Tracking inventory can become difficult as businesses grow. When you first start, tracking your products and inventory in a spreadsheet may be sufficient. However, as businesses expand globally, they will want a better way to manage inventory. Inventory management software increases productivity and streamlines processes, but where do you begin? In this guide, we address a variety of subjects to answer questions such as "What does inventory management software do?"
Understanding Inventory Management
Inventory management is the process of managing and controlling products. It includes every step, from purchasing products from a vendor to tracking, storage, and fulfilling customer orders. Sellers must maintain the right amount of inventory to meet customer demand while reducing stockout situations.
For an eCommerce store, this covers two important elements: inventory and order management.
- Inventory tracking: This involves tracking the products physically present on a seller's warehouse shelves. Inventory management software updates reorder stock levels based on fluctuations to align inventory levels with demand trends.
- Order management system: An order management system logs, tracks, and manages orders from purchase through to delivery. By combining the two, businesses can remove operational barriers and improve stock visibility.
Common Inventory Management Challenges for Ecommerce Businesses
1. No Instantaneous Sight Of All Channels
Problem: When businesses sell the same product on Shopify and Amazon, inventory levels need to be updated across both channels whenever a sale occurs. Otherwise, sales channels operate in silos, making it difficult for sellers to know their actual available stock.
Solution: A unified dashboard provides a single comprehensive view of all sales channels. This interface provides a snapshot of stock stored across different warehouses and marketplaces. This way, all teams have information about stock availability.
2. Managing Multiple Selling Channels
Challenge: Managing inventory across multiple websites requires hours of importing stock. Sellers may struggle to keep stock levels updated as orders arrive, increasing the risk of overselling
Solution: Multichannel e-commerce integration connects multiple storefronts through a single centralized dashboard. If a customer buys something from TikTok Shop, the existing stock on Shopify and eBay is reduced automatically. This helps to maintain accurate inventory levels.
3. Demand-Supply Imbalance Driving Overstock and Stockouts
Problem: Estimating incorrect replenishment requirements can create two costly problems. Overstocking causes cash flow problems and additional storage costs. Understocking leads to out-of-stock situations, lost sales, and disappointed customers.
Solution: Inventory management software tracks customer demand trends. It aligns products that need reordering to reflect the true sales pace. This keeps the inventory pool sufficient to fulfill orders at all times.
4. Inaccurate Demand Forecasting
Challenge: Simple spreadsheets may not effectively capture changing demand patterns. If sellers fail to recognize an increase in customer demand, they may run out of stock before they can respond.
Solution: Advanced inventory analytics aggregate historical sales data, seasonality, and market variation. It then generates forecast reports. This reduces buying risk, enabling sellers to buy only what they are likely to sell.
5. Inaccurate Safety Stock Calculations
Problem: Safety stock, or an emergency inventory buffer, is extra inventory to cover shipping delays or unexpected sales spikes. If sellers maintain too little safety stock, they risk stockouts, while too much ties up working capital and increases storage costs.
Solution: Built-in calculators do the calculations on the supplier lead times for the sellers. These calculators factor in daily demand fluctuations to determine the ideal safety buffer for every item in the product catalog.
6. Complex Multi-Channel Inventory
Problem: As a business expands, inventory stored across warehouses, the Amazon network, and 3PL providers also grows. Tracking orders across sales channels separately can create operational chaos.
Solution: An Order Management Software routes incoming orders to the fulfillment center or 3PL fulfillment warehouse with available stock across all the connected marketplaces. A 3rd-party fulfillment provider is an external company a business hires to handle warehousing, packing, and shipping.
7. Relying on Manual Tracking
Problem: Typing in every entry in the spreadsheets leaves the business at the mercy of typos, forgotten entries, and updates that take forever. And by the time the mistake is identified, the firm has an overnight shipping crisis on its hands.
Solution: Replace paper and manual checking with barcode scanners and a digital process, so that whenever a product is shifted, it is recorded right away. The only catch is that the digital log must always be kept up to date.
Benefits of Using Inventory Management Software
For small enterprises as well as major retail or warehouse optimization, using an inventory management system offers several advantages, such as:
1. Increased Inventory Accuracy
Inventory management systems facilitate order fulfillment and product tracking for enterprises. Throughout manufacturing, storage, and sales, these systems keep an eye on every product that comes into and goes out of the business. Because they can handle payments and sales and link with already-existing point-of-sale systems, many inventory management systems are also point-of-sale systems. Inventory Accuracy could save internal inventory management expenses for businesses and improve connections with partners and consumers.
2. Lower Operating Costs
By avoiding overstocking, inventory management systems assist businesses in cutting expenses. A business may ensure sales orders for clients and avoid backorders when it maintains a precise inventory record. Overstocking can result in unforeseen expenses for businesses since they frequently rent or lease storage space for their goods. Costs associated with storage space increase if it takes weeks or months to get rid of the extra inventory. Using an inventory management system, you might cut additional stocking inventory expenses such as:
- Wages for Employees: The company's labor expenses will rise as a result of employees having to handle and store extra merchandise.
- Insurance: To safeguard the property and its assets while renting or leasing a warehouse, an insurance policy is usually required. This raises the expenses of the business.
- Transportation: The cost of transporting extra goods to and from warehouses may go up if it is stored there.
3. Automated Manual Processes
Automation is the process by which corporations employ software to automate specific tasks. Businesses may automate the process to lower mistakes, save labor expenses, and get more accurate stock counts by using inventory management software. In the long run, automation improves inventory management process efficiency and lessens a company's reliance on human labor.
4. Increased Output
Utilizing inventory management software may lead to increased production rates for businesses. Reducing inventory mistakes frees up organizations to concentrate on manufacturing faster, higher-quality items. The company can then reallocate labor hours to other duties to enhance operations and increase productivity.
For instance, by employing inventory management software, a business that employs three inventory management staff members might cut that number and save labor expenditures. Additionally, it's possible to transfer one or more of those inventory management staff members to a different department inside the company. This guarantees businesses are making the most of their workers.
5. More Coordination
Businesses may also improve their inventory organizational methods with the use of inventory management systems. Employees can use them to group items according to names, sizes, shapes, or any other relevant criteria. An organization's inventory may facilitate both simple and efficient product tracking and faster, more accurate order fulfillment for the company.
An inventory management system, for instance, can assist a vehicle manufacturer in arranging every piece of equipment according to its batch number and name. This enables the business to trace every component from the delivery truck to the finished product and helps the material handling staff locate the right components promptly. Moreover, this can lessen culpability in the event of a recall, as every material or product in the system is trackable.
6. Enhanced Customer Satisfaction
A precise and well-organized inventory system can enhance the clientele's experience. Orders may be filled by businesses precisely and swiftly, which boosts client satisfaction. This kind of customer care may strengthen the bond between the company and its clients by gaining their confidence and loyalty. As more people utilize your items, you should expect a boost in earnings and a more positive brand image.
7. Reduced Stockouts and Overstocking
Inventory management software helps sellers maintain a balance between available stock and customer demand. Holding more inventory than needed at the warehouses ties up product capital, including cash.
8. Enhanced Productivity
Inventory management software helps businesses reduce manual stock counts and chaotic data cleanups. Warehouse staff focus more time on ordering, packing, and optimizing operational workflows.
9. Real-Time Stock Visibility
Inventory management systems increase the security of data while also increasing its visibility to the executive team of the organization. Greater data visibility means executives can make more educated business choices with fewer mistakes that might cost time or money. A warehouse manager, for instance, may track what goods come into and go out of the facility, which can assist them in identifying any differences in inventory counts.
10. Enhanced Interlocation Coordination
Managing additional inventory is a result of having several warehouses or retail locations. An inventory management system can facilitate better coordination and organization among various facilities. Improved sales processes and cost savings may be achieved through increased coordination among locations, enhancing the brand's reputation and drawing in new clients.
For instance, a chain of bookstores may need to purchase extra books from another location when a particular book is running short in stock at one of its locations. Store employees may see which locations own the book, how many are in the system, and how much they cost with the use of an inventory management system. The technology then allows them to make an order, which instantly modifies the amount of inventory in each location.
Best Practices for Inventory Management
1. Build a Forecasting Model
Avoid purchasing stock through speculation. Base all future purchase forecast estimates on past sales data and factors that might influence future sales. Create well-defined and seasonal purchase timeframes that reflect actual demand.
2. Use the Correct Inventory Management Software
Invest in cloud inventory management software. It should be compatible with all online stores, accounting software, and shipping software. This will ensure connectivity for all data.
3. Peak Season Planning
Forecast safety stock levels well before peak sales season. Clear communication with suppliers reduces delivery delays during peak sales seasons.
4. Manage Supplier Relationships
Maintain strong relationships with the supplier. Forecasting future sales with the manufacturer allows the supplier to produce faster, with a very short lead time, and at a constant price for the items.
5. Set Inventory KPIs
Track business KPIs regularly, such as order fill rate and inventory turnover ratio, which measures how often a company has sold through its stock over a specific period.
Use MapMyChannel to Manage Your Inventory and Associated Costs
When sellers begin to see actual growth, they must reinvest in the company to keep up a high standard of customer service, increase revenue, and advance. Bringing on more staff to handle increased sales volumes is an expensive strategy that may make operations more complex as the business grows.
Keeping up with the most recent technological advancements and industry best practices is essential for effective inventory management in e-commerce. With accurate inventory sync and ecommerce automation, businesses can protect their seller metrics and prevent costly double sale errors while still striving for delivery.
Leverage the potential of online inventory management software to position your company for expansion and success. Keep in mind the benefits of effective inventory management for e-commerce. Discover the incredible advantages of MapMyChannel and the countless opportunities it presents for the development of your online store.
Register for a free trial now to discover how MapMyChannel may help you save money.
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