A complete guide to eCommerce inventory management

A complete guide to eCommerce inventory management

A complete guide to eCommerce inventory management
Noya Zwebner
Mar 10
5 min

Effective inventory management is crucial for the success of any eCommerce business. One of the main challenges of eCommerce inventory management is keeping track of inventory levels in real-time. Whether you sell products through your website, Amazon, eBay, or other channels, you need to have a clear understanding of your inventory levels and processes to keep your business profitable. Another challenge of running an online business is predicting demand and ensuring you have enough stock to keep your customers happy and meet their needs. In this guide, we will explore everything you need to know about eCommerce inventory management. We will take a look at the key challenges eCommerce businesses face when managing their inventory, the benefits of correct inventory management, and the different solutions available to manage your inventory correctly. 

What is Inventory Management? 

Inventory management is all about making sure your business has the right amount of products and goods on hand at the right time.  Correct inventory management requires keeping track of inventory levels at all times so that at any given moment, you know what you have available, what you need to order, where it's stored, and when to ship to customers. Inventory management services aim to help businesses maintain optimal inventory levels, follow consumer trends, reflect inventory turnover, reduce storage costs, and avoid stockouts or overstocking.

Inventory Management Challenges

Managing inventory can be a complex task, especially when you're selling products across multiple platforms. Here are some of the common challenges that eCommerce businesses face when it comes to managing their inventory:

  • Accurately tracking inventory levels in real-time - One of the most critical yet common challenges of running an eCommerce business is keeping tabs on inventory levels. Difficulty tracking inventory can result in having too much inventory that you can’t get rid of, not having enough to fulfill orders, and not knowing which items you have available or where they are located. Inaccurate stock details can cost your business large sums of money and should be addressed from the get-go. 
  • Predicting demand - Customer demand is something that is constantly changing, and meeting these demands means having enough stock without overstocking, which can be very tricky. For that to be done, you must keep track of customer trends and follow your their preferences at all times.  
  • Managing stockouts - Running out of stock can be detrimental to your business, causing lost sales, dissatisfied customers, and damage to your reputation. Knowing when to restock and in what quantity is not an easy task, but one that needs to be mastered with accuracy. 
  • Handling returns - Managing returns can be time-consuming, and it's essential to have a clear returns management process in place to avoid inventory discrepancies.
  • Effective warehouse space management - When you aren’t managing your warehouse with precision and accuracy, it can result in a lot of time being wasted trying to locate products. Poor management can also result in mistakes when fulfilling orders and difficulty keeping track of inventory levels. 

The benefits of inventory management

Effective inventory management can bring several benefits to your eCommerce business, including:

  1. Increased efficiency - By having an effective inventory management system in place, you are improving the processes required when handling orders—improved efficiency results in better time management, fewer mistakes, and reduced costs. 
  2. Improved accuracy - Real-time inventory tracking and management can improve inventory accuracy, reducing the risk of stockouts or overstocking.
  3. Enhanced customer satisfaction - Having enough stock to meet customer demand, handling orders on time and with no disruptions, and quickly processing returns are all factors that contribute to customer satisfaction.
  4. Reduced costs - Knowing and understanding trends means that you can adapt your stock levels to customer demand. Optimizing inventory levels can reduce the cost of holding stock and minimize the risk of stock becoming obsolete. 

The Process of Inventory Management

Although the inventory management method may vary from business to business, all require a similar process to be in place. An inventory management process refers to tracking stock from the moment it is manufactured until it is shipped and reaches customers. Here are the main basic strategies for managing inventory:

  1. Define your inventory management goals and KPIs - Determine your desired service level, expected product sales revenue, inventory levels, lead time, and inventory turnover rate.
  2. Establish an inventory management system - Set up an inventory management system that can track inventory levels, sales orders, and returns.
  3. Monitor inventory levels - Regularly review inventory levels and sales data to make informed decisions about restocking and ordering.
  4. Optimize stock levels - Maintain the right inventory level to meet customer demand without overstocking.
  5. Streamline returns management - Establish a straightforward process for managing returns, including tracking and updating inventory levels.

Inventory Management Techniques

The type of technique an eCommerce store may choose to manage its inventory can vary, but no matter the method, all techniques should aim for accuracy. Here are some techniques that can help optimize your eCommerce inventory management process:

  1. ABC analysis - ABC analysis is an inventory management technique that determines the value of inventory items based on their importance to the business.  This method helps businesses understand which products are most critical to the financial success of their business. 
  2. Just-in-time (JIT) inventory management - This method aims to maintain the lowest stock levels possible before restocking. A JIT approach seeks to reduce the cost of holding stock while ensuring you have enough inventory to meet customer demand.
  3. Dropshipping - Outsourcing fulfillment to suppliers who ship products directly to customers, reducing the need to hold inventory.
  4. Bundling - This refers to grouping products together to reduce inventory levels and encourage customers to buy more.

Inventory management logistics services

eCommerce logistics refers to the process of getting a product to its customers. It includes all stages from the moment a customer makes a purchase, including how the order is packed, shipped, and delivered to him. Whether completed in-hour or via outsourcing, a thorough and thought-out logistics process can serve as a huge advantage when confronting competition or meeting customer expectations.

  1. 3PL (third-party logistics) providers - A third-party logistics provider is a company that provides a range of logistics services to businesses. This can include transportation, warehousing, inventory management, order fulfillment, and other supply chain services. A 3PL works as a middle-man between businesses and their suppliers, providing expertise and resources to help optimize the supply chain and reduce costs.
  1. Fulfillment centers - A fulfillment center is a specialized warehouse that handles order fulfillment for businesses. Fulfillment centers are used by eCommerce businesses to store their inventory, process orders, and ship products to customers. Fulfillment centers sometimes offer additional services such as pick-and-pack, kitting, and returns management.

Although both 3PLs and fulfillment centers can offer warehousing and order fulfillment services, the key difference between them is their level of involvement in the supply chain. 3PLs are usually more involved in managing the entire supply chain, sourcing materials, and delivering finished products to customers. They may also offer a wider range of services, such as transportation and customs clearance. On the other hand, fulfillment centers are focused on order fulfillment and may be less involved in the supply chain process.

  1.  Consulting services - Logistics consulting services for eCommerce businesses are available to help businesses optimize their supply chain, reduce costs, and improve customer satisfaction. These services are usually provided by logistics consultants with extensive experience and expertise in managing eCommerce logistics. 

To wrap it up

Effective eCommerce inventory management is essential for the success of your business. By understanding the challenges, benefits, processes, and solutions available, you can optimize your inventory management and provide an excellent customer experience while minimizing costs. Whether you choose to manage inventory in-house or outsource to a 3PL provider, make sure to have a clear process in place to ensure accuracy and efficiency.

ehouse - a solution for effective and accurate eCommerce logistics management

ehouse is an international 3PL provider that offers a comprehensive range of logistics services for eCommerce businesses. ehouse’s team of experienced logistics professionals uses advanced technologies and data analytics tools to optimize supply chain operations and improve customer satisfaction. At ehouse, we are committed to providing accurate and timely logistics services, which help your business to reduce costs, improve efficiency, and enhance the customer experience. With our expertise and innovative approach to logistics management, ehouse is the perfect solution for eCommerce businesses looking to streamline their logistics operations and improve their bottom line.

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