Evolving ecommerce brands are usually still in the initial stages of building meaningful, long-term connections with clients. Out of fear of jeopardizing these fragile relationships, brands can end up making poor business decisions. For example, new brands may stop discounting products after pursuing extremely aggressive buying strategies. Such decisions may put brand image and reliability for high-grade and on-time delivery at risk. Thus, businesses must devise strategies that provide an unequaled customer experience while strengthening their financial muscle. They must adopt sound inventory management practices.
Why is Inventory Management Important?
Inventory management is the most fundamental responsibility for both emerging and established ecommerce companies. It enables a business to continue doing business by always having what consumers need. Here are functions of inventory management:
Creating a Perfect Balance Between Supply and Demand
Inventory management ensures replacement of consumed items and clearing out of seasoned ones. For instance, Easter Holiday-related products stay in stock until the end of the season and the surplus products are liquidated via sales or special deals.
Offering Safety Stock
While the main purpose of inventory management is to guarantee there is no surplus or scarcity of required items, it can also ensure a buffer or safety stock is available in the event of more sales than predicted or any unanticipated new inventory delays.
Offering Geographical Specialization
A company can take advantage of specific attributes of a location as far as inventory management is involved. Some areas may have low costs of energy, labor, and transport. While other locations may have a specific material more readily available compared to others.
Tips for Putting in Place Effective Inventory Management
Regardless of the value of effective inventory management, almost half of small businesses don’t track it. Any ecommerce that sells products must prioritize on monitoring, measuring, and predicting its inventory. Disorganized or hard to track inventory makes delivering goods on time a challenge. These three tips will help you develop a reliable inventory management.
Rely on Latest Inventory Data
Timeliness is an important aspect to consider when collecting inventory data. An emerging ecommerce brand should know the types of products existing in each of its inventory locations, the speed of packing and shipping, and routes and fulfillment partners involved in getting the products to clients. When this data is current and available, streamlining communication and making sound decisions becomes easy. You can use online tools https://www.stitchlabs.com/operations-management/ to develop an outstanding inventory management system.
Understand the Velocity of Your Products
Inventory velocity is an important sign of brand health, and it is measured by the time required to sell each product in the stock. You can easily make intelligent inventory decisions when you know the velocity throughout all your product lines. For instance, if a specific item tends to stay in inventory for months before a sale, you could perform a cost/benefit analysis to help you decide whether the proceeds of that sale are worth the accrued warehouse expenses over time. With a clear understanding of product velocity, you can decide to liquidate a product line swiftly and confidently.
Familiarize Yourself with Industry Standards
Whether you are running an ecommerce business in the line of health and beauty, home goods, or fashion products, you should compare the metrics of your inventory management with applicable industry benchmarks. If you discover your inventory is lagging behind in terms of competition, assess partners and involve key stakeholders in creating a new tactic for improvement.
Inventory management is undoubtedly the one responsibility your emerging ecommerce business can’t afford to overlook. The ability to develop inventory and monitor stock lowers the risk of missed sales opportunities and disappointed customers. Always use clear, latest inventory data to make your decisions.