How to Implement Inventory Management in eCommerce?

Starting a new eCommerce business? Then you need to understand that one of the major parts of running any product-based business is the inventory. Imagine this: You have managed to sell a product in high numbers, with profits soaring through the roof. But now, suddenly, that product is out of stock. There are no more units in the inventory and you have forgotten to order more.

Now, let’s look at another scenario. You have ordered a product in great numbers because a similar one was flying off the shelves. But you were wrong; this one isn’t doing so well, and now you have too many of them in your inventory. So what do you do? How to manage these inventory issues? That’s why the eCommerce experts recommend inventory management.

Let’s talk about this software and how you can implement it on your eCommerce website.

What is an Inventory Management System?

An Inventory Management System, or IMS, is a software solution designed to track and control your stock throughout the entire supply chain, from purchasing raw materials to selling finished products. It’s essentially the digital brain of your inventory operations, helping you optimize stock levels, automate tasks, and gain valuable insights.

Here’s a breakdown of what an IMS can do:

• Track inventory: It keeps a detailed record of every item you have, including its location, quantity, condition, and purchase history.
• Automate tasks: It automates repetitive tasks like purchase orders, reordering based on demand forecasts, and generating reports.
• Improve accuracy: It minimizes human error by providing real-time data and reducing manual data entry.
• Optimize stock levels: It helps you strike a balance between having enough inventory to meet demand and avoiding overstocking, which ties up capital and adds storage costs.
• Forecast demand: It uses historical sales data and other factors to predict future demand, helping you plan your purchases more effectively.
• Generate reports: It provides valuable insights into your inventory performance, such as best-selling items, stock turnover rates, and potential stockouts.

There are three types of inventory management systems based on their key functionalities. First, there is the cloud-based IMS, which is accessible from anywhere with an internet connection, often subscription-based. Then, there is the on-premise IMS, which is installed on your own servers and requires IT expertise. And finally, there is the open-source IMS, which is free or very low-cost. Although it can be extensively customizable, it requires technical skills.

But what kind of benefits does an inventory management system offer? And why do the eCommerce development services implement it in their websites?

Why Implement Inventory Management System in an eCommerce Website?

An inventory management system is a critical part of an eStore. It can enhance the customer satisfaction and improve the site efficiency. Here are some key reasons why it’s essential:

• Reduced stockouts: With accurate real-time inventory data, you’ll know exactly what’s available in your inventory. So there are no frustrating “out-of-stock” situations, leading to happier customers.
• Faster order fulfillment: Efficient management streamlines the picking, packing, and shipping process. So your orders reach customers much quicker.
• Improved order accuracy: Reduced errors in order fulfillment due to better data management. It minimizes the customer frustration due to product returns.
• Lower storage costs: By optimizing inventory levels, you can minimize unnecessary storage space, reducing rental or property costs.
• Reduced carrying costs: Holding on to less stock minimizes the expense of holding inventory. That frees up the capital for other investments.
• Efficient product purchasing: Data-driven insights help you predict demand and optimize purchase orders. It prevents overstocking and minimizes waste.
• Automated processes: Tasks like purchase orders, restocking, and reporting can be automated, saving time and reducing manual errors.
• Improved warehouse management: Streamlined picking and packing workflows lead to faster order fulfillment and reduce labor costs.
• Data-driven decision making: Real-time insights help you make informed decisions about product assortment, promotions, and purchasing strategies.
• Improved product availability: Consistent stock levels ensure you don’t lose sales due to stockouts. It enhances your brand image and customer loyalty.
• Faster response to trends: Timely insights into demand fluctuations allow you to quickly adapt your inventory to seasonal trends or hot-selling products.
• Scalability and growth: A robust IMS provides a foundation for managing inventory effectively as your business grows and expands.
• Improved product availability: Consistent stock levels ensure you don’t lose sales due to stockouts. It enhances your brand image and customer loyalty.
• Faster response to trends: Timely insights into demand fluctuations allow you to quickly adapt your inventory to seasonal trends or hot-selling products.
• Scalability and growth: A robust IMS provides a foundation for managing inventory effectively as your business grows and expands.

Implementing an Inventory Management System on your eCommerce website is an investment that pays off in multiple ways. It helps you avoid costly mistakes, optimize efficiency, improve customer satisfaction, and make data-driven decisions for growth.

So, want to implement the inventory management system on an eCommerce website? Then you can either consult with an eCommerce development company or follow the process shown in the next section.

How to Implement an Inventory Management System in eCommerce?

Inventory issues can devour profits, frustrate the customers, and leave yourself and the customers scrambling. So follow this procedure and integrate an inventory management system in eCommerce.

Assess Your Needs

First stage of the process is assessing the unique project needs. It lays the foundation for a successful experience and ensures there are no costly missteps. The key aspects to consider are:

• Number of Products: Are you a solopreneur selling handmade crafts, or a bustling marketplace with thousands of items?
• Order Volume: Do you receive a handful of orders per week, or hundreds daily?
• Product Variations: Do you offer multiple sizes, colors, or configurations for each product?
• Existing System: Are you using spreadsheets, manual systems, or existing software (even rudimentary ones)?
• Pain Points: What are the current challenges you face? Stockouts, overstocking, inaccurate data, inefficient processes?
• Tech Savvy: Are you comfortable learning new software, or do you prefer a simple solution?
• Investment Range: Consider how much you’re willing to spend on an IMS (one-time fee, subscription, etc.).
• Scalability: Choose a solution that can adapt to your anticipated growth.
• Basic Tracking: Need essential functionalities like stock levels and order fulfillment?
• Advanced Features: Do you require forecasting, analytics, multi-warehouse support, or integrations?
• Specific Requirements: Are there any industry-specific needs or unique workflows to cater to?

Assess your project requirements carefully. Then you’ll be ready to choose the perfect inventory management software for your eStore website.

Research and Choose an IMS

After defining the IMS requirements for your project, you can select the perfect software for your website. Make sure you do extensive research based on the integrations, scalability, features, budget, and more.

• Explore the different types of IMS: There are three main types of inventory management systems available for the eCommerce websites:
  • Cloud-based IMS: Offers scalability, accessibility, and automatic updates, but may require internet connectivity.
  • On-premise IMS: Provides more control and security, but requires IT expertise and hardware investment.
  • Open-source IMS: Free or low-cost, but often requires technical skills for customization and maintenance.

You need to introspect which one would be suitable for your eStore, based on the inventory size and traffic.

• Look at the features: Check the features of the software. There are three main types of features you need to look for.
  • Essential features: Inventory tracking, order fulfillment, reporting.
  • Advanced features: Forecasting, analytics, multi-warehouse support, integrations.
  • Industry-specific features: Catering to unique needs (e.g., food, fashion).

The more features you desire, the higher the price of the software.

• Seek expert reviews and recommendations: See what the community recommends and prefers. Inventory systems can differ based on the industrial domains.
  • Industry publications: Look for unbiased reviews and comparisons.
  • eCommerce forums: Engage with other businesses for real-world insights.
  • Customer testimonials: Read about users’ experiences with different IMS.

Although recommendations can be helpful, ensure you don’t make the decision solely on that.

• Leverage free trials and demos: After you have narrowed down the prospects, it’s time to see how these inventory management systems work.
  • Test the software firsthand: Get a feel for the interface and features.
  • Ask questions and seek clarification: Don’t hesitate to contact the vendor.
  • Compare experiences across different options: Identify the one that best suits your needs.

Make sure you implement every sort of test on this IMS that you can.

Finally, check the software’s pricing and scaling abilities to see if it will be a feasible option in the long term. And ensure your chosen inventory software is secure and offers good support in case something happens.

Prepare Your Data

One of the critical aspects that governs the success of your inventory management system is clean, accurate, and well-organized data. So you need to dedicate some time into preparing your data.

Here’s a breakdown of the key areas to focus on:

• Accuracy: Scrutinize product descriptions, SKU numbers, stock levels, and other critical information. Eliminate typos, inconsistencies, and outdated entries.
• Standardization: Ensure consistent formatting across product details. This simplifies data entry and analysis in the IMS.
• Duplicates: Eliminate duplicate entries that can inflate inventory levels and create confusion.
• Product Attributes: Group products based on relevant attributes like size, color, brand, category, or seasonality. This facilitates easier management and reporting.
• Location Tracking: If you have multiple warehouses or storage locations, define clear codes or identifiers for each.
• Reorder Point: Determine the minimum stock level before you need to reorder to avoid stockouts. Consider factors like demand, lead times, and safety stock.
• Lead Time: Calculate the average time it takes for suppliers to deliver new inventory. This helps ensure timely replenishment.
• Supplier Information: Ensure accuracy of supplier details like contact information, lead times, and minimum order quantities.
• Custom Fields: If your business has unique needs, consider using custom fields in the IMS to capture additional relevant data.
• Historical Data: If you have historical sales data, import it into the IMS to leverage forecasting and demand planning features.

Understand that data preparation is an ongoing process that proliferates as the business evolves. So you will need to regularly review and update your inventory data to maintain accuracy and optimize performance.

Make sure you keep a well-organized spreadsheet to make the data preparation process easier as the operations begin. Also, data cleansing tools will help improve efficiency. And don’t hesitate to seek help from the eCommerce professionals. They can help you make well-informed decisions and maximize profitability.

Implement the Inventory Management System

Each IMS has its unique setup process. Carefully follow the vendor’s instructions, typically provided through detailed documentation, online tutorials, or even video guides. Don’t hesitate to contact their support team if you encounter any challenges.

Step 1: Start with the basic functionalities

Resist the urge to activate every feature at once. Begin by setting up core functionalities like product data import, inventory tracking, and order fulfillment. This phased approach allows you to familiarize yourself with the system. Identify any initial hurdles and address them before adding more complex features.

Step 2: Integrate with other platforms

Most IMS offer seamless integration with popular eCommerce platforms, accounting software, and shipping solutions. This eliminates manual data entry, reduces errors, and streamlines your overall workflow. Make sure of proper configuration for smooth data exchange between platforms.

Step 3: Train your team

Effective inventory management requires everyone involved, from procurement to fulfillment, to be in the loop. They should understand the system’s functionalities and workflows. So conduct training sessions or provide comprehensive documentation. Then your team will be familiarized with the IMS and its impact on their tasks.

Step 4: Test and refine

Once basic functionalities are up and running, conduct thorough testing to identify any bugs or inconsistencies. Refine your settings and processes based on the initial testing results. Encourage team feedback and address any concerns or challenges they encounter.

Now, the inventory management system is up and running on your eCommerce website. But make sure to embrace continuous learning. Then you can refine and adapt the system, so it remains a valuable tool for your eCommerce business growth.

Monitor and Refine

Now that your inventory is being managed by the software, it’s time to streamline the operations. For that, you will need continuous monitoring and refinement. It’s like fine-tuning an engine for maximum performance.

It’s important to track the key metrics of the IMS for valuable insights into how the system is working.

• Inventory Levels: Closely monitor stock levels across all products and locations. Identify potential overstocking or stock outs before they occur.
• Order Fulfillment Times: Track how quickly orders are processed and shipped. Aim for efficiency and consistent fulfillment times.
• Stockouts and Backorders: Analyze the frequency and impact of stockouts and backorders. Adjust reorder points and lead times to minimize issues.
• Demand Patterns: Track sales trends and seasonal fluctuations to forecast demand more accurately and optimize inventory levels.

Through these key metrics, look for trends and identify the areas for improvement. That will help you set goals for optimization. You can also use reporting tools for insights into the inventory performance and trends.

Based on what you learn from the analysis of your IMS implementation, you will need to do some much-needed refinements. Here are a few key ones:

• Adjust reorder points and lead times: Based on your analysis, refine these parameters to minimize stockouts and overstocking.
• Optimize product assortment: Analyze product performance and adjust your product mix to focus on profitable and high-demand items.
• Refine forecasting models: Incorporate historical data and sales trends to improve demand forecasting accuracy.
• Automate workflows: Leverage automation features within your IMS to streamline repetitive tasks and reduce manual errors.

Dedicate some time into regular analysis, proactive adjustments, and continuous learning. That way, you will get the best out of your inventory management system implementation.

If you need help with this inventory management implementation on your eCommerce website, our eCommerce site development services would be great.

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FAQs on Implementing Inventory Management in eCommerce

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Conclusion

Inventory management is a critical part of an eCommerce website. It streamlines operations, minimizes costs, and ultimately, elevates your eCommerce empire to new heights. Here’s what you need to do for this implementation:

• Assess your needs thoroughly
• Prepare your data meticulously
• Implement strategically
• Monitor and refine continuously
• Embrace continuous learning

Need help with inventory management on your eCommerce website? Then let’s have a chat today!