When starting an e-commerce business, few things will be as important as your inventory management. It’s something that doesn’t always get much attention, yet business owners will quickly discover just how much of an impact it has. Inventory management will make it possible for you to know when it’s time to order more stock and it helps you to track sales and ensures you have the items your customers want. With that said it can also be a bit overwhelming, especially for those who don’t have formal training or experience in inventory management.
Let’s dispel all that fear and apprehension and take a look at the inventory management basics for your e-commerce business.
Be Aware of the Inventory Turnover Ratio
Here’s a term you’ll want to familiarize yourself with and that’s inventory turnover ratio. This refers to the rate at which inventory is sold – the speed or the number of times. So why is this so important? Well, it helps you to figure out what to stock, how much to stock, and when to replenish.
There are two types of turnover – it can be low or high. If an item has a low turnover ratio that means it isn’t selling fast or often. On the flipside, an item with a high turnover ratio means it sells often and fast, meaning it is probably a lot more popular.
You can use this formula to quickly and easily figure out the inventory turnover ratio on various items. This will help you to better plan in all aspects of the business. Keep in mind there is no universally perfect ratio or rate as it will depend on the product itself.
Do All You Can to Prevent Spoilage from Happening
One of the worst things for businesses to absorb is inventory spoilage. If you’re selling items that have a defined expiration date, they need to be sold before they end up spoiling. Thorough inventory management should be tracking expiry dates to ensure that proper inventory gets sent out.
Make Sure You’re Not Overstocking
This is a basic inventory management tip that doesn’t just apply to e-commerce businesses but all businesses. Overstocking means you’ve got too much inventory on hand at once. That means you need to deal with additional storage fees (you need more space for storage), you may be spending more on products and goods than needed if those items don’t sell and it can mess with your numbers.
Overstocking is often referred to as dead stock and it can reach a point where you are no longer able to sell it all, especially if demand wanes.
Avoid Over-Selling to Customers
Then there is over-selling, another huge no-no that can mess with inventory management. Not only will you run into issues providing product to the customer since you don’t it on-hand, but you also risk making the customer angry. If items are constantly on backorder and shipping is slow while you wait for inventory to be replenished, you can bet that the customers will start shopping elsewhere.
Automate the Process
Perhaps one of the most useful tips is to automate the inventory management process. There are so many different types of inventory management software and apps you can use that simplify and streamline the process. It doesn’t matter that you have no experience with inventory management, this kind of software is meant to make it easy. If you haven’t yet automated the process, it’s time to embrace the technology.
Ensure You Have Full Visibility
Finally, there is the visibility of inventory across all the warehouses and channels the company uses and relies on. This ties in with automated inventory management, as that kind of software ensures clear visibility and transparency at all times and in real-time. You don’t want to be guessing what you do and don’t have in the various settings, everything needs to work cohesively.
Simple Tips and Basics You Can Follow
Inventory management can be quite challenging for e-commerce business owners, especially if you don’t have much experience in it. But just because it’s challenging doesn’t mean you can’t and shouldn’t try to master it. These basic tips and practices will ensure you take control of your inventory management and set the company up for success.
