The omnichannel shopping strategies have played a vital role in increasing the number of digital buyers in recent years, as they can now browse and buy a product using mobile devices, laptops, desktops, tablets, smartwatches, and several other touchpoints. Additionally, top eCommerce trends like social commerce, BOPIS, and BNPL amongst a few have fueled the growth of online shopping models. The boost in the digital commerce ecosystem further increases when merchants meet customers’ requirements and fulfill their orders with quality products within a stipulated time, which can be achieved by implementing immaculate inventory management strategies.
Amazon, the biggest online retailer, operates more than 175 fulfillment centers to maintain sufficient product stock. It also offers its FBA sellers a machine learning-based inventory management system that helps them have control of their inventory levels.
What is inventory management?
Inventory management is the process of keeping track of all the products (raw and finished goods) that businesses intend to sell to their existing and prospective customers. Keeping track of stock includes ordering, storing, outlining, listing, and delivering the inventory items to the customers. Inventory management is a critical aspect of supply chain management that helps businesses make well-informed order decisions.
An inventory management system enables business owners to know the precise quantities of stock in their warehouse or storage facilities that are physically distributed and optimize the process of buying and selling commodities.
How inventory management strategies benefit eCommerce businesses?
Inventory management facilitates retailers to automate the business management process and reduce wastage, disruptions, and delays while offering a seamless customer shopping experience. While there are numerous benefits of inventory management systems, here’re a few advantages of implementing effective inventory management strategies in a digital commerce ecosystem:
#1: Cost savings
Buying commodities in bulk and storing them for a long time is detrimental to a business. Investing money in something that does not provide returns; is a waste of resources. With an effective inventory management system in place, retailers can have a clear picture of their inventory and thus save significant business margins by only ordering what they need.
#2: Greater inventory visibility
Inventory management strategies enable retailers to have a greater inventory visibility that gives them accurate information about out-of-stock products, emerging sales trends, customer buying behavior, and excess inventory. Having a consolidated view of their inventory helps merchants accelerate their supply chain and order fulfillment processes.
#3: Increased productivity
Replacing manual inventory management processes with an automated system saves time and adds to the productivity of the eCommerce business. The latest and technologically advanced solutions, such as Salesforce Order Management (SOM), improvises the customer shopping experience and help brands achieve their commerce goals when integrated with efficient eCommerce platforms. Digital commerce platforms like Shopify Plus, SFCC, and Magento have their own customized inventory management systems that can further help organizations to reduce their overhead cost and ensure the economic growth of the online shopping platform.
#4: Enhanced customer satisfaction
Inventory management techniques empower businesses to deliver superior customer satisfaction by studying their purchasing habits and understanding their requirements. It also increases their customer retention rates and helps them build a rapport in the eCommerce industry.
#5: Better supplier and vendor relationships
Inventory management software gives deep insights to retailers with bona fide data that helps them justify their buying and selling decisions. This de facto information helps merchants leverage the opportunity to negotiate better costs for their products and get a good deal with suppliers and vendors.
5 best inventory management strategies for eCommerce industry
Enterprises must adopt effective methods of inventory management to offer multi-channel order fulfillment, reduce stockouts, optimize shipment turnaround time, and minimize oversells and undersells. Deploying efficient tools and techniques of inventory management helps enterprises meet customers’ demands and run a cost-effective business.
The following types of inventory management techniques can help eCommerce businesses to be productive and stay competitive.
#1: Six sigma implementation
Six sigma is a teaching methodology that comprises business process improvement tools and techniques. Lean six sigma approach follows DMAIC (Define, Measure, Analyze, Implement, Control) problem-solving techniques that help businesses reach the root cause of the problems like excess and obsolete inventory write-offs.
#2: Adoption of FIFO/LIFO system
Depending on the type of business, retailers can adopt FIFO (First In, First Out) or LIFO (Last In, First Out) inventory management systems. Usually, inventory for non-perishable items can use the FIFO process, and the LIFO strategy is best suited for products that can go bad quickly. So, food items or packaged goods should essentially follow the Last In, First Out process to avoid wastage. And to keep the inventory filled with the latest stock, it is advisable to use the First In, First Out method.
#3: ABC analysis
ABC analysis is one of the best inventory management techniques that helps merchants categorize their inventory items into three categories – A, B, and C; A being the most profitable and C being the least profitable products. The inventory stock categorization based on products’ revenue generation capability helps retailers organize the buying and selling process and avoid delays and disruptions.
#4: Just-in-time inventory management techniques
JIT or Just-In-Time is one of the inventory management strategies that lets merchants keep the lowest inventory levels and still manage to meet their customers’ demands by refilling the inventory before the last of the product goes out of stock. JIT allows retailers to place orders for products as and when needed to reduce inventory costs and mitigate the risk of dead stock.
#5: Practicing dropshipping
One of the inventory management strategies is implementing dropshipping, an order fulfillment method that enables eCommerce stores to sell a product, even when it is not in stock. With this approach, online stores pass buyers’ requests for a product to the supplier, who in turn delivers it to customers. Dropshipping simplifies the supply chain by streamlining the business process flow and refines the order fulfillment process.
Inventory management strategies empowering business longevity
The success of a global retail framework heavily relies on fulfilling customers’ needs without disruptions and delays. An eCommerce business must fill the gap between demand and supply to earn their customers’ trust and have a large customer base with more returning customers. To achieve a seamless product delivery and a high level of customer satisfaction, employing a leading inventory management system and reaping the benefits of inventory management solution is a must for online retail businesses. Practicing the best inventory management strategies can also help eCommerce businesses gain longevity, brand loyalty, and brand affinity.