If you want your ecommerce business—or any product-selling business—to be efficient and profitable, you need to make sure your inventory is neither too high nor too low. This requires keeping accurate stock details, following customer demand trends, and proactively forecasting market conditions. Read on to learn how you can gain greater control of your inventory management process to save money and time.
Inventory management is the process of managing and monitoring a business's goods in stock. To properly manage the supply chain, ensure enough stock is on hand, and prevent overstock of unnecessary items, product inventory management is essential.
This includes monitoring the materials you use to manufacture your products as well as the finished goods that you ship out to your customers. Your inventory management can include ordering, restocking, storing, adjusting order frequency and quantity, and forecasting demand for the future.
Successful inventory management means making sure that you have the right amount of stock at any given time, when and where you need it. A thorough approach to inventory management can help your business cut unnecessary costs and increase customer satisfaction.
Inventory management is essential to a business's financial health. A well-oiled inventory management process ensures that you always have product in stock when customers make a purchase, but not too much stock that it doesn’t get sold—ultimately leading to markdowns and overstock. More, proper management allows you to reduce the risk of running out of stock or holding inaccurate records that can lead to a sudden scramble when more goods are needed.
As your company grows, accurate inventory management will also be necessary to comply with regulations. If your company goes public, for example, it must keep stock inventory management records to comply with the requirements of the Sarbanes-Oxley Act (SOX) and the Securities and Exchange Commission (SEC).
If proper inventory management is meant to help your company save money, ensure customer satisfaction, and forecast future demand, then rigid processes need to be in place so you’re never caught surprised.
Managing your inventory works by keeping clear records of stock levels on hand. It also entails records of your products' location—whether it’s in your office, warehouses, or fulfillment centers. By coupling inventory management software with a fourth-party logistics (4PL) provider like Airhouse, you can track the flow of your products from the initial supplier to the fulfillment center to the end customer. This includes monitoring stock receipts, packing, and shipping.
While there are different processes that you can use to track your inventory, including a perpetual and constantly updating inventory system or a periodic system updated at regular intervals, there are four main types of inventory management.
If your business can meet demand while avoiding expensive overstock, you're in a good position. Here are some of the key goals that you can meet through inventory management:
Of course, there are also challenges to implementing an inventory management program that reaches maximum efficiency. Some obstacles include:
Mistaken counts or inadequate updates to your system can leave you with "phantom inventory," that is, goods are on record as being present but are not actually there. This can affect the decisions you make when ordering raw materials and manufacturing products.
Changes in society, the economy, and the world can shift demand up or down in ways that cannot be fully integrated into an inventory management process.
Similarly, externalities like supply chain problems, trade issues, or natural disasters can impact your stock—especially if you rely on narrow margins of inventory.
Counting can be challenging, especially if you rely on your own labor to keep track of all of your items. Manual counts are also more prone to errors, so having an inventory management system is crucial.
If you are responsible for all of your own inventory on site, stock rooms can easily become disorganized and items moved from one place to another without documentation.
The right inventory management tools can help your ecommerce business cut unnecessary costs while improving customer satisfaction and delivery time. Connect with a fulfillment expert at Airhouse to find out how working with an ecommerce fulfillment professional can help you streamline your inventory—gaining a greater level of control over all aspects of your business.
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