on 1 November 2021 / 0
The importance of inventory management cannot be stressed enough especially for e-commerce and online retail brands.
Having an efficient inventory management system in place makes your job easy and more organized. A system that results better sales for you and also creating a happier and loyal customer base
With a mix of the right technology and methods mentioned below, you can streamline your inventory to a great extent, which can be tricky especially in e-commerce businesses.
Benefits of having a proper inventory management
1. Better Cash Management
Managing inventory can be a real drag. But once planned and controlled, it allows small businesses to manage cash flow efficiently. Small and Medium Enterprises do not purchase large amounts of inventory due to limited capital. With better control over your inventory, you can know exactly how much is needed and when, freeing up your capital to invest in other areas of your business.
2. Business Awareness
A properly managed inventory control and planning solution allows your business to get clarity of the fast/better-performing products, allowing you to adjust your product line and to make quick and smart business decisions.
3. Better Profits
Making smart business decisions inevitably give you a boost in profits. This is because the stock in your inventory has value if it’s actually selling while the rest of the stock that doesn’t get the customer’s attention can be obsolete.
4. Reduced Manpower Costs
A refined inventory planning and surveilling techniques can substantially cut down labour costs associated with the inventory, which includes the time spent on counting the stock, handling and its transportation.
How does inventory management work (especially for e-commerce sellers)?
An efficient inventory management is designed to track your products, components, and ingredients across suppliers, along with the stock in hand, production, and sales to ensure that stock is used most efficiently. But it can go as thoroughly as you need it to be. For instance, by forecasting the upcoming sales or verifying the difference between a dependent and independent demand.
How can online sellers manage their inventory?
Analyze and prioritize your stock
A warehouse full of inventory can be intimidating and also cost consuming. One way of making it easier is to identify the items which are in better demand and place them in priority. Not every item in your warehouse can have the same demand. Keep the best-selling items listed and properly stocked.
Engage with suppliers
In e-commerce business, it is essential to have a healthy buyer-supplier relationship. Develop a constructive bond with your key suppliers to ensure reliable supply.
Create an efficient inventory management system
Keep in view how your business deals with order quantities, replenishment cycle times, safety stock, forecasts, etc. it is essential that you constantly analyze and improvise operations. This will help you to try and test what works for you and what doesn’t.
Let’s briefly take a look at costs associated with inventory
There are three broad categories of inventory costs: ordering cost, carrying cost and shortage cost
How can online sellers reduce inventory costs?
Here are some basic rules that can help you reduce inventory costs considerably
1. Observe the best time to reorder
Understanding the right time to reorder within the right quantity is a way that can help you ensure that you have just the right quantity of products as needed.
SMEs usually go through previous months overview to gain insights about sales patterns. Using these insights, you can set up the right time to reorder.
2. Find a right balance between MOQ and your stock
Minimum order quantities (MOQs) are wholesalers’ way to reap the advantages of economies of scale. The greater the quantity, the cheaper prices they have to pay. Create a perfect balance where you get the best price while also not having to hold large quantities.
3. Never overstock
To sell most of their stock, wholesalers often offer deals or discounts if you order in large quantity. Keep away from such temptation and manage your budget optimally. Unless your product is in high demand, never opt for overstocking.
4. Say NO to Deadstock!
A smart business can be led by ordering the right amount of stock and using the free capital to sell on new channels or diversify your inventory.
However, if you are still stuck with a deadstock, you can follow the below mentioned steps.
- Return it to your supplier if the return policy allows. Some suppliers charge for returning items or only provide refunds in the form of store credit, but you can try your luck
- Donate it and enjoy tax deductions for contributions and charities
- Give it away as free gifts to customers for purchasing popular items
- Offer such items on extremely discounted prices as deals to attract new customers
Inventory can be an asset as well as a liability to your company. So, in order make it remain as asset, you need to analyze, plan and stock accordingly. Traditional brick-and-mortar inventory can be managed simply because there is only one channel to sell through the storefront. But in the age of digitization, e-commerce and multi-channel selling, things may get complicated. Therefore, the role of a technology driven system becomes even more important to optimize your supply chain and helping your business to scale up.