If you sell products through an online store, inventory management is probably the most crucial success factor. Why? The answer is simple. Imagine you’re running a fantastic marketing campaign, and sales orders start coming in, only to realize that the product is actually out of stock. At that moment, you miss the mark entirely because you’re not only investing in an expensive marketing campaign but also disappointing consumers who ordered a product that is not in stock and will have to wait longer than expected.
In short, it’s a situation you must avoid. You need to manage your inventory flows as efficiently as possible. Are you running a promotion? Make sure you have enough stock. But there’s more to inventory management than just keeping track of stock levels for a particular product. Here are some tips to help you manage your inventory effectively.
What is Inventory Management?
Before we give you some tips, let’s first ask: what is inventory management? Inventory management refers to overseeing the flow of goods within your business. You keep track of which products enter and exit your warehouse or storage space. Storing products costs money, so you should aim to keep these costs as low as possible. How? For example, by keeping products in stock for a short period of time. Products that sit in your warehouse for too long are not profitable!
On the other hand, you need to have enough stock to meet demand. The trick is finding the right balance. Fortunately, this isn’t guesswork, as you can optimize the incoming and outgoing product flows through good inventory management. This will ultimately lead to higher sales, more satisfied customers, and maximum profit. Additionally, you’ll not only create satisfied customers but loyal, returning ones! Below are 7 tips to boost your inventory management.
1. Track Your Inventory
Everything starts with whether or not you track your inventory. It’s extremely important to map out your stock and gather sufficient data. This data provides a wealth of valuable information that you can use as a business owner. Based on this data, you can make smart, informed decisions. There are several ways to keep track of your inventory. Let’s list them:
- Manually with pen and paper
- On a computer, using Excel or a similar program
- With a WMS system that automatically tracks inventory
The method you prefer depends on your needs. We always recommend using a WMS system because such a system is accurate and can automatically generate various useful statistics. A WMS system requires a small investment, but it can save a tremendous amount of time and minimize errors.
2. Use One Inventory Management System or WMS System
The first tip naturally leads us to the second one. We strongly recommend using an inventory management system. Such a system will help you manage your inventory effectively. You can monitor the flow of goods and move them through the warehouse in an organized way. With a WMS system, you can process orders more efficiently. For example, you can process orders in bulk, while the system gives you the most logical pick route through the warehouse based on the created warehouse locations.
Still, we often see entrepreneurs using multiple methods to manage inventory. Collecting data from various sources is time-consuming and increases the likelihood of errors. Therefore, you must choose one centralized system. We, of course, recommend using Webship Online. Webship Online is the WMS system developed by Webship. It is a user-friendly cloud application, making the system accessible anytime and anywhere with a working internet connection.
Want more information about Webship Online? Contact us at hallo@webship.online and request your free trial!
3. Gain Insight into Inventory Data
A webshop is often launched with a few products, but the number of products grows quickly. To keep track of the entire range, it’s important to organize information correctly. If you don’t do this, you’re likely to lose track over time and make poor decisions.
To gain insight into inventory data, you should use things like Stock Keeping Units (SKUs), inventory costs, batch numbers, expiration dates, warehouse locations, supplier information, and courier details. In the blog ‘Importance of Product Codes in a Warehouse,’ you’ll learn more about creating clear SKUs.
Again, we emphasize that creating an organized inventory is tied to working with a WMS system. With a WMS system, you can process all inventory information within the system.
4. Avoid Inventory Loss
Many entrepreneurs start with the assumption that a purchased product will actually be sold. If you start with this mindset, you may often return empty-handed. Inventory loss will always occur. The key is to minimize inventory loss because it can significantly reduce your margins.
Inventory loss can happen in several ways, such as damage, theft, incorrect storage, expiration dates, and administrative errors. Research shows that about 15% of inventory loss is caused by administrative errors. Some factors, like theft, are beyond your control, but you have full control over administration. Once again, an inventory management system like Webship Online can be a lifesaver! Outsourcing logistics is also an option. A fulfillment partner has tons of experience in managing large inventories. Inventory loss due to damage, poor storage, theft (better security), and administrative errors can be minimized by a fulfillment partner to a level that you’ll never achieve on your own.
5. Inventory Turnover
Products that are out of stock logically can’t be sold. However, many webshops manage to run out of stock on their bestsellers. This not only leads to missed sales opportunities but also causes customers not to return to the store. A situation you must avoid at all costs! How can you prevent this? By calculating your inventory turnover rate. These calculations help you estimate how long it will take before stock runs out, and when you need to reorder. Always consider the supplier’s lead times.
6. Manage Obsolete Inventory
Naturally, some products sell slower than others. These products often end up in a forgotten corner. You must avoid this. Obsolete inventory can lower profits because it prevents you from purchasing new stock and increases warehouse costs. By managing your inventory properly, you can avoid these pitfalls and ultimately increase profits. Furthermore, the value of obsolete inventory decreases as the market gets flooded with new products.
In this case, inventory turnover isn’t the right metric. You can have a low turnover rate while sales are still strong. How? Because you may have a large amount of stock. In this case, you need to identify slow-moving inventory. An inventory management system like Webship Online quickly generates a report on slow-moving inventory. Once you’ve identified it, you should eliminate this inventory. You can do this by running targeted marketing campaigns.
7. Track All Costs
Inventory management is more than just managing the products you sell. To build a successful webshop, you need to track all costs. Take into account costs like storage (warehouse), shipping boxes, packing materials, and shipping labels.
Based on these costs, you can determine your profit margin. An important exercise every entrepreneur should perform!
Professional Inventory Management
Want to learn more about inventory management and fulfillment? Contact Webship at hallo@webship.be, and together, we’ll explore how to manage your inventory! Want an immediate indication of the all-in fulfillment price? Check out our online cost calculator.
