Inventory management is the backbone of any successful e-commerce business run through Shopify. There are 13 types of inventory you could have. It is so important to know how to manage them to ensure the smooth running of your shop.
Inventory management can be confusing. It differs slightly from inventory control, as this refers to just handling stock you already have.Instead, management is about everything starting with ordering, to receiving, and finishing with selling.
We’ve previously advised on how to create and use barcodes with our app, EasyScan. However, there is much more this app can do for you! Our 8 easy ways to improve your inventory management will streamline this process, making the most of its features.
Why Does Inventory Management Matter?
Keeping track of your products from purchase to sale is fundamental for smooth operations. Knowing what you have and where helps you to identify how much to order, and when. If you want to have excellent customer service and increase your profits, this is one way to ensure success.
Not only this, but it makes financial sense too. Making sure there is never too little or too much stock reduces the likelihood that you’ll run out, oversell, or make a loss on discarded products. This is especially the case if you sell things that could expire, like food, drinks, or skincare products.
Moreover, customers often order again if they can get what they want. Meeting demand is an important part of e-commerce and encourages shoppers to be loyal to a particular shop or brand. There are other great ways of doing this, like using our app EasyGift to create Shopify store promotions. However, it’s no good doing this if you don’t manage your inventory to meet demand!
What Are The Difficulties With InventoryManagement?
Any e-commerce shop owner has faced difficulties with their inventory management. One of the most common is changes in demand, especially if you sell seasonal products. After all, not many people buy beach clothes inDecember, or Christmas decorations in July! As demand fluctuates, so does your need for stock, making it tricky to control what you’re ordering in and sending out.
Another difficulty might be having a disorganized warehouse. You can organize your warehouse with bin locations, however, you need to manage what is in those locations too. Poor organization can have knock-on effects. You might have trouble counting your stock, or checking what you have sold. This can be time-consuming at best, and costly at worst.
Finally, if you are not tracking your stock well, you might end up with phantom inventory. This, in simple terms, is when what is on your shopfront has inconsistencies with what is in your warehouse. Aside from being costly, this can lead to customers being unable to receive products they’ve purchased. It can then have a negative domino effect on your profits.
8 Ways To Manage Your Inventory
So, you know why inventory management is important, and what the difficulties with it are. But what can you do about it? Don’t worry — we’ve got some great tips to get you started.
1. Know your Market and Learn to Forecast
At a very basic level, inventory management is all about being able to forecast. Seeing trends in the market, having an accurate overview of your yearly sales, and understanding what your spending and growth look like will give you extra tools for getting your inventory right.
Of course, you can’t plan for everything. Sometimes, unexpected events happen or things go wrong in ways no one could have predicted. However, having a good grasp on the basics of what you’re aiming to sell when, and the way the market changes with the seasons can improve your inventory management.
Do your research, know your products and intended markets, and keep this in mind whenever you’re ordering or organizing your inventory.
2. Organize your Warehouse
Any other tips for improving your inventory management aren’t much help if your warehouse is disorganized!
We’ve already written about why an organized warehouse is important for making order fulfillment efficient. Using EasyScan todo the (metaphorical) heavy lifting by creating barcodes or SKUs to label what stock is and where it is located. This means your warehouse will be easy to navigate. Additionally, ensure your space is clutter-free. This means navigating the stock locations in person will be a lot less difficult.
Good inventory management is essential for an organized warehouse, but the reverse is true too. You can’t have a well-managed inventory without your warehouse being in the best shape it can be!
3. Use the ABC System
Coming up with an effective way to know your stock is an important part of creating that organized warehouse. There are plenty of ways of doing this, however, the ‘ABC System’ is widely known and relatively straightforward. It gives you 3 categories to put your stock under.
Category A is the stuff you sell frequently and fast.Category B is the next biggest seller. The final category, C, is made up of the things that are least sold, but still important for your overall stock. This isa very simplified version, but it gives you an idea of how you can understand what products you have in and the levels of importance they fall at for your revenue.
There is lots more advice available on how to introduce the ABC system.
4. Know your Par Levels
Once you know what stock you have, you need to come up with par levels for your inventory. This means the lowest amount of product that you must have in your warehouse all the time.
Setting these numbers is important as it helps you work out when to order more stock from suppliers. This is all part of managing inventory efficiently and not running out of items, or having too much stock.
EasyScan can help you with this. If you use it to barcode your items, you’ll be able to see at all times how much of each you have in your inventory. The app allows you to monitor stock levels quickly, remotely, and across any amount of warehouse locations.
5. Automate Order Fulfillment
Another way to ensure effective inventory management is to automate as much as you can. Human error costs U.S. businesses an estimated total of more than $3.1 trillion a year. Taking out a substantial amount of that error can help you avoid adding your dollars to this total. Automated order fulfillment leaves less room for problems.
EasyScan gives you a simple, automated way to track and send orders using automatically assigned barcodes and a label printing function. You can use a barcode scanner to pick and pack orders efficiently. This translates directly into updates to your inventory. That way, there is less chance that inventory levels will contain errors.
6. Audit Inventory Regularly
Additionally, make a point of auditing your inventory regularly. Whilst automation and organization eliminate most human error, there can still occasionally be inconsistencies. Checking that what is represented on your digital inventory is accurate to the physical inventory is key.
You can physically count your inventory, which many companies choose to do at the end of each tax year. Smaller checks throughout the year are important too. You can pick a single product or a few products to check if the numbers match up. This is especially important for things you sell a lot of on quicker timescales, as that’s where most errors can occur.
Luckily, EasyScan can make this process more simple too. Just scan the barcodes of your stock, and print a detailed report of what has been scanned. This is compared to what is on the digital inventory.
7. Build Great Relationships with Suppliers
Relationships with suppliers are very important for inventory management. However, this is something not often prioritized. A good supplier relationship can mean the difference between receiving products on time, or getting something at short notice when you run out. It can also affect prices and where you fall in the list of priorities for your suppliers.
There are plenty of ways to build a great relationship with your suppliers. From effective communication to understanding how your suppliers work and maintaining loyalty to those you value, this is simple but effective advice.
8. Expect the Unexpected
Finally, I’ve hammered home the importance of forecasting, but being prepared for the unexpected is essential enough that it deserves recognition! For all our predictions and projections, sometimes things just go wrong. Miscalculations, discontinuations of products, big events that affect sales, or just the everyday ups and downs of business are unavoidable sometimes. The unexpected can also be positive. A week of especially high sales can affect your management, for instance.
It is always good to have contingencies in place for when the unexpected happens. Knowing how you will react and what steps you will take to get things back on track are critical business skills. You can’t prepare for everything, but you can sure try!