An inventory is a detailed list or record that is used to keep a check on the goods that a business store has in stock. The system is used by all kinds of manufacturers and industrial factories. However, service companies such as those that offer internet and cable packages typically do not have inventories.
The importance of online inventory management is increasing as e-commerce is becoming the preferred mode of shopping. To cater to the needs and demands of the consumer, businesses need effective online inventory management tools.
These can help businesses forecast customer demand, determine production amount, keep track of stock levels as well as analyze sales data. Here are some tips and methods you can employ to improve inventory management for your online store.
Ecommerce inventory management is the act of measuring the amount, location, pricing, and mix of products available from your business. These could be products hosted in your own warehouse, provided through a third-party logistics fulfillment center (3PL), or housed in a separate business and purchased through dropshipping. Through eCommerce inventory management, businesses know what products are overstocked, in stock, understocked, and out of stock.
Inventory management is closely tied to a company’s financials. In any given large warehouse, correct control over inventory gives you a birds-eye view of the amount of revenue potential from every single pallet. From there, businesses can make more informed decisions around other strategies – like marketing – and adjust the demand for future storage or warehousing.
Logistics and analytics play a large part in inventory management. The amount of products you maintain in stock tells you about purchasing trends, seasonal trends, and fluctuating customer demand.
1. Inventory Forecasting System
When ordering products for your inventory, you need to be able to have a solid figure in mind. And since you can’t tell how many items would sell ahead of time, you tend to use a rough estimate. This estimate can be more accurate if you base it on the sales of the past four to six months.
Forecasting becomes easier when you calculate the estimate by taking into account previous sales, current growth rate, market trends, and upcoming ad campaigns. Ideally, you should order inventory that is neither too little nor too much. If you order in excess, you unnecessarily spend on items that would remain unsold.
On the other hand, if you don’t order enough, it would reflect badly on your customer service and you’d end up losing potential sales. A quality inventory system can considerably improve your forecasting capabilities.
2. Par Inventory System
Through a Periodic Automatic Replenishment system, you can determine the quantity of a product that a store should have at all times. The par levels vary depending on how many products sell at a given time and how much you order. So it is wise to have a system that tracks this information automatically. It can be rather difficult to keep a record of all the items manually.
And you can’t afford to lose track of par levels because that could lead you to run out of a popular item and annoy your customers. Therefore, make it a point to check par levels from time to time. In this way, you’ll be prepared to increase stock well in time.
3. Barcode Scanning
Setting up a barcode system for your items is another effective method of managing your inventory. Many retail stores make use of this system as it’s very simple and accurate. By simply scanning the barcode, the system updates the inventory automatically and lets you know how many products of a kind are left. So consider investing in a quality barcode system. They are inexpensive but save you a lot of hassle.
4. Use a Software
According to a report by Wasp, over 40% of small businesses still use manual ways of inventory management. They are hence likely to make mistakes. In today’s digital age, it is imperative to have inventory software that can help avoid human error and the problems that come with it. But you need to choose the apt inventory management software for your business.
For this purpose, you will need to consider factors such as the nature of your business, the size of your company, and much more. Once you are well aware of your needs, look for software that meets them in the best possible way. Choose a software that is capable of analyzing data in real-time, notices understocking and overstocking, and also takes seasonality into consideration.
You could also use the software for price optimization. In this way, you can get useful recommendations on when to sell at lower or higher prices and also which products would sell best in a particular season. This would not just allow you to sell a product for the best price/profit margin but also make space for new inventory.
5. Conduct Regular Audits
Regular audits can ensure that your recorded data is in line with the situation at your warehouse/store. If you don’t practice timely auditing, you run the risk of losing or misplacing certain data. This can lead to issues like having lesser inventory than predicted, popular products running out, and others misplacing.
Auditing is particularly important in the case of online stores. This is because when you handle things digitally, the risk of them getting mixed up is higher. And that has nothing to do with software problems. It is largely because you do not double-check and trust the system to do all the work. Remember even the more sophisticated software/systems need to be checked from time to time.