How to manage your ecommerce Inventory: best way to save money

How to manage your ecommerce Inventory: best way to save money

In ecommerce inventory management is the crucial part to ensure the maximum use of limited resources for better and profitable business.

While inventory is a vital part of whole ecommerce function, better and solid management of inventory leads to great prosperity. Any ecommerce business today needs to optimize its inventory to function without time lags and to save extra expenses.

It is also crucial for any growing business to meet the demand successfully with optimal supplies and to avoid spoilages and Stockouts.

Why do you need to manage inventory

Inventory management is the process of ordering, organizing and storing products and makes them ready for future sale. It is a process of managing inventory (warehouse, storerooms etc) and stock. The process includes controlling and overseeing ordering inventorying, storage inventory and controlling the amount of products for sale.

Inventory management just not only manage the inventory it also includes the whole operation of producing products to delivery them to the customers.

A better inventory management helps to cut down extra costs such as storage costs, product maintenance costs and inventory updating costs. It also helps business owners to determine what to sell in what amount and how to prevent overselling or Stockouts.

  1. Avoid overstocks

Overstock sometimes causes product spoilage and no definite knowledge about supplies creates these overstock hazards. The longer the product stay unsold inventory, the greater the chance of being spoiled or never sell at all. Again some products have definite timeline like foods, makeup products, body oils and baby products. So you have to sell these products with huge discounts or throw them away. Both of these decisions will cost you a huge loss in your business. Solid inventory management helps you to solve overstock hazards and avoid spoilage.

  1. Avoid Stock-outs

What is worst than telling a potential customer “the item is currently stock-out” at the right moment of making money? Stockouts not just only drive away current customers, they also can create a bad impression and drive away your customers for good! Good inventory management solve this Stockouts by tracking down the exact number of product you have in stock and forecast how long they will last.

  1. Balancing Supply and Demand

Solid and efficient inventory management keep balancing the supplies and demands, ensure to replace the consumed items and place new demands. If you stock seasonal products for a certain seasonal sales, you could end up either selling them during the time or will have few unsold product wandering in your inventory all around the year. It depends how you control your inventory. If you sell costumes, for example, your inventory control system will ensure stock availability of related products for Halloween and clear out remaining products through special sales and discounts.

  1. Reduce Inventory related unnecessary costs

Warehousing often causes a great cost including maintenance, product stocking, product maintaining and others associational costs. Reducing these unnecessary costs helps in boosting revenue and cost management. Solid inventory management system helps avoiding extra storage cost of overstocks and dead stocks. 

  1. Multi-channel Selling

Multi-channel selling of your product helps you earning more than selling only in your ecommerce platform. Multi-channel selling requires more organized and synchronized inventory, to minimize your effort and to maintain sales through all the channels at the same time. Efficient and solid inventory management helps to establish a centralized inventory for a cost effective, convenient and error-free multi-channel retailing.

Inventory management tips

There are many practices to manage your inventory efficiently. You can also adopt automated management system but that may cost you extra expenses. Ecommerce marketers suggest optimizing some tips to manage inventory and stock.

  1. Real time Inventory Update

Real time inventory updates show the exact and actual stock number after a sale takes place. It allows you and your customer to know how much product you have right at this moment.

The practice is called Real Time inventory update or availability where “Real” stands for immediate inventory updates after you sell a product. Where real time emphasizes on immediate updating, near real time refers you update your inventory once in every 15 minutes or once per hour or twice in a day which creates the risk of overselling.

Overselling causes marketers a great loss, hampers their reputation to customers and eventually reduces conversions. Many things can happen in ecommerce but the worst one happen when you cannot deliver the promised item or the product your customer just bought from you. It happens when you don’t have actual inventory information.

Real time inventory update allows you to manage both your physical and virtual inventory as your customers can only see the virtual one. You can track your supply level and can replenish items when needed. As you can inform your customers about your stock outs immediately, your customers become satisfied and trust you. Thus you can maintain a good buyer-customer relationship.

  1. Centralize your inventory

Selling from only your ecommerce platform may not that much profitable than selling on different social media or marketplaces. Multi-channel retailing is now more profitable and online store owners are integrating various popular social media channels with their ecommerce store to sell more and to boost conversions.

When selling products from online store front, you can manage your inventory from your ecommerce platform but when you sell products on various social media or in market places it’s better to centralize your inventory.

Centralization of your inventory allows you to cut extra cost of maintain different storage units for your different selling channel while you can manage all types of product activities from your central inventory such as warehouse or single storage unit with less cost.

The system is cost-effective, less risk, convenient and requires less time to manage your inventory. It also allows you to scale up your business by opening new channels for selling and closing an old one. 

  1. Determine stock size : minimum stock-great inventory

Set your par level of products-try to stick with minimum stock level. Par levels are the minimum numbers of products that must always kept in stock. When a number decreases from par, you should order a product to make the number whole again.

Setting par level actually depends on what you are selling and how much demand you get for your each products. Seasonal products have great demand while some products have year around demand. So you have to be careful when setting par considering seasonality and changing consumer preferences.

Market analyzers give importance on setting the most minimum par for each product to get the maximum result. You need to update your par twice a year-during sale season and during off season.

  1. “First-in, First-out” Approach

Leveraging “First-in, First-out” (FIFO) approach is one of the greatest practices to manage your ecommerce inventory efficiently. First-in, first-out refers the process of selling the first produced or purchased item, which means what is produced or purchased “First”, must be sold “First”.

Many companies sell newly produced/ purchased products instead of previous purchased or produced lot which create products overselling and spoilage. This approach is actually for perishable goods or goods that may better to consume quickly like foods, flowers or makeup products.

For example, a flower shop must sell their pre-stock flowers instead newly bought flowers to maintain a better inventory. In terms of non-perishable goods the idea also works as letting sit them around may lose their demand.

The best way of practicing FIFO is to add new product just behind the old one in warehouse or store room’s shelves so they come forward in a synchronize way.

  1. Audit Regularly

Auditing is always great to manage any kind of inventory to track the actual number of stock products. It also allows you to inspect the condition of your stored products. Whether you use software or not, regular auditing with specific time interval helps to track and manage your inventory more efficiently.

There are various ways to audit your stocks. You can follow either one of them or the most suited one to get better result. The first way of auditing is physical inventory auditing which is done by calculating your all inventory at once. Businesses mainly do this once in a year as it is most time consuming process. Physical inventory is good to determine your annual taxes.

The second way is cycle counting, the process of counting inventory items throughout the year instead of end of the year. This process can be done daily or quarterly or even half yearly.

  1. Forecasting

Inventory forecasting is the predicting of your demand and stock. Forecasting of demand and stock is necessary to draw a definite cost for your products. If you cannot indicate how much demand you can expect for your each products you will not able to determine the stock level.

As stock number depends on demand forecasting, you have to be careful when forecast your demand and stock. If you predict too much and stock huge products then you may face overselling while predicting to low may cause Stockouts.

You do not have to be exactly right in projecting- it is hard to do, but try to make the gap tiny so you can meet the demand and supply balance.

  1. ABC analyzing

ABC is an inventory optimization technique which divides all products in three different categories according to their quality, price or other attributes. ABC analyzing is great for prioritizing your inventory.

According to Pareto principle, 80% of the overall consumption value is based on only 20% of total items. The ABC approach review all products according their consumption value so you determine your product’s stock according their demand by categorizing them into three groups-

  • A –Products with highest annual consumption value. The rate of annual consumption is about 70%-80% and accounts for only 210-20% 0f total inventory items.
  • B- Moderate value products with moderate consumption rate. The rate of annual consumption is about 15-25% typically accounts for 50% of total inventory
  • C- Lowest consumption value products with 5% of annual consumption rate value typically accounts for 30% of total inventory.

A category item needs intensive inventory control, regular auditing, more secure storage facilities and better sell forecast while C category items requires less oversight as they have less value. Category B products are in between.

  1. Back-up planning

All of the above are not enough. A lot of crisis and issues can pop up. It is better to have a back-up plan to reduce lose when any crisis arise. Try to make a trackable inventory alignment and avoid complexities. Review the process you practice and create a contingency plan for every practice you follow. For example, always contact with secondary suppliers or pre-notify your key customers about Stockouts to less the impact of related crisis.

  1. Consider Dropshipping

If you are not in dropshipping business, it is sometime better to adopt dropshipping for your business to fulfill your orders accurately. Dropshipping allow you to fill an order by delivering the ordered product directly from the suppliers. In this system you need not have the product physically; your suppliers have it and do the rest of work of delivering it to your customers on behalf of you.

Dropshipping provides the easiest way of product retailing, offers a great collection of products without managing physical inventory. You can easily find drop shippers on Amazon, eBay or Aliexpress and place your order either manually or with any dropshipping apps like Oberlo.


Inventory management is not easy task to do and your success largely depends on it. Solid and efficient inventory management reduces extra costs and help in building a strong brand to win the game.

Happy Selling!!!!

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