Inventory management is vital to the smooth operation of an eCommerce business. Developing a winning strategy for sourcing products to shipping those products to your customers all depend on managing your inventory efficiently.
So, how do you effectively manage your inventory to ensure that your customers always get exactly what they ordered as quickly as possible? And how do you do that without spending all your time on inventory tasks?
To help you answer those questions and more, we have a list of five inventory management best practices that you should employ right now.
1. Create A SKU System
Each product that you sell should have its own unique identifier to make it easy to differentiate between products. This is especially important for businesses that have a larger catalog of products, but it applies even to those stores that only sell a handful of different items. Assigning a SKU (stock keeping unit) to each type of product will make it easy for your warehouse to find the right items for your customers’ orders.
You will also need to use a universal barcode and a UPC number on each of your products if you partner with vendors or resellers. These are like SKU numbers in that they identify specific products, but they are part of a universal database and are obtained through GS1, not assigned by you.
2. Make Forecasting A Priority
Forecasting is a crucial part of an effective inventory management plan. It’s essential to know how your inventory sells so you can anticipate how much product you’ll need and when you’ll need it.
The challenge is that your business will fluctuate throughout the year. That necessitates considering busy seasons, sales spikes around promotions, economic trends, and any other factors that may affect your sales.
To accurate forecast your inventory, you must have data. The best way to obtain data is with a robust inventory management software solution. It will help you track inventory and analyze insights so that you’re better able to plan your product sourcing for the future.
If that isn’t written in the stars for you at the moment, excel is a great alternative. Pull your sales from each platform you sell on and map out sales by month. Whether you choose to use a software solution or have a manual system, be sure that you factor in the following:
- Sales for the same time period from the prior year
- Planned marketing promotions such as email campaigns and online advertising
- Potential changes in sales due to upcoming holidays
- Market conditions and trends
- Any guaranteed sales from subscriptions
- Growth rate over prior periods
- Updated versions of products or new product releases
Accurate forecasting, when done effectively, will help you understand which products your customers love and when they usually buy them.
3. Evaluate Products and Strategize How to Move Them
Having more stock than you can sell is a costly predicament to be in. It means that you have capital tied up in inventory and are likely paying storage fees for those products. If you have stock that just isn’t moving, you need to have a strategy to get it off your shelves before it becomes obsolete.
Three strategies to consider are making price adjustments to sell your excess stock, re-marketing it, or bundling it. Let’s look at those a little closer.
- Selling excess inventory – The strategy here is to offer deep discounts on your slow-moving products. You can promote the discounts on social media, on your home page, or via email marketing. Try doing a flash sale or a limited time offer. Creating some urgency can entice shoppers to buy.
- Re-marketing excess inventory – This strategy works for inventory that isn’t selling because of a poor marketing strategy. Sometimes it’s a matter of visibility. Freshen up your product pages with updated descriptions and images (lifestyle and action images are great). Next, look at where your slow movers are located within the marketplace or your own website. Would they be better placed in a different category or on a different page? Lastly, try updating your SEO. You may be using keywords that customers simply aren’t searching for. There are lots of keyword tools online to help you find the right lingo to improve your product’s visibility.
- Bundling products – With this strategy, you can increase your average order value and sell slow-moving stock at the same time. There are several ways that you can bundle items to make them appealing to shoppers:
- Bundling multiple units of the same product works great for smaller items. Try bundling the same type of products but in different colours or designs.
- You can also bundle complementary products. Put items that partner well with other products you sell together and sell at a money-saving price.
- Another tried and true method is to bundle slow-movers with top-sellers. Bundle products from your slow-moving inventory with products that you know will sell. Customers who are looking for your best-selling products will likely view the bundle as an even better deal.
4. Prepare Contingency Plans
As your business grows, you’ll find that there are things (both good and bad) that happen when you least expect it. You may have a sudden spike in sales that depletes your inventory faster than you anticipated. Or, you may find out that your supplier is not going to carry your best-selling products anymore. Things like this can and do happen.
Developing contingency plans for anything that could go wrong helps reduce customer impact. Having back-up suppliers and knowing their lead times are two plans that will address the above issues. Now, you need to consider other things that could happen and how you’ll deal with them. It’s better to be prepared for something that never happens than to be unprepared when something does.
5. Automate Ecommerce Inventory Management
Manually updating inventory data is quickly becoming a thing of the past – even for smaller eCommerce businesses. It’s too time-consuming to even consider and is prone to mistakes. But not tracking inventory at all can lead to overstocking, out-of-stocks, and excessive returns, which will negatively affect your business.
Inventory management is one part of your business that you can automate. Using an inventory software solution helps automate tasks such as stock level updates when you receive an incoming shipment of inventory, when buyers make purchases, or when returns are processed. Additionally, with an effective inventory management system you’ll be better able to manage a SKU system, forecast accurately, handle product bundling, and connect with multiple suppliers.
Take Control of Your Inventory Management
Operating a successful eCommerce store has its challenges. When you implement the above best practices, effective inventory management will be one less thing you have to worry about.
It’s also worth the investment to find a multichannel inventory management software, like ecomdash, that allows you to track inventory at a glance. It will help you forecast accurately and free up more time that you can spend on other important aspects of your online business.