Effectively managing your eCommerce inventory is essential when you own an online business. For many companies, knowing where to start when it comes to inventory management can be difficult. But don’t worry – we’re here to help.
Perhaps you’ve just started your own online business or have been working in the eCommerce industry for some time. Either way, gaining as much information on the best eCommerce inventory management techniques is most useful.
To learn more about inventory management and the top techniques to be aware of, continue reading.
What is Inventory Management?
Inventory management is the process of checking your company’s inventory – which refers to the products and goods that you sell online. Managing your company’s inventory often includes ordering, storing, monitoring, selling, and restocking your goods.
With great inventory management comes precise planning. Businesses should know their exact inventory to ensure a smooth supply chain and streamlined buying experience for online buyers.
Is Inventory Management and Order Management the Same?
No, inventory management and order management are not the same. However, the two processes share some similarities, helping companies stay organised while meeting their customer’s expectations.
| Feature | Description |
|---|---|
| Inventory Management | Tracks stock levels |
| Order Management | Tracks customer orders |
| Overall Stock Management | Simplifies ordering, storing, and selling overall stock |
| Individual Order Management | Simplifies dealing with individual orders |
| Main Objective (Stock Levels) | The main objective is to maintain stock levels |
| Main Objective (Customer Satisfaction) | The main objective is to ensure customer satisfaction |
Although both processes are different, integration of the two functions helps businesses operate. With great inventory and order management, you’ll likely make better business decisions based on stock insights, allowing for more efficient order processes.
Which Inventory Management Technique is Best?
There’s no set answer on which inventory management technique is best. Ultimately, the type of inventory management technique that your eCommerce business decides to use should be carefully considered based on a few factors, such as the size of your business and how much stock you sell.
We understand that it’s hard knowing which management system to choose – but we’ve got you covered. We’ve gathered a few inventory management techniques for you to think about below.
Top 5 of the Best Techniques for Inventory Management
There are numerous eCommerce inventory management techniques out there to use. It’s no secret that inventory management can be a little complex – but with such techniques in place, managing your inventory can be much easier.
We’ve rounded up five popular inventory management techniques for your eCommerce business to consider.
1 – Perpetual Inventory Management (PIM)
One of the more basic techniques, perpetual inventory management counts inventory as soon as it arrives, helping deliver insights quickly in real-time.
Typically recorded online or using devices that scan product barcodes, perpetual inventory management updates as the balance is sold. Unlike most periodic systems, perpetual inventory offers a more accurate inventory count.
2 – Economic Order Quantity (EOQ)
EOQ helps eCommerce companies determine the right order quantity for a product to help minimise inventory costs. It also allows companies to understand the amount of stock they should order to meet customer demand. By implementing EOQ, eCommerce businesses can reduce overall costs and enhance their inventory management.
3 – ABC Analysis
ABC analysis is a popular inventory management tool that’s helped many eCommerce businesses improve their inventory management. ABC analysis technique works by splitting your goods into three main categories based on two key factors – value and importance.
- Category A – Products that are most valuable and bring in the most profit
- Category B – Products that sit in the middle of the most valuable and least valuable products
- Category C – Low-value products
4 – Just-in-Time (JIT)
JIT technique mainly focuses on only ordering inventory when it’s needed. By using this technique, eCommerce businesses can reduce their overall storage costs and amount of dead stock.
However, JIT inventory often requires precise timing, and should only really be used if you work with reliable and trustworthy suppliers who you know will deliver your goods on time.
5 – First In First Out and Last in Last Out (FIFO/LIFO)
FIFO and LIFO are two methods used to help eCommerce businesses determine how much their goods will cost.
- FIFO – More focus on selling older stock first to keep up with stock rotation
- LIFO – Assumes more recent inventory goods are sold or used first
Advantages of Inventory Management
Without inventory management, eCommerce businesses would struggle. Regardless of your business size, eCommerce inventory management allows for all-around better processes and helps companies both big and small. Several benefits come with efficient inventory management:
- Enhanced accuracy
- Improved cash flow
- Better business processes
- Efficient business planning
- Customer satisfaction
- Prevention of understocking or overstocking goods
- Reduced chance of stockouts
Do You Require Expert eCommerce Accounting Services?
More people are using the Internet to sell their products – but is there enough in place to support these types of businesses? Whether you sell on Amazon, or have your own platform, working with a reliable accountant is most useful.
Here at DH Business Support, we offer expert accounting services to those working in eCommerce. Our chartered accountants have a wealth of knowledge and experience working with online businesses – and like all our clients, we want you to thrive. You’ll have access to a range of services:
- Bookkeeping
- Cloud accounting
- General tax advice
- Management reporting
- Professional online business advice
But that’s not all. With our services in place, you’ll have more time to focus on other important aspects of your eCommerce business, which means your business can work towards reaching its full potential and long-term success.
To find out more about our accountancy services for eCommerce clients, contact us today. We look forward to speaking with you soon!