As a small or medium-sized online retailer, you know that inventory management is important for your success. Your number of sales won't matter if you can't deliver your customers' orders efficiently. And there's an inventory sweet spot you're always looking to achieve, too—not overstocking, not understocking, and still managing to keep up with changing buyer demands.
It's a tough line to follow, and there are likely plenty of challenges that you face in your everyday business operations. But don't lose sight of your objectives. Learning to master your inventory management processes can net significant bottom-line results in your eCommerce business. Explore these common challenges and discover how to overcome them so you can position your online business for big results, growth, and scaling in 2024.
The Most Common Inventory Management Challenges
The first thing to recognize is that you're not alone in facing inventory management challenges. And for most eCommerce and online brands, there are some inventory-related obstacles that tend to be more common.
The most obvious involves having enough inventory without reserving too much. Here are 5 other challenges to look out for when it comes to managing your inventory.
Challenge #1. Inventory Visibility: Knowing What You Have and Don't Have
On-time delivery of your various products is only possible when you have complete visibility of your inventory. If your items are off-site, hiccups can occur, misplacements happen, and what you think is available may not be. Also, without robust inventory visibility, you might not realize that you're overstocked on low-demand products or understocked on high-demand products.
Challenge #2. Inefficient Processes and Software: Not Harnessing the Right Tools
If your eCommerce business has been around for a while, you might still be processing orders or managing your inventory with manual methods. Or you could still be using outdated inventory software solutions that aren't providing you with the actionable insights you need to be more effective in inventory management.
Challenge #3. Obsolete Inventory: Unsold, Unused, and Expired Goods
Depending on your niche business and core offerings, you could have obsolete inventory to contend with in your arsenal. This means products that no longer generate buyer demand, have gone unsold, or have outlived their expiration dates. Inventory waste and defective items stacking up in your inventory will only bog down your management efforts. Over time, these non-essential inventory items can accumulate.
Challenge #4: Identifying Inventory: Mislabeling Items
Another challenge for eCommerce businesses involves labeling and categorizing inventory. Without a good system for tracking your materials, products, or equipment, you'll be weighed down with time-consuming, tail-chasing efforts to keep track of and master your inventory. Mislabeled stock can snowball into a customer service dilemma—with wrong items shipping out to buying customers.
Challenge #5: Shifting Customer Demands: Keeping Up with Buying Trends
Whether you're selling keychains or high-value pieces of art online, knowing what your customers want is a top priority. Your buyers' preferences can change all the time, meaning an item that was once popular may suddenly no longer be a top seller. Mastering your inventory means always knowing what your buyers want and consistently keeping the right amount of inventory to meet those wants.
Why Mastering Inventory Management Matters
As a small or medium-sized eCommerce business owner, you're probably focusing your operation efforts on marketing, driving sales, and boosting your cash flow and bottom-line revenue. However, putting your inventory management processes on the back burner could lead to major setbacks. Companies must work toward:
- Preventing Stockouts and Overstocking
- Creating a Reliable Flow of Product Availability
- Efficiency in Order Fulfillment
- Optimizing Your Pricing Strategies
- Improving Data
- Reducing Overhead Costs
- Streamlining Productivity
Today's most successful online businesses are prioritizing their inventory management just as much as their sales—and mastering your inventory management is essential because it plays a notable role in contributing to your bottom-line results.
Tools for Transforming Your Inventory Management
As you look for new ways to streamline your eCommerce business operations and position yourself for a strong 2024, consider prioritizing inventory management. Create strategies and adopt new software solutions that make managing your inventory easier, more efficient, and data-centric. Explore these inventory-related solutions to address the common stocking challenges you have.
Real-Time Inventory Management Systems
A real-time inventory management system will allow you to have increased inventory visibility. Get in-the-moment details about stock availability, location, and labeling. There are typically four pillar methods for an inventory management system:
- JIT: Just-in-time Management
- MRP: Materials Requirement Planning
- EOQ: Economic Order Quantity
- DSI: Days Sales of Inventory
Decide which best applies to your eCommerce business model and integrate that system into your overall strategy.
Internet-of-Things Inventory Management Solutions
Internet-of-Things (IoT) solutions are game changers for those eCommerce businesses with small warehouses and staff. These solutions empower those responsible for filling orders with inventory details they need for quick and efficient turnaround. These solutions might include:
- Sensors for inventory temperature regulation
- Scanning bar codes for fulfillment and tracking
- Triggering reorders for routine subscribers
Stock Control Systems
Adopting stock control systems solutions and software can help you identify and locate dead stock, shortened stock, and overstock more efficiently. Explore the various methods for stock control, such as:
- Just-in-time: Customer orders it, you order it.
- First-in-First-out: Items received first are to ship out first.
- ABC Control: Assigning A, B, and C levels to items according to demand.
- Two-Bin System: Bin one holds the majority of the stock, while bin two serves as a backup until bin one is replenished.
- Three-Bin System: The first two bins hold the majority of the stock, while bin three serves as a backup until the first two bins are replenished.
- Order-Cycling: Software automatically checks inventory levels and suggests restocking.
- Setting Stock Levels: Establish lower and upper inventory levels, alerting you to restock or cut back overstock.
Decide which best applies to your products and customer delivery preferences.
Product Finding Tools
Depending on the inventory you're managing and the size of your online company, you might find huge value in product finders. Scanning QR or bar codes can be essential for growing eCommerce companies managing larger inventories.
Here are just a few solutions to evaluate and consider:
- PackageX Inventory
- Inventory Cloud
- Finale Inventory
Implementing a rigorous inventory audit process allows you to accurately identify items. This means quickly spotting unused stock, recognizing fulfillment delays, and identifying demand trends. When developing your inventory audit processes, make sure to include the following steps:
- A physical inventory count
- Cutoff analysis
- Freight costs
- Overhead costs
- Direct labor costs
- Finished goods inventory analysis
- Inventory in transit tracking
Audits are great for creating to-do lists to cut costs, boost productivity, and cut down on delivery delays.
Inventory Management Software
If you're still manually processing orders or tracking your inventory with an outdated or legacy system, it's time for an upgrade. Today's inventory management software solutions are far more efficient, providing full suites of features and data-driven insights. Finding a modern, best-fit software option can be just the improvement your inventory management process needs. Here are some of the biggest eCommerce inventory management software solutions:
- Skubana, LLC
- Scout, Inc.
Inventory Planning Software
Consider adopting software solutions that help you create forecasts and funnels around your product demand. Tapping into resources to help you maintain control of your planning will positively impact your operations in these strategic ways:
- Improved management of inventory minimums and lead times
- Improved contingency planning for stock sellouts
- Improved finances in reduction of overage fees
- Improved supplier relationships with tighter control of your needs
The right tools can merge sales data with inventory levels, helping you to better predict customer preferences, stock availability, and even seasonal buying trends.
Insights for Choosing the Best-Fit Inventory Solution
There are plenty of software solutions out there specifically designed for small, startup, and medium-sized eCommerce businesses. But it can be daunting to sort through these options to find the best-fit option. Learn to avoid chasing "shiny objects" and, instead, drill down on those software platforms that best complement your online retail needs. Consider these insights before officially choosing an inventory management software solution:
- Identify whether you first need an inventory management system or an enterprise resource planning solution. IMS software solves operational challenges, while ERP software improves financial challenges.
- Make sure the inventory software solution you choose can grow with your eCommerce company over time and not just fix "now" problems.
- Determine what inventory metrics and data are most valuable to your business and identify software with robust applications for collecting and analyzing it for you.
- Recognize that some software solutions are better suited for warehouse management while others are more plug-and-play for drop-shipping models.
- Evaluate a software solution's support network should you have questions or need help getting started.
- Look for inventory software that supports other eCommerce retailers like you to quickly see if it's a good fit for your model.
- Talk with your suppliers and existing vendor partners about which inventory management solutions they recommend.
- Perform a cost analysis of your current expenses to justify your budgetary investment into a software solution. Compare with potential cost savings with the right-fit solution in place.
As you evaluate your online business strategies and wrap up 2023, consider exploring new methods for improving your inventory management. Carve out your sales plans for 2024, but also prioritize your steps and processes for managing your stock. It's a mission-critical element for your business—bringing with it the potential to see a massive impact on your revenue and growth.
Get Inventory On Track and Manage It Efficiently with the Right Funding to Keep it Moving
As you get a better handle on your inventory management, you’ll need efficient, eComm-oriented capital to help. With the right partner, you can access flexible merchant funding options that provide you with the necessary capital to optimize your inventory management processes. Quick and hassle-free lending services can ensure you have the cash flow you need to maintain optimal stock levels, invest in advanced inventory tracking technologies, and seamlessly adapt to shifting customer demands.
By leveraging Onramp's merchant lending expertise, you empower your business to overcome inventory management challenges and capitalize on market opportunities, paving the way for sustained growth, increased sales, and long-term success in the competitive online retail landscape. Contact us today and transform your inventory management strategies with the right financial support tailored to your business needs.