15 Jul 2022

eCommerce Inventory Management Best Practices

Amidst the increasing competition of e-commerce business, there are some specific aspects you should proficiently work on & proper inventory management is one of them. It plays a vital role in a smooth running of an e-commerce business. Good e-commerce inventory management evolves in choosing the right products, sourcing the products to making them available in time to the customer.

But what are the best ways to manage your e-commerce business inventory properly? The years 2020 & 2021 have shown us the ideal case study of the impact of having organized inventory management for the online business. There is no ideal time to optimize your inventory. For a profitable, scalable & most importantly sustainable e-commerce business, a good knowledgeable understanding of managing inventory is essential. Making a wrong choice can lead you to a huge loss.

The inventory management system is the backbone of any e-commerce business. It is the system that manages inventory and helps to ensure that products are available to customers when they want them. In this article, we will share 7 best practices for successful e-commerce inventory management that you should leverage in your business. 


7 eCommerce Inventory Management Best Practices


ABC Analysis Helps Prioritizing Products

ABC Analysis Helps Prioritizing Products

ABC analysis is a technique used to determine the high-priority product of a company. ABC stands for: A- high demand products but low in quantity, B- products with medium demand & quantity & C- low demand products but high in quantity. It is necessary for the inventory managers to know what their most popular items are and the frequency of selling them. This will allow them to make better decisions about ordering more or less of certain items from their manufacturers or suppliers. Some steps to perform ABC analysis:

Step1-  For a specific product, collect data like yearly spending per item

Step2- List & rank inventory products according to highest to lowest cost

Step3- Categorize products with ABC analysis

Step4- Conduct monthly analysis of the product to have the real purchasing trends.


Set Par Levels- Minimum Viable Stock

Par levels or minimal stock levels work as a safety shield for your inventory. It’s like ensuring to have minimum viable stock of your product you sell frequently. This process includes two fundamental variables- product manufacturing timelines & demand patterns of the product. 

There are some warehouse management software that automatically gives you reminders if the par levels fall below a certain level by analyzing the demand curve of that particular product with the current stock level.


Choose A Great Inventory Management Software

Choose A Great Inventory Management Software

So far, the best practice for managing the inventory of your e-commerce is to implement a well-features inventory management software. Do you want to waste your time by creating an excel sheet or analyzing historical data on your own? Manually maintaining all the tasks of inventory management is nearly impossible. Hence this type of software come effective & reasonable. You can able to automate all the tedious tasks by setting up a simple workflow. Inventory management software helps you:

  • Real-time inventory tracking
  • Manage multiple warehouses, sales channels & products at a time
  • Alert you whether you are overstocked or understocked
  • Integration with multiple vendors easily
  • Analyze historical data & determine future needs


Based On Past Sales Forecast Future Demands

Based On Past Sales Forecast Future Demands

Forecasting the future demands of your products is another best practice to optimize your inventory system. In order to maintain a competitive edge in this fast-forwarding e-commerce market, online retailers need to be able to predict future demands for inventory and manage their inventory accordingly. Some ways to predict future demand:

There are two ways to predict future demand:

  •  Using past sales data 
  •  Using marketing data 
  • Seasonal product demand
  • Calculate average sale
  • Monitoring various products trends


Measure Inventory Turnover Ratio

The inventory turnover ratio is the number of times a company's inventory has been sold and replaced in a given sales period. It is calculated by dividing the cost of goods sold by the average inventory. The higher the ratio, the more efficiently a company is managing its inventory. Knowing this metric will help you one step forward knowing that your products are in stock & your brand can able to replace inventory in any given period of time. Calculating these metrics helps you to track stores’ insights & performance.


Leverage First In & First Out Method

Leverage First In & First Out Method

The First in and First out method is one of the best practices for better e-commerce inventory management. It is a method where the first product to come into stock is the first to be sold. This FIFO method is used by many retailers and wholesalers because it ensures that the products that have been on the shelf longest are sold first, which can help to minimize losses from items going out of stock. Though this strategy is mostly used by the food industry all types of businesses can leverage this method.


Audit Your Supply Chain

The best way to control your inventory is to regularly audit your supply chain. This includes examining the items in your inventory, the quantity on hand, and their location. If you have more than one manufacturer or supplier that this practice is a must. A supply chain should be regularly audited to make sure that there are no errors that could potentially lead to inventory problems.


If you want to run a hassle-free e-commerce business, you should be aware of the importance of proper maintenance inventory management. It is one of the most important factors that can make or break your business. 

One of the biggest mistakes that many businesses make is not having enough inventory on hand for their customers. This leads to unhappy customers who then go elsewhere for their needs.

The goal of good e-commerce inventory management is to have enough products available so that customers are always able to find what they're looking for and purchase it with ease. 

Okommerce is a feature-rich & leading enterprise e-commerce platform. If you own a large-scale business or are planning to expand your business, Commerce can help you with amazing enterprise e-commerce solutions. Employ this platform to operate your e-commerce business properly.

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