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A Beginner's Guide to E-Commerce Inventory Management

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What You Need to Know

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In recent years, hundreds of factors have propelled people to begin shopping online, and with that, the number of e-commerce merchants has followed. Popular platforms such as Shopify and WooCommerce have only encouraged this process. With the onset of COVID-19, new entrepreneurs and established companies alike have been turning to the online sphere to develop their business. According to a 2020 study by Statista, over two billion people purchased goods or services online last year, with e-commerce sales surpassing 4.2 trillion (USD) globally.

So... can you use e-commerce to get rich quick?

Definitely not! While examples of overnight successes dot every corner of the internet, managing the day to day operations of a business is a lot of hard work. One key component of running an e-commerce business many merchants struggle with is the delicate management of inventory. While tracking stock may start simple, as your business scales, it becomes increasingly complex. Failing to manage inventory well will lead to shipping issues, bad store reviews, poor allocation of resources, and a lack of funding.

Through this article, let's explore the basic concepts of inventory management and it's importance to e-commerce providers.

A Beginner's Guide to E-Commerce Inventory Management

What is Inventory Management?

According to a 2020 study by the IHL Group, over $1.14 trillion worth of wanted products were out-of-stock, and $626 billion were overstocked.


As supply chains and managing your business becomes increasingly complex, it's important to manage your inventory well.

But first of all, what is inventory?

Inventory describes all items, raw materials, and produced goods your company sells and produces. All of your inventory are considered assets, as they allow you to continue building and selling your products. However, housing too much stock may be a liability if you are unable to sell it.

This delicate balancing act is inventory management. Formally, inventory management is described as all aspects of controlling and managing purchases of the supply chain including customer and supplier needs. Your personal definition of inventory management may vary depending on the specific products you sell, and sector you work under.

While some businesses choose to manage inventory manually through spreadsheets, most elect to purchase an online system. These softwares can provide in-depth analytics regarding past shipments, current stockouts, and plan future purchases.

A Beginner's Guide to E-Commerce Inventory Management

Why is Inventory Management Important?

As discussed above, running a business comes with all types of risks and uncertainties- and inventory is a big one. Overstock, and you end up with old merchandise that is less valuable. Understock, and you can loose out on hundreds of sales.

Inventory management tracks inventory from its creation to the minute it leaves your shelves. This will help you identify the exact quantities you need to manufacture or purchase. Inventory management identifies trends, and can ensure there is always enough stock to meet customer demands. Proper inventory management will help you identify trends, ensure you have enough stock, and balance cost-to-earnings.

The importance of inventory management is exemplified in the larger businesses with multiple warehouses and facilities. Inventory management gives business owners an overview of their entire supply chain from forecasting to fulfillment. This visibility can allow for easy multi-location management, forecast demands, and allow for easy data visualization.

Good inventory management is just as essential for smaller businesses. Small businesses typically purchase and produce less stock, which means each individual piece is more valuable. As a result, it is integral to reduce costs, keep cash flow free, and forecast demands.

Using an inventory management system can simplify every area of your business, and improve efficiency for years to come.

Benefits of Managing your E-commerce Inventory

Inventory management can help you better forecast customer demands and the changing consumer market. Most stores regardless of size choose to use a cloud-based system.

If you're looking for more reasons to use an inventory management system, consider:

1. Save Time and Money

Using an inventory management system gives you a holistic view of your business's processes. Knowing the exact distributions and quantities of stock you have across several locations will help you better allocate resources. This can save hours of commute time between different facilities, and help customers get products faster. In addition, seeing exactly what sells and what doesn't can help you make smart business decisions, improving cash flow in coming months.

2. Prevent Stockouts

Picture this: you have a hit product that everyone wants. But... you only have 50 units, and the next shipment will take months to arrive!

Not having necessary stock is a major concern for e-commerce merchants. As the retail sphere becomes increasingly crowded, it becomes easier to find duplicates and choose alternative merchants. To keep your sales for the next month and years to come, use a reliable inventory management system. Most robust systems can calculate lead times to predict dates to order new shipments, calculate how much of a product you need to buy, and estimate when you will run out of stock.

3. Easy Data Visualization and Forecasting

Inventory management allows you to view every detail in your production line, no matter how big or small. Most inventory management systems are cloud-based, meaning you can view analytics from any device and location. In addition, many systems track inventory counts by facilities, provide percent calculations, and can organize by SKU numbers. Being able to visualize your stock in an online environment can give you more perspective, helping you accurately understand when you'll be out of stock, and automatically place new orders of raw materials. These complex systems can help you stay on top of the most important parts of your business, and plan your pathway.

4. Better Customer Support

In a time where same day shipping is common, ensuring you can fulfill orders quickly is essential to building a loyal customer base. Same day shipping, however, is often unreasonable for smaller businesses. Being able to tell your clients when an item will ship will improve transparency and build brand trust.

Inventory Management with Shypyard

If you are a Shopify user who doesn't already use an inventory management system, refer to our article about the Top 5 Inventory Management Systems for Shopify Merchants for a complete overview of what to look for, and some trusted options. Some general things to look for include:

  • Product purchase planning: Helping you decide how many units of a specific product to buy
  • Automatic order time calculations: Finding the optimal time to order new stock
  • Reasonable pricing: A good inventory management system doesn't need to break the bank! Look for free trials and cheaper pricing plans before committing to a system.

If you're looking for an inventory management system that ticks all the boxes, consider Shypyard's Inventory management Integration. Shypyard's robust analytics, easy use, and cash flow forecasting make it a popular option among retailers. As an added bonus, we can build custom features to suit your business's unique needs, and are constantly improving our services.

Register now to try the Shypyard Inventory Management Solutions for free!

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