Effective eCommerce Inventory Management Tips

Effective eCommerce Inventory Management Tips

Thursday, January 16, 2020Eric Zegarski

Best Practeces For Managing Your eCommerce Inventory 

Improper inventory management can stunt your growth as an eCommerce business. We’re willing to bet that most people have a negative connotation anytime the term inventory management is brought up. They’re triggered by thinking about sitting in a warehouse for hours, if not days, and manually counting every single piece of merchandise. However, the good news is, there’s a better way!  


An ERP (Enterprise Resource Planning) program is your best friend when it comes to proper inventory management. It allows you to keep track of your finances as well as your inventory levels. ERP solutions like those from Microsoft, Sage, and SAP have nifty features that even allow you to set reorder points! As a merchant, you want your inventory management strategy to help you minimize your cost of holding inventory while maintaining adequate inventory levels to meet your sales needs. Below you’re find essential inventory management tactics that you can execute today.  
 

1.Use FIFO – First-In First-Out  

This principle ensures that the first piece of stock you received is the first one out the door. Adopting this principle is extremely important for businesses that sell perishable goods. FIFO allows for automatic rotation of stock; therefore, you limit the chances of your inventory expiring.  


As for businesses who do not sell perishable products, FIFO is still beneficial. Packaging designs change from time to time, FIFO ensures that you're not suck with packaging that is off brand. In addition, warehouses tend to be busy places with a lot of movement. FIFO limits the amount of time inventory remains susceptible to accidents in the warehouse. 
 

2.Contingency Planning for Murphy’s Law  

If you’re not familiar with Murphy’s Law it’s “anything that can go wrong, will go wrong.” A lot of issues can strike like an RKO from Randy Orton out of nowhere. These issues can cause problems that can limit your eCommerce business’s growth. Here’s a few common things that can go wrong:  
 
  • You have a sudden spike in sales and oversell your stock  
  • Due to random financial expenditures, you have limited cashflow and can’t pay for extra inventory  
  • A slow-moving product is taking up valuable inventory space in your warehouse  
  • Your manufacturer is experiencing logistics issues and cannot send you an immediate supply of fresh stock  
  • Your warehouse is too small to handle an increase in demand for your products  


No one knows your business and your industry better than you. Take some time and reflect on issues that you can foresee running into. Come up with a contingency plan each one that you can act on immediately should the given issue arise.  
 

3.Develop an Accurate Inventory Forecasting Method  

The simplest way to develop a strong forecasting model is to ensure that all your departments are aligned through open communication. Having large silos in your organization can lead to miscommunication and certain departments being left in the dark. Open communication also enables organizations to be nimble and make agile decisions. In addition to open communication, here are a few things you can keep track of to have a more accurate demand forecasting model for your eCommerce business:  
 
  • Keeping track of market trends  
  • Examining last year’s sales at this given time 
  • Progress with meeting this year’s projected growth rate 
  • Guaranteed upcoming sales from subscriptions and contracts 
  • Upcoming promotions and projected ad spend  
 

4.Regular Inventory Audits  

From time to time you must get your hands dirty and count inventory manually. There are many things that can occur due to human interaction that can alter your physical inventory count. Therefore, it’s important to occasionally audit your listed inventory counts in your ERP to ensure they match your physical count. Below you’ll find 3 common inventory auditing techniques:  


Full Inventory Audit  

Many organizations count every single piece of inventory on hand once a year right before their yea-end. This gives accounting accurate numbers for filing income tax. This task is crucial in finding and identifying discrepancies. We’re sure you can find several people who are willing to give you a helping hand by throwing an inventory counting pizza party!  


Spot Checking Random Items 

If you have a lot of products that you sell on your eCommerce store, then random inventory counts will ensure that you don’t run into major unknown discrepancies when you’re doing your end of the year counts. This process is as simple as picking a random product, counting it, and ensuring it matches the count stated in your ERP. Spot checking is a good method to use with problematic items or inventory items that sell at a high volume.  


Inventory Cycle Counting  

Companies with a large inventory catalogue execute scheduled cycle counts. These counts spread inventory audits throughout the year, rather than one final year end count. One popular tactic with this method is to count low volume and low performing inventory annually or semiannually and high performing inventory quarterly or monthly.  
 

5.Utilizing the ABC Method to Categorize Inventory  

Some products perform better than others. It’s crucial for you to know which products and product variants perform the best. ABC allows you to categorize your products into buckets so you can determine which products require a lot of attention and which don’t. Go through your product list and qualify them into the following categories:  
 
  • A: High-value products with low frequency sales  
  • B: Moderate value products with moderate frequency of sales  
  • C: Low-value products with high frequency sales 

Items that you classify under category A require a lot of attention since their impact to the bottom line is significant, but their demand is very unpredictable. Items that are in the C category require less management since they have a small financial impact and a high inventory turnover. Items that are listed under the B category have medium demand and contribution to the bottom line.  
 

BONUS – Bridge the Gap Between Your eCommerce and ERP 

Your ERP system is a wonderful tool. It provides organizational wide transparency in relation to your sales and inventory levels. However, without integration, you’re stuck doing things the old-school way and imputing data manually. This may lead to human error as well as reports not being accurate and therefore limiting your ability to make important business decisions on the fly. Right now, you’re probably thinking that there must be a way to automate data flow throughout your eCommerce network.  


Our iPaaS (integration Platform as a Service) enables almost instantaneous data flow between your eCommerce systems. We have pre-built connectors for leading eComnmerce service providers like Shopify, BigCommerce, Magento, and Amazon. As well as ERP solutions from Sage, Microsoft, SAP and NetSuite. We even have a pre-built connector for ShipStation, which allows you to fulfill orders faster and smarter. In addition, if you’re a big box retail supplier, we can even automate your EDI document flow. Our cloud-based platform is hosted on Microsoft Azure, as a result we can guarantee industry leading security as well as a 99.95% uptime.  
 
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