Ways to manage inventory for your eCommerce website
Online stores are certainly increasing by each passing day. Consumers are being more drawn towards them as a means of shopping. Well, that doesn’t mean traditional brick and mortar stores will cease to exist. The online stores run like any other business or company, it’s just that most of their business activities are conducted online.
One important aspect of any store both online and offline is proper inventory management as inventory holds back a lot of money. There is always some physical inventory which is kept either in the warehouse, stock room or any other area. Managing the inventory in these areas can be simple to be a difficult task depending on the size of your inventory. To keep track of your products, it is essential to know which products are in high demand and need immediate replenishing and which products can wait. The way you manage your inventory can either make or break your business.
What is Inventory Management?
Inventory management is the act of keeping track of a company’s stocked goods and monitoring their weight, dimensions, amounts, and location. If a product is in stock, it’s counted as part of the business’s inventory and managed as it moves through the supply chain.
Knowing what’s currently in the inventory, how many units of the product have been ordered, and how many units of the product is shipping and receiving is all part of basic inventory management.
Inventory Management Techniques
eCommerce companies can manage their inventory in several ways that can help them their business to grow. Here are a few inventory management techniques
1. Stock Control and Inventory
Companies usually aim to minimize the required investment to stock inventory while maintaining operations and controlling both waste and surplus. But one should also have a minimum level of inventory at all times and if it falls below it, it’s time to order more. Effective inventory management can help reduce costs, keep the business profitable, analyze sales patterns, predict future sales, and prepare the business for the worst-case scenario.
Provide Supply and Demand Balance: This means ensuring that consumed items are replaced, and seasonal items are cleared out. Businesses must keep track of demand of the products in the market to maintain the balance of product supply.
Provide Safety Stock: Inventory management is used to ensure that there is no excess and shortage of required products. But at the same time, it also has to ensure that safety stock exists if any unexpected situation occurs.
Provide Geographical Specialization: It’s essential to utilize the particular aspect of a location when it comes to stock inventory. It’s possible that certain areas may have less cost of labor and transportation or there is less demand in the area.
Just-In-Time inventory management technique stocks a product each time a consumer orders it, so the volume of your inventory is more or less equal to the number of orders you are filling.
Benefits of JIT
- The advantage of this technique is that business has to manage only the products it has to ship to the customers. To run on this technique long term, a business has to anticipate the inventory needs in advance.
- JIT helps organizations save on inventory holding costs by keeping stock levels low and eliminates situations where deadstock remains in warehouses for months. It also has to handle a much shorter production cycle.
3. First-In-First-Out (FIFO)
First In, First Out (FIFO) means the first products your inventory receives are the first to be shipped out to their respective customers. It means that your oldest stock gets sold first, and not your newest stock. In order to manage a FIFO system, you’ll need an organized warehouse.
This technique ensures products don’t sit in your inventory for too long before they’re delivered to a customer. Basically, it ensures people get the freshest inventory possible. FIFO is popular in the food industry, where businesses are up against the expiration dates of perishable items and need to ship food while it’s fresh.
In consignment wholesaler place stock in the hands of a retailer but retaining it’s ownership until the product is sold, at which point the retailers purchase the consumed stock.
Benefits of Consignment
- Offers a product range
- Return unsold goods at no cost
Drop shipping is basically an anti-inventory. This inventory management techniques eliminate the cost of holding inventory. In a drop shipping, we can directly transfer shipment details to the manufacturer or wholesaler, who then ships the goods. Drop shipping is beneficial for businesses who don’t have their own storage space. But it is also important for one to communicate with the shipping party for delivering products on time. Many wholesalers and manufacturers consider dropshipping as a service.
Benefits of a drop shipping scenario:
- The good earning potential with an arguably low barrier to entry.
- For small or one person businesses, you just need internet and laptop and you can operate from wherever you want.
- With drop shipping, you don’t have to invest in inventory, material, and tools and save huge costs.
- You buy from suppliers only after you’ve already made your money.
6. ABC analysis
Use ABC analysis that will let you prioritize your inventory management by separating out products that require a lot of attention. ABC analysis groups a business’s products into three categories based on a product’s importance.
- Category A: High-value products with a low frequency of sales.
- Category B: MOderate value products with a moderate frequency of sales.
- Category C: Low-value products with a high frequency of sales.
This technique allows businesses with a categorize variety of products to easily prioritize the contents of their inventory.
7. Demand Forecasting
This inventory management system creates long term forecasts for when the sales of each product you sell will fluctuate. One way to conduct a demand forecasting is to look at last year’s sales report and use them as a guideline for suspecting your inventory to change over.
Benefits of Inventory Management Software
1. Achieve Efficiency and productivity in operations
You want efficiency in managing your stock levels so that your business is efficient and productive. With the help of inventory management software, you will be able to monitor and analyze sale reports. Simple analytics and reports can help you see what products are selling fast through your multiple sales channels. This helps you make smarter stock keeping decisions
2. Automation of Manual tasks
Inventory management software should automatically split landed costs by the proportion of the purchase cost of the product, saving you time, effort and mistakes. Customer checkout their purchases using an online cart. These purchases are automatically entered as sales orders in your system. This saves you selling time and needless data reentry.
3. Minimize costs, maximize sales and profits
You need to manage orders across your sales channels to minimize the loss of sales. Inventory control is also crucial if you want to minimize the carrying costs of holding stock as keeping stock in warehouses is expensive.
4. Integrate your entire business
Firstly, manage users in the software so that you can easily create user accounts for each staff in your company’s departments: management, administration, sales, purchasing, and fulfillment. You create job roles and then assign user permissions to each user. Thus, they only have access to modules and functions for their job responsibilities.
Secondly, for the fulfillment, your operations team can easily create a shipment and pack all the products in the sales order. They can also issue picking and packing lists to the warehouse team to ship. When the order has been received by the customer, they can then mark it as delivered.
Finally, your accountant can filter sales orders by their shipment status. They can then issue invoices for those orders that have been shipped. These same customer invoices can be quickly listed and marked as paid when payment is received.
As you can see you can’t manage your business without competent inventory management technique and software. You must choose one that works for you and your business.