Inventory Management For Ecommerce: A Complete Guide

Ecommerce inventory management is a complex procedure involving huge product movements, tracking, resourcing, and planning. If you are still using old-school manual inventory management solutions, you are at high risk. 

So, can efficient ecommerce inventory management practices help you increase your business sales from $1 million to $100 million?

Let’s get the answer to this with a practical example!

Imagine yourself as a Super Market Store Owner.

Now ask yourself these few questions:

• Are your popular products consistently available for customers? 
• Is your inventory consistently stocked both on shelves and across online platforms?
• Are you able to fulfill the demands of customers regularly?
• Are your customers satisfied with the product quality?

If yes, then you are following the best inventory management practices for ecommerce business.

With the predictions saying that 24% of retail purchases are moving to online platforms, it is worth saying that you need to adopt such e-commerce inventory management practices that help you establish a scalable and sustainable e-commerce business. 

An inventory management system is the backbone of your e-commerce business, even when if you have only fewer customers to serve. Poor e-commerce inventory management will not only lead to dissatisfaction among customers but also cause huge challenges in e-commerce business management. 

As inventory is the biggest budget eater and success-driving element of your e-commerce business, you need to look for the best practices to streamline inventory management.

Seeking an efficient e-commerce inventory management process? Hidden Brains offers you the Next-Gen RockEye “Warehouse and Inventory Management Solution” that can help you streamline the stock-level process. 

If you are still doubting why there is a need for a Warehouse inventory management system, then you need to have a look at the below figures. 

• By 2026, the global ecommerce market is expected to generate over $8.1 trillion in sales. 
• There are over 2.14 billion online shoppers in the world which is expected to increase 27% globally.
• Moreover, it is predicted that the average ecommerce conversion rate will be 3.65%. 

So is your ecommerce business able to handle such intensive market growth? Are you willing to handle a sudden rise in demand?

As an online retailer, you might have exceptional products to sell, but what if you have high stock production and no customers to purchase it or low inventory with high market demand? In both cases, it is affecting the bottom line of your business. 

To prevent such scenarios, let’s understand the concept from the basics…

What is Ecommerce Inventory Management and Why It is Important?

Firstly, inventory management and e-commerce inventory management are almost the same thing. It refers to a process of overseeing, controlling, and managing the flow of products and making sure that the process of the supply chain falls correctly. 

E-commerce inventory management is an ongoing process where managers must constantly track the inventory and ensure a constant flow of products you sell over the Internet. 

As inventory management is the fundamental building block of business longevity, therefore fine-tuning the inventory management process with some proven practices can help businesses improve their efficiency and reduce operational costs.

When your inventory is rightly managed, the rest of the supply chain will fall into place and make things work smoothly. Ultimately, if it comes to concluding the concept of ecommerce inventory management, then it will help you:

• Enables you to track stock location, 
• Real-time stock monitoring status, 
• Keep products in a warehouse with a variety of products and their prices,
• Get insights into materials stored with contract manufacturers or consigned inventory or with other businesses,
• Track products sold via drop shipping,
• Analyze your multichannel product sale reports.

By having a complete yet accurate overview of your inventory, you can better plan your logistics and able to maintain the right stock levels. It cuts down the risk of overstocking or going out of stock situation.

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Ecommerce Inventory Management Processing: How Does It Work?

Inventory management is a complex process. So before you get straight to hiring a software development company to start planning inventory management strategies, it is worth understanding the ins and outs of inventory management. 

You should know how exactly it works. How the process of stock keeping and recording what and when to process re-orders to avoid overstocking and low stock positions.  

The primary aim is to guarantee that the correct products are in the right quantities, available precisely when needed, and in optimal locations. Achieving a seamless balance within the supply chain not only fulfills customer demands effectively but also minimizes overall costs.

Here’s a breakdown of how e-commerce inventory management typically works:

Step 1: Inventory Tracking and Warehouse Insights

Before you receive any order request and roll out with any order placement, you must have the right stock insights on hand. For this, you can follow these two best practices:

• Centralized Inventory Tracking System: Keeping track of stock levels with manual procedures is always challenging and prone to human errors. That’s where businesses use centralized systems or software to track inventory levels across various channels and locations. This provides real-time visibility into stock levels and can generate weekly reports.

• Barcodes and SKUs: It simplify the inventory tracking process by assigning a distinctive identifier to each item. Whether through a barcode or a Stock Keeping Unit (SKU), this approach enhances efficiency in managing and tracking products within the warehouse, ensuring a more transparent and streamlined process.

Step 2: Order Processing

Source: global.website

Now this is where you decide whether to process the order or to hold it for a while. The ultimate decision will depend upon your stock level. So here are the few best practices to make it easier for you:

• Automation: Upon a customer placing an online order, the e-commerce inventory management system seamlessly updates inventory levels in real time. This will auto-generate a message about how many products you have in stock and what’s left after that order. 

• Order Confirmation: The auto-generated message will be given to the order processing team. The system sends order confirmations to customers and updates the inventory database to reflect the products sold.

Step 3: Reorder Management

This is the most critical and complicated part of inventory management. However, understanding stock levels will help you better manage the reordering of stock. 

Here are the quick tips and tricks of reordering products:

• When to re-order: To avoid finding yourself in a position where you can’t provide products to the customers, it is worth you to “Set Reorder Points in Your Inventory Management System”. Businesses can set minimum inventory levels for each product. When the stock falls below these levels, it triggers a reorder to maintain optimal stock levels.

• How Much To Re-order: Re-ordering with predictive qualities is a big challenge that many businesses usually come across. That’s where inventor management solutions help in calculating the previous sale record of a particular product and provide future predictions. 

• Vendor Communication: To avoid any delays or miscommunications, businesses can choose to automate the alerts or notifications to inform vendors when it’s time to restock, streamlining the replenishment process.

Step 4: Multi-Channel Integration

Imagine you are selling pet toys on multiple platforms i;e websites, marketplaces, retail shops, and more. How would you keep a track on your stock and what number of products you are selling and having in stock? Managing the record of different platforms at different places leads to blunder. 

That’s where you need to adopt these two practices for multi-channel integration:

• Syncing Platforms: Businesses selling on multiple platforms can choose to sync data across all channels with inventory management systems to avoid overselling or underselling.
• Activate Real-Time Updates: Inventory levels are updated in real-time across all platforms to maintain accuracy.

Step 5: Warehouse Management

To meet your customer’s needs flawlessly, you must have the right warehouse floor plan in place. here’s what you need to do:

• Planning and Organizing the Products: Within the warehouse, a meticulous organizational strategy is employed, taking into account factors such as product popularity, physical size, and the frequency of sales. By categorizing products based on these criteria, the warehouse layout is optimized for accessibility, facilitating efficient picking and restocking processes.

• First-In-First-Out (FIFO): With this principle, businesses can maintain product freshness and prevent blockage. This means that products received first are the ones that are sold first. By adhering to FIFO, businesses ensure that older stock is prioritized for sales, reducing the risk of expired or outdated inventory and promoting a dynamic and responsive product turnover.

Step 6: Handling Product Returns 

Source: blog.fleetx.io

As you have an order processing plan, make sure you have the right order return strategies as well. Most businesses choose to hire a mobile app developer to implement a feature in the app for “return order tracking”. But where do those orders go and when will you take back these products in process? 

• Efficient Returns Handling: E-commerce inventory management includes processes for handling returned items, restocking them if possible, and updating inventory levels accordingly.

Step 7: Analytics and Reporting

Make sure you have weekly or monthly analytics or reports generated to have a look at the big picture of your warehouse and inventory. Here’s how you can manage it:

• Performance Metrics: Businesses use analytics tools to measure inventory turnover, track stockouts, and assess overall inventory performance.
• Data-Driven Decisions: The system-generated reports help businesses understand what exactly they have in stock. In addition, it helps them decide about restocking and future inventory strategies.

E-commerce inventory management is an ongoing process that requires careful monitoring and planning.

Looking for the best practices of e-commerce inventory management strategies? Let Hidden Brains- a top software development company be your strategic partner.

Now you know the complete process of inventory management. But how will you get complete control over your inventory? 

Let’s quickly check out the practical strategies to oversee inventory management and learn how you can better manage your inventory.

What Are Some Ecommerce Inventory Management Strategies?

Are you finding it challenging to get insights of your inventory? Is it becoming troublesome to have the right flow of supply chain? 

Well if you are running an e-commerce store, then encountering these issues is a common problem. This is where you can elevate your business acumen with these practice tips designed to enhance efficiency and save costs.

Strategy 1: Ecommerce Inventory Management – Establish a Minimum Stock Level

Set a strategic minimum reorder number in your system, known as “par levels,” for your online store. The Minimum Stock Level (MSL) signifies the minimum quantity of products to maintain consistently. This metric serves as a critical indicator, prompting timely reordering when inventory drops below the predefined points.

But the central question is how will you decide the minimum stock level. Here’s a formula for the figures and set the MSL.

Numerous businesses opt to hire an app developer to seamlessly integrate a stock reorder reminder feature into their applications. Given the context of inventory management for e-commerce, it holds considerable value to synchronize orders across multiple platforms with inventory management systems.

This synchronization ensures real-time updates on stock levels, enhancing the accuracy and efficiency of inventory management processes.

Strategy 2: Ecommerce Inventory Management – Implement ABC Analysis for Product Prioritization

Conduct an ABC analysis to prioritize your products effectively in your warehouse. This classification includes:

A Items: Arrange the best-selling items with high sales frequency at the front row of the shelves.

B Items: Less frequently sold items that incur higher holding costs, and possess average importance can be placed in the less accessible areas.

C Items: Inventory bulk in terms of costs, contributing minimally to the bottom line as be stored separately.

Strategy 3: Ecommerce Inventory Management – Strategic Planning for Predicting Future Demands

How much to re-order? How will you evaluate the future demands? Well, the simple way is to analyze the anticipated demand by reviewing past sales and trends. 

Businesses with a history can analyze past data and get insights into stock requirements. For newer ventures, examining data from the previous year establishes a baseline demand for each season, aiding in accurate future demand forecasts.

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Strategy 4: Ecommerce Inventory Management- Centralizing Inventory Management System

Using manual traditional ways of inventory management has become outdated. Adopting yet centralizing the inventory management system is a modern yet effective way to track and oversee your warehouse activities. 

To avoid any risk data, businesses can choose a cloud-based inventory management system, offering real-time tracking, forecasting, analysis, and control from any location globally. 

If you are considering any platform-specific ecommerce solutions, then you can look for the best software development company for eCommerce stores on platforms like Shopify ecommerce services or Magento ecommerce development services, for cost savings without compromising quality.

Strategy 5: Ecommerce Inventory Management- Conduct Regular System Audits

Even the most sophisticated systems can encounter inventory challenges. Periodic system audits are essential to ensure precision in inventory management. Factors like changing trends, fluctuating prices, and shifting customer preferences necessitate a dynamic approach. Align your audit efforts with marketing initiatives to maintain optimal inventory management standards.

By fine-tuning these practices, your business can achieve a professional and efficient inventory management approach, optimizing resources and bolstering overall success.

What Are the Challenges of Ecommerce Inventory Management?

Undoubtedly, the basis of your business should be to quickly get your products to customers and turn a profit. Meaning, your products need to be ready to go as soon as the order comes in. Inventory management doesn’t come naturally to many business owners and it is a fact.

Source: researchgate.net

There are times when one may feel like they are spending countless hours checking inventory and making sure the numbers add up. For someone who is not a fan of numbers, this may seem like a tedious, confusing effort.

• Incorrect Numbers: Has it ever happened to you where you tried fulfilling orders thinking you had three products in stock when you had only one? Incorrect and poor track of inventory can force you to have to cancel orders, leading to your business having a poor reputation among unhappy customers. It can also make you question your inventory numbers across the board, leading to major accounting issues.

• Overstocking and Under-stocking: It is implied that you neither want overstocked inventory nor do you want understocked inventory. Overstocking and understocking alike can both cause unforeseen and unpleasant financial issues for your business.

• Real-Time Tracking and Visibility: Ecommerce faces challenges in real-time inventory tracking, causing discrepancies between online and offline channels. This can lead to overselling, stockouts, and customer dissatisfaction.

• Multi-Channel Integration: E-commerce struggles with multi-channel inventory integration complexity. Without seamless coordination, overselling or underselling risks arise, impacting operational efficiency due to manual errors and time-consuming processes.

• Seasonal Demand and Trends: Handling sudden rises and drops in product demands causes huge inconvenience to ecommerce businesses. Maintaining and maximizing the revenue of the business with the huge fluctuations has become a serious problem for businesses. 

• Returns and Reverse Logistics: Ecommerce businesses experience a higher rate of returns compared to brick-and-mortar stores. Online stores handle 30% of product returns as compared to brick-and-mortar stores which handle only 8.89% of product returns. Managing returned inventory and implementing efficient reverse logistics processes can be demanding. Poorly handled returns can lead to inaccuracies in stock levels and may hurt future sales. and customer satisfaction. 

So what’s the way of dealing with these challenges? Is there any power-pack ecommerce system that enables you to handle the complexities of ecommerce inventory management?

Yes, the implementation of ERP systems for ecommerce inventory management will be a worthy decision. But before you hire a mobile app developer, just understand how and where to get started.

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How Can Hidden Brains Help You With ERP System Integration in Ecommerce Warehouse and Inventory Management?

Hidden Brains excels in facilitating ERP system integration for E-commerce warehouse and inventory management, with an excellent choice of features. Regardless of business size and complexities, we make sure to deliver a solution that can be easily integrated with other business modules. 

1. Single Platform Efficiency

Hidden Brains’ ERP integration establishes a unified platform for streamlined operations across departments. This ensures a comprehensive view of operational, financial, and customer data, enhancing overall efficiency.

2. Automated Operations

Leveraging automation, Hidden Brains reduces time-consuming and error-prone tasks. This not only saves time but also enhances accuracy, contributing to improved productivity and cost savings.

3. Robust Financial Management

The ERP system assists in organizing and optimizing financial planning, allowing businesses to monitor, analyze, and forecast financial data. This feature aids in better expenditure management and informed decision-making.

4. Enhanced Customer Relationship Management (CRM)

Hidden Brains’ ERP organizes customer data into a searchable database, enabling efficient CRM. This helps marketing and sales teams focus on high-converting prospects, resulting in reduced lead times and more effective campaigns.

5. Automated Order Management          

Hidden Brains’ ERP system automates the order management process, from purchase order creation to final invoice payment. This integration seamlessly connects invoicing and order management, ensuring prompt updates for warehouse staff.

6. Multi-Channel Inventory Control

For retailers managing inventory across various channels, Hidden Brains’ ERP system provides robust multi-channel inventory management. This is essential for accurate tracking and control of merchandise sold through multiple warehouses and outlets.

7. Warehouse Management Excellence

Hidden Brains addresses challenges in warehouse management associated with multi-channel inventory. This ensures optimal inventory control, minimizing issues such as delayed order fulfillment or missing items.

All-in-all, Hidden Brains stands as a reliable partner in leveraging ERP system integration for E-commerce, offering comprehensive solutions that enhance operational efficiency, customer satisfaction, and overall business success.

Frequently Asked Questions

If you still have any queries left regarding ecommerce inventory management solutions, then consider this FAQs section.