Inventory management for E-Commerce Business

 

Ecommerce inventory management is the calculation of the quantity, location, pricing, and mix of company's goods available.

This may be goods hosted in  warehouse, supplied via a third-party logistics fulfilment centre (3PL), or housed and purchased through drop shipping in a separate company.

Companies know what goods are overstocked, in stock, understocked, and out of stock by e-commerce inventory management.

Inventory management is closely related to the financials of a corporation. Proper control over inventory gives you a bird's-eye view of the amount of revenue potential from each single pallet in any given large warehouse.

From there, corporations may make more informed decisions about other tactics and change the need for potential storage or warehousing, such as marketing.

Some of the inventory management techniques on e commerce business are:

• ABC Analysis

An ABC analysis is a way of evaluating the most and least desirable of  items, so we have an idea of where our time and money should be invested. The analysis is based on the Pareto Principle (the 80/20 law, AKA), which comes down to this: 20% of the triggers come from 80% of the results.

To work through this important, but potentially confusing, inventory management technique, let's try a step-by - step approach:

• Make a list of all the items, how many of them we have, and the prices.
• To find its potential revenue, multiply each item by the sum in stock
• Put the goods in order from the highest potential revenue to the lowest possible revenue
• To find your total potential revenue, add together the potential revenue for each product.
• Divide the potential revenue of that product by the overall potential revenue for each product and figure out what amount the product adds and your revenue.

An ABC Analysis then divides the entire inventory into three groups based on the overall value of the commodity to the business. The three classifications sometimes end up looking like this:

Monitor System of Inventory: ABC Analysis

Segment A: Items that make up 80% of overall sales and 20% of inventory

Segment B: Items that produce 15 % of total sales and 30% of inventory

Segment C: items that include 50 percent of the stock with 5 percent of your overall revenue

• Setting Par levels

Setting par levels means assigning an item a minimum quantity of stock. If the inventory goes below that level, you know that it is a priority to reorder that object. To ensure the quantities are matched with your current requirement,  par levels should be regularly re-evaluated.

• First in first out(FIFO)

 Concentrate on selling the oldest products in the warehouse first (the ones that arrived first) by using the first in first out (FIFO) strategy. For many businesses, this inventory management strategy is a perfect fit, since it appears to complement the way the products naturally flow. To make sure we are moving the right items, we'll need a well-organized warehouse, but this is a great inventory management system to start with.

Although inventory control strategies such as this are most important for companies manufacturing perishable goods, retail inventory management is also important. Usually want to get the first clothes that hit your warehouse on the sales floor ASAP if we're in the fashion industry: anything that's in fashion right now may not be next month. Products that sit in the warehouse for too long can begin to display wear-and - tear, regardless of the industry. It is therefore less burden on the record-keeping method, as you won't have to care for much older inventory on an ongoing basis.

• Regular Inventory auditing

Whether you check the methods of store inventory control or stock management of a warehouse, there are a few ways in which e-commerce companies approach this enormous task:

1.FULL AUDIT 

This is, as it sounds, a full-on counting of every warehouse component. It's long, it's exhausting, and no more than once or twice a year is generally completed.

2. PARTIAL AUDIT

Cycle counting is also known as this method. A partial audit breaks the job up over the year instead of going in and counting every item you have all at once, so everything is still being tested against your reported numbers. One benefit of using partial audits is that, for the rest of the warehouse, we can use the accuracy of one of your cycle counts to get an indication of the accuracy of numbers.

 

3.SPOT CHECKING

Another way to spread out the inventory count is spot testing. Randomly choose a product at any time with spot checking, and compare the actual count to the numbers in our software.

In the ecommerce sector, a day-to-day management of inventory helps increase business intelligence and visibility. Ecommerce business owners have better ongoing control when they have constant eyes on inventory.