By our partner Ledger Labs
Key Insights
34% of e-commerce businesses experience delays in order deliveries as they mistakenly sell unavailable products in their inventory. This usually happens when they don’t have accurate visibility across their supply chain, leading to stockout and overstock situations.
A solid inventory management system can solve this issue quite easily. But have you wondered why businesses often undermine the role of inventory management? It’s not because they don’t take their work seriously – it’s because they believe in the thousands of myths regarding e-commerce inventory management. And sadly, it’s costing them sales.
Let’s take a look into the most common inventory management myths in detail.
There are two ways you can look at inventory management for e-commerce businesses:
Inventory management helps you see what you have and how much of it. This will help you avoid spoilage.
Imagine buying new products that simply end up gathering dust on your shelf. The lack of movement, spoilage, or the cost of your products sitting on shelves are unnecessary costs that can be avoided.
Inventory management also eliminates the guesswork, so you won’t have to spend time wondering whether or not you have enough stock in your inventory. This allows you to save time and efficiently manage your inventory.
As a business owner, you have a lot on your plate. You’re processing orders, packing and shipping them, and at the same time, you are ordering more products to fill up your inventory to avoid stockouts.
Now all of this is time-consuming. But you’d be surprised to know that 24% of small businesses still track their inventory using pen and paper.
Managing your inventory the traditional way can be mentally draining. You’re looking after your stock, sales, orders, and finances. By adding inventory management software to your ecosystem, you’ll have a wealth of information at your fingertips.
This software automates all orders, helping you tackle not one but hundreds of orders simultaneously. And yes, all business units get updated in real-time.
What makes an inventory management system better is that everything is right there at one glance. You’re not hopping from one system to another. Inventory management helps you save money and improve your revenue regardless of your business size.
This primarily happens when e-commerce brands prioritise every other task above inventory management. Inventory management is one of the most important, if not the most important, part of running an e-commerce business.
It demands every bit of your attention and effort. However, 7% of businesses don’t track their inventory at all.
Many businesses make the mistake of buying in bulk, thinking it will save them money. While buying in bulk comes with discount prices, it may not be ideal for every business. Especially when you have limited resources and money – this decision can, in fact, be a huge blow to your finances.
Paying upfront charges for raw materials may translate to tight cash flow management. It’s true when the business is slow and the item will sit in your inventory for some time.
Imagine adding bulks of products to your inventory and they end up eating dust in your inventory for months to come. You could easily use this money somewhere else.
Of course, this can be a great idea if you already have a large shipment waiting. But when the business is slow and you’re only testing water, buying in bulk is not worth it.
While having variety is never a bad idea, it may not be in your best interest right off the bat. Yes, diverse options entice the audience and attract more customers. But it comes with an increase in inventory baggage.
Now consider adding new products to improve the diversity ratio. Do you think there are enough customers that are even interested in them? Sometimes it’s best to operate on specialization.
This strategy works best as you don’t try to grab everyone’s attention. You are simply asking the people you already know are interested in your product. And guess what? It will make your inventory management simple.
Do you know that 46% of warehouses falter due to human error?
This happens when businesses rely on human resources more than technology to manage their inventories. There is a myth that inventory management tools and software are too expensive. But that’s not the complete truth.
While it’s true that the software used by large companies to manage inventories is expensive, small businesses have other options that aren’t too hefty.
Think about all the benefits one would get out of a proper system that automates the entire process with an inventory management solution like Cin7.
Another thing you can do is get a NetSuite Salesforce integration implemented into your business. While it is more on the expensive side, the benefits and ROI are massive.
Many believe in investing in their inventory too early on in their business. They think of the inventory as an asset. But this is not real estate where you can buy a property for some time and then sell it when the price is good.
Here, your money gets locked and you can’t do anything about it until it gets sold.
Now this can take a day or months. You have no clear answer for when you can access money.
It’s best to remove the dead stock to make space for new products.
This actually aligns with the first myth we discussed about bulk buying.
The most common myth is the belief that businesses forecast future sales based on history. This is not completely true.
If you research the concept of inventory forecasting, you’ll find that it considers not just your history but also future and present conditions.
Yes, you must go back to see which products were popular and sold out fast and the ones that didn’t, this will help you predict product demand. But it cannot directly suggest a number for sales.
Preparation is crucial if you want to run a business successfully. Having a proper strategy outlined before you go live with your products is extremely important.
It’s best to deal with inefficiencies beforehand than to experience the same problem but now with higher repercussions.
Inventory management helps you improve your budgets, sales forecasting, and business operations.
On the contrary, a mismanaged inventory or lack of proper management leads to dead stock, order delays, higher costs, and reduced revenue.
Inventory management gives you control which is crucial in eliminating various events such as stockouts, overstocking, and order fulfillment errors.
It clarifies how much stock you have and how much you require more.
Thus, it’s best to have techniques that work for both midsize and small businesses.
Let’s explore the top techniques to manage your inventory.
This is quite a unique strategy to manage inventory. It helps you split up your entire stocks into three categories.
You can use this method to visualize which item in your inventory has the largest impact on your finances.
Just-In-Time is an inventory management technique where you order products for inventory depending on your needs. So you only order what you need to avoid dead stock.
Dead stock includes the products that never got sold and were removed from the inventory due to the lack of demand.
This is a modern technique that helps you fulfill orders faster. You deliver the product directly from the supplier to the shipping address without ever bringing it to your warehouse or inventory.
The product is purchased from a third party and sold to the customers.
It means you don’t keep an inventory of your own, eliminating the need to manage it altogether.
There are several myths surrounding e-commerce inventory management.
From bulk buying to adding variety, thinking it is an asset, inventory management can be easy only when you stop believing in these myths. To avoid these myths, conduct the ABC analysis to visualize which product of yours is more popular. You can also look into Just-In-Time inventory or dropshipping.
E-commerce inventory management is a crucial part of your business. Ledger Labs, a Cin7 partner, can help you implement a solid inventory management system. We have 12+ years of experience, giving you the expertise and tools to offer you extensive help.
Book an appointment today to discuss inventory management in detail.
