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XendooeCommerce Accounting & Bookkeeping Inventory Control for eCommerce: Getting the Balance Right
tax consulting for retail stores

Inventory Control for eCommerce: Getting the Balance Right

As an ecommerce retailer, you may not have a bricks-and-mortar store, or even your own warehouse and fulfillment facility. But that doesn’t mean inventory control has to be more difficult. With the right mix of tools and strategies, you can manage your merchandise supplies and turnover efficiently and cost-effectively.

 

Decide how much stock to keep on hand.

Your goal is to strike a balance between too little and too much. In most cases, a one-month supply will be enough to meet any unexpected increases in customer demand, without tying up unnecessary working capital or warehouse space.

 

To calculate your one-month supply, analyze sales and fulfillment information from previous years. If you’re a new startup, research the performance of your product category as a whole.

 

Allow for variables in your stock-on-hand plan.

Depending on your business, you may need to adjust inventory levels for:

  • Seasonal fluctuations, such as the Q4 holiday shopping season
  • Shipping time from the manufacturer to your warehouse, import delays, etc.
  • Store promotions such as an annual sale

 

Apply the same variables to fulfillment planning.

During periods of higher sales volumes, you will also need more packaging materials as well as additional employees to do the order processing, packing and shipping.

 

Keep a close eye on your inventory — digitally.

Real-time inventory software can save a ton of time and effort. By using bar code identification, it automatically updates your stock levels whenever an item is sold, alerts you and website visitors when an item is out of stock and tracks delivery to customers.

 

Keep a close eye on your inventory — manually.

It may seem old-fashioned, but a physical stock count is the only sure way to know what’s in your warehouse. Do it weekly, monthly, quarterly or annually, whatever makes sense for your business.

 

Have a plan for out-of-stock incidents.

Your software should notify you in time to replenish stock before it runs out. But in case there are snafus at the manufacturer or in transit, be prepared to respond and keep customers happy:

  • Remove the product page from your website, or add an “out of stock” message letting customers know when it will be available again
  • Take back orders
  • Pay extra attention to stock levels of fast-moving products and reorder them farther in advance

 

Choose the right business management system.

A system that’s specifically designed for ecommerce is an invaluable asset. For example, it can show order processing and shipping costs in relation to revenues. Even better, it can link inventory management to other operating systems within your business, such as accounting and payroll, greatly reducing administration time and duplication of effort.

 

Organize your warehouse for fast response.

Keep your best-selling items on the shelves that are easiest to reach. Slower moving merchandise can go in the less accessible areas.

 

Consider off-site warehousing options.

The advantages of storing some or all of your inventory in other locations include reduced shipping time to your customers and saving on overhead. Check out:

  • Adding regional warehouse locations
  • Renting warehouse space from a national retail chain or postal service
  • Using Amazon FBA (Fulfillment by Amazon) — you advertise your product on Amazon and they handle merchandise storage, order processing, shipping and customer service

 

Stay on top of record keeping.

For both current decision-making and long-term planning, “knowing your numbers” is essential. So checking them at the same time every day or week is a great habit to get into. (It only takes a couple of seconds with the right software, just press a button to see inventory status, turnover and associated costs.) You’ll always have a clear picture of your inventory … and your business.

 

For successful inventory management, every ecommerce business must find the right balance between too much or too little stock, online and hands-on tools, and on-site or off-site locations. Most important of all, accurate records will reveal what’s working and what isn’t, so that the future will be even more rewarding than the past.

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