Tracking your competitor’s prices is vital to maintaining viability in your market. However, competitive pricing is going to be more effective when you provide products to your customers when they want them. This means you also need to have the right tools to manage your products.
Making sure your products are in stock, priced and categorized correctly, and tracked properly is easily achievable with a dedicated inventory management system. So, what is inventory management all about? Here’s everything you need to know.
What is inventory management?
Inventory management is the process of overseeing and tracking stock, and includes aspects such as storing products, managing orders, and adjusting the amount of products for sale. Simply put, inventory management is all about making sure you have the right quantity of stock on hand when you need it, and where you need it – so it’s really crucial to the success of any eCommerce business.
Types of inventory
Most inventory falls into one of three categories:
- Raw materials: Any materials that your business uses to produce your goods or services. For example, if you sell cupcakes, all the ingredients for your products would be considered raw materials.
- Work-in-process: Any unfinished goods that are in the process of being completed. If you produce wooden furniture, this would be any furniture on hand that’s still in the process of being finished.
- Finished goods: Any goods you have in stock that are ready to be sold.
Inventory management best practices
Keeping inventory on hand (also known as ‘holding inventory’) can help eCommerce businesses be prepared for spikes in demand and take advantage of deals from suppliers when they arise. But to reduce the risk of overstock and dead stock, it’s important to follow these inventory management best practices:
- Stock control: Maintaining stock levels as low as possible can help increase cash flow and decrease the cost of holding stock. However, there’s no one-size-fits-all approach, so stock levels should be determined using data on sales patterns, seasonality, and past turnover.
- Quality control: All eCommerce businesses should have quality control procedures in place to ensure their product is up to standard. All goods should be examined for signs of damage, including leaks, tears, broken seals, or discrepancies in descriptions.
- Conducting a Stocktake: Stocktake or cycle counting is the process of counting and categorizing inventory, and typically includes dividing stock by location, category, item, or value. Conducting a stocktake is critical in ensuring businesses have an up-to-date record of stock on hand.
- Know your reorder point and safety stock level: Understanding when to order more stock (the “reorder point”) and reducing the risk of stock-outs by maintaining safety stock are key to retaining market share while keeping stock overheads down. Learn more about the reorder point formula and safety stock formula.
How an inventory management system can benefit your eCommerce business
The most obvious way a dedicated inventory management system can benefit any eCommerce business is by making life easier. Inventory management software, such as TradeGecko, improves the accuracy of orders, facilitates a more organized warehouse through unique SKUs and recorded stock levels, and increases efficiency by cutting out manual processes. Ultimately, all of these factors help save time and money whilst positively contributing to the bottom line.