E-Commerce changes a few things about inventory management. You need to plan things better and be more prepared if you want your business to do well. The best way to do that is to follow some of the best practices for managing inventory in the age of e-Commerce!
Scan your stock
Due to the volume of goods that get handled and the business models of e-Commerce businesses, it can be challenging to keep track of your stock. This task in some distribution centres is nearly overwhelming. And the more popular your business is, the more this becomes true. As such, you need to take advantage of the rise of the intelligent warehouse and make things a bit easier for yourself. That is why one of the best practices for managing inventory in the age of e-Commerce is scanning the barcodes of your goods as they are received, moved, or shipped. That lets you avoid the perils of human error in inventory management. And you will always know, beyond the shadow of a doubt, exactly what your inventory consists of, even when your business expands considerably!
Just-in-time vs. keeping items in stock
There are two possible approaches to managing inventory in the age of e-Commerce: just-in-time order fulfillment or keeping items in stock. Now, both approaches do have their good and bad sides. If you opt for the former, your entire philosophy will revolve around obtaining goods only once someone’s ordered them. Some manufacturers follow this approach since it saves much money on logistics costs. However, the risk that you’ll suddenly be swamped by orders you can’t fulfill quickly always exists. That, in turn, could easily result in losing the faith of your customers and financial losses. The second approach is relatively ‘traditional’ – you keep a stock of goods on hand and replenish it whenever it dips low. Of course, this necessitates a lot more inventory space and, as such, increases everyday operating expenses. But it is relatively safer long term!
The minimum amount of stock you need
Unless you are dealing with perishable goods, there is a minimum amount of stock you need to have. That wise practice should let you avoid some of the perils of the just-in-time fulfillment approach. Also, it is even more crucial if you opt for a traditional inventory. The nice thing about this is that there’s software you can pair up with the scanning operation that will automatically alert you when your stock levels drop! However, this does leave us with a question: what is the ‘optimal’ level of minimum stock? It comes down to your goods acquisition speed and interest in a particular item. If you know, you sell two to three thousand items of particular stock daily and restock them once a month. Then you need to have at least enough items in inventory to cover this ‘average’ number.
Have a product hierarchy in place
One thing that will help you immensely with all three points we’ve discussed already is product hierarchy. Typically, e-Commerce businesses tend to follow the ‘ABC hierarchy.’ It is relatively simple: divide your stock into three tiers, A, B, and C. The goods in the ‘A’ category should be all premium quality and the most expensive items. They need to account for fifteen to twenty percent of your current stock and up to eighty percent of your expenditures. Category ‘B’ goods are those of high quality and value, but that still can’t match the prices of the ‘A’ category. They should account for thirty to thirty-five percent of your inventory and fifteen percent of your expenses. The final ‘C’ category contains your ‘regular’ goods and should account for around fifty percent of your inventory and five percent of your expenditures.
The importance of seasonal forecasts
Seasonal forecasting is another essential part of managing inventory in the age of e-Commerce. The interest of your customers will shift with the seasons. And you might even want to put out different, seasonal-appropriate stock. Well, forecasting will let you at least partially predict the interest of your customers and let you adjust your stock accordingly. As the experts from WP Full Care like to point out, a properly built website will let you collect and collate data from past seasons and get quite a reliable picture. However, when your business is new, you don’t have a lot of data. You will need to do much market research to do your forecasting instead.
Optimize your warehouse layouts and stocking
Another essential part of managing inventory in the age of e-Commerce is the warehouse itself. If you take the time to learn about logistics, you will quickly realize that the warehouse is crucial. If you manage it well, it can significantly speed up the operation of your business. The opposite is true and can slow down crucial steps, such as order fulfillment and even the preparation of goods once they’re delivered to your warehouses. So, you need to optimize the layout of your warehouses. Make it easy to get at popular goods, as well as to load and unload goods.
Centralized warehousing vs. decentralized warehousing
The final aspect of managing inventory in the age of e-Commerce is your approach to warehousing locations. Now, like our first point, there are two good choices here. You can either have a centralized warehouse system or a decentralized one. A centralized warehouse can be turned into one massive fulfillment center and can benefit from having direct access to your stock. However, things can get chaotic quickly, and acquiring a building of that size of scope is both problematic and expensive. Decentralized warehousing, on the other hand, is cheaper, and more manageable, and you can place warehouses near crucial distribution points. And yet, managing your inventory becomes harder. And your delivery routes are less optimized if they require stops at multiple warehouses to pick up goods. Ultimately, it comes down to how you prefer your warehouses.
For the sake of the right inventory
As can be seen, even with the best practices for managing inventory in the age of e-Commerce under your belt, you still have a lot of work to do. However, if it’s for the sake of having the proper inventory, the effort is well worth it!