Inventory management can seem like the biggest pain that you have to deal with in this industry. Counting every piece of inventory, making sure there are no stockouts or overstocks, ordering and then reordering.
No matter where you have your inventory, at home in your basement or garage to renting or outsourcing ecommerce warehouse space, it is very important to manage your inventory to make sure to save money and time while making the least number of mistakes as possible.
What is Inventory Management?
Inventory management is the monitoring of a company’s products that are stocked whether in a warehouse or at home in your basement or garage. Having your inventory managed and watched over is very vital for all kinds of businesses, not just ecommerce businesses. With this managing your inventory means keeping track of everything that is involved with the process. From the first order to restocking after those products are sold. From storing the inventory to changing the frequencies to match your sales. This also includes order quantity and inventory forecasting to know what kind of sales to prepare for.
Inventory Management is Very Important
There are many reasons why inventory management is important, especially when talking about growing ecommerce businesses.
It makes sure you don’t run out of stock. If your inventory management is running smoothly, it can help you not only know when you are low in inventory but also predict how many sales you will have and when the best time to restock your products to stay on track.
Along with that if you order too much and have way too much inventory for what you are selling, you could very easily risk dead stock (products that can’t be sold anymore because it is outdated). That and having too little inventory are things that could hurt your company in ways that would be hard to come back from.
Inventory management will keep you from spending too much on storage. If you order too much and have way too much inventory for your sales levels, you could be spending far too much to store those items that you don’t necessarily need. Keeping on top of your inventory levels can help you be able to use that money elsewhere instead of spending it on space you didn’t even need anyway.
It can help you be prepared for the unexpected things that pop up in ecommerce businesses. So many things can go wrong. Anything from an unexpected sell out of your products to incoming inventory being delayed to a miscalculation of how much storage you need and then you run out of space. Having well thought out and planned inventory solutions can help you get out of those kinds of situations. Tracking and understanding the aspects of your inventory can help you to stay ready and prepared so things like that don’t happen, and if they do, you are ready for it.
Inventory management can help you understand the trends your customers have. Knowing what products are selling and what products are getting left behind is very important and keeps you in the loop with your customers, what they are and aren’t liking. Understanding the wants and needs of your customers is very important it understand and work with.
It can help you understand what might be happening in the future. When you have good inventory management, it can lead to inventory forecasting. That then helps you be able to predict the demand you will have. You can use this for predicting how a season will go, how a month will go, how a promotion will pan out, or even just what the trends are SKU by SKU.
Managing your inventory the best you can will also be able to show you and help you keep track of how much your products are, how much they are charging you for them. You can then change your pricing to accommodate for that. If you don’t have anything keeping track of that you can’t know how much the budget for when you need to buy more inventory for your business.
Inventory Management Techniques
Understanding why you need inventory management is just the beginning of what you need to know about it. Now let’s go over the best ways on how to manage your inventory.
Reorder points, also known as par levels, keep a note that once the inventory gets to a curtain quantity of each product it is time to reorder more of that said product. This helps prevent stockouts to ensure that every customer can order from you and you are able to still have their business.
In order to find this point you’ve got to do some math. Calculating how long it will take for your inventory to get to you, lead time from your manufacturer to your fulfillment center, if you have a fulfillment provider what is their turnaround time, and then a safety stock of about 2 weeks (14 days) incase you have a huge order or a random rise in demand. Add all those days up and multiply the average amount of products sold per day. That number should be your reorder point. This point might change as your business grows and changes as well. Don’t be afraid to update that number as frequently as you see fit.
Be sure you us the FIFO system. FIFO means “first-in, first-out” which is an inventory approach to keep the products you have be newer than the products being sent out. So your oldest inventory is shipped out first. That inventory was first in so not its first out. This should for sure be done with any products that are perishable or have an expiration date. But it would be very helpful to implement this with every kind of product. Things change, design elements, product features, so in order to keep that up, FIFO is a very useful and great way to keep it fresh. If you are doing all your inventory in-house, you will need to do this yourself, manually. But if you hire a fulfillment center or 3PL, they will be able to have the FIFO system in place for you.
Keeping your inventory updated is very important. Doing a regular audit of your inventory can be a little tedious but it is important to make sure what you actually have in the warehouse is the amount you have listed electronically. Auditing is when you count the amount of physical products you have in your inventory and making sure that the numbers match up with what you have electronically.
When finding the right manufacturer you have to take many things into account. Making sure they can help elevate your growth, they are cost-effective, and efficient. But finding them isn’t the last of it. You need to make sure to keep a relationship with your supplier. Making sure they are helping you while you manage your inventory and not being a burden or obstacle. Having good communication with them is something that can make the inventory process that much easier. They want to help you just as much as you want to use them as your supplier. If it goes both ways and there is a mutual respect and communication from both sides, the relationship can last for a very long time, giving both you and them business.
Using software that is designed to help you with managing your inventory can help you so much. It can help you save money on possible unsold products, it can show you real time inventory reports, help give suggestions, and can automate most of these other techniques to save so much time and money.
Inventory Management Software
Inventory management software helps automate the inventory process. It tracks how much inventory there is, what is ordered, how your sales are going, and the shipments. This software will help you plan by recording trends and historical patterns. You can be more prepared for what is to come when you have this software tracking everything going in and out of inventory.
Inventory Management System
Having a system for your inventory management is so important when you are trying to grow an ecommerce business. It can benefit your company and help you grow and thrive.
It can give you real-time inventory counts, at the stock keeping unit (SKU) level. You can see what the inventory looking like with the various partners, how much you have left at your storage center and how many total units are sold per day. This give you a good look into what is available for your customers in real-time. As well as finding out the impact of product launches or promotions in real-time.
Like was said above, you can work with the reorder points you’ve made and automate notifications, so you don’t have any stockouts. Having those points there and having it notify you helps you to not have to guess when to reorder, it tells you when to reorder.
Having inventory management system in place can also help you get and run reports on trends that have been happening with your inventory as well as forecasting what your sales could look like in the future. Being able to have that information in one place you can better predict what will happen in the future, what demands will come up and how your sales will be at different points in the year or what promotions did better. It tracks everything so you can better know what to expect in the future.
Why Outsource to a 3PL?
You may be wondering why you should outsource your inventory management to a 3PL. But inventory and fulfillment management go hand in hand and when you are able to integrate them together, the entire operation runs just that much smoother. The 3PL will not take total control of your inventory management but they will help you have the right information for you to make those decisions. They will provide you with the tools, data, and information they need in order to manage both your inventory as well as your orders.
They will have those real-time numbers for you. They will provide that notification for reorder. They can tell you which warehouses would be best to store your inventory. You will have control, the 3PL will help you keep track of your inventory and provide you with the numbers you need to make the decisions you need to make.
We provide all of that at Launch Fulfillment. Let us help you manage your inventory. We’ve got the system, the program, and the skill to provide you with the easiest way to keep track of your inventory. Be sure to contact us with any questions you may have. We would love to help you and you ecommerce company grow!