Inventory Management is the backbone of eCommerce success. You have to understand the importance of Inventory Management with it’s the ins and outs. Unorganized or poor inventory management can leads towards you out of business. As the year progresses, there are new techniques and inventory management concepts that guide you to optimize inventory for the streamlining business.

Here, we are sharing with you a brief overview of Inventory Management and guide you for the challenges of the eCommerce owners may face. Finally, we assist you with the easily applicable best practices and recommendation that you can apply to optimize effective inventory management for your business.

1. Overstocking Or Under fulfillment
2. Manual Inventory Management
3. Lack of visibility
4. Lack of insights
5. Understand basic product category demand
6. Forecast future demand based on past sales
7. Set initial minimal stock levels
8. Prioritize products with an ABC analysis
9. Gear up for seasonality
10. Implement inventory management software

Inventory Management Challenges

Every eCommerce business owners meet with the inventory management challenges into their business. Knowing them ahead of the time with the actionable best practices helps you to manage inventory and grow your business. Here are some of the most common challenges that can affect the profitability, customer experience, and growth of the business.

1. Overstocking Or Under fulfillment

If you can’t decide on the time about the inventory requirements and orders estimation. You may fall in a situation where you ordered and stored more inventory then the requirement or you shortfall with the inventory that leads to customer dissatisfaction. It is the expectation to keep a large inventory on hand, especially you are approaching a busy season.

• It is expensive to stock more inventory: You need to store all the products what you’ve ordered from the supplier. You require ample space to store all of them.
• Deadstock on hand: Deadstock refers to the inventory that you can’t sell on-time. It may be because you stocked more, and there is less demand in the market. Another reason it may be when the product expires or depreciate over time. It may be because of market trends, or shopping behavior is change.
• Under fulfillment Order: It may be possible that you failed to judge the products requirements and does not have enough stock Or you sell more out of stock products. In both cases, you cannot fulfill all orders, and your reputations are online in this scenario.

Today, customers want clear visibility when they receive the product what they are ordering from an eCommerce store. You have to pay a considerable cost for overselling the products. A quick and easy fix is to show product In-Stock or Out of Stock with available quantities on the product page.

2. Manual Inventory Management

When you are a startup, or you are in the early stage of building your eCommerce business, it is possible that you can control your inventory manually. In such cases, you can control and manage inventory across all sales channels without any issue. However, you cannot grow your business with manual inventory management. Sometimes you do not meet the growing demands of your products and start losing eCommerce business. To scale eCommerce business, you have to sell products on multiple sales channels, like Amazon, eBay, Walmart, Wayfair, etc. It requires to work with multiple partners, vendors, and manufacturers with multiple warehouses across the country. You cannot take such steps to scale your eCommerce business with manual inventory management.

Manual inventory control involves:

• Use of pen and paper to manually track inventory
• Use of offline spreadsheets to track inventory
• Use of separate inventory tool that isn’t integrated or synchronized with eCommerce and not provides automatic real-time data.

As described earlier, you can use a manual process for Inventory management to minimize cost and save many for your eCommerce startup business. It is utmost important that you can take a right call to scale your business with automated real-time inventory solution.

3. Lack of visibility

Lack of visibility is one of the most common problems that eCommerce business owner faced. It happens with all growing businesses where an increase in product demand creates more complex Inventory management issues.

• Lack of visibility across multiple sales channel: To grow eCommerce business, you have to sell products on sales channels (Amazon, eBay, Walmart, Wayfair, etc.). You cannot provide accurate inventory to each of them and manage orders effectively unless you have inventory management software.
• Lack of visibility across multiple warehouses: With a growing eCommerce business, you may require partnering with more manufacturer and warehouses to meet with the increasing demand. You have to make sure that you have on hand and easily accessible inventory that you can use when demand suddenly increases. Here also, without inventory management software, you cannot manage everything from one place.

Without visibility and inventory management software, it is not possible to take any inventory related decision that grows your business and meet with customer demands.

4. Lack of insights

The final and most crucial inventory management challenge is Data Insight. To grow your eCommerce business and take the right decision at the right time, you must require accurate data insight.

In order to grow eCommerce business, boost profits and cater to the needs of customers you have to understand the inventory supply and demand over time, how demand is changing over time and forecasting affected with demand. There is some crucial decision that you can take with the help of data insight – when to reorder products and when to scale back on products.

Businesses require inventory data as and when required to capitalize and emerging opportunity. Without centralized Inventory management system, it is not possible.

Getting started with inventory management

Now that you understand some of the concepts and challenges relating to inventory management in eCommerce, it’s time to take action. To build an optimized inventory management system at your eCommerce business, consider the following steps:

5. Understand basic product category demand

The first step to getting a better handle on inventory management, especially if you're launching a brand new eCommerce store is to understand how demand varies over the time for your product.

Google trend is one of the tools to look for how search demand and interest changes periodically.

If you have established eCommerce store, then another tool to look for is Google analytics. It shows which pages and products your audience visits the most and how long they spend there. This insight will help you to evaluate which of your products interest your visitor's attention and which are popular products and require more stock.

6. Forecast future demand based on past sales

The second step to optimizing inventory management is to forecast future demands that include seasonal demand as well. For this, go through at the past sales record and determine when the demand and interest were the highest. Also, look for significant selling opportunities throughout the year like holidays, special events, and plan increased demand. Accordingly, order and store inventory to prevent out of stock during peak time. In case if you don't have any sales history, then refer analysis, you performed using Google Trends and Google Analytics.

7. Set initial minimal stock levels

For running an eCommerce store, you should set minimum stock levels for each product. Remember your agenda is to determine the lowest possible inventory you should have to meet the demand and avoid any delays in fulfillment. To reach your target, you'll need a better understanding of demand and the time it takes to replace out of stock inventory. Get new inventory ordered when quantity gets down. Think of this activity in the first place. Do not bother about adjusting this number over time as you experience increasing or decreasing demand from consumers.

8. Prioritize products with an ABC analysis

To increase efficiency and save money, take the time to prioritize products using the ABC analysis.

It is a method for prioritizing your existing inventory using three categories:

• high-value products with low sales numbers like sporting equipment.
• mediocre value products with nominal sales like electronics & jewelry
• low-value products with high sales numbers like clothing and food.

Importance of this analysis is to understand which products need the most attention from you from an inventory management perspective.

9. Gear up for seasonality

If you have an eCommerce business that will take advantage of a particular shopping season like holidays, summer or any special occasion then prepare accordingly. Keep inventory levels low during slow months and near the end of a peak season, promote special offers to sell off the majority of inventory to avoid consuming too much of dead stocks. Cut down the operating cost as long as possible and while the business is slower use that time to ensure if everything is in a place like, warehouse storage, tools, partners for assured smooth and successful sales period.

10. Implement inventory management software

In order to develop and scale an eCommerce business, you must invest in Inventory Management Software. It helps you to sync inventory tracking across all the channels, shows real-time inventory data within a single dashboard system. Ensure that you never go understocked or overstocked. It allows you to leverage valuable insights that you can use to take advantage of opportunities, boost sales, and grow your eCommerce business.

Think about your inventory management strategy

When you think of improving inventory management for your eCommerce, ask yourself a few questions. Like, how is your current approach towards inventory management at your business? What are the challenges you are facing and how you can overcome? Answers to these questions will help you to understand how you implement the inventory management system and help you to grow your business and fulfill your customer's needs.

1. Overstocking Or Under fulfillment
2. Manual Inventory Management
3. Lack of visibility
4. Lack of insights
5. Understand basic product category demand
6. Forecast future demand based on past sales
7. Set initial minimal stock levels
8. Prioritize products with an ABC analysis
9. Gear up for seasonality
10. Implement inventory management software