.
A best practice is to scan items when you receive, move or ship them in any way. Without the barcode or scanning system, you are prone to human error, the garbage of inventor data, and mistyped SKU numbers. It becomes detrimental as your business grows beyond a few SKUs in a small warehouse.
8. Set your par levels
Par levels serve as a safety net for ecommerce sellers to ensure that you get a minimum quantity of stock at all times. Let’s say that you’re not selling perishable items such as food.
As an ecommerce business owner, you should at least have a minimum viable stock. Setting par levels depends on two variables: the demand patterns of your products and manufacturing timelines.
Some IMS platforms alert administrators automatically if a product SKU falls below the par level threshold, considering several variables. It might include how long it takes to get the new product, your current stock levels, and that particular SKU’s demand curve.
9. Adapt the FIFO rule
FIFO means first in, first out. This rule is mandatory for ecommerce businesses, especially if you’re selling products with an expiration date, like food and cosmetics. Here are the handy tips to enhance your digital sales funnel.
In the same way, non-perishable goods can also rot on shelves if you don’t sell them on time. A software system will determine which items need to go out first and in what order you need to sell them.
Over to you
Inventory management in ecommerce is a complex process. Hopefully, you now know about different inventory management and techniques and which ones you’ll use for your ecommerce business.
Using the right software and strategies will ensure you stay on top of your inventory resulting in more profits. Moreover, applying these to your own business will result in happier customers who will keep returning. Good luck!