3 Tips for Optimizing eCommerce Inventory Management
eCommerce companies who sell products in the B2B space and B2C space share one common challenge when it comes to inventory management — juggling the amount of inventory sitting on your fulfillment warehouse shelves. The delicate balance between maintaining enough inventory to fulfill orders quickly and making sure you don’t store too much extra inventory is essential for success in eCommerce.
Whether you’re looking to partner with an eCommerce fulfillment center, or you’re focused on growing your customer base and increasing sales, determining fulfillment inventory levels is an important part of the overall process and can influence cash flow and your bottom line. By optimizing your inventory management, you can not only improve your cash flow and increase revenue, but you can also more accurately predict and prepare for stockouts and reduce the chance of backorders. Tracking inventory trends will also help you avoid overstocking inventory that sits unpurchased on the warehouse storage shelves.
Get to Know Your eCommerce Manufacturer and 3PL Provider
The best strategy for accurate eCommerce inventory management is to aggregate all data available to you and calculate optimal stock levels accordingly. Two components of inventory planning include learning your manufacturer’s order fulfillment turnaround times, and how long it takes your 3PL provider to receive inbound inventory shipments. When you order inventory from the manufacturer, take note of how long it takes to ship that product to your fulfillment center – and subsequently how long it takes your fulfillment warehouse to process incoming inventory and stock the shelves. If your product takes 6 weeks to manufacture and ship to a fulfillment warehouse, to keep from running out of inventory, plan new orders 8-10 weeks in advance. Understanding these business patterns will help you anticipate stock levels and ensure customers won’t pass you up for a competitor’s product because you’re out of inventory.
Observe Sales Patterns and Buying Trends
eCommerce sales records can serve as valuable data for predicting trends and patterns for inventory levels. Are your products seasonal? Do they make great Christmas presents? Do you promote sales or discounts during certain times of the year? Check out Google Trends to note what people are searching for during certain times of the year. Set a minimum stock level for each item and set alerts when inventory reaches the minimum so you can proactively order more stock. Based on your minimum inventory levels and sales data, you can accurately predict inventory levels and build in some additional safety stock to protect you from unfortunate out of stock situations. Eventually, you will be able to use this data to create a forecast inventory — which will track your product from manufacturing, through order fulfillment, shipping, and returns.
Don’t Hang On to Slow-selling or Obsolete Inventory
Inventory hoarding is a real thing — and it could end up costing you more money in the long run. There’s a fine line between having just the right amount of inventory and having too much of it. Inventory sitting on the shelves will not appreciate and can actually become outdated if you’ve made marketing or packaging changes that can make older products less desirable to customers. Work with your fulfillment warehouse to calculate old inventory so that your eCommerce business doesn’t suffer from the “Ghost of Inventory Past.” A trustworthy 3PL provider will strategize with you to ensure you aren’t paying for unnecessary warehouse storage. Set realistic turnover goals and start analyzing that sales data to help you identify slow-moving inventory so that you can adjust your order fulfillment accordingly.