Five Tips for Inventory Management
Inventory management is a challenge for many eCommerce merchants. Without an effective strategy, web stores can tie up capital in excess inventory, create fulfillment problems in the warehouse, and lose out on sales when they run out of stock.
Yet when done well, inventory management can please the customer base, optimize cash flow, and improve a merchant’s bottom line. Here are five tips for running a smooth warehouse operation:
Carefully determine your inventory amounts. Keep good records, monitor your trends, and analyze your performance in past years so that you can forecast your sales cycles more accurately. Also consider product cost, storage space, shelf life, and delivery time. Determine what sells and what doesn’t. Some metrics to analyze are inventory turn (the time it takes to sell your inventory and restock), average inventory investment period, turnover analysis, and inventory-to-sales ratio. For example, if the latter is increasing, you’re investing too much in inventory or your sales have dropped, and you may have too much cash tied up in your warehouse.
Organize your warehouse. Create a system and communicate it clearly to your staff so that all your products are stocked efficiently, shipped smoothly, and tracked accurately. Use clear guidelines, like shipping guides and packaging instructions.
Have a multifaceted management system. Consider your operations, marketing, and purchasing. For instance, keep your eye on your promotions calendar when managing your inventory. That way, you know when and how much product to purchase, and you can set up your storage space and prepare your staff and vendors for increased business.
Make sure your stocking information is accurate. There’s nothing customers hate more than to order an item and then learn that it’s no longer in stock. Communicate closely with your vendors and have a backup plan during high season. Find a second vendor who can supply you with product if your primary source runs out.
Get help. Consider using software, like Megaventory, that can help you manage inventory, orders and returns across multiple channels, send purchase orders to suppliers, issue documents for shipping and invoicing goods, and create customizable inventory reports. Integrate your operations with Quickbooks. You may even want to outsource your warehousing and fulfillment to services like ProStores add-on tool ShipWire. Software and outsourcing can free up your time to concentrate on other parts of your business like design, marketing and customer service.