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A reliable point-of-sale (POS) system is essential for business success today. Setting it up isn’t…
Read More >>For growing online stores, ecommerce inventory management can make or break the operation.
Poor inventory management causes numerous problems for ecommerce sellers: Stockouts, long order lead times, overselling, etc. And this often leads to ecommerce business killers like customer ratings and cash flow issues.
The problem is ecommerce inventory can spiral out of control as you scale and sell across multiple channels.
Fortunately, following best practices and ecommerce inventory management software takes a lot of the complexity out of stocking an online store. Using inventory software, for example, you can simplify fulfillment, cycle counting, and replenishment. Plus, the best inventory techniques will help you greatly improve efficiency.
Learn the keys to effective ecommerce stock management. Our guide takes a deep dive into ecommerce inventory management best practices. Plus, find practical techniques to avoid ecommerce stockouts, warehouse chaos, and overselling.
Ecommerce inventory management is the process of overseeing and controlling the flow of goods in your online store.
This includes everything from ordering and receiving products to storing them, fulfilling orders, and tracking stock levels. Effective inventory management ensures you have the right amount of stock on hand to meet customer demand, while managing storage costs.
Many ecommerce stores manage inventory with spreadsheets or basic inventory software. However, when online stores scale – e.g. selling on website, marketplaces, and at pop-up shops – chaos follows:
Effective ecommerce inventory management processes fix this. The best ecommerce inventory management software can help you reach 95% inventory accuracy, which is near-perfect.
Knowing and trusting your inventory records can help you avoid the most common ecommerce inventory problems. Some of the benefits of accurate inventory in ecommerce include:
1. Improved customer satisfaction: By fulfilling orders efficiently and avoiding stockouts, you keep customers happy. Out-of-stock or backorder issues, late delivery, and receiving wrong items are among the most common reasons for bad ecommerce reviews.
2. Reduced costs: Optimized inventory levels minimize storage carrying costs and prevent dead stock (e.g. warehouse stock that’s no longer sellable). For example, an ecommerce strategy like Just-in-Time inventory management will help you focus on ordering only what’s needed at the exact right time.
3. Increased cash flow: Having the right inventory reduces the need for large purchases, freeing up capital. For example, if multiple items sell out at the same time, you’ll have to large orders.
4. Better decision-making: Data-driven insights from inventory management software inform purchasing and marketing strategies. Want to know which products you might carry by season? You can review historical inventory data to learn when the seasonal sales bounce starts.
Compared to brick-and-mortar retailers, ecommerce shops face some different challenges when it comes to inventory. The 4 biggest inventory challenges in ecommerce are:
Traditional demand forecasting methods struggle with the rapid shifts in demand seen in ecommerce. A viral marketing video might send sales soaring, but the growth is unsustainable. This can send your forecasts awry.
Therefore, ecommerce businesses need to find ways to incorporate real-time data and external factors like web traffic and conversion rates for more accurate predictions.
Customers expect a unified experience across all channels (online, in-store, and on third-party marketplaces). However, ensuring your inventory data is legitimate across every channel (especially if you’re juggling 3 or more), is difficult.
This requires businesses to have a unified view of inventory, sometimes called real-time inventory, across all locations and platforms to avoid stockouts and overstocking.
The rise of fresh food grocery ecommerce and meal kit delivery services presents a new set of challenges. Therefore, food ecommerce shops need to choose customizable ecommerce inventory software that can track specialized data and optimize inventory processes.
This allows them to track data like spoilage rates, ensure proper storage conditions, and optimize delivery routes to minimize waste.
Ecommerce shoppers today expect your shop to offer easy refunds and returns. This is especially true in the clothing industry.
However, managing refunds adds another layer into your inventory management. Therefore, ecommerce businesses need tools that allow them to track returns and restocking, as well as integrate potential returns into inventory planning.
Inventory starts when you place a wholesale order, and businesses need to track inventory throughout the entire cycle. The process is different for every business and depends on the items the business sells.
Here’s a simplified breakdown of the ecommerce inventory management cycle and how :
1. Inventory Delivered: Your supplier delivers products to your warehouse. Using software, orders can be scanned, and warehouse location logged.
2. Inspect, Sort, Check-in: Received goods are inspected, sorted, and added to your inventory management system. Receiving staff can be directed through an inspection checklist using software.
3. Monitor Inventory Levels: Track stock levels in real-time to identify potential stockouts. Once orders are checked in, they’re automatically added to your inventory.
4. Take goods from stock: Picking and packing teams retrieve products from the warehouse to fulfill customer orders. Ecommerce inventory tools automate picklist generation, as well as order accuracy verification.
5. Update Inventory Levels: Inventory levels are automatically updated after each sale. In addition to providing real-time data, software can also alert you to discrepancies between actual stock and system records.
6. Low stock triggers purchase order: The cycle restarts when inventory reaches a predetermined minimum level, called a reorder point. You set reorder points for automated replenishment. The software creates a purchase order when the reorder point is met.
7. Stock orders approved: You review and approve the purchase order and send it to your supplier. You can manually adjust the order in the software, and once approved, the software can electronically send to the supplier. Then, the cycle starts again.
Inventory management processes vary from business to business. But there are some basic principles to follow.
Here are general guidelines for how to set up and manage ecommerce inventory processes:
Step 1 would be preparation. If you were just launching an inventory platform, you would start with these tasks:
Once you’ve established item-level protocols, you can begin to actively manage ecommerce inventory processes. Here are some tasks to focus on:
Finally, you’ll want to regularly analyze your data to find opportunities.
An effective inventory management plan is crucial for any ecommerce business. Here are some key strategies to optimize your stock and ensure smooth operations:
By implementing effective inventory management strategies, you can streamline your operations, improve customer satisfaction, and gain a competitive edge in the ecommerce landscape.
However, it is next-to-impossible to do without the right software tools. FTx POS includes ecommerce inventory tools. Our ecommerce software offers key advantages:
Bottom line, FTx POS offers all the functionalities you need to scale your operation (both in-store and online).
See FTx POS in action. Schedule a demo today to learn how FTx POS can help you better manage your ecommerce processes.
Costs vary depending on the features offered, storage capacity needed, and the number of users. Pricing models typically include monthly subscriptions or pay-per-user fees.
Most inventory management software is user-friendly and offers intuitive interfaces. Many providers also offer training and support resources to help you get started.
A reorder point is the minimum inventory level that triggers an automatic purchase order to avoid stockouts. Inventory management software helps you calculate reorder points by considering factors like sales velocity (average daily sales) and lead time (time it takes to receive new stock). The software can then monitor your stock levels and automatically generate purchase orders when the reorder point is reached.
Some inventory management software offers built-in forecasting tools that analyze historical sales data and identify trends. This can help you predict future demand for your products and adjust your inventory levels accordingly. This can be particularly helpful for seasonal businesses or those with products with fluctuating demand.
Learn more about this topic. See these related posts on the FTx POS blog.
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