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How E-commerce Business Can Manage the Inventory to Maximize the Profits?

The paradigm of sale and purchase has changed dramatically, the old ways of selling out from the brick and mortar shop is a thing of the past. Now-a-days, the businesses have resorted to online platform to sell their goods and services. The e-Commerce platform has created a lot of avenues for the business to expand exponentially, but the e-Commerce platform is a double-edged sword. As a business, you must make sure that inventory management is paid the maximum heed. Most of the customers are annoyed whenever they have to purchase their goods online when they find the products out-of-stock. In most probabilities, the consumer may not be interested anymore to return to the website unless proper software technology is installed. A right software which would help them send notifications would definitely help track the churning customers and convert them into prospective sale.

So, as an e-Commerce business, you can incorporate the 12 inventory management techniques to cut down on the losses and make maximum from the business.

Delegates Responsibility to a Responsible Person

The e-Commerce business involves a lot of purchase and sale of goods. It is of utmost importance to make sure that every inventories are recorded with utmost care and dedication. Performing adjustments, managing returns, validating the received merchandize would involve a lot of hassle, but with proper software management system, the hassles of inventory management can be handled effectively.

Re-Order Level

e-Commerce business demands a lot of responsibility. Everyday millions of customers are hooked up to your website. They may analyze the products, opt for the purchase and thereby, you should have the right software system which would help setup a re-order level. When the stock is on the verge of getting exhausted, the staffs who have been delegated with the responsibility should look into this matter and make the stocks available all over again. The proper mechanism about the re-ordering would always make stuffs available on your e-commerce website and prevent customer churning at any point of time.

Inventory Categorization

Proper management of your e-Commerce website can help you manage your inventories effectively. Most of the experts have recommended that an effective layout plan should be adopted to organize the business. In the effective layout plan, you can adopt the model of high value item with a low frequency of sales, low value item with high frequency of sales and moderate item with moderate frequency of sales. The bottom-line of this practice is to make sure that customers are segregated based on their choices and they get a dynamic outlook when they opt for the purchase.

Prioritize your Products

When you have availed the products on your e-Commerce website for purchase, in that case, you must develop a grand strategy. The items may have different response, for those items which have got the maximum response, you must set stipulated forecasting, reviewing stock positing and re-ordering levels. It is important that those products are catered at first hand. After analyzing those products, you have to come down the ladder based on the demand and purchase of the items and subsequently, you will have to setup a different reordering level and stock management for such items. When you have planned the dynamics effectively, you can definitely make your e-Commerce website a money making proposition.

Adopt FIFO Method

When you are selling products online, you will have to adopt a different set of standards. Most of the products might enter the stock earlier and they should be dispatched at the earliest. If you are selling the perishable products, you have to track on the dates and manufacturer initials. The First-in-First-Out method can be adopted for even non-perishable items as well. You would like to get the goods dispatched and sold off immediately, with a proper stock management system, you can give a promising edge to your business.

Carrying Cost

You must make sure that cost evaluation is streamlined to perfection. When you are running an e-commerce business, you have to manage the storage, insurance, extra equipment cost and other personnel. These overheads may dramatically inflate the price of the product and reduce your profit margin. In order to make sure that such things are kept under check, you must evaluate the stock and accordingly you can order the stocks. If you order excessive stocks, you will have to bear the cost. Make sure that the stock ordering is carefully handled.

Drop Shipping

Drop shipping is an unprecedented way where there is direct delivery of the goods. You don’t have to bother about carrying the inventories from one location to another, rather, the manufacturer directly delivers the goods to the retailer. There is a greater possibility of earning profits by maximizing the difference between the wholesale price and the retail price. The possibility of sales increases when the manufacturer directly delivers to the retail stores. Through these things, the disadvantage of managing the inventory and storage can be minimized, thereby, it would make the goods competitive in the market.

Excess Stock Action Plan

When you run an e-Commerce business, there might be instances when certain stocks may fail to impress the customers. Such stocks may remain idle in the inventory system. It is important that as an e-Commerce business, you find out the root cause which has driven such a trend. You should then deviate the focus towards employing different mechanism to make sure that such stocks are easily sold with different attractive offers. It is difficult to sell the old and obsolete items, but with effective planning you can easily get rid of the unwanted stocks.

Inventory Audit

Auditing the inventory is of paramount importance. You should deploy the best inventory management software system. When you have the right software management system, you can streamline the following dynamics:

Physical Inventory

It is a herculean challenge but it is very effective. For tax filing and computation, the physical inventory system would effectively manage the discrepancies and make valuation of the stock effective.

Spot Checking

Spot checking is also an effective tool wherein you can pick any product and comparing it with different periods. The basic advantage is that you don’t have to maintain a stipulated standards, rather, you can easily pick the product as per your choice and find out about the nature and pattern of the purchase and dispatch of the period in the preceding years.

Cycle Counting

E-Commerce business may have a different cycle and you can easily maintain the reconciliation for every day, month and week. This kind of evaluation would dramatically drive away the negligence and make the inventory management effective.


It is very important to forecast the demand and accordingly the purchase quantity has to be ordered. Few basics would definitely help you jumpstart your venture and make it exciting.

  • Previous year’s sales during the same week/month
  • Current year’s weekly/monthly/quarterly growth rate
  • Confirmed sales from contracts and subscriptions
  • Seasonality and holidays
  • Planned promotions
  • Current trends in the market

Contingency Planning

It is important that you can anticipate the demand and accordingly you must plan the action. You must make sure that these specifics are handled effectively to make the sale of goods effective on your e-Commerce platform.  Take a look at the contingency situations which might arise and you should have the right plan to deal with them effectively.

  • Unexpected sales spike and stock remain oversold.
  • Cash flow is negative to help maintain the purchase of goods.
  • A product which has the minimum demand has taken a lot of space in your warehouse.
  • You might have relied on only one manufacturer, but they are not able to maintain the supply at par with the demand.
  • The manufacturer has discounted the product without giving a prior notice.
  • You have found out that the stock valuation is not updated and the demand cannot be satiated.

Inventory Management Software

As an e-commerce business, you have to be upbeat and upfront. This pursuit can be achieved effectively when you have the right software management system. The right software management system would monitor the stocks, re-ordering levels, notification handling for aboundone checkouts. These aspects would help the business to thrive and always adhere to the needs of the customers effectively.

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