If you are starting a new ecommerce business and you have stock to manage, but you don’t know exactly how to do it, you need to read this post. When you don’t have a pro-level inventory management system in place, it can be costly to you and it can create dissatisfied customers. But when your inventory is properly managed, you will avoid those pitfalls and more – and you will see your profits increase.
These best inventory management practices can help you organize and keep track of all stock from the time a purchase order is created to when the product is delivered to a customer. You have to consider inventory levels, tracking purchase orders, pricing, reordering, inventory costs, naming stock, and forecasting in order to have a well-oiled machine. The following are a few best practices to help you get there.
Inventory Management Best Practices
Understanding the four basic product types is the first thing you should get under your belt.
- Item – This is a single product that requires no assembling and is ready to be purchased.
- Assembly – These are items that require assembly.
- Family – These are groups of similar items. For example, if you have a product that comes in different sizes, colors, or other variant, they are part of one family.
- Case Pack – These are bundled items, typically a multiple number of the same type of product.
Use SKU Numbers and Barcodes
Every one of your products has to be identifiable, so you need to assign them their own unique ID number. The number you assign is known as a Stock Keeping Unit, or SKU. As your business grows, this becomes even more important as you likely will have a larger inventory and you may have similar items that need to be differentiated. You want to make it as easy as possible for your warehouse to find the correct item, so that your customers always receive exactly what they ordered.
Additionally, if you are partnering with other vendors (like resellers) you will need to utilize a universal barcode with a UPC number. UPC numbers are like SKU numbers, however they are managed as a part of a live database by GS1. That means that you need to obtain UPC numbers through GS1, so that your items can be easily scanned and identified.
Invest in the Right Software Solution
Many ecommerce retailers begin managing their inventory manually with spreadsheets and checklists. That may work for a while, but as your inventory and sales grow, you’ll find that it becomes increasingly difficult and time-consuming. In order to have the time you need to dedicate to other aspects of your company, investing in an inventory management software solution is well worth the expense. Not only will it allow you to quickly see exact quantities of your products, no matter how many sales channels you use, it will also help you eliminate errors, help you with audits, and let you know when you need to reorder inventory.
Track Customer Information
Once you have a software solution, tracking things like top-selling products, repeat customers, and other important trends, is easy. The ecommerce reporting features of your software will be able to provide you with all the key metrics you need to know exactly where your business is succeeding and where it needs to improve. If you have no way to create reports and track metrics, it’s like flying blind. While you may have good gut instincts, relying solely on intuition doesn’t make good business sense – and it certainly doesn’t increase your chances of being profitable.
Establish an Order Fulfillment System
How you handle customer orders from the time they make a purchase until it is shipped is considered your order fulfillment system. In the beginning, it may be something that you handle yourself, but as your sales increase you may want to have a third-party do your order fulfillment for you. Choose one that matches with your inventory management software like Fulfillment By Amazon (FBA) and ecomdash. Another option for fulfillment is dropshipping. In the dropshipping model, the manufacturer handles storage and fulfillment. That means that you don’t have to worry about getting your products to your customers, the dropshipper will take care of all aspects of order fulfillment for you.
Maintain Emergency Stock
It’s likely that at some point you will find yourself short on a specific product that customers have ordered. If you are using an inventory management solution, this certainly won’t happen often, but it’s a situation that warrants having a plan B. If it happens to you, but you’re prepared, your customers will never know that anything went wrong and will continue to be satisfied with your service. So, what’s plan B? You can either keep some emergency stock on-hand and fulfill orders yourself, or maintain a backup supplier or dropshipper for emergency fulfillment.
Accurately Forecast Inventory Needs
Forecasting is an essential component of inventory management. It includes using your past inventory data to predict what the demands for your products will be in the future. While you may run into some unforeseen trends occasionally, you will be able to use the metrics you are tracking to forecast what you need to order, and what you need to discontinue. Forecasting will allow you operate more efficiently, avoid overselling, and keep inventory costs down and profits up.
Use These Best Practices to Manage Your Inventory
Inventory management is essential to the success of your online business. The above are just a few of the guidelines you should follow as you are getting started to ensure the growth and success of your company.