The world has gone online, so have the businesses all over. Digital presence, which is both relevant and optimized, is the key to business growth. E-commerce retail business has got into a whole new echelon with multi-channel adoption. With the selling channels & customer demands expanding and increasing in chorus, the need for effective inventory management strategies becomes inevitable.
First, let us ponder over few major obstacles in inventory management:
So, Inventory management, both on and off screen, is a potent matter to be dealt with. To leverage inventory the best way and increase both sales & profits, online retailers should primarily embrace a mix of modern inventory management methods and traditional methods. Some are listed below:
1. Forecast your demand
Properly forecasting demand for your products forms the base of a good inventory management plan. Using past few months or past years data to forecast demand & sales, while also considering current market trends, demand can be forecasted depending on area, sales channels and season.
2. Choosing the right stock allocation technique
Smart allocation of stocks is the key. If you have 100 SKUs of a single product and 3 sales channels, you can allocate stock in the following ways:
5. Determine safety stock level
Purpose to ensure that the business NEVER runs out of stock, a safety stock level should be maintained, but not so much that the carrying costs end up straining your finances. Safety stocks are also known as BUFFER stock. You can use the formula: Safety stock = (Maximum usage x Maximum lead time) – (Average usage x Average lead time)
6. Outsource fulfilment
Outsourcing is one of the smart inventory management methods for ecommerce retail. This way, you can handover complete inventory-keeping and fulfilment process to a third-party vendor. For instance, using Amazon FBA (Fulfilment by Amazon), you handover warehouse stocking, picking, packing and shipping processes to Amazon itself.
7. Supplement with dropshipping
Just because you don’t have a dropshipping business, doesn’t mean you can’t use dropshippers to fulfil your orders. If you run out of stock, you can partially adopt dropshipping to get orders fulfilled and hence not miss any sales. Additionally, you could also use dropshipping to test new product ideas.
8. Finding the right inventory management software
Centralizing your inventory management activities done across multiple sales channels has become a must so that you can keep errors at bay and focus only on one thing: business. With inventory data being centralized, you can sync & track inventory across the channels – warehouse to end-customer, manage orders and fulfilment, shipping, accounting etc; all from one place. While you have real-time updates, inventory management software also provides you accurate sales reports and analytics, enabling you to take better business decisions. You can determine stock replenishment time for each of your sales channel in real time. There are tons of potential inventory management systems that work with multi-channel stores offering a multitude of inventory solutions. Some of the best and well-equipped are:
Ecommerce retailers function in an extremely competitive landscape; and effective inventory management can often make or break a business. It becomes extremely important to make sure that your inventory works for you and not against you.
How do you approach inventory management? What challenges have you faced and how did you overcome? What lessons can you share with budding business owners? Share your thoughts in the comments section below. I’d love to hear from you!
Simple, yet powerful