8 Best Practices for Efficient Ecommerce Inventory Management

Having a centralized inventory tracking system is your first step towards efficient inventory management. This is the most important practice you must follow. Have a centralized tracking system where every inventory related activity can be tracked at a single place.

You know how important real time visibility is especially when you have multiple stores and you operate across multiple channels. Having all your data accessible at one place gives you clarity on your stocks and gets easy to monitor. So, you neither overstock nor understock.

With the use of centralized inventory tracking systems, you get comprehensive reporting capabilities, allowing you to track inventory performance, identify trends, and make informed decisions.

Some common centralized inventory systems include Warehouse Management Systems (WMS), Cloud-based Inventory Management Software and Enterprise Resource Planning (ERP) Systems.

Having a centralized tracking system improves inventory performance, reduces costs, and improves operational efficiency.

A centralized tracking system helps you monitor all your stocks but how do you decide which products you must stock which products are not needed?

And for that you need a well-placed demand forecasting tool.

When you invest in a good demand forecasting tool you predict sales trend and better optimize stocks. For example, a retailer predicted festive surge of printed tops and stocked well in advance to avoid any stock out. You can even plan your product promotions with predicted buying behaviour.

It is a great tool which helps plan your business well using historical data, market trends, algorithms and analytics. These tools collect data from multiple sources. The tools collect data on seasonal demands, economic indicators, weather conditions, market trends etc. that helps them forecast future demands and customer behaviour.

Getting to the pulse of your customers is half the battle won. You get data on what they need, when they need and how much will be needed. It is a win-win situation for all. Customers get what they need, your stocks are never under or over stocked. You customers are happy, and you save on costs associated excess stocks.

Getting these tools integrated into your system is simple; they easily integrate with your ERP or inventory management systems. They work on a auto mode and keep updating stocks needed.

Now that you have your demand forecasting tool in place that will take care of any predictions but how do you handle unexpected demand surges. They can happen any time. And for that reason, you need to optimize safety stock levels.

Safety stock tools account for lead-time variability, which forecasting alone cannot manage. Any sudden unplanned things like logistic breakdown, weather changes etc. can cause revenue loss and this is where safety stock levels come to rescue.

Say for instance, there is a sudden spike in the sale of electronic gadget due to some celebrity endorsing the gadget and you don’t want to get out of stock mid sale as this will lead to cancelled orders and deliveries may also get delayed. Your market credibility may also take a dip.

Having an extra inventory can protect against unexpected fluctuations in demand or supply chain disruptions. You will always have stock as a buffer to tackle any uncertainties.

Implementing inventory management software, safety stock calculation and collaborating with suppliers support inventory optimization.

Your stock calculation plays an important role in keeping the stock optimized. But often certain stocks go redundant, and you must remove them to save space and optimize your stocks. How do you do that. Manually doing this is next to impossible.

This is where SKU optimization comes in. This will help you find out stocks that are not performing. You can either remove them or optimise the performance.

To explain better, suppose a retailer is selling t-shirts of 10 colours and out of that, only 6 colours sell the maximum. The retailer can discontinue the other 4 slow-moving and unprofitable colours, which will reduce storage space and costs too.

The benefits of a well-optimized inventory are multiple, which ultimately help with your revenue and overall business operations.

SKU rationalization is a great way to remove or optimize underperforming stocks. The other way to save on storage cost is to buy products as and when it is needed.

This is done through Just-in-time (JIT) inventory management. It is a strategy where materials are purchased and produced only as needed, minimizing waste and storage costs.

But then for this your forecasting must be accurate and you also need to have good connection with your suppliers. The arrangement should be such that the product is made available to you whenever you require.

This approach works best when production processes are synchronized with material deliveries. Say, for example, you own a furniture store. Now you would need materials like fabric, wood, etc only you receive an order. Storing such materials without an order will unnecessarily increase your storage cost. So, you get just before you start production.

After managing your stocks, you also need to have a control on all your warehouse operations such as receiving goods, storage, packing and shipping. The real time visibility check ensures less errors, storage optimization and accurate order fulfilment.

So, how do you do that?

You integrate a Warehouse Management System (WMS) that helps you connect with other business software systems to streamline operations and improve data flow.

You can link WMS with systems like ERP, CRM, and accounting software. There is inventory synchronization across all channels. This improves the overall efficiency of the system benefiting organization.

Some examples of WMS Integration include ERP Integration, CRM Integration, E-commerce Integration and Accounting Software Integration.

Real-time data analytics empowers businesses with up-to-the-minute insights into inventory levels, enabling faster and more informed decisions for optimized inventory management. To implement this, you need to have systems in place that track inventory levels, sales data, and other information, all in real time. And then comes the next step, where you analyze the data to identify trends, predict demand, and optimize stock levels.

The benefits of this can help your business perform at an optimal level, and your systems become more streamlined, leading to higher revenue.

Technologies that can be used for real-time tracking include RFID (Radio Frequency Identification), IoT (Internet of Things), and Cloud Computing.

We all know that faster refunds and hassle-free returns make a customer happy and start trusting the brand. That is why it is important to establish strong returns and reverse logistics workflows. This ultimately benefits a business by improving customer satisfaction, reducing costs, and enhancing sustainability.

You need to manage the process of receiving, inspecting, repairing, reselling, or recycling returned products, ultimately turning a liability into an asset. Of course, this has its challenges, like logistics costs, inventory management, and meeting customer expectations. But on the other hand, it offers long-term benefits in terms of building your brand image.