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Inventory Management in Ecommerce: What You Need to Know 
Inventory Management in Ecommerce: What You Need to Know 
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E-commerce Inventory Management: What You Need to Know 

If you’re new to selling online, then you might be asking, “What exactly is e-commerce inventory management?” 

The simple answer is that inventory is your stock, and e-commerce inventory management is how you source, store, and sell your stock. 

Understanding the balance of how much stock you have, the price you should sell it for, and where to store it is called inventory forecasting. While these terms are your baseline of inventory knowledge, there are several others that are crucial to understanding e-commerce inventory management.  

We’re breaking down the important facts to help you better manage your inventory. 

Inventory terms and what you should know 

In order to best manage your stock, it’s important to get familiarised with the big keywords. Understanding the business and strategy of e-commerce inventory management will make the process smooth and leave you sailing. 

  • Stock Keeping Unit (SKU): is an identification code used to classify and organize products. 
  • Variants: variations of the same product, such as a different color, size, etc. 
  • Supply Chain: the processes used in producing, managing, and distributing products. 
  • Dead Stock: inventory you have in stock but can’t sell anymore.
  • Buffer Stock: extra stock that’s used to limit risk if supply and demand are uncertain. 
  • Minimum Viable Stock: the minimum amount of product you need to have to keep up with consumer demand and complete orders without delay. 
  • Reorder Point (ROP): the predetermined level inventory must drop to before ordering more inventory. 
  • Lead Time: the time between when inventory is ordered from a supplier and when it arrives to the fulfillment center.
  • First in First Out (FIFO): an accounting method that assumes that sellable assets, such as inventory, raw materials, or components acquired first, were sold first. That is, the oldest merchandise is sold first, with its associated costs being used to determine profitability.
  • Just-in-Time (JIT): a fulfillment method where inventory orders are made just in time to keep up with demand from consumers. 
  • Dropshipping: a fulfillment method where you don’t actually store any inventory onsite. Instead, orders are fulfilled, and inventory is shipped directly from a third party to the customer. 
  • Inventory Auditing: the act of manually counting or checking inventory to ensure that it matches the numbers that exist within your tracking and automation systems. 
  • Inventory Forecasting: making informed decisions about ordering and reordering products based on historical data, trends, and seasonality in your business. 

The ins and outs of e-commerce inventory management 

In order to build a sustainable and profitable e-commerce business, it’s important to properly manage your inventory. If you start out poorly managing your inventory, it can be a challenge to overcome later on, for a business of any size or scope.

The keys to success are understanding the following:

  • When to reorder stock
  • How to reorder stock
  • How much stock to reorder
  • How long your supply can stay in or out of the warehouse

Overstocking and overselling 

Do your best to never run out of product. Calculating the right amount of product units (SKUs) needed at a given time is the most critical part of inventory management. If stock levels dip too low, it can cause a cascade of problems like losing out on potential sales, back-ordering, and customer service issues. On the flip side, there’s a downside to overstocking too. Imagine overstocking on a product that then is no longer popular or demanded by your customers. You’re stuck with what’s known as dead stock.   

Manual e-commerce inventory management prevents scalability 

You’ll be tempted to manage inventory manually to save costs if you’re starting out. However, this prevents you from scaling in the long run. You’ll want to streamline these processes early on to avoid disorganization and keep up with your customers’ ever-growing demands. 

You’ll want to avoid doing these manual inventory management traps:

  • Using offline spreadsheets to track inventory numbers 
  • Using separate tools that aren’t integrated or synced with each other 
  • Using an offline program that can’t provide you with automatic real-time updates 
  • Using a paper and pencil method to track and fulfill orders 

Overcoming Challenges

Some challenges are unavoidable, but there are some tips and tricks that can help you to overcome them. Start by forecasting for the future. By tracking and managing your inventory storage levels and output flow, you will be better able to plan for demand. If you monitor your inventory trends on a monthly, quarterly, or even unit-to-unit basis, you’ll be better able to keep up with sales.

Forecast for the future

By tracking and managing your inventory storage levels and output flow, you will be better able to plan for demand. If you monitor your inventory trends on a monthly, quarterly, or unit-to-unit basis, you will likely be more able to keep up with sales. 

Plan for the unexpected 

Supply chain issues like delayed inventory from the manufacturer, unexpected sell-out of a product, running out of storage space, and cash flow problems are unavoidable. Preparing for them by analyzing your inventory and creating a contingency plan can help prevent the adverse effects they can cause to your bottom line.  

The benefits of e-commerce inventory management

  • Increased sales 
  • Increased information transparency 
  • Shorter lead times 
  • Lower costs in the long-term 
  • Improved Delivery performance 
  • Increased productivity and efficiency  
  • Accurate and efficient planning 
  • Decreased Stock-outs 
  • Increased customer loyalty 
  • Increased inventory turnover 

When you’re managing your inventory and supply efficiently, it creates a more customer-first approach in your e-commerce business strategy. It focuses on giving people the products they love and want, without having to wait.  

Having too much inventory could cost a lot in storage fees. That money could be better spent on branded materials, earning goodwill with your customers by replacing lost or damaged goods, and absorbing expedited shipping costs. Fees vary by fulfillment center and depend on how many units you keep in stock. Preparing your inventory based on the forecasted needs and demands of your customer can help you save money on storage fees which can allow you to put money towards other aspects of your business. The long and the short of it — it prevents waste, saves costs, and saves time. 

Amazon Prime Day 

Unless you’ve been hiding under a rock, you’ve probably heard that Prime Day has been officially announced for June 2021. With the big day around the corner, it’s time to decide if you’ll participate, and how to prepare if you do.

If you’re stuck on inventory cut-off deadlines, we have just the tool for you. Check out our exclusive calendar which has all of the important Amazon Prime Day inventory cut-off deadlines below.

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