8 Inventory Management Practices to Streamline Your eCommerce Store


Aniruddh Parmar

Senior editor

Parul Saxena

Chief editor

Last updated: April 13, 2021

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It doesn’t matter whether you own a brick and mortar or an eCommerce store, inventory management practices are any company’s backbone. An investment in it will only result in higher ROI as it will help you successfully deliver your products to the customers. 

An ideal inventory management system ensures that there is neither a shortage nor a surplus of stock.

Looking for Inventory Management Software? Check out SoftwareSuggest’s list of the best inventory management software solutions.

Statistics show that nearly 46% of SMEs do not have powerful inventory management systems in place. Either they use manual methods or they are not tracking their inventory at all.

This is something to worry about as having an inventory management system has its own benefits.  And without it, you can lose your profits as well as the growing opportunities.

Businesses that have successfully implemented inventory management software have seen a rise in their work efficiency. The study reveals that 95.4 percent of orders were delivered to the customers on time and 94.6 percent of the time the inventory from the supplier was received as scheduled. It resulted in a tremendous decrease of 7.5 percent in the frequency of out of stock inventory.

Now that you know the benefits of good inventory management practices, let’s discuss some of the strategies to increase your work productivity.

Strategies to Keep Your Inventory Management Practices Under Control

1. ABC Classification

Also known as the ABC analysis, this inventory categorization technique is mostly used for material management. A simple and a better description for this can be “a method that will help you organize your inventory into a hierarchy from the most important to least important items”. This inventory management practice is best suited for companies that manage different stocked items and are not equal in value or order frequency.

How does it work?

Let’s group them into 3 categories and name them as A, B, and C

  • A Items
    Items in A-category are the best selling products. These are the most important products of all as they are responsible for bringing the maximum revenue and higher customer satisfaction rates. These items need to be continuously monitored to ensure that they don’t run out of stock and you don’t lose your customer.  It’s safe to call it high priority items that require frequent reordering
  • B Items
    Less important than “A” and more important than “C” items. These are medium priority items and mostly require monthly reordering.
  • C Items
    These are usually stocked in very fewer quantities and sometimes not at all due to their high carrying charges. They have minimal reordering rates.

2. Just-In-Time Inventory Management (JIT)

This inventory management practice helps you increase efficiency and decrease waste. You stock items only when it’s needed in the production or sales process. This way you save the costs of storing the inventory and your cash flow is not stuck in the inventory.

The success of JIT technique entirely depends on the company’s ability to forecast and predict sales and demand for a particular product in the future, plus the potential to foretell the period of fluctuation.

To make sure everything works fine, you can use inventory management practices to give you real-time information on demand and order information.

3. Hybrid Warehousing

It’s a mixture of your warehouse space and that of third parties such as suppliers. This gives you the super-power to decide the items you want to store close in your neighborhood and the ones that will stay safe with your suppliers.

This warehouse technique is practiced by leading eCommerce like Snapdeal, Flipkart, Homeshop18, Amazon, Jabong, Myntra, etc. For example, small products like stationery items, clothes can be kept in their own warehouse while heavy electronic items such as washing machines or TV can be delivered to customers directly from the supplier location once an order is placed.

4. First-In, First Out

If you are selling perishable goods, then this inventory management practices can be the best choice.

First-In-First-Out requires you to follow one simple mantra,” The items that are already present on the shelf should be shipped first”.

In fact, non-perishable items can also survive for a specific time, then they start depreciating or degrading.

5. Drop-Shipping

Using Drop Shipping, you can sell online without maintaining a storage unit. The suppliers will maintain the inventory of items and ship the item as soon as the purchase order is made the buyer. The suppliers will remain unrevealed and the buyers will feel as if the items are delivered from your eCommerce store.

The success to use drop shopping is to maintain an inventory software as these will enable immediate sharing of information between you and the supplier with regard to orders, invoices, real-time inventory counts, etc.

6. Get a Centralized Inventory Management in Place

If you are selling across multiple geographical locations both online and offline, then a centralized inventory management software is the most preferable option. It can be either an ERP system or POS, which is integrated with your eCommerce platforms enabling you to manage your inventory in real-time.

7. Planning for Contingencies

Inventory management is not an easy task. Several things can go wrong such as running out of stock and having no working capital to purchase items. Or during the seasonal hike, you are having a shortage of warehouse space to store your products. 

Sometimes even a miscalculation can lead to understock or overstock of products. Many other such issues can come up while managing your inventory. Imagine your manufacturer suddenly discontinues the production without any prior notice. How will you deal with your consumers’ demand then? 

That’s why it is crucial to stay prepared during the time of contingency. List out all the possible things that can go wrong. And then, think of steps you will take to solve these problems in case it occurs. 

Remember, this is a matter of how you will deal with the issues when it appears.  

8. Regular Auditing

Regular auditing is important for reconciliation purposes. The most obvious choice is to rely on software. Mobile technology allows your employees to control and track your assets at any time and from any location. It gives you real-time inventory data and accurate information so that you can request stock replenishment when in-store inventory levels are low.

Apart from that, there are many other methods to do so. For instance, 

  • Cycle Counting

You don’t leave the full physical inventory count for the year-end. Instead, you use the cycle counting for auditing the inventory. It could be daily, weekly, or monthly depending upon your products and requirements. You can have different products checked on a rotating schedule.  

  • Spot Checking

Businesses who do inventory checks only at the end of the year, there is a likelihood of them running into problems. That’s why spot-checking is recommended in such conditions. On a random day, you pick a product, count the number, and check if it tallies with your sheet. Such an inventory check is not pre-scheduled. Moreover, spot-checking can be performed when you have a lot of products, throughout the year.

Golden Words of Advice for E-retailers

  • Stay organized

This is an obvious suggestion because for a business to operate successfully it is important to have an insight into the materials available in stock and ways in which it can be found quickly. Place your inventory in a visually organized way so that you can know what is placed where. This method perfectly suits when you are dealing with smaller stock levels.

If you are stocking for the large operation, it is advisable to use technology-enabled solutions. A good option is to implement a barcode system to track the inventory. These systems are now easily available in the market and at affordable prices.

  • Never run out of stock

If customers receive an “out of stock” message, it is a little disappointing for them. If you are providing your customers with any of the products, make sure you never run out of it.

  • Pick a customized inventory software

Because of the increasing competition and business processes becoming complex than before, it has become a necessity to use an excellent inventory management software that perfectly suits your business requirements. For example, when choosing a shopping cart solution, choose a system that allows standard integration with inventory management software, an accounting application, and other important services.

In a Nutshell!

Inventory management is indeed a crucial task and if not done correctly and at the right time, it can blemish your online business. It is necessary to follow a proper guideline to ensure unwrinkled operations, thus making a way for your business success.

Aniruddh is Blogger and Digital Marketing Specialist at SoftwareSuggest. Ready to grab a cup of coffee anytime if you want to talk about tech, cars, businesses or cricket.

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