Ecommerce Inventory Management: Why the Right Software is Key

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Manufacturers and brick-and-mortar retailers have been using software to manage their inventory for years – but inventory management is even more important when you’re running a business that operates in the complex eCommerce space.

Here we examine the common challenges eCommerce businesses face, and the features and functions software offers to solve them.

What is eCommerce inventory management?

Inventory management for eCommerce is the process of monitoring and organising inventory for online retail, from sourcing through to shipping. It allows an organisation to track how much inventory it has at a given time, where that inventory is, what it’s worth, and where it needs to go next.

Why do eCommerce stores need this level of inventory control?

As an eCommerce store, we imagine you’re dealing mostly in finished goods. That means your inventory is one of your biggest company assets, and any loss here is serious money down the drain. Your capital is tied up in these goods until sold, so the more you can streamline the process of selling your products, the healthier your bottom line will be.

Inventory management is a critical process in that streamlining effort. It deals with making it easier to track and analyse the comings and goings of your warehouse, so you always know:

  • Where something is coming from
  • Where it’s going
  • Where you’ve stored it
  • How much it’s worth
  • How long it’s been stored in your warehouse
  • What times of year you would expect to sell more or less of that product

While this is important for all inventory, it’s even more important for products with a short shelf life – like perishable food products or seasonal / promotional items. These are items where over- or under-stocking is harder to recover from, not to mention the risk of spoilage.

Two men pull a cart in a warehouse

With eCommerce’s increasingly important role in both B2C and B2B markets, making sure your inventory is managed properly has become central to any business that retails online

5 common challenges of eCommerce inventory management

  1. Stock in the wrong place: If you manage multiple warehouses, but can’t track the location of your products, you run the risk of keeping important items in the wrong section of your warehouse – or perhaps even the wrong part of the country.
  2. Not enough stock: Sudden surges in demand can happen at any time, and if you aren’t confident about when these surges will occur, or you don’t have an appropriate amount of safety stock (or perhaps operate a just-in-time business model) then you may stock out during these waves.
  3. Too much stock: The opposite problem to the above. Sudden troughs in demand may also occur at certain times of year, leading to slow inventory turnover and higher carrying costs as a result. Wastage is sure to follow for items with a limited shelf life, like perishables and seasonal items.
  4. Forgetting stock: How often have you gone into the back of the warehouse and found goods unsold from years ago? These dust-gatherers are locking up capital that could be otherwise spent on growing your business. Forgetting stock by not understanding what items are where, and what hasn’t been sold yet, is a needless waste of money.
  5. Inability to communicate with customers: At the end of all of the above is the customer – and an unsatisfied customer at that. Customers may forgive stock delays and problems with the supply chain, but only if a business is open, honest, and quick to communicate. But you’ll struggle to communicate if you don’t have good control of inventory because you may not know what’s wrong and therefore can’t explain it to the customer in a timely – if not immediate – fashion.

5 benefits of eCommerce inventory management

  1. Gather data: By controlling your inventory through software, you can gather real-time data on your stock. This can help to spot red flags and money pits on the go, as well as predict future demand by comparing historical sales data to predicted future trends, such as upcoming seasonal events.
  2. Reduce waste: By carefully tracking expiry dates and other factors in real time, you’ll have a clear picture of your risk of waste via spoilage and can push those products accordingly. Additionally, if you’re forecasting future demand, you can purchase new inventory to match reality – so there’s less chance you’ll stock out, or buy too much.
  3. Streamline processes: Inventory management practices reduce not just product waste, but time wasting too. Your staff can spend less of their day on menial picking, sorting or data entry tasks, and more doing value-adding activities like strategy or upskilling.
  4. Share information: Connecting your various processes together into a single system is a part of the inventory management onboarding process. The side benefit of this is that this interconnection of systems means they can talk to each other clearly, so you can start to compare all sorts of factors from different business units to spot trends and opportunities. This includes not just inventory, but sales, financials, marketing, HR, supply chain management, and more
  5. Improve satisfaction: With a better handle on your inventory, and predicted future demand, you’ll be better placing your business to satisfy customer orders in a more timely fashion, with fewer chances of errors – even on complex split shipments.
A woman works at her computer and takes notes

Many of the benefits of effective inventory management come back to one key thing: customer satisfaction

Inventory control is especially important for multi- or omnichannel eCommerce

Managing an omnichannel or multi-channel eCommerce business model can be very challenging if you don’t have a firm handle on your inventory control, and especially if nothing has been automated.

Overselling is a common challenge, and a great example

When you move to omnichannel retail, and your system can’t manage itself, you may inadvertently sell the same product on two channels when you only had one item in stock. One customer gets the product, the other goes away unhappy.

With a multi-channel inventory management platform, your system would have seen that only one product was in stock, mentioned that publicly on both channels, and informed whichever customer came second that they had missed out. Perhaps it would also give them an opportunity to sign up to hear when the product came back in stock.

What functions does eCommerce inventory management include?

In a nutshell, modern inventory management software is a cloud-based software-as-a-service (SaaS) product designed to connect your people, warehouse and systems together into a single platform. From there it can:

  • Track real-time stock levels with barcode scanners and automatic data entry
  • Track inventory across its lifetime by batch or serial number
  • Inform you where each individual item is located across multiple warehouses or shipping carriers
  • Record details about each product such as weight, dimensions, cost and price
  • Help you forecast demand
  • Automatically inform you when certain items are running low on stock (or about to hit maximum preferred stock levels), so you can restock or stop buying before it’s a problem
Boxes stacked up and in two rows

While you can use spreadsheets to manage your inventory, the process is time-consuming – and if you have more than one warehouse or online store, real-time inventory data is essential

Can you use spreadsheets to manage eCommerce inventory?

Well, technically yes. If you’re willing to set up a series of spreadsheets, input all the formulas, triple check everything, then manually input all data and maintain good spreadsheet hygiene every day your business operates, then yes – you can use spreadsheets.

The problem with spreadsheets – as you can see – is that they’re manual. You won’t have that real-time data tracking, your people will need to manually enter all information instead of just, say, scanning a quick barcode, and there will always be a risk of human error – a decimal in the wrong place, a typo, a forgotten product.

Do eCommerce platforms include an inventory management function?

The short answer: to a degree.

Some of the big eCommerce platforms such as WooCommerce and Magento do include some inventory management functions, but these don’t quite offer the full range of benefits we’ve talked about in this article.

For example, they will usually track your catalogue of products, show stock levels to customers where appropriate and inform you of low stock. They’ll also often offer an array of analytical features to do with sales and inventory. But these systems are not connected to your actual warehouse unless you have software in place to connect them – meaning you end up with manual processes in the mix.

This is where dedicated inventory management software comes into play

To truly optimise your eCommerce store and fully control inventory, you’ll want both a modern eCommerce front-end and a dedicated inventory management software back-end. It’s common for these systems to be integrated with each other.

This way you get the benefit of the sales aspect of the eCommerce store, and the inventory optimisation, automation and forecasting data of the back-end.

A man writes in a notebook while sitting at his computer

Look for features like real-time data, inventory value tracking and supplier management to optimise your inventory processes

Top 5 features to look for in good eCommerce inventory management software

1. Real-time data analytics

Business improvement comes from good data. Being able to gather evidence about your business allows you to perform a thorough SWOT analysis and make data-based strategic decisions about what to do next, where to expand, and what to buy.

This data should come through in real time, or as close to it as possible. Without this feature, you can’t determine what stock you have, where it is, and where it needs to go. In the fast-moving world of eCommerce – and omnichannel eCommerce at that – a lack of real-time visibility can lead to errors. And errors lead to unsatisfied customers.

2. Barcode scanning and serial number (or batch) tracking

In order to make data entry as smooth as possible, you have to eliminate it where possible. Barcode scanning is one crucial way to achieve this, allowing pickers and sorters to update the system with the push of a button – no menial data entry needed on their part, and therefore they can move faster and make fewer errors.

If your system can also track products via serial number or batch, you gain visibility across a product’s entire lifetime, from the manufacturer (if that company is different to yours) all the way through to shipping and delivery. Then if products ever come back up the supply chain in the form of returns or maintenance, you still have all that historical data to know where it’s been and when it was sold.

3. Real-time inventory value tracking

Your warehouse managers might be more concerned with the what and where of your stock, but your accounts team and management are going to want to know the value of these goods.

With a live view of inventory value, historical inventory turnover data, and the ability to track additional variable costs like courier fees or spoilage, you’ll have the power to accurately monitor your company’s complex finances – potentially helping you find money pits, or opportunities to invest and grow.

4. Supplier management

The quality of your customer experience starts with your suppliers. So knowing where your goods are coming from, what they’re costing you, and understanding the quality of these goods (i.e. goods sold versus goods returned), will put you in a position where you can make evidence-based decisions on who to purchase from, and who to drop.

Beyond that, inventory management software with a supplier management feature should also automatically generate purchase orders, store supplier details centrally, generate quantity discounts, record transaction histories and more. Each of these functions takes a degree of manual labour out of your day, giving you more time to do what you do best.

5. Adaptability

Finally, a degree of configurability is always welcome in any SaaS product, inventory management included. Every business is unique, so you’ll want to find software that can be adjusted – even if only a little bit – to better suit the specific needs of your industry or business model.

This adaptability should also extend to plug-ins. Look for inventory management software that plays nice with others, such as ERP systems, marketing or sales databases, and of course eCommerce platforms.

A woman types on her computer in an office

How do you work out which inventory software is the right option for you? We suggest asking yourself questions like how your staff will use it and what other apps – if any – you want your inventory software to integrate with

6 things to consider before investing in inventory management software

Make sure that before you invest in software, you’ve taken time to reflect on your organisational needs regarding the software. If you want to make the most of any new purchase, that purchase must be well-suited to your business type, goals and organisational strategy.

So ask yourself:

  • How many users will require access to the platform?
  • How scalable is the software if we grow or shrink?
  • Is the software compatible with my existing platforms – like ERP or eCommerce – or compatible with the ones I am considering?
  • What will it cost, either up-front or on a rolling basis? What is my budget?
  • Does the system need any on-premise hardware or can it be accessed remotely? If it can be accessed remotely, can it be accessed via mobile or strictly desktop?
  • What support does the provider offer, in the form of both resources and contact people?

Is inventory management software right for eCommerce SMEs?

For some SMEs it may feel like a serious cost to invest in new software – especially if you’re used to doing things yourself.

But the reality is that SMEs can benefit from better inventory control as well as – if not more than – larger enterprises: in a business where every dollar counts, saving those dollars has a larger impact.

So that investment cost must be considered against what it’s costing you or your team to manually carry out the processes we’ve discussed above.

Two men unload boxes from the back of a van

To calculate if inventory software is worth the cost, think about how long your personnel – including pickers, sorters and back-office staff – are spending on manual data input

How do I calculate if investing in eCommerce inventory software is worth it?

Here’s an exercise for you if you’re worried about cost

Consider your annual salary – or that of whoever it is in your company this most applies to.

Now ask yourself how many minutes or hours they spend each day (or week, if that’s easier) on data entry and data management. Consider the time your pickers and sorters spend manually inputting inventory data into your current system. Also calculate the time your financial team has to take sorting through pages of Excel sheet data to look for the information they require.

Then take into account any money you’re losing on, say, a quarterly basis from spoilage, clearance discounts for unsold stock, and lost business due to stockouts.

These are the easy losses to calculate – you may also be losing money on missed business opportunities due to not foreseeing trends, inefficiencies in your supply chain, or poor customer satisfaction.

If all of that data entry were instant, and those inefficiencies were to be cut, how much would you save per week or month – and does that offset the rolling cost of an inventory management product?

How Unleashed simplifies eCommerce inventory management

We recognise that we’re biased towards inventory management, since it’s what we work hard on to make people’s lives easier.

In short, Unleashed has the functionality to do everything we’ve talked about in this article. From inventory tracking and data analytics to supplier management and easy integration, it covers every major feature that an SME eCommerce business should need for its day-to-day inventory control.

Even better – Unleashed provides its own dedicated B2B eCommerce platform, meaning your B2B eCommerce and inventory software work together seamlessly.

And Unleashed also integrates with major eCommerce platforms like Shopify and Amazon to streamline your eCommerce inventory management.

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Alecia Bland - Unleashed Software
Alecia Bland

Article by Alecia Bland in collaboration with our team of inventory management and business specialists. Alecia's background is in ancient languages. When she's not reading a book with her cat for company, you can usually find her cooking, eating or trying to make her garden productive.

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