Inventory Management Techniques Every Business Should Know

In simple terms, inventory management is a part of supply chain management that focuses on tracking the movement of goods and keeping the inventory in check. Any business - big or small - should be aware of their inventory at all times. 

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In the world of eCommerce, inventory tracking becomes even more crucial, as proper eCommerce inventory management can mean the difference between keeping your business competitive or entirely falling behind.

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Since eCommerce platforms open the doors that allow this type of business to reach global markets and audiences, knowing exactly how much stock you have, where you can keep it, for how long you can/should keep it, as well as where and when you can sell it will make all the difference.

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Additionally, with the help of some of the best eCommerce inventory management software solutions, such as the ones offered by Bezos, businesses can easily stay on top of their supply, which will lead to greater customer focus and overall better efficiency.

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The Process of Inventory Management

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Before you decide to create a reliable eCommerce inventory management plan, you will first need to learn more about each step of the inventory management process that looks something like this:

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• Receiving the goods
• Inspecting, sorting and storing the goods
• Monitoring inventory levels
• Receiving stock orders
• Approving stock orders
• Shipping the goods from the stock
• Updating inventory
• Restocking the inventory as needed

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Understanding how the inventory management process works is key when it comes to decreasing errors.

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To better understand these steps, you can also create an inventory process map, which will allow you to stay on top of each step of the process and stay in full control of your inventory.

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Of course, doing all of this manually would not only be extremely time-consuming but it would also lead to numerous errors. That’s why it’s always best to find reliable inventory management software for eCommerce to take care of this for you. This way, you won’t risk getting stuck with obsolete inventory, and you can easily conduct regular inventory audits to ensure that everything matches.

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The Benefits of Good eCommerce Inventory Management

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As mentioned earlier, reliable eCommerce inventory management software solutions can really help you stay on top of your supply chain operations, which can - inevitably - improve your relationship not just with suppliers but with customers as well. 

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That being said, here’s a breakdown of three major ways in which proper inventory management can help your eCommerce business grow.

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Better customer relationship and greater customer satisfaction

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In any type of relationship first impressions play a very important role as they more or less determine the outcome of future interactions. And considering the fact that, on average, it takes customers about 7 seconds to form the first impression means that eCommerce businesses need to do all that’s in their power to ensure those impressions are positive. 

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Needless to say, the more satisfied your customers are, the more likely they’ll come back for repeat business. And the more they do so, the stronger the customer relationship you can expect to form with them.

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This will not only benefit your business in terms of a larger and happier customer base, but it will also potentially bring more business through the door, as satisfied customers are more likely to recommend your business to others. Of course, this will lead to a profit increase, which will improve your bottom line.

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Clearer image of the state of your inventory

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By gaining a clearer insight into the state of your inventory, not only will you be able to determine which items bring and which items end up costing you money, but you can also potentially change some things in your supply chain.

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For instance, if you notice that you’re stuck with certain types of inventory or that you often over- or under-order, you could consider switching to consignment inventory instead. This way, you won’t actually have to pay for stock until it sells and you can more easily return unsold products to the supplier without losing any money on them. 

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Better efficiency

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Last but not least, proper inventory management can also help you:

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• Streamline the supply chain dynamics to ensure a steady flow of goods.
• More accurately predict customer demand to minimise stockouts and/or overstocking.
• Better optimise your inventory to ensure product availability, reduce costs and eliminate obsolete inventory.
• Boost the efficiency of your order fulfilment and logistics to reduce downtime, speed up delivery and improve customer satisfaction.
• Make better informed financial decisions based on data analysis.

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The Most Common Challenges of eCommerce Inventory Management

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Aside from the benefits mentioned above, eCommerce businesses can also face some potential drawbacks if they don’t approach their inventory management responsibly enough.

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Not choosing a suitable inventory management platform

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eCommerce businesses can easily use platforms such as Shopify, WooCommerce and BigCommerce to offer their products to a global audience. However, these established platforms lack in more advanced inventory tracking features, which can easily lead to numerous problems. 

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That’s why eCommerce businesses that decide to leverage these platforms should look for additional inventory management systems that can help them get rid of those issues which can include waste of time and money, unnecessary labour, as well as missing inventory.

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Over- or underestimating the amount of stock

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If an eCommerce business fails to understand its customers’ shopping habits, it can easily fail to meet customer demand, which can lead to both over- and under-stocking.

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Simply put, not having enough stock will lead to missed sale opportunities while having too much will lead to money loss. Basically, the longer you have stock sitting in your inventory, the more the profit margin you can expect from it will diminish. 

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This failure to understand the amount of stock you need can also lead to:

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• Money wasted on keeping dead stock
• Failing to provide your customers with the items they wish to purchase
• Needing more inventory space for items that won’t necessarily sell
• Not having enough inventory space for items that would maybe sell better/faster

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Failing to understand the data

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Similar and closely tied to the previous point, failing to understand data provided by your eCommerce inventory management software - or not having one in the first place - can prevent your business from growing.

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In essence, you want to be able to answer these questions as accurately as you possibly can:

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• What are the best-selling items?
• What are the worst-selling items?
• How does my inventory fluctuate over time?
• Do I need more items in my inventory?
• Do I need fewer items in my inventory?

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Unless you’re able to do so - and do so accurately - your business won’t really be able to meet customer expectations, secure larger profit and - in turn - grow and expand.

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eCommerce Inventory Management Techniques to Keep in Mind

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Safety stock

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The fact of the matter is that you can’t actually know when you’ll need extras of some items, so it's always wise to keep some safety stock, just in case. However, when it comes to safety stock, it’s easy to over-order items, which can easily lead to dead stock.

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So, it’s important to use data analysis to determine which items should be in your safety stock. In simple terms, safety stock allows you to continue to fulfil orders even in case of a sudden, unexpected surge in demand.

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Balance inventory

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Keeping your inventory balanced may sound easier than it actually is. In essence, you should try to avoid both overstocking and under-stocking to ensure you always have just enough stock you actually will sell.

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With the right eCommerce inventory software and proper data analysis, you can easily keep your inventory balanced and stay on top of market shifts.

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Just-in-time (JIT) inventory management

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Just-in-time inventory management is a technique used by eCommerce businesses where the items (stock) are being ordered as needed, which prevents the accumulation of dead stock, as well as leaking assets on stock that simply won’t sell as quickly or at all.

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Inventory kitting

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Inventory kitting is another supply chain technique where similar items are grouped together in kits and sold as a single unit. This enables businesses to boost the efficiency of product shipping and delivery.

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What’s more, kitting allows businesses to group lower-selling products with products that are selling well to clear out their inventory and recover some of the costs.

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Future stock prediction and planning

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The point of predicting and planning future stock is to try and make the whole process of restocking a bit less uncertain. Here, businesses should - once again - look at data analysis, previous fulfilment orders and market trends.

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This part of the process is also often affected by political, economic, socio-cultural and technological trends.

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Storage and routing

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Since storage and routing determine how quickly and efficiently a business will be able to deliver goods to their customers, every eCommerce business that's looking to grow should optimise this process by:

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• Arranging the items in their warehouse so that the products that are quick to sell are also the easiest to access fast
• Dividing inventory into categories to enable better and easier inventory handling
• Using technology, such as warehouse management systems, to improve efficiency and minimise errors
• Leveraging cross-decking to reduce downtime, minimise required storage and speed up deliveries

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ABC inventory analysis

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With the ABC inventory analysis, eCommerce businesses can divide their products into three categories:

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A - most valuable products
B - in-between products
C - least valuable products

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This way, businesses can focus on improving the availability of products in the A category, and reduce costs on the products in the C category.

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Stocktakes (inventory checking)

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Stocktake is an inventory management strategy that allows businesses to compare their records with their physical stock to see if the numbers align. If there are any discrepancies, businesses can then use this data to further improve their inventory management practices.

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Improve Your Inventory Management Operations with Bezos

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Proper inventory management can really become a handful for businesses, but it really doesn’t have to be. Here at Bezos, we ensure that your inventory is stored, picked, packed and delivered safely and on time.

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What’s more, with the help of our network of eCommerce fulfilment warehouses that uses the latest technology to keep track of your stock, you’ll be able to save both time and money and focus your attention on growing your business.

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So, make sure you request a quote today and see how we can help you improve your inventory management and take at least some load off of your shoulders.

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Conclusión

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With the help of the right eCommerce inventory management techniques, businesses in this industry can really make their jobs easier. Not only will a good inventory management technique allow businesses to boost their efficiency and gain better control over their inventory, but it will also make room for more orders and faster fulfilment. In the end, it will all lead to happier customers and, in turn, greater profit.

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Preguntas frecuentes

What is eCommerce inventory management?

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Inventory management in eCommerce refers to the process of sourcing, storing, tracking, and shipping the business’s inventory. The better organised the eCommerce inventory management is, the more streamlined the rest of the supply chain operations will be.

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How do I track my eCommerce inventory?

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You can track your eCommerce inventory by relying on technology and software solutions that will create detailed inventory spreadsheets, track SKUs, analyse gathered data, accurately predict market trends and help you reorder items as needed.

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Which tool is frequently used to manage inventory in eCommerce?

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The most commonly used tools in inventory management are the ones that allow for barcode scanning, automated order fulfilment, as well as multiple warehouse support. Choose these tools based on your specific business needs for the best results.

What are the four types of inventory management?

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The four main types of inventory management are just-in-time management (JIT), days sales of inventory (DSI), economic order quantity (EOQ) and materials requirement planning (MRP). All of these are in place to ensure that businesses always have enough stock to fulfil their orders quickly and efficiently.

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