Nothing is more frustrating for both customers and retailers than seeing their favorite, necessary, and high-demand products out of stock. It hampers the business significantly, resulting in unsubscription.
It’s a common issue that haunts many merchants, irrespective of their business and customer size. A single customer loss is a big deal in this rapidly competitive digital business landscape.
Like every other problem, this issue has a solution in the form of inventory management. Every eCommerce merchant is well aware of this term. However, only a few have implemented it fully and are now enjoying the benefits.
In this blog, we will discuss inventory management. We will explain its definition, importance, benefits, and top techniques for mastering the process.
What is Inventory Management?
Inventory management refers to the complete cycle of tracking and controlling the flow of goods within a business. Its process involves:
- Tracking the movement of goods and materials
- Monitoring inventory turnover
- Optimizing replenishment to ensure product availability.
Inventory management helps minimize inventory holding costs by providing replenishment and material purchasing insights.
Things that count as inventories are:
RAW Goods – Suppliers and producers provide wood, metals, plastics, or fabrics for finished goods.
Work-in-Progress – WIP represents a partially finished product that incurs production costs such as labor and machinery.
Final Products – This type of inventory refers to the number of products that are in stock and suitable for purchase.
Maintenance, Repair, Operations (MRO) – The following items are included: personal protective equipment, cleaning supplies, office supplies, and tech equipment.
Inventory management varies by business category, size, budget, and region. Understanding and implying the best inventory management for a smooth and hassle-free process depends on your business category, size, budget, and region.
Why is Inventory Management Crucial for Merchants?
Accurate inventory levels are crucial for merchants as they directly affect various business aspects. This helps meet customer demand and avoid stockouts, which might lead to lost sales and customer dissatisfaction.
By optimizing the balance between supply and demand, Shopify merchants can improve customer satisfaction, streamline operations, and maximize profitability.
Efficient inventory management can prevent overstock and enhance cost control by reducing carrying and holding costs and the risk of obsolete or expired stock.
Benefits Inventory Management Comprises:
An agile inventory management system can do wonders for you and your business. It helps you organize things better and enhance your decision-making power. Moreover, it benefits you in several ways, including:
Scale Growth – Inventory management applications can help businesses scale by providing tools and infrastructure to manage larger inventory volumes and increased order fulfillment demands.
Improves Customer Satisfaction – Accurate and timely order fulfillment and consistent product availability can achieve customer satisfaction, which can, in turn, increase the likelihood of repeat customers and referrals.
Improves Cash Flow – Managing your inventory is crucial for your business’s success, as it directly impacts your sales and expenses. Your inventory determines how much you can sell and what you need to purchase, affecting your current assets, such as your cash flow.
You can seamlessly manage your cash flow and improve your overall business performance by improving your inventory management.
Reduce Errors – Automated processes and data synchronization eliminate/reduce human error in inventory management.
Optimize Pricing & Promotions – Analyze inventory data to identify slow-moving products. It helps develop effective clearance strategies to free up storage space and generate additional revenue.
Improve Order Fulfilment – Effective inventory management is crucial in enhancing order fulfillment. A smart tactic is distributing inventory across multiple fulfillment centers to ensure products are close to the customers.
This approach helps reduce shipping costs and accelerate delivery, increasing customer satisfaction.
Shopify Inventory Management – A Thread!
Shopify has an integrated inventory management system that helps keep track of:
- Inventory across multiple locations
- Streamlines the procurement process
- Maintains accurate inventory quantities
- Quickly moves inventory across the supply chain.
In the Shopify admin Inventory section, you can manage inventory tracking, view stock levels, and make adjustments. You can also view the history of inventory transfers and adjustments for Shopify-tracked variants.
Shopify also provides inventory reports that display a snapshot of your inventory at the end of each month. You can access various reports, such as:
- Average inventory sold per day
- ABC analysis by product
- Product sell-through rate
- Days of inventory remaining
Follow the instructions to find and preview these reports:
- Go to Analytics > Reports. (From Shpify Admin)
- Click Categories.
- Click Inventory (Filter the reports section to see only inventory reports)
To better understand the process and end-to-end assistance, hire Shopify experts today!
Top Shopify Inventory Management Tips for 2024!
In 2024, efficient inventory management is more crucial than ever for Shopify stores. You must be wise and show bravery in your decision-making to achieve the desired results.
Here are some top tips to optimize your approach:
Set Par Levels – Par levels indicate the minimum required product inventory. When the inventory falls below these levels, an order should be placed.
You can adjust Par levels based on product, customer demand, and restocking time. Your IMS can track this information in a retail sales report.
Inventory Forecasting – Accurately predicting demand is vital in effective inventory management. Though several variables are involved in anticipating future sales, it is important to observe closely:
- Sales data from the same period last year
- Guaranteed sales from contracts and subscriptions
- Seasonal trends
- Upcoming promotional events.
Leverage Built-in Tools – Use Shopify’s reporting features, such as sales velocity and inventory turnover, to identify demand patterns and optimize purchase orders.
Manage/Improve Relationships – Strong relationships with suppliers can provide flexibility during unexpected problems, as minimum order quantities are often negotiable.
To ensure a successful partnership, inform your supplier of any anticipated increase in sales or purchase orders so that they can adjust production and lead times accordingly.
ABC Analysis – Categorize products based on value (A-high, B-medium, C-low) to prioritize restocking and marketing efforts.
For example:
A – Products that generate 80% or more revenue
B – Products that generate 20% revenue
C – Products that generate 5% revenue
Contingency Planning – One shouldn’t wait for the storm to take shelter; instead, build a more substantial shelter that withstands every tiny or colossal storm.
In Shopify Inventory plans, you must prepare for unexpected events like supply chain disruptions or seasonal sales spikes to avoid stockouts or costly delays.
Regular Auditing – Regular inventory reconciliation is crucial. You can use you’ll software and reports from your warehouse management system to track your stock levels.
It’s vital to conduct a physical inventory count or stock take to ensure the accuracy of information.
Final Thoughts!
Effective and agile inventory management is crucial for the success of any eCommerce business. It ensures that the right products are available at the right time to meet customer demand.
Investing in an optimum inventory management system should remain your top priority if you are a Shopify merchant. It will double up your sales in a more organized way. You can better:
- Optimize product stocks
- Ensure availability/unavailability of products
- Reduce losses
- Improve the bottom line
- Enhance customer experience
A proper inventory system gives businesses a better chance of profitability and survival. Many have already implemented this in their existing businesses, if not by themselves, then with the help of agile Shopify Development Agency. Now, it’s your turn to learn, understand, and explore its latest versions for high-end profitability. Contact Metizsoft Solutions for seamless integration and management!
