Best Practices for Effective Inventory Management in Your Online Store

Several things could happen when you have poor inventory management for your online store. Imagine not having the right products when they are needed or losing so much money due to items either being out of stock or being excessively stocked. Such scenarios may very well hurt your business.

It is therefore necessary to occasionally assess your inventory and properly manage it if you want your online store to succeed. By implementing the best practices in this article, you’ll maintain optimal stock levels, improve customer satisfaction, and safeguard your profit margins.

What Inventory Management for Online Stores Entails

Inventory management in the context of an online store involves overseeing product storage, tracking sales, and ensuring accurate stock levels. Proper inventory control prevents scenarios like running out of top-selling items or being stuck with dead stock that ties up your capital. With a well-structured inventory strategy, you can deliver a seamless customer experience and avoid unnecessary losses.

You usually end up not tying down funds due to products that are in excess stock and your products can also be sold on time so that they do not spoil or become obsolete.

Why You Should Manage Inventory in Your Online Store

While there are benefits to proper inventory management for your online store such as better supply chain management and improved efficiency, you should be more concerned about what could happen with poor online store inventory management.

Disrupted Business Operations: Inconsistent stock levels can delay order fulfilment. This is because customers are unlikely to receive products on time if there are issues with inventory levels.
Lower Order Fulfilment Rate: Insufficient inventory can lead to unmet customer demand.
Decreased Customer Satisfaction: Poor inventory management or frequent out-of-stock notifications can massively affect your business reputation and reduce customer retention levels.
Business Failure: consistent issues of understocking, overstocking, and outstocking of products erode profits and threaten long-term business success, which will likely lead to a downward spiral of the business.

Best Practices for Inventory Management in Online Stores

Read on for some best practices and techniques you can implement to ensure good inventory management in your online store:

Ensure Accurate Forecasting of Projected Sales

There may be times when market forces and demands thrust sales emergencies upon you, but you are not as helpless as you may think. You can use factors such as historical sales trends, current economic status, market trends, marketing promotions, and predicted growth to calculate projected future sales.

Indeed, when you have accurately nailed down the art of inventory forecasts, you will be better able to predict and adjust to sudden changes in inventory demands and supply.

Apply The FIFO Approach

The first in, first out (FIFO) approach entails selling off products in the chronological order with which you purchased or manufactured them. Ideal for perishable goods such as food and flowers, this method reduces waste and frees up capital.

In any case, products that sit too long in your inventory tend to become worse for wear, expire, or become damaged.

Here’s an approach that you may use to apply FIFO for your warehouse that complements your online store:

Keep older products at the front of the inventory while adding new products from the back.
You may stop stocking items that tend to not get sold for as long as six to 12 months.
Offer special discounts and promos in a bid to get rid of old stock that does not get sold to free up space and capital.

Use The LIFO Approach

You may alternatively use the last-in, first-out (LIFO) approach that prioritizes selling the newer inventory first. This ensures that products are sold as fresh as possible from inventory. This can be useful for items that are trend-driven or have shorter shelf lives.

Perform Regular Audits on Your Stock

Whether you run an inventory management software or not, it is best practice to regularly do a count of your inventory. This will help you ensure that your physical stock actually matches your inventory record.

You may run comprehensive annual physical inventory audits.
On-going spot-checks are ideal for products that tend to have stocking issues or move fast.
Have a thorough checklist for ongoing spot checks and periodic audits.
Train employees to do stock quality audits for both incoming, in-stock, and outgoing inventory.

Make Use of Good Inventory Management Software

It makes sense to leverage a cloud-based inventory management software that provides real-time inventory and sales analytics.

Some of such software also links up with your point of sale to automatically adjust soft levels for every sale. They can also prompt you with an alert when items are low or below stock.

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Set Up Standard Operating Procedures for Production Workflows

One way to reduce the likelihood of sudden understocking is to implement SOPs that provide backup for failing processes or equipment. In any case, you have to monitor your processes and equipment and optimize them so that issues can be quickly resolved.

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Hire A Dedicated Stock Controller

A dedicated stock controller should be on hand to process orders and receive inventories. Such persons are usually responsible for ensuring that incoming stock levels match ordered stock levels.

Implement Drop Shipping Methods

Outsource storage and fulfilment to a drop shipping provider, reducing your overhead and inventory management challenges. This strategy is especially beneficial for stores with diverse or bulky product lines.

Create An Inventory Process Map

An important way to minimize inventory errors is to understand your inventory process from the start to the end. A typical inventory management process includes the following:

Product delivery: Either raw materials, subcomponents or finished goods are delivered to your warehouse.
Inspection and storage: The inventory is reviewed, sorted and stored.
Inventory monitoring: Inventory levels are monitored through counts, periodic audits, and inventory software to help reduce possible errors.
Stock order placements and approvals: Here, you receive orders from customers on your online or physical store. Thereafter, such stock orders have to be approved.
Stock retrieval: the products are taken from stock according to stock numbers and shipped to the destination.
Stock inventory update: the inventory level is updated, and relevant stakeholders can access it.
Low stock level alerts: A purchase or reordering process is triggered when stock levels are low.
Inventory restocking: The inventory levels are restocked as needed.

Apply the ABC method

Here, you categorize products into A, B, and C groups based on their value and profitability.

Category A defines your most valuable product that yields the highest percentage of overall profit.
Category B products are in between the most and least valuable categories.
Category C is assigned for products with small value but may majorly contribute to overall profit.

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Utilise The Just-In-Time Inventory Management Approach

JIT (Just-In-Time) technique involves the receipt of inventories when you need them rather than ending up having excess or dead stock. Here, dead stock refers to inventory that you end up not selling until you remove it from stock.

Use The Safety Stock Inventory Technique

With this technique, you simply order extra inventory that you keep aside for whenever there’s inadequate restock quantity. Understandably, this comes in handy during emergency customer demands.

Apply The Reorder Point Formula

This formula prioritises safe stock levels as you calculate and fix a minimum stock level point for reordering. Note that you have to assign a point that is usually higher than your safety stock number to provide good lead time.

Use The Inventory Kitting Method

You do not necessarily have to completely cut your losses from dead stock that has stayed so long in your inventory. You can kit such products by bundling them with items that sell away. In this way, you can recoup some of your losses.

Streamlining Inventory Management Processes for Success

You need an effective inventory management process to make your online store successful. Implementing these best practices can help you reduce stock errors, enhance customer satisfaction, and boost your bottom line. You also need to regularly assess and optimise your inventory processes and leverage technology to help your business meet market demands. In this way, your online store can remain competitive in an ever-changing e-commerce landscape.

If you’d like to find more tips on managing your online store, check out more content on our website: Exclusive Blueprint, a digital marketing blog powered by Buzztide Technologies. Our blog provides valuable tips, trends, and tools that can help you stay ahead in the competitive landscape of digital marketing.

You can read other valuable content and trending topics on E-commerce, content marketing, technology, and industry news by checking out our latest articles and expert advice on Exclusive Blueprint today!

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