As digital markets expand and diversify, managing inventory effectively has never been a more essential feature of running an effective e-commerce store. Understanding basic inventory control concepts could make all the difference between successful operations and operational catastrophes.
Inventory Management in E-commerce: Top 15 Techniques and Best Practices
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Unnecessary ecommerce inventory management practices may result in lost opportunities, frustrated customers, and lower profits.
This comprehensive blog presents 15 best practices and techniques for effectively managing e-commerce inventories.
This post will outline:
- What distinctions exist between methods and best practices?
- What are the pros and cons?
- Inventory management is a key component of e-commerce success.
- Technology can help streamline warehouse workflows.
Know how to enhance inventory management for e-commerce businesses.
Here Are 15 Proven Inventory Management Techniques and Practices for Online Stores
Just-In-Time Inventory Management
This inventory strategy relies on businesses storing a product each time a client places an order so that their inventory volume matches up perfectly with the total number of requests received from clients. Toyota's car-making process was responsible for perfecting the JIT Method, an approach to car production that offers significant capital savings but comes at great financial risk.
Just-in-time (JIT) inventory management can be affected by disruptions such as natural disasters or labor strikes; suppliers can be unreliable in meeting deliveries; moreover, suppliers themselves could fail to deliver products when scheduled. JIT can be adversely impacted by factors like poor quality control and overreliance on technologies; geopolitical shifts may increase costs or compromise product quality causing disruptions of production lines and supply chains.JIT inventory management has long been considered one of the most efficient inventory management approaches despite some drawbacks. JIT inventory can reduce costs by up to 50% while increasing cash flow and cutting waste significantly from operations. Maintaining consistent stock turnover ensures the quality and relevance of products for increased customer satisfaction.
Benefits
- There is no risk of losing revenue due to dead stocks
- Inventory management and process of tracking is easier in your warehouse
- A smaller warehouse will reduce storage costs.
Disadvantages
- A heavy reliance on buying trends can cause stockouts.
- It is difficult to maintain with rapid growth, multiple warehouses, or a large number of types of products
First In, First Out (FIFO) Inventory Management:
This strategy for inventory control adheres to the "first in, first out" concept - meaning that whatever products arrive in your warehouse are also distributed out as soon as they can. Food services or supply businesses dealing with perishable goods will likely adopt this inventory management strategy first.
FIFO can be an efficient storage method for companies that do not wish to keep products for too long. FIFO may not be suitable if materials or products purchased are subject to price fluctuation; doing so could create discrepancies between what was bought and sold at retail price.
Benefits
- Reduce waste when handling perishables.
- The warehouse is optimized for maximum product availability circulation.
Disadvantages
- Profits can be inflated if the production costs fluctuate
Dropshipping
Dropshipping can be an efficient means of inventory control. As its owner, you never actually handle or touch the products when dropshipping takes place. Dropshipping eliminates the middleman.
Dropshipping offers entrepreneurs who wish to venture into e-commerce but cannot justify the expense of leasing warehouse space an ideal starting point. To help kick-start this strategy, we compiled a post with several dropship ideas on our blog shortcut that comes without its cost, and all these quick solutions come at a premium. Manufacturers with discounts or bonus offers from them frequently recognize businesses that purchase and store large volumes of products. Once products have been shipped into warehouses for storage purposes, they are up for sale by their owner(s). Dropshipping eliminates this incentive, and fulfillment costs are nearly always higher; as a result, many business owners feel forced to adopt this model, with others willing to incur greater expenses in order to venture into online commerce.
Dropshipping also presents the challenge of not being in control over your customer experience. Since drop shippers cannot physically supervise delivery to each customer, their experience may depend solely on how products arrive with them at their destinations.
Benefits
- Advantages pertaining to warehouse space procurement. Small businesses no longer need to lease warehouse space.
- An Introduction to E-commerce.
Disadvantages
- Lack of quality and visibility
3PL Fulfilment
Third-party logistics (3PL), also referred to as eCommerce logistics, refers to when businesses provide logistics support services on behalf of another.
3PLs offer logistics management services such as inventory and warehouse storage at an agreed rate for a fee. 3PL vendors often specialize in complex supply chains. 3PL services appeal to entrepreneurs who consider themselves visionaries rather than details-focused; business goals willing to pay more to save valuable time are prime candidates for 3PL outsourcing services.
Discover if warehouse fulfillment logistics could benefit your online business operations with this in-depth look at it.
Benefits
- Cost savings of up to 50% can be realized on shipping, warehouse space rental costs, staff salaries, and materials costs.
- Accessing large warehouse facilities that will expand our client bases.
- Allows leaders more time for more complex activities.
Disadvantages
- The distance can limit the quality control and branding capabilities of products sold.
- Products requiring complex assembly or kitting processes may not qualify.
- Some 3PL providers require an initial investment.
Predict Future Demand by Analyzing Historical Data
Once your inventory management strategy and current product demand analysis have been decided upon, predictive analytics are the next logical step to follow.
An effective business growth is an organization that reduces uncertainty over time. Inventory forecasting provides an effective solution for manual processes that don't work as intended, with immediate access to historical purchasing information through Arion's Inventory module. Arion ERP also allows you to examine historical information for specific channels, so you can efficiently stock up for holidays or seasonal trends on a channel basis.
Install a Scanner System
Any opportunity that presents itself should be exploited in order to increase automation. Barcodes can save a business substantial sums of money since human errors can prove extremely expensive.
Inventory management is an essential practice that necessitates scanning items when they're moved, received, or relocated - leaving room for human errors, incorrect SKUs, and inexact inventory data. As your business expands beyond a handful of products in a small store, its potential risks increase dramatically.
Establish Minimum Viable Stock Levels
Setting minimum viable stock levels or "par levels" can provide online ecommerce store with a safeguard that guarantees they maintain consistent minimum stock levels at any one time. All e-commerce businesses should maintain an inventory with at least minimal inventory levels unless dealing with perishable goods such as food. Par levels depend upon two key elements: demand and production timelines. Some platforms provide automatic alerts when specific product SKUs fall below acceptable levels, considering various factors.
Included herein are factors such as the time it takes you to acquire new merchandise, stock levels available to you, and demand. ArionERP not only recommends when to order new products for optimal stock levels and maximum revenue potential but can also automate an order form - creating one-click efficiency! ArionERP's replenishment report is an effective, efficient solution that takes all supply, demand, and inventory factors into consideration, saving you the effort of manually sorting each product by its par levels.
An easy example: Let's imagine you sell one unit each day on average, and it takes 30 days to produce and fill that product at your warehouse. Your par level should at least include 30 units to avoid stockouts.
This example is straightforward. Since purchasing trends are constantly fluctuating and your par levels must adapt in order to keep pace, your demand forecast should always reflect this reality. All these factors apply only to one product; to store intelligently, every single one will require individual evaluation. Due to this reason, an IMS platform - especially one with historical purchasing patterns and data-driven decisions- is essential in automating inventory management.
ABC Analysis: Prioritise Products
Once your inventory management strategy, demand forecast, and par levels have been effectively established, now is the time to segment products based on ABC analysis. An ABC analysis can assist in increasing revenues through tailored fulfillment strategies tailored specifically for specific product lines or categories.
An example would be as follows. Products with high value but limited quantities might fit under Category A; those of moderate value with limited amounts might fall into Category B, whereas category C includes low values but large volumes. Companies that deal in multiple physical product categories can leverage this advantage to craft tailor-made strategies for replenishing each category.
Related:- Strategies to Ensure Success in Ecommerce Inventory Management
Implement Inventory Management Software
This point has been brought up several times throughout this article, but let us make one thing very clear: Every business system reaches a point at which manual processes can no longer keep pace with modern business needs. At that time comes inventory management software: an essential step toward improved results in managing inventories effectively and efficiently. Before, your inventory management methods involved maintaining an excel sheet or paper inventory list. Assuming you want your business to continue expanding in any capacity, an inventory management software solution would provide invaluable assistance in growing efficiently.
Are the owners of busy e-commerce businesses really in a position to dedicate the necessary time and resources towards creating Excel reports and searching old files to find historical data?
An IMS can automate much of that tedious work for you.
ArionERP can do more than manage inventory numbers or perform basic counts; thanks to integrations and APIs, you can turn an IMS solution like ArionERP into an ERP-like system. Learn more by exploring this post's integrations section or reviewing the differences between an IMS and ERP.
Conduct Regular Supply Chain Audits
E-commerce operations that entail extensive assembly or kitting are likely ordering components from several different sources, creating multiple supply chains for them to manage.
Examples include custom jewelry, formulae, or electronic components crafted by hand. Even if your supply chain only includes two vendors, this exercise will still prove worthwhile.
Create an alert every six months to review and map out your entire supply chain, with emphasis on auditing their contributions to your company's success. Included here should be:
- Measure lead time against your competitors
- Cost comparisons with competitors
- Measure any negative trend (returns, defects) which may require a change.
Issues arising in your online business could not have been caused by you alone; rather, it was likely due to an improper link in the supply chain being disrupted.
Conduct Cycle Count Audits in Your Warehouse
Audits that necessitate closing down an entire warehouse need to be updated, effective, and safe - they're also highly unpopular! Instead, cycle counts are becoming an effective and popular solution to warehouse auditing challenges. Cycle counting is our solution to regular auditing that ensures we remain compliant.
Inventory counting duties can be spread among multiple employees on separate days.
Prioritize your highest value products (those belonging to category A if ABC has already been completed) before assigning several employees or yourself (if you're working solo) the task of counting these products for part of each shift. Once again, how conservative your approach to inventory issues will determine how frequently you count.
Consolidate All Technologies Into One "Single Source of Truth"
With your expanding e-commerce business comes increased software bills, password lists, and browser tabs - and their management may prove challenging unless managed efficiently.
Consider that most successful online business owners use multiple platforms:
- Inventory management
- Accountancy
- Email marketing
- Billing
- Website
- Point-of-sale systems
All this needs to account for multiple channels of sales! You need to oversee all these platforms and monitor sales on Amazon, eBay, and Etsy, as well as any brick-and-mortar online shopping platform.
Under your desk, crawl into a ball as quickly as you can. Many modern inventory solutions, like ArionERP, allow integration across a number of platforms for seamless inventory management. ArionERP can connect seamlessly to all major systems - whether they're accounting software like ArionERP for point-of-sale purposes or CRMs like Salesforce for CRM CRM use. Solely using data warehousing allows your business to have one comprehensive source for all essential data that connects across platforms that are mission-critical for its existence and delivery.
Implement an Intelligent Picking Strategy
We have frequently mentioned in this blog time does not progress by minutes but seconds; picking products faster and with greater accuracy can often be key components to increasing profits and, ultimately, profits. Implement an intelligent pick strategy instead of printing out some paper and randomly walking around your warehouse, as this approach takes more consideration and takes less time.
Wave picking strategy involves organizing orders ahead of time for each day and grouping them based on set criteria before dispersing them into "Waves", with all workers working concurrently until completion.
Hyper Picking: We have come up with an innovative solution: Hyperpicking. Hyper picking, the digital equivalent to wave-picking, uses intelligent location and filtering technology from each wave-picking session to identify and select an ideal route for picking.
Hyperpicking gives managers the power to automate picking sessions by filtering orders with high priorities, or when used with physical bins, it allows picking to occur according to bin capacity. Filters can be especially beneficial during hyperpicking as they drastically cut fulfillment times. Managers can assign filters directly to employees so that pick lists are instantaneously updated rather than having to create them manually.
Integrate Quality Control Checks Into Your Shipping Workflow
Excellent customer service trumps any fancy inventory management technologies or processes: satisfied customers mean more sales!
Quality control is the final piece in the safety puzzle. It will determine whether customers have an enjoyable experience with you and the warehouse staff. Mistakes do happen, however, and products might only sometimes get picked, packed, and secured appropriately, or damaged items may become lost along the way. Eliminating 10% of errors makes all the difference between happy customers and disappointed ones.
ArionERP includes essential tools for quality assurance to assist users in taking extra measures to eliminate misspeaking and defective product shipping.
Physically Organize Your Warehouse Layout According to the Demand
As part of performing ABC analysis, it may come as quite a shock when discovering that high-value and most-wanted products are located the farthest away from processing facilities. What time could be saved by organizing your warehouse so that the products sold by best-sellers are within easy access to processing areas and shipping channels?
If customers tend to purchase similar SKUs (such as DSLR cameras and SD Cards) together, consider designing your warehouse so these products can remain close together.
What Exactly is Inventory Management in E-commerce?
E-commerce inventory management refers to the process of measuring the quantity, location, price, and variety of goods available for your business.
Inventory management encompasses much more than what was just described here.
- Coordinate the delicate balance between supply and demand and communicate with end users and suppliers.
- Visibility of products that are out-of-stock, overstocked, or in short supply
- Calculate per-pallet revenue potential.
- You can visualize and analyze purchasing patterns, seasonal factors, customer demands, and other variables to help you make smart business decisions.
Modern businesses must possess the capacity for intelligent inventory management - including lead generation or content marketing strategies - in order to remain successful.
The benefits of inventory control extend throughout your business. Still, unfortunately, many neglected this vital area, leading to revenue losses and the potential expansion of other parts of it.
Why is Inventory Management Necessary for Success?
Effective eCommerce inventory management is crucial to its success. It fosters good customer relations by eliminating customer frustrations such as out-of-stock items, incorrect shipping expectations, or sending the incorrect product(s). Success for any online business depends upon customer loyalty and repeat purchases. Inventory control is also integral for expanding businesses. Without such tools, managing multiple warehouses and employees may prove challenging.
ArionERP, an effective inventory management e-commerce company capable of handling rapid growth while organizing information about inventory, is an ideal way to facilitate this process. Inventory management can significantly boost revenue. Unfortunately, eCommerce operations businesses tend to overlook it for other "shinier" methods of creating revenue. Still, inventory management can be used effectively as an efficient and accurate means of cutting costs, improving efficiencies, and minimizing errors.
Why Implement Inventory Management Software?
Many readers may feel they need help with the inventory management process for online businesses. To help ease that transition process and help manage inventory effectively.
Inventory Management Software - A Rapid Growth Tool
As an experienced e-commerce entrepreneur knows, running multiple side hustle e-commerce ventures without an established platform is a large undertaking. ArionERP can offer several important advantages that it may bring, so let us explore them now.
Inventory management software as an accelerated growth Platform. ArionERP provides an effective platform to help manage inventory levels and expand products rapidly. Inventory workflows remain the same even as warehouses expand and product lines grow. ArionERP brings all your warehouse data, purchasing analytics, channel information, and channel sales into one central platform - making inventory replenishment effortless regardless of business size or industry!
Get Real-time Access to All of Your Channels
Can you provide me with the figures of your top-selling product comparison with brick-and-mortar stores and the per-pallet sales potential of the website? I'd be curious to learn the answers quickly from you - the faster I could access my information, the faster we could make decisions together!
ArionERP allows you to achieve this level of detail quickly. Furthermore, it helps prevent dead stock by assigning inventory directly to channels rather than mass-restocking products.
Reduce Lead Times Through Intelligent Picklists
Watching Amazon's warehouse on YouTube will demonstrate that inventory management should be measured in minutes rather than seconds. Time is of utmost importance, and ArionERP provides intelligent lists of picks and routes.
ArionERP sends customers comprehensive instructions when placing an order with them, providing information such as quantity and location of products along with picklists that guide as to the optimal way of collecting them depending on where the items reside in a warehouse. Picklists can be printed out or downloaded digitally to assist warehouse employees in processing orders quickly. Reducing waste improves warehouse operations while making customers happier.
Data Analysis and Insights
No one enjoys data analysis. But imagine if what you collect is directly related to your finances - that would make things much more exciting! ArionERPand IMS platforms provide access to analytics available at any moment from any device, providing instant insight.
Demand forecasting, demand-supply curves, and replenishment plans can all be accomplished easily at just the click of a mouse button. The reports not only make your life simpler and provide valuable direction on what needs to be done going forward but are a fantastic time saver and time saver! Analytics also enable you to determine when it would be wiser to reduce fulfillment efforts and prevent roadblocks at every stage of e-commerce.
ArionERP will transform the way you view data forever.
Intelligent replenishment insights
ArionERP's replenishment report goes beyond minimal viable stock by creating an automated schedule for replenishment based on specific business needs.
This report takes into consideration your preferred par level as well as customer purchasing patterns and projected demand, along with customized purchase orders for specific products or quantities. The App also allows users to place customized purchase orders.
The Value of Inventory Control in E-commerce Enterprises
Inventory management is vitally important to the success and growth of E-commerce businesses online.
Filling Customer Orders:
Inventory management solution helps businesses maintain adequate levels of stock for products customers want, which in turn results in fulfilling customer orders on time and correctly.
Cost Optimization:
E-commerce businesses find excess inventory expensive as it ties up resources or increases the risk of damage, leading to customer churn and unhappy clients. Inventory management services can assist businesses in reducing additional costs by managing and optimizing inventory levels to meet demand more easily.
Demand Forecasting:
In order to meet customer demands effectively, online stores need to anticipate demand accurately. Inventory management helps organizations analyze data in order to spot trends and predict future demand.
Avoid Overstocking/ Understocking
I am understocking, and overstocking both leads to increased costs, product obsolescence, and damage. Inventory management can help businesses find the balance between both extremes. It tracks stock levels and sends alerts when levels drop too low.
Enhancing Customer Satisfaction:
For online businesses, timely and accurate order fulfillment is paramount for increasing customer satisfaction. Successful inventory management plays an essential role in fulfilling orders efficiently and correctly - leading to higher levels of customer happiness!
Best Practices for Inventory Management in E-commerce:
Inventory control is fundamental for online businesses' growth and success.
Here are the best practices of inventory management for online commerce.
- Utilize inventory management software. Inventory software assists businesses by automating and streamlining the inventory management process. They allow businesses to track inventories, send alerts when levels drop below threshold levels, and gain insights into inventory patterns and trends.
- Demand Prediction: Precise demand prediction is necessary for efficient inventory control.
- Businesses can predict consumer needs based on historical information to accurately project demand for future products; additionally, analytics allow them to adjust inventory accordingly.
- Optimization of Stock Levels. Businesses should work toward maintaining optimal inventories that satisfy customer demand while minimizing inventory costs, using tools like Reorder Point or Economic Order Quantity to do this effectively.
- Prioritize Products That Sell Quickly: Businesses should prioritize products in high demand to ensure there are enough of these available to satisfy customer demands. Sales data and analytical tools can be used to establish which items sell rapidly and adjust inventory levels accordingly.
- Automating Inventory Tracking: Automating inventory tracking enables businesses to save both time and effort while eliminating mistakes in real-time visibility. Barcode scanning or RFID technologies provide businesses with accurate ways to monitor inventory movements accurately over time.
- Implement an inventory system to incorporate returns and damaged items: Inventory control is one of the cornerstones of online retailing, so businesses need to implement an inventory tracking and return system capable of managing both damaged goods and returned ones.
Tips for Effective Inventory Management in E-commerce:
Tips for Managing Inventory in Online Commerce:
- Conduct regular inventory audits. Frequent physical audits to check that inventory records are current and accurate will help detect discrepancies or errors within them, helping prevent stockouts or overstocking from occurring.
- Keep tabs on inventory turnover. By tracking inventory rotation rates, businesses can monitor slow-moving or obsolete stock. By understanding inventory turnover rates more effectively, they will make more informed decisions regarding inventory levels that do not eat up resources and capital.
- Forecast future demand with sales forecasting: Adjust inventory levels accordingly in order to satisfy customer demands while minimizing excess inventory levels. It will ensure businesses can manage to satisfy them efficiently while simultaneously minimizing excess stocks.
- Prioritise high-demand products: Give priority to high-demand items to ensure there are sufficient stocks on hand to satisfy customer demands and prevent shortages that result in sales losses. This will prevent shortages from stocking out too soon or going unsold altogether.
- Make use of just-in-time inventory management systems: JIT Inventory. In order to reduce inventory costs, consider adopting just-in-time inventory systems, which entail purchasing stock just before customer orders come through, which reduces excess stock levels.
- Use inventory management software: Automate and streamline inventory management using inventory management ecommerce software. They allow for tracking inventories, sending alerts if the stock drops too low, as well as gathering insights on patterns and trends related to inventories.
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Conclusion:
E-commerce inventory management presents numerous obstacles, from rapidly fluctuating customer demands, tracking inventory levels and managing them effectively, maintaining a balance between costs and levels, seasonal variations in inventory levels, and multichannel management of inventory to returns management.
Applying best practices, such as forecasting demand and optimizing inventory levels, prioritizing products that sell quickly, automating tracking inventory management systems, and creating systems to track returns/damaged goods, can enable online businesses to successfully manage inventory while cutting costs while improving customer service satisfaction.
