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Understanding the Key Factors Affecting Inventory Control for eCommerce Businesses

01 Apr, 2021 | Business Tips, Inventory Management

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According to recent data, eCommerce grew 44% in 2020. This growth, which in dollars amounts to more than $861 billion spent by consumers on merchandise sold by online merchants, reflects the largest such growth in 20 years. What’s also significant is that Amazon, while still capturing just over 30% of the online market, is down from nearly 44% of the market in 2019. This means that there are other eCommerce businesses growing at a rapid rate, showing that online selling is exploding as other retailers like Wal-Mart and Target as well as other, smaller businesses increase their online sales.

Much of this jump in online sales and growth of many eCommerce businesses are, of course, attributed to the COVID-19 pandemic, which saw people in self-isolation or quarantine turn to online sales to make various purchases.

Though there are of course many differences in running an online as compared to a brick-and-mortar business, one thing does remain the same: in both cases, inventory must be stocked and tracked. Controlling inventory is just as important for eCommerce businesses as it is for traditional businesses.

So, what key factors affect inventory control for eCommerce businesses? Let’s take a closer look.


Accuracy in Inventory for eCommerce Businesses

In some cases, on-hand inventory is not as easy to be aware of for an e-business as for a traditional business. For the latter, the inventory might physically be on hand, so it’s simpler to walk down to the warehouse and ensure that enough product is available to fulfill orders.

For eCommerce, inventory might be stored in a warehouse that’s miles or even several states away, or inventory may be dispersed among several warehouse sites. Orders are filled through what is known as dropshipping: orders are filled and inventory is shipped using a third party.

In this case, up-to-date sales records and fulfillment reports are crucial to knowing how much inventory is available at any given time. An online business’s website, for instance, might reflect that stock is available for immediate shipping, when in reality, sales information has not been updated in real-time. An online business must work closely with its third-party shipper or shippers to ensure adequate stock is on hand at all times.

If this is not done accurately or consistently, customers who thought they were getting their merchandise quickly are now forced to wait days or even weeks before their orders can be filled. Impatient customers might cancel their orders and buy the merchandise from other online sellers—in other words, your competitors. 

Thus, perhaps the single most important factor for controlling inventory for eCommerce businesses is maintaining real-time sales reports and up-to-date inventory tracking systems to ensure that stock shortages do not negatively impact the company’s brand name, reputation, and ability to provide customer satisfaction. Real-time inventory control and shipping information improve delivery performance and flow of merchandise to consumers.


Understanding eCommerce Consumer Buying Habits

Overstocking is a reflection of bad inventory control. If you miscalculate the demands of consumers, you could be left with too much stock at the end of the month; thus, you’ve overspent to hold on to merchandise that’s not selling, so you’re losing money.

And if you’re an eCommerce business that’s not dropshipping but holding on to inventory and shipping yourself, it could become a problem as to how and where to store this excess inventory. It’s smart to set minimum inventory levels for eCommerce businesses, especially smaller operations. First, you’ll need to understand the demand for your product and precisely how long it takes for you to replenish stock. Then, you can only hold on to the stock you know you can sell at any given time, and have the knowledge that you can fulfill future orders quickly by having the ability to order and receive new inventory on a timely basis.

Proper market research methods, observations of market demand models, understanding market trends and patterns relating to the type of merchandise your e-business is selling, and realizing the amount of stock needed to meet measured demands are all important factors in controlling inventory for eCommerce businesses.


Stock Lifecycle and Turnover for eCommerce Businesses

Another important inventory control practice for eCommerce businesses is performing routine inventory checks to make sure that stock is not outdated, spoiled, or expired. If your online business is selling food products, it’s crucial that you rotate stock and consistently check expiration dates so you’re not caught in an instance where you cannot fulfill an order or orders because you do not have fresh stock on hand.

Or, if your sales forecasting or consumer behavior analysis methods are not accurate, you simply might overstock on a product that has been declining in sales. If this happens, you’re stuck with a warehouse filled with unsaleable items. You’re then forced to sell these items at a reduced price and thus lose money…and of course, there’s no guarantee you can even sell the merchandise for cheaper if the demand does not exist.

Again, it could not be as simple for eCommerce businesses to perform routine inventory checks as it would be for brick-and-mortar businesses that have the inventory stored in the building. If an online business holds its stock in a warehouse or warehouses off-premises, arrangements must be made on a consistent basis to check the inventory to ensure its availability to consumers.

Along these lines, it’s important to maintain good communications with suppliers and warehouses when controlling inventory for ecommerce businesses. Unless you’re selling small trinkets out of your garage for your online business and only relying on yourself when it comes to inventory management, order fulfillment, and market research, you’ll need to have open communication lines to distributors, suppliers, warehouse managers, and others involved in controlling inventory for your online business.


Proper Inventory Management Tools and Methods

While it’s true for most any business these days, it’s especially true that paper and pencil just won’t cut it when it comes to controlling inventory for ecommerce businesses.

When you’re an eCommerce entrepreneur, you are likely working across many channels with various parties, including vendors, manufacturers, distributors, and maybe even marketers. For the most accurate inventory control, syncing inventory management information with all of these parties will prove most valuable and most efficient when it comes to controlling inventory. It’s simply too large a task to track orders, maintain inventory information, and keep up with ever-changing sales data without inventory management software.

Manually tracking orders and inventories leaves you wide open for data errors and an inability to gather real-time information. While you might believe that you’ll save money by not investing in inventory management software, which can be expensive, in the long run you’ll lose more through inaccurate inventory levels, customer dissatisfaction, and even overstocking.

Integrating across all channels becomes crucial when controlling inventory in the eCommerce world. For example, if you’re not integrated, your product might be shown as unavailable on one or more websites, even though you have adequate stock on hand to fulfill orders. You have the potential to lose sales in these cases, as consumers will believe that your product is unavailable and shop elsewhere. Integrating an automated inventory management system across channels avoids this issue.

Good inventory management software also gives you the capability to study sales trends, consumer behavior patterns, the impact of seasonality in sales of your particular product, and other factors that will influence your decisions when it comes to ordering and reordering inventory. These capabilities go a long way toward controlling inventory for online businesses.

Essentially, controlling inventory for eCommerce or any other type of business starts with adequate and accurate inventory management software. Start there, and your chances for the best in inventory management will grow exponentially…as will your sales, customer satisfaction, and reputation.


Controlling Inventory with DEAR Systems

Investing in the right kind of cloud ERP software will be one of the most important decisions you’ll make once you start up your eCommerce business. You simply can’t go wrong with the software offered by DEAR Systems. From the Drop Shipment feature allowing you to automatically generate purchase orders to multiple warehouse locations to transferring stock across locations, you’ll find that inventory management software from DEAR Systems will be your eCommerce company’s most valuable asset.

With DEAR Systems inventory management software you can easily, among other things:

  • Automate Pick, Pack, and Ship steps
  • Update product listings
  • Sync product updates with existing catalogs
  • Eliminate stock shortages with real-time syncing of sales transactions
  • Customize integration processes across sales channels
  • Keep accurate accounts of inventory availability with updated stock reports across multiple warehouse sites

Other areas addressed with the DEAR Systems inventory management software includes real-time data availability for purchasing, production costs and planning, accounting, and invoice payments. 

In short, the DEAR Systems inventory management system will make sure you have instant and constant knowledge about your eCommerce inventory from automated orders to warehouse storage; all the information you hold “DEAR” to running a successful eCommerce business is literally at your fingertips.

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