Nowadays online shopping is becoming more popular than before. Many people changed their shopping habits from traditional to online purchases.
However, managing an online store for a business needs more tools and features than just shopping online. For that, you must use effective inventory management to maintain your store smoothly.
So, when you choose an e-commerce platform you need to consider the best inventory management and tools for your online business.
This helps to keep track of the products you have, make sure you have enough quantity, and not have too much that you are unable to sell.
With the support of good ecommerce inventory management, you can run your business easily and keep customers happy.
In this article, we will explore Inventory management for ecommerce business, why it’s important, and how you can use these tools effectively.
What is Inventory Management?
Ecommerce inventory management is the complete process of ordering, storing, tracking, and controlling your products in a shop or store. For an online store, this entails understanding what products are in stock, what must be reordered, and what is selling well.
The best inventory management makes sure that you always have the correct quantity of products for your customer’s demand without keeping too much overstock.
Why is Inventory Management Important?
Ecommerce Inventory management is one of the most important and valuable assets for any kind of online business. Because it helps you to organize your business to run the correct way without wasting money and time.
So, let’s see how inventory management for ecommerce business supports you to increase performance.
Fulfill customer demand
You can easily understand the needs of your customers by analyzing your inventory management. Once you know the fast-moving products, you can keep the necessary quantity and fulfill your customer’s demand. Otherwise, if an item is out of stock, you lose the sale, and the customer may buy elsewhere.
Reducing costs
If you keep too much stock can be expensive. So, you must spend more money on that and there is a risk if the products may not sell. Implementing reliable inventory management for ecommerce business, can reduce unnecessary expenses and improve profitability.
Improving cash flow
Perfect ecommerce inventory management helps you keep your cash flow steady. Because you are not going to spend money on unsold products. So, you can invest the money in other parts of your business.
Enhancing efficiency
With the best inventory management, your operations run more smoothly in your business. It is possible to process orders faster, reduce errors, and boost overall efficiency.
Improve customer experience
When customers find what they want in stock and place their orders very quickly, they are more likely to return and recommend your shop to other people. Effective inventory management is key to providing a great shopping experience to your customers.
What are the different types of inventories?
An ecommerce business or any type of other business consists of many types of inventories to pay attention to. Even if there are many inventories depending on your business you must have to consider some types of inventories for your business.
Inventory types for manufacturers
As a manufacturer, you need to think about 5 important inventories such as raw materials, work in progress, finished goods, MRO, and packing materials. Let’s see one by one in detail.
Raw materials inventory: The basic materials that are used to produce products for selling online. Raw materials are the starting point of the production process for any product.
Work in progress inventory: Products that are not finished but are still in the manufacturing process.
Finished goods inventory: These are products that are finished every process during the manufacturing time and are ready for sale to customers.
Maintenance, repair, and operation inventory (MRO): Not part of the final products, but these items are needed to support production in case of maintenance, repair, and operations.
Packing materials inventory: Packing materials is more important for any business. Without these goods, you can’t deliver any products in perfect condition. These are the products that are usually used to enclose the goods that are ready to deliver to the customer.
Inventory types for ecommerce businesses
In an ecommerce business as a retailer usually, you should focus and track mainly only one type of inventory called merchandise inventory and others are subcategories of merchandise inventory.
Merchandise Inventory: The products that are in stock and ready to sell to the customers, purchased as finished goods from a manufacturer or wholesaler.
Safety stock: Safety stock covers the business in case of unexpected demand or supply chain issues to prevent stockouts. These are extra stocks that are kept in hand to maintain consistent output.
Cycle stock: These are the goods allocated to meet regular sales orders, during a certain period.
Obsolete inventory: The products that are not sellable due to expiration or no longer in demand or any other reasons.
Anticipatory stock: Stock that is purchased and stored for anticipation of future demands such as seasonal trends or upcoming promotions. This is also called seasonal inventory.
Perishable inventory: These products have a limited shelf life. Therefore, the goods must be used or sold within a certain period.
Psychic inventory: These products are not for sale, but are used for marketing purposes such as displays, free samples, etc.
Transit inventory: Also called Pipeline inventory the goods are in the transportation from one location to another, such as from supplier to warehouse or retailer.
Consignment inventory: This is such a different inventory than others. Because the goods are stored at the retailer’s location, but owned by the supplier until they are sold to the customers.
Drop shipping inventory: This inventory is managed by the suppliers who directly ship to the customers, but the order process is handled by the retailer with an ecommerce platform.
How does inventory management help in ecommerce?
Poor inventory management for ecommerce business can lead to lost sales, profit, and customer trust. Ecommerce platforms are the tools that support businesses selling products on the internet for global customers.
These platforms usually come with built-in inventory management solutions, or you can integrate with third-party tools to help manage the stock of your online store.
Real-time inventory tracking
Ecommerce platform updates product quantity in real-time. This means when a product is sold, the inventory is automatically adjusted to the quantity on time. So, you can maintain the quantity of products without overstock.
Centralized data management
Product management, sales tracking, and stock reordering are easier to handle because all the inventory information is stored in one location.
Accurate inventory management for ecommerce business ensures to make decisions quickly about which products are selling well and need to be reordered. Also, you can analyze everything in one dashboard.
Automation
Many inventory management systems automate processes such as reordering stock, tracking shipments, and updating product information. Automation in inventory management for ecommerce business can reduce human errors, save time, and increase efficiency.
Multi-channel selling
Ecommerce platforms allow businesses to manage their inventory from a single dashboard and sell through many channels such as their own website, Amazon, eBay, etc. So, you can sell your products everywhere and maintain your stock levels easily in one place.
Key Features of Inventory Management Solutions
As I already mentioned inventory management for ecommerce business is very essential to growing your online store. Then only you can track and manage your business.
For that, your inventory management includes some key features provided by the ecommerce platform to run your business smoothly. Here are the important key features of inventory management.
Product catalog management
This feature allows businesses to create and manage product listings with descriptions, images, and prices. Not only that but also, it is easy for customers to find what they are looking for and simplifies the process of managing the product lineup.
Inventory alerts and reordering
Ecommerce Inventory management solutions help to get alerts if the stock levels are low. When the stock is running low, automatically the system will send you alerts through email or SMS. Also, it can automate reordering the of low-level items, so you never run out of high-demand products.
Order management
Assists with order tracking from the movement they are placed until to delivered to the customers. This covers processing payments, updating inventory, and managing returns.
Warehouse management
For businesses with physical stock these tools support managing the warehouse including organizing products, tracking their location, and optimizing the picking and packing process.
Reporting and analytics
Reporting and analytics are essential to run a business successfully. For that ecommerce platforms provide useful tools to analyze sales trends, inventory turnover, and customer behavior.
These data help you to make complete decisions about your business that what products to stock, when to reorder, how to increase sales, how to clear unsold products, etc.
Ecommerce Inventory Management Methods
Effective inventory management is more important to the success of any products-related business, especially in e-commerce. Here are some methods for utilizing ecommerce inventory management solutions effectively.
Regularly update inventory data
Make sure that the inventory levels are updated regularly to analyze sales, returns, and new stock. This will help you to maintain accurate records and avoid stockouts or overstocks.
With this data, you can expand your business or invest the correct amount of money without spending too much in the future.
Set reorder points
Set minimum stock levels for each product on your system. When inventory goes below that level the system should notify you to reorder. By using this feature your business always has the correct amount of stock on your hand to meet customer demand.
Use ABC analysis
ABC analysis is a very useful technique to optimize and manage better the business. All the products in your store’s inventory can be divided into three categories.
- A – High-value items with low quantity
- B – Moderate value items and moderate quantity
- C – Low-value items with high quantity
By using this method your store always has the most important items when they need them. This helps to improve overall business efficiency and reduce costs and losses.
Implement FIFO (First In, First Out)
First in, first out means the products which are received first to your store, are the first delivered to the customers.
This method will be very useful to people who are dealing with perishable or need to sell fast items. By doing this method you can reduce waste and save more money.
Conduct regular audits
Every business requires a regular audit of the physical stock and inventory records to check for discrepancies. As well as you need to check the financial records with inventory records. This helps to find and eliminate inventory problems early.
Conclusion – Inventory Management for Ecommerce Business
An effective ecommerce inventory management system is essential for any type of ecommerce business. It helps to make sure that you have the correct quantity of products to meet your customers’ demands to fulfill their needs.
Not only that but, you can also analyze your whole business through your inventory management system to make the right decision.
Now ecommerce platforms provide integrated inventory management solutions with powerful tools to streamline your business operations and improve overall business performance.
By choosing the perfect solution, and regularly following the methods mentioned above, you can build a robust inventory management system that supports your business growth and enhances customer satisfaction.
In this fast ecommerce world choosing the correct Inventory management for ecommerce business is the key to staying on top of your business and competition.
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