Selling online changed how most companies reach customers. It also changed what it takes to keep the right products in stock. Yet, with the multitude of opportunities it presents, challenges also arise—particularly in inventory management. For senior leaders, understanding how to manage stock levels deftly, cater to customer demands, and utilize inventory management software can make the difference between a thriving ecommerce platform and one that falters. This article delves into the nuances of ecommerce inventory, offering expert advice to maximize efficiency and customer satisfaction.
Executive Summary
Running an ecommerce business requires a lot of planning and organizing. One of the best ways to help keep organized and measure where the company is at is with ecommerce inventory management systems.
These systems are designed to help online businesses run efficiently and, ideally, increase profitability. The only way you can take advantage of an ecommerce inventory management system is by thoroughly understanding them and how to make them work for you.
You might be starting an ecommerce business, running one that needs help, or shopping for a new inventory system. We will walk you through what these systems do and how to pick one that fits your business now and as it grows.
Introduction to Ecommerce Inventory Management
Whether you’re new to ecommerce inventory management or know what it is, learning more about it and how it can benefit your ecommerce business is vital before deciding on a system.
Zoho Inventory is an ecommerce inventory management software perfect for monitoring inventory turnover rate, collecting inventory reports, and intelligent inventory management. Below is an in-depth dive into inventory efficiency and every ecommerce inventory management solution available to help with your inventory items.
Understanding Ecommerce Inventory Management
Ecommerce inventory management organizes, oversees, and optimizes a company’s average inventory. The process involves strategically managing the flow of goods to ensure enough stock to meet customer demand without having a costly excess of goods.
There are several core functions of an ecommerce inventory management system. The systems help business owners and staff with demand forecasting to see how much of a product they should have compared to historical trends. Other core functions include stock replenishment, order fulfillment, tracking, returns, reporting, and analytics.
Ecommerce inventory management systems functions are designed to make the online business run as efficiently as possible.
The Importance of Ecommerce Inventory Management
Running an ecommerce business gets harder as customers arrive, demand rises, and you push the business to grow. Ecommerce inventory management is vital to the success of an online business for several reasons.
The right inventory software takes the day-to-day counting off your hands. You spend your time on what to stock and when.
Inventory management has always mattered to an ecommerce business. What has changed is how fast the whole channel grew and what that growth now asks of you. While it offers convenience and accessibility, it’s not without challenges. Some challenges include expedited fulfillment speeds, higher return rates, inventory holding costs, etc.
Beyond these internal challenges that ecommerce business owners face, the increase in customer expectations can often feel overwhelming.
For instance, customers shopping online are accustomed to inventory always appearing in stock, which might not be the case. When you add various shipping options, like overnight and 2-day, customer expectations can be even more challenging for staff to manage.
The Impact of Efficient Inventory Management
Efficient inventory management can only benefit your ecommerce business. By taking advantage of all the features these systems offer business owners and executives, you can help reduce costs across several sectors.
When you implement inventory management strategies correctly, you’ll reduce the amount of excess stock you have, save on storage costs, and reduce the risk that one or more of your products will become obsolete. Additionally, you’ll see which products you should reorder, how much of each, and when the order should take place.
Besides improving how everything runs internally, you’ll likely see much happier customers. When you have optimal stock levels, customers can get what they want and be satisfied with your company. Customers expect their products to arrive promptly. With efficient inventory management, shipping will run on time and keep them happy.
Using inventory management systems will help your business run more efficiently by helping you to allocate resources efficiently and remain competitive within the ecommerce space.
Overview of the Article Contents
In this article, we’ll talk about everything there is to know about ecommerce inventory management, such as its importance, the different types of inventory management, what to look for in these management systems, and more.
Understanding the Importance of Ecommerce Inventory Management
Ecommerce inventory management systems aren’t just something some businesses use to keep track of inventory; they’re essential for scalability, customer satisfaction, and other aspects of your business.
The Link Between Inventory Management and Customer Satisfaction
You want to keep your customers happy as a business owner or executive. They’re what keep you in business and keep the money flowing in. There are direct links between inventory management and customer satisfaction.
For example, IHL Group conducted a study regarding out-of-stock items. They surveyed several ecommerce businesses and found that having out-of-stock items, especially for prolonged periods, was responsible for losing $1 trillion in sales worldwide.
Customers who can’t get a product from your store will likely shop at a competitor rather than wait until it’s back in stock. In addition to keeping goods stocked, staying on top of delivery times via an inventory management system will keep customers happy and coming back. More than 50% of customers choose where they buy a product from based on how fast shipping is.
Consistent product availability and staying on top of shipping times will increase customer satisfaction. Staying on top of orders can be challenging with the shipping options available nowadays. Efficient inventory management can help you keep track of orders and prioritize those that paid for faster shipping.
Inventory Management and Business Profitability
Storage is a cost that is easy to overlook. Most owners only notice it once the monthly bill gets big. When you order too many products compared to the customer demand, you’ll be paying additional fees to store them until they’re potentially sold. Getting this right starts with disciplined ecommerce business budgeting that accounts for carrying costs.
Inventory management systems can help track demand and trends so you know how much of a particular product you should order to meet demand but not pay outrageous storage costs.
Besides paying to store stock that you over-purchased, when you purchase too much of a particular product, you risk that product expiring or no longer being in demand.
With effective inventory management, you can reduce the losses your ecommerce business will see due to expired or obsolete stock. Being able to manage cash flow is vital to staying afloat. Ecommerce inventory management can ensure that supply and demand are matching. This way, you don’t overspend on products that aren’t selling.
When you don’t overspend, you can apply that money to other business areas, like reinvesting and operational needs.
The Role of Inventory Management in Business Scalability
If you have plans to grow your online business, effective inventory management can help you with scalability. Good inventory management is what lets a store grow. It keeps stock in line with demand, frees up cash, and lets you spend that cash where it earns more.
Keeping customers happy and inventory constantly moving positively impacts the customer’s experience when they interact with your online store.
You can probably manage inventory by hand at first. Once orders and products pile up, that stops working.
That’s where ecommerce inventory management systems come into play. These platforms take over the tasks you already do by hand. You ship on time and you order enough of each product without tracking it yourself.
The more products and orders you carry, the harder stock is to track by hand. That is why a growing store automates it. Automating these processes will increase customer satisfaction while reducing sales losses due to a lack of inventory or delays in shipping.
Types of Ecommerce Inventory Management Systems
You know you need an inventory management system, but which type do you go with? You can choose from several ecommerce inventory management systems, each bringing something different.
Manual Inventory Management
Manual inventory management is precisely what it sounds like. It’s a way to track inventory management without specific software or automation. People within the company would physically keep track of all orders and inventory to monitor supply and demand.
Your staff can track inventory in a spreadsheet, on paper, or in whatever format suits them. Whichever they pick, someone has to update it by hand every day. Doing the tracking manually takes a lot of time, and sometimes, there needs to be more time in the day to do so accurately. There are pros and cons to using manual inventory management.
Some pros to manually managing inventory are that there are little to no startup costs, you get to be hands-on with the stock and have direct control, it’s simple, and you can personalize your tracking protocol to your business.
As for the cons of taking manual inventory counts, it can be time-consuming. Staff will spend a lot of time manually logging things, and that also leaves room for human error. It’ll be harder to grow the business with manual tracking because staff might need help to handle larger orders and inventory manually.
Lastly, you get fewer data insights than you would with automated inventory management systems. Manual inventory management is feasible for small businesses and those selling minimal products.
Automated Inventory Management
Automated inventory management systems have been able to change how ecommerce businesses conduct inventory management in the best way. These systems are constructed explicitly with technology that allows businesses to streamline every aspect of inventory management.
Staff can save time by not manually entering data for the inventory management records. These systems keep real-time track of inventory, sales, and shipping and can provide insights based on historical data to know what products need restocking and how much of them to purchase.
The benefits of automated inventory management systems, like QuickBooks Commerce, are abundant. They are far more efficient than manual inventory management; they’re more accurate, perfect for growing your business, offer advanced reporting and analysis, and ultimately result in higher customer satisfaction.
Despite the initial cost of setting up and obtaining the inventory management system, they provide cost savings in the future. They can prevent an accumulation of inventory on the shelves, which means your business will save money on storage costs and potential losses from unsold inventory.
As wonderful as automated inventory management systems can be, some challenges occasionally present themselves. Implementing these systems can be tricky, requiring training and overcoming a potential learning curve. In addition, there’s the possibility of security issues and glitches that can halt tracking.
Cloud-Based Inventory Management Systems
Cloud-based inventory management systems are automated systems that store all the business’ data regarding inventory management in the cloud or remote servers. Staff can access all this information with an internet connection, making it accessible almost anywhere. Many popular ecommerce platforms rely on cloud-based inventory management systems to monitor sales channels.
Choosing cloud-based inventory management systems eliminates the need to have any hardware installed or kept in the office. There are several benefits to implementing a cloud-based inventory management system for your ecommerce business.
They offer accessibility that other automated systems don’t because you can access them remotely with an internet connection. Another benefit is that you have scalability with these systems. As your business grows, you will only need to switch inventory management systems occasionally.
There are several cloud-based inventory management systems available. Shopify and Zoho (a popular cloud-based inventory management solution) Inventory are just two of the most popular inventory management software. One of the most popular athletic brands, Gymshark, utilizes Shopify for inventory management. This highly successful business has hundreds of products worth almost $1.5 billion.
With an automated inventory management system like Shopify, Gymshark is up with the high demand and keeps customers happy.
ERP-Based Inventory Management Systems
ERP (enterprise resource planning) systems are another automated inventory management system. They’re comprehensive and can integrate into a business’ processes and functions to create a unified platform. ERP-based systems take inventory management and integrate it into the larger business ecosystem.
These systems help automate reordering, demand forecasting, replenishment, and more. The main benefit of ERP-based systems is their integration capabilities, but there’s more to appreciate about them. They’re highly efficient, offer real-time insights into inventory so you can make better business decisions, are scalable, and are ultimately cost-effective.
A great thing about this inventory software is that it allows for more collaboration. Many businesses that use ERP-based inventory management systems have improved communication throughout the company and between departments.
As for the challenges with this type of system, there are a few worth noting. The first is that they can be complex. They require far more training and organizational commitment to implement and run. While they’re designed to integrate, that process might take time or be difficult. Plus, maintenance and upgrades are required every so often.
Several famous companies use ERP systems to deal with inventory management. Coca-Cola uses one to monitor demand patterns to create better marketing and production plans. Hershey’s also uses this type of inventory management to help collaborate with suppliers and optimize production.
Just-in-Time Inventory Management
Just-in-time (JIT) inventory management is more of a strategy. It aims to keep inventory levels as low as possible while meeting customer demands on time or early. It focuses on producing or purchasing products as needed to help reduce waste in additional costs and excess stock.
To function correctly, the strategy relies heavily on demand forecasting and supply chain coordination. When implemented effectively, it can be cost-saving and beneficial.
If you’re considering utilizing JIT, knowing the benefits can help you decide. The main advantages of JIT are optimized inventory, better space utilization, improved quality control, better order fulfillment, and increased customer satisfaction.
As for the challenges of JIT, you might run into supply chain vulnerability. Your company might face delivery delays due to supplier issues and other external factors. Other challenges include the risk of stockouts, the initial implementation, and demand variability.
JIT isn’t for every business. Businesses benefitting from JIT the most prioritize efficiency, timely order fulfillment, and waste reduction. Ecommerce stores in industries like electronics, fast-fashion, and food companies with short shelf life products will benefit the most from JIT.
Dropshipping
Dropshipping is a specific ecommerce fulfillment model where the retailer selling a product doesn’t physically have the product in their stock. When a customer places an order for a particular product, the retailer purchases said product from a third-party company that supplies and manufactures the product before shipping it to the customer.
It’s excellent for eliminating operational costs upfront and offering a wide range of products without stocking them in an office or your home. Dropshipping can have a significant impact on inventory management.
One of the ways it impacts inventory management is by moving the responsibility of inventory storage and shipping labels to third-party suppliers. Ecommerce businesses no longer have to keep track of physical inventory. It makes things easier in many ways for ecommerce companies.
Dropshipping pros are low startup costs, scalability, reduced storage, and you can focus more on marketing. The cons of this model are that you have lower profit margins and rely on suppliers, which can be problematic and affect customer satisfaction if there are issues.
Key Features to Look for in an Ecommerce Inventory Management System
Knowing the different types of inventory management systems is only half the battle. Once you know what type or are deciding between a few types that would benefit your business best, you need to evaluate the features of each system. You’ll want to look for specific features to help you manage inventory, grow your business, and integrate well into existing systems.
Real-Time Inventory Tracking
For several reasons, you’ll want real-time inventory tracking in an inventory management system. This feature helps provide you instant visibility into how your inventory is moving. It lets you see accurate stock levels and any discrepancies, allowing you to make changes in real-time.
The benefit of real-time tracking is that you can prevent overselling inventory you don’t have. Live stock levels show you where you are running short. The system flags a product before it runs out so you can reorder in time. You can also monitor historical sales to see sales volume and operational efficiency.
Integration Capabilities
An inventory program like QuickBooks Commerce cannot work on its own. It must run smoothly and efficiently with your existing platforms and software. Integration is vital because it helps unify operations and automate many processes like CRM and ecommerce solutions. Inventory software is just one piece of the larger technology stack decisions ecommerce teams face.
There are several possible integrations with these types of software. There is CRM software where you can monitor customer information and preferences. Another integration is accounting software like Quickbooks Commerce, where you can keep financial records of all transactions.
Scalability
If the goal of your ecommerce business is to grow, then you need to find scalable inventory management software, like Quickbooks Commerce. Whether you’re growing in the number of customers you’re seeing, the number of products you’re offering, or both, you want to avoid switching software every time you outgrow the one you’re currently using.
Scalability is essential for growth management and complexity handling. As orders grow, you need more detail on what is selling. As your product range grows, tracking each product by hand takes more time than anyone has.
Features to look for in scalability are batch processing, system upgrades, and multi-location support.
Reporting and Analytics
Accurate data is vital in any inventory management software, so looking for solid reporting and analytics is essential. Good reporting shows you which products sell best and how demand for each one moves through the year. Forecasting is another tool to help you see trends and make informed business decisions on inventory control. These reports should feed directly into the ecommerce KPIs leadership already tracks.
Some reporting and analytic features you should look for include trend analysis, real-time inventory updates, inventory forecasting, customizable reports, and predictive analysis. If you need to start using software that offers different types of reporting and analytics, then use a manual inventory tracking system rather than an automated one.
User-Friendly Interface
Every inventory management tool will have a learning curve, but you can choose one that’s relatively easy to learn (a good example is QuickBooks Commerce). Look for a system your staff can learn quickly. The faster they pick it up, the sooner the whole operation runs better.
You’ll want to look for tools that offer quick training, ongoing learning opportunities, and enhanced productivity features. Productivity features will help reduce errors and make the day-to-day operations run smoother.
The benefits of a user-friendly interface include staff being more open to adopting the new process, reducing human error, and creating personalized user profiles.
Customer Support
Each system needs to be complete with robust customer service. When something breaks, you need to reach a real person quickly. Slow or unhelpful support turns a small problem into a lost week.
Reliable support is vital for immediate problem-solving, resources, and training yourself and the rest of your staff. Signs you’ll want to look for in a system with excellent customer support are their responsiveness, how many channels they utilize for contact methods, how knowledgeable the customer support team is, and how many interactive tutorials they offer.
AI and Machine Learning in Inventory Management
Artificial intelligence (AI) has been around for years but has become an increasingly important part of almost all aspects of online life, including ecommerce businesses. As AI technology progresses, we’ll see more AI and machine learning in inventory management.
We’ll see AI help with stock levels, demand forecasting, dead stock assessment, and automating replenishment in the future. AI will take historical data and provide better insights into customers’ preferences, sales history, and more, which can help you grow your business and improve customer satisfaction.
AI and machine learning can revolutionize inventory management to be more responsive, proactive, and precise. Eventually, AI might ship products to your doorstep.
IoT in Inventory Management
IoT (Internet of Things) is the interconnectivity of physical objects into the internet by enabling data automation and exchange. It can help embed sensors and other devices into inventory, equipment, and storage spaces to help gather real-time data on stock levels, movement, and more.
This technology can help improve inventory management software and customer relationships by providing more accurate data and producing more accurate reports and analytics for shipping management. IoT will help give businesses more inventory visibility regarding location, condition, and more.
If this is part of the future of inventory management, it should help ecommerce businesses make more informed decisions regarding inventory and suppliers.
Increased Use of Cloud-Based Systems
Cloud-based systems such as Quickbooks Online are some of the most popular software in our world right now, regardless of whether they’re used for ecommerce businesses or something else. Fewer companies want hardware in the office. More of them are moving to cloud systems, which keep every record in one place.
These systems provide remote access to company records, real-time inventory tracking, and warehouse management. This way, you can see all reporting or analytics that could require immediate attention. These are also easy to back up and keep stored in the cloud and allow for more collaboration amongst staff members of the ecommerce business.
Cloud-based systems are standard in inventory management but are the future, so we expect to see far more use. It is mandatory for warehouse managers and those in the retail business to integrate ecommerce inventory management software in supply chain management for real-time updates.
Sustainability in Inventory Management
Many people assume an online store is greener than a physical one. Plenty of online stores are not. With many people focusing on more sustainable practices, it is no surprise that we predict the future of inventory management will include sustainability.
We foresee businesses looking to adapt to practices that reduce waste, energy consumption, and overall carbon footprint throughout the supply chain for their fulfillment strategy. This can be accomplished by adopting sustainable packaging, working with eco-friendly suppliers via responsible sourcing, and using efficient transportation to reduce fossil fuels.
Increasing Profitability through Proper Inventory Management System Implementation
Inventory management is a logistic necessity and the backbone of the customer experience in the ecommerce world. It can help increase growth and profitability by allowing things to run more efficiently and reducing costs in various areas. This link between inventory discipline and ecommerce profitability only grows as order volume rises.
With accurate inventory management, you can scale your business effectively without running into excess spending due to product storage costs and losses from damaged or expired stock.
When it comes to navigating the complex world of ecommerce, you need to have foresight, strategy, and precision. Inventory management is where you put all three to work. Inventory management can help your business run smoother, ensure consistent production without running low on inventory, and increase customer satisfaction.
Choosing the Right Inventory Management System
Whether it is through manual or automated inventory management, every ecommerce business needs to implement the right inventory management strategy for their precise individual needs at their current growth stage.
There are several excellent inventory management software platforms, each with their own strengths and unique user interfaces. To choose the right one for your business, you need to carefully consider each software’s cost, features, and integration abilities.
You’ll want to dive deeply into your current inventory management processes to see how one of these invaluable systems can help you. Doing so will allow you to evaluate your strengths and identify which areas need improvement. This deep dive will undoubtedly inform which system is ultimately right for your business. This decision belongs in your broader ecommerce business plan, not treated as a standalone purchase.
Looking Forward
In ecommerce, you must stay ahead of the game, and choosing the proper inventory management system is one of the most important steps you can take to ensure customer satisfaction and drive profitability.
As technology improves and the ecommerce space continues to adapt to changes, so will the way inventory management software operates. Innovations like AI learning and sustainability are already making their way to the forefront, offering business leaders new data-driven insights.
As a business owner, leader, and executive, staying on top of these trends is critical to ensure your ecommerce business stays relevant and quickly adapts to the ever-changing retail world.
Final Thoughts
Stores that manage stock well have happier customers. Most owners never connect the two. When inventory is managed proficiently, customers are less likely to encounter out-of-stock items, leading to fewer disappointments and abandoned carts. Furthermore, it streamlines order fulfillment processes, ensuring that deliveries are timely and accurate. These positive experiences not only bolster a brand’s reputation but also enhance customer loyalty. Consequently, satisfied customers are more likely to make repeat purchases and refer others, driving a positive cycle of revenue growth.
Business leaders should regularly assess: “How does our inventory management affect our customer experience? Are we missing sales opportunities due to stock issues? How can we leverage our inventory system to improve overall customer satisfaction?” By addressing these queries, businesses can pinpoint areas for improvement, ensuring that their inventory management system is not just a logistical tool, but a strategic asset for revenue growth.
Inventory management is more than counting stock. You are deciding what to buy, how much of it, and when, based on what customers will actually order. Three key takeaways from this article include the significance of real-time inventory tracking, the value of integrating inventory systems with other business operations, and the importance of scalable solutions that can grow with your business.
As business leaders consider these principles, they should ask themselves: “Does our current system provide accurate, real-time data? How seamlessly does it integrate with other facets of our operations? Can it adapt as our business grows and evolves?” The answers to these questions will guide the path to choosing the optimal inventory management system for sustained success.
