The textbook definition of e-commerce is selling over the internet, but those in the industry understand that e-commerce is more about inventory management and logistics. 

Whether you are running a startup or an established company exploring how to expand your business in the digital space, you need to understand that inventory management will be at the center of what you do. Inventory management is an essential facet of a successful e-commerce business; you must always know what’s going on with your products. 

What Is Inventory Management?

Inventory management is the ordering, storing, organizing, and shipping out of your inventory. It is present in every business process, from sourcing raw material to making sales and even taking returns. The science of inventory management ensures that the business has everything it needs at every stage without being under or over-stocked. If inventory management is out of balance, the company will lose money from lost sales, idle stock, or higher inventory handling costs. Your inventory can be affected by the following factors.

Financial factors such as spending to stock enough inventory can affect your inventory levels. Additionally, tax considerations can affect your stock management, particularly when preparing for the end of the fiscal year. Some other considerations include warehouse operations and transportation expenses.

The reliability of your suppliers can affect your stock levels. For your business to effectively plan for future demand or handle demand shocks, you need a supplier that can deliver. An unreliable or unpredictable supplier can result in knock-on effects for your inventory control.

The product type and manufacturing process can affect your lead time. Lead time is the amount of time a product arrives after you have placed an order. If you outsource a part of the manufacturing process, it will affect your inventory management. For example, many manufacturers that relied on suppliers from outside the country experienced shortages during the pandemic as economies worldwide shut down.

The nature of the product will affect inventory levels and flow. For example, you must manage perishable goods according to expiration dates, creating tighter deadlines.

The skills and tools at your disposal will have an impact on your inventory management. Devices like barcode scanners, label printers, mobile computers, and inventory management software can make your operation more efficient and cost-effective.

Factors to Consider

  • Tracking Order Volume 

Your inventory needs ebb and flow depending on several factors. You need to anticipate inventory requirements so that you maintain the right balance. To achieve that, you can track patterns from your history. If you are a new business, you can use industry trends that apply to your business. 

Customer demand fluctuates for many reasons, including:

  • Time of day. For example, a restaurant sells more coffee in the morning than in the evening.
  • Your inventory will also shift seasonally; winter coats are unlikely to move during the summer.
  • Regulations or a change of law can affect demand for better or worse. An example is the legalization of marijuana across states and how that has affected hydroponic farm suppliers.
  • Fads are short-term trends that can be lucrative if you time them well, but if you mistime or misjudge them, you can end up with a bunch of inventory that’s difficult to move.

You will likely face more orders around holidays and higher demand for certain products around specific occasions (like women’s products around Mothers’ Day, toys during the winter holidays, and sweets leading up to Valentine’s Day.) Once you can anticipate these fluctuations, you can factor them into your inventory management 

  • Keep Extras On Hand

Businesses have faced many disruptions lately, so you may need to keep safety stock or extra inventory in case of unexpected surges or shortages. Keep extra inventory to prepare for recalls, damaged inventory, shipping issues, and so on. 

What’s more, if the stars align to boost one of your products, you want to be ready to offer it widely.

  • Know When to Re-Order

Tracking orders and managing inventory also helps you track when it’s time to order more from your suppliers. In addition, it helps you avoid hold-ups and missed revenue due to being sold out. If you’re the only supplier with a particular product still in stock, you stand to make a tidy sum.

Inventory and Fulfillment

Fulfillment is the process of sending people the products they’ve ordered from your e-commerce business. It is a complex operation that involves receiving orders, packaging goods, and delivering them. 

It is essential to your business’s success that this flows smoothly. The logistics of e-commerce fulfillment are accessible for any business, including yours. If you employ a professional service to outsource this aspect of your business to a third party, you can expand your distribution network, lower your costs and reduce your delivery times with a bespoke solution.

Improve Your Inventory Management, Improve Your Business

Whether you are a manufacturer or retailer, your business needs an inventory management system that adds to the bottom line. Get the expertise like an analytics masters degree and tools you need to reap the benefits, and as your operation grows, consider outsourcing your inventory management. Above all, remember that keeping your operation efficient and cost-effective will make your business run better.


Sumit is a Tech and Gadget freak and loves writing about Android and iOS, his favourite past time is playing video games.

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