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Best Practices for Ecommerce Inventory Management

Updated on  24th November

4 Min Read
Reading Time: 4 minutes

For an ecommerce startup, it is important to follow proper business practices. If the online store owner intends to simply jump into selling online, without a proper laid-out plan, and hoping to learn by trial-and-error, then your venture is likely to fail.

Recently, I wrote about ecommerce business models. If you read that article, you will know that the first step to starting your ecommerce store is to decide what kind of products and services you will offer online. Afterwards, you choose an appropriate business model.

Now, we come to the next step, which you should get the hang of before you begin your operations. This is one of the most important stages of an ecommerce store management and development, it can easily make or break your sales – Inventory Management. It is time you learn and master your inventory management to ensure you are sufficiently stocked before the holiday rush.


What is Inventory Management?

Simply put, inventory management is the vital process of ordering raw materials required to manufacture and package products, tracking items in stock, and reordering items which are below a certain stock level, in a timely manner.

Every material and part required for the product is a part of this process. You might also be following a business model which relies on acquiring finished products, these are also controlled by inventory management.

As soon as these raw materials or finished assets are acquired, the online store owner is aware that the return on investment cannot be accomplished until the finished product is sold. Any hiccups in the inventory management process can delay or even reduce the ROI.

On the other hand, being overzealous in acquiring materials or products could see too many finished products, with sales failing to keep pace, resulting in spiraling storage costs.

This graph explains the inventory stock cycle.

The “Lead Time” is the period which begins after the stock replenishment order has been placed, ecommerce sales are on-going, and stock is depleting towards “safety stock” level. Ideally, your business partners deliver the raw materials or finished goods just in time to raise your stock level back up. The safety stock level is to account for any unexpected delays in acquisition of required resources.

So, as you can see, it’s a game of timing and intuition, to some extent. You have to anticipate the sales rate during the lead time and adjust your order placement timing accordingly.

Best Practices for Ecommerce Inventory Management

There’s three main best practices you should follow.

Prioritize Materials and Products

You should ensure that your best selling products are categorized as high priority. This allows you to be vigilant about the inventory management of your high priority products, which should never run out of stock. Other items which are seasonal, or performing poorly in terms of sales, may have a lower reorder point.

Accurately Calculate Lead Time

Before entering into a partnership, communicate with all potential materials and products suppliers and find out their period of order fulfillment. Once your business is in operation, keep track of the average lead time from each supplier, and plan your future purchases accordingly. Make sure to only partner with suppliers who have a reputation for timely order fulfillment, as a delay from their end could adversely affect your sales.

Avoid Cross Platform Overselling

In your enthusiasm to sell your products, you could establish a presence on multiple selling channels. That is absolutely fine. However, if you don’t establish separate physical warehouses and inventory management books for each of these channels, you could commit a common mistake: overselling.

As you make sales across multiple channels, you may actually be out of stock of a particular product, which is reflected on one or some of your online channels, but the product may still be listed as available on other channels. Any customer ordering from that channel will not receive their order in time, and you will face the embarrassment of communicating your failure to fulfill the order, despite the “in-stock” listing.

To avoid this from happening, use an ecommerce inventory management software, which integrates all channels and update stock levels in real time.

Minimize Hosting Worries

Your job and your passion is to sell. Your website is a means to an end, which is the success of your ecommerce venture. You shouldn’t have to deal with every aspect of running an online store all by yourself.

Managing your hosting server, and the ecommerce application used to build your online store could eat up a lot of your time, which is better spent in marketing your store and keeping track of inventory levels. You can save money on in-house technical staff for server management by deploying your ecommerce store on Cloudways Managed Cloud Web Hosting Platform.

Cloudways offers ecommerce businesses the ease of launching servers, website migrations, as well as management of servers and applications, all in one click! Monitoring of 15+ server metrics in graphical format helps ensure everything’s running smoothly.

Customer Support is available 24/7/365, so you’re never left to deal with any problem alone, even during the peak holiday season. Launch your free trial on Cloudways today to experience the advantages of Managed Cloud Web Hosting, the future of ecommerce hosting. Remember, early adopters gain a long term edge over their competition.

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Zain Imran

Zain Imran is a Digital Content Producer at Cloudways. He is an engineer and loves to learn about technologies. He is a sports and fitness freak.

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