Why Is Inventory Control Critical for an E-Commerce Business?

All manufacturing businesses have to manage inventory to ensure smooth operations.
online-shopping

All manufacturing businesses have to manage inventory to ensure smooth operations. From inventory velocity to forecasting, the company needs to plan everything out to reach maximum profitability.

When it comes to e-commerce businesses, inventory management is a whole different ballgame. Since online platforms don’t have traditional Point of Sale (POS), they need to integrate their online system with their inventory management system. Some e-commerce businesses don’t have a brick-and-mortar presence at all, which makes inventory control especially important. 

If you’re a budding e-commerce business that’s new to the game, here’s everything you need to know about inventory control and why it’s important for your business.

What is Inventory Control?

Inventory control is all about maintaining an appropriate stock level to meet customer demand and increase the company’s profits. It’s famously said that a stock-out causes a walkout, and it’s based on the fact that customers tend to leave if they don’t get served. This means you lose out on profits that your company could’ve earned if they had inventory. 

Another major goal of inventory control is to keep the cost of inventory to a minimum. It takes money for a business to manufacture and then store inventory. These are expenses that cut into the company’s profits.

Methods of Inventory Control in E-Commerce Business

E-commerce businesses have several inventory control methods that allow a proper flow of inventory and its appropriate velocity. Here are the five major methods that these businesses use.

1. Safety Stock

Safety stock (also called buffer stock) is additional inventory kept by the company to avoid stock-outs. This inventory usually comes in handy during peak demand seasons or when the business sees unusual demand. It helps the company retain customers and increase profits.

2. Kitting Technique

E-commerce businesses often bundle several different products together and sell them as one unit. This allows more inventory to move and especially the products and SKUs that were otherwise sluggish.

This method of inventory control is especially popular for businesses that have a diverse range of products and a handful of star performers.

3. Balance Inventory

Balancing inventory requires an analysis of the cost and benefits of holding stock. To do this, you have to consider the cost of storage, spoilage, decreased sales, losing customers, and other important factors that go into this decision. Once the situation is clear, you can strike the right balance with your inventory and never have excess stock or stock-outs.

4. Forecasting Based on Past Trends

Past trends are the easiest way to predict the future. Analyzing past data allows seasonality and patterns to emerge amongst chaotic data. Using these trends, e-commerce companies can manage their stock and plan well ahead of time.

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5. Smart Storage

E-commerce platforms are increasingly using smart storage to manage their inventory. This method allows integration of all sales channels to know exactly how much inventory they have on hand and where they can find it. As a result, they can meet all orders and minimize inventory costs.

Why is Inventory Control Important for an E-Commerce Business?

Without inventory control, an e-commerce business is likely to face unnecessary troubles and challenges in the market. Here are all the reasons why they should work on managing their inventory well.

Avoiding Excess Inventory

Excess inventory means higher costs. With a higher cost, the company can suffer from lower profit margins as too much of the company’s money will be tied up in inventory. Amongst all current assets, inventory is the most difficult to liquidate as well.

Stock-Out Troubles

Getting out of stock is the quickest way to lose customers or alienate them. If a customer is on your platform for a particular product and they find it’s out of stock, you’ll immediately lose them. Managing inventory properly can help you avoid this problem.

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Integrated Supply Chain

With proper inventory management techniques in place, you can align your entire supply chain to meet demands regularly. The whole system will work like a well-oiled machine and all the players in the supply chain will know how much to deliver and when to deliver.

More Data for Better Forecasting

Inventory control measures allow e-commerce businesses to attain more accurate data that can be helpful for forecasting. The more data you get, the more likely it is you’ll be to make better decisions in the future.

 

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Improved Marketing Tactics

Lastly, inventory control allows you to devise better strategies for your businesses. If you understand that a particular product is in high demand, you’ll manage your inventory accordingly. As such, you’ll also design your marketing strategy to promote the sale of these already popular products. Additionally, kitting techniques can also come into play with good inventory control.

Inventory control is essential for smooth operations and to ensure rapid and sustainable business growth. Its far-reaching benefits positively impact all facets of the business, which consequently results in higher profitability. It’s also beneficial for developing business strategies that work well on all levels.

Get AltheaSuite’s Inventory Management System for Your Business

Are you looking for the best inventory management software to ensure smooth operations for your business? AltheaSuite’s all encompassing system has got you covered! Our qualified team is adept at developing inventory system software for furniture retailers, distribution, and many other industries.

You can also use our batch tracking inventory management system for product traceability and contingency planning. Our top-of-the-line cloud-based inventory management system is easy to configure and remains accessible through a single application. You can also integrate your other software with AltheaSuite to maximize your capabilities.

Visit our website to learn more about our service, or get in touch with us today for more information. You can also get a free trial or book a demo of our software, and we’ll customize it for you!

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