eCommerce Inventory Management and Its Impact on Business
Running a business is a task that needs a set of rules and working methods to handle every aspect of its operations. In this guide, we will mainly focus on the inventory aspect of eCommerce. A retail business inventory management could be easier compared to eCommerce as the main difference between the two is the physical location. So let us get right into it.
What is eCommerce inventory management?
The concepts of “Inventory” and “Inventory Management” might seem very similar but they actually have some distinct differences. Inventory management is not just storing products effectively to sell to your customers. It is also about creating a system that allows you to source and ship the inventory efficiently. A strong inventory management system will help you reduce your operational cost and turnaround time.
How to establish eCommerce inventory
Establishing a management system requires you to keep various factors in mind and also be better prepared for the unexpected. Let’s go through some of the ways to create an effective eCommerce inventory management system.
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Understand the demand for your product
To start with, the most important aspect of inventory management is to understand the demand for the products you offer. Remember, this is not predicting the demand, but rather understanding the demand. If you are a new business, you can do this effectively with Google trends and understand the data of previous years to see the fluctuations. Once your business is running, the latest data can be used to interpret your product’s future demand using Google analytics.
Set minimal stock levels
One of the main goals here is to keep the stock at such a level that you can meet your demand and provide the best turnaround time possible. This will require a good understanding of your product demand and how quickly the items can be re-stocked.
Be ready for festive and seasonal change
Understanding seasonal and festive changes are important. You will see that the demand for a few products increases and others decrease during holidays, summers, or winters. So with such a change, you must do your best to make predictions and manage your inventory accordingly. Understanding when to place an order with your suppliers is also part of this process. For example, if the Christmas season is near, people will demand more products based on a Christmas party theme, so you can stock related products such as Christmas party decorations, custom-made balloons, festive t-shirts, and many more things to make their event memorable with your products.
Prioritize your products
It’s important to understand which products need to be stocked and how much. You might not need to stock many high-value products, for example, refrigerators, compared to low-value products like clothing.
- Products with a high value and a low sales frequency.
- Moderately frequent sales of moderate-value products.
- High frequency of sales for low-value products.
Distribute your products in these categories and you will be able to manage your inventory much more effectively.
Use inventory management software
It’s also worth considering using inventory management software. Many aspects of inventory management can be tracked with software that will allow you to work with precision and manage your business more effectively. This will reduce your manual work and can be very useful for established eCommerce. This will ensure you do not overstock and sales are boosted, all while keeping track of it.
Do an inventory audit
Doing an audit of your inventory will help you to track the things that are available, and what you need to restock. It’s also an essential process to stay on top of the financial side of things. It helps the business to understand the inventory being used more clearly and how the whole process is working. This will help to give you insights into where you can improve.
Challenges while managing inventory
Let us discuss what kind of challenges you might face while establishing an inventory management system. This will give you a heads-up on how to handle these challenges and not let them affect your growth.
- Overstocking and overselling can be a frequent challenge if you are not able to understand the demand and supply for the product.
- Finding the right time to scale can be challenging and could backfire if the timing is wrong.
- Lack of product visibility across multiple platforms, as it gets difficult to track you might not effectively use all the platforms to make your product visible at all times.
- Adapting to using inventory management software can be challenging for new users or people lacking tech skills. However if implemented properly, it can enable you to understand data and grow your business.
These are some of the best insights you should consider before starting your eCommerce brand. Even if you have already started it’s never too late to adapt to change. As you practice this skill, you will get more proficient. You be able to manage your inventory more effectively and reap all the rewards that come with it.
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