What is eCommerce Inventory Management And Why Businesses Need It 


Ecommerce inventory management is a crucial system for businesses to streamline warehousing operations and make better decisions on their stock. Without an efficient inventory management process, companies will find themselves at risk of failing to meet customer demand and losing revenue. Once you can fully manage your inventory, you can identify bottlenecks such as overstocking or understocking to optimize the process. This article will walk you through the basic knowledge of eCommerce inventory management and why you should care about it.

What is eCommerce inventory management? 

What is eCommerce inventory management?

Ecommerce inventory management is the organized approach to tracking the goods you have in stock, including activities such as sourcing, ordering, restocking, storing, shipping, and inventory forecasting. It gives you detailed information about the products, such as location, amount, pricing, sales volume, lead time, etc. 

The inventory management process is the backbone of your business, acting as the middleman between your suppliers and customers. A robust process and strategy can help you leverage efficiency and reduce operational costs. As you grow with a higher volume of units sold, your inventory management system must scale to handle a larger number of goods. 

If you own a Magento business, check this article to learn more about how to manage the inventory system perfectly. 

Why is it important for businesses? 

Disrupted inventory management can harm your business if customers aren’t getting the products in time or you can’t fulfill enough stock, you’ll lose customers and miss sales opportunities. If you get the right inventory management strategy, you can tackle the problems of lost revenue and dead stock, while gaining more insights into buying behaviors and your stock flow to operate your online stores better. 

Here are 6 benefits that proper inventory management brings to your eCommerce businesses:

1. Greater efficiency and productivity 

Greater efficiency and productivity

First of all, effective inventory control results in better storage management. You can easily locate, collect, pack, and ship your products to buyers from your warehouse. This is especially helpful if you have multiple stores and need to keep records of stock flow across your stores. The inventory management systems can provide you visibility into all of your warehouses and stores, providing you with real-time alerts so you can take timely actions. 

In addition, with a data-oriented system, you can analyze trends and measure the results of your business efforts. By studying inventory insights for a specific duration, you can get insights into your overall business growth and find ways to improve your overall profit margins.

2. Improve customer experience 

Improve customer experience

For eCommerce stores, a reliable inventory management system helps create a positive shopping experience for your customers. The system can automatically record the quantities across your sales channels and update the stock level accordingly. Therefore, it gives accurate inventory counts when customers visit your website, ensuring customers can receive the right products. 

Furthermore, once you know exactly how many items are left and their shipping status, you can fulfill orders faster and become more aligned with customers’ expectations about the availability of the product. This is essential to build customer trust and increase their loyalty.

3. Provide insights into customer behaviors 

Provide insights into customer behaviors

By tracking the number of products successfully shipped to customers, you can obtain valuable insights into their preferences, for example: 

  • Is there a peak month of purchase for a type of item? 
  • Which is the customer segment that buys your products most frequently? 
  • How does a promotional campaign affect your sales performance and customer satisfaction? 

Knowing your customers’ preferences will help you further optimize your inventory and cut down lead time. For example, you can identify and purchase more bestselling items and fewer slow-selling items. Thus, you can streamline performance at your point of sale and set up proper marketing strategies.

4. Optimize storage costs 

Optimize storage costs

If you keep excess stock in your warehouse, it’ll cost you a lot of inventory carrying costs. The fees depend on the number of units and the physical space they take up in a fulfillment center. 

A good inventory management system will help you optimize the storage fees by calculating the right amount of inventory you should keep based on customer demand. You’ll know which items to reorder and at what time to minimize the risk of overbuying. The money can be saved for other important aspects like branded shipping materials or absorbing expedited shipping fees.

5. Avoid running out of stock 

Avoid running out of stock

Since the inventory management system can let you know how many stocks should be kept at a given time, you can handle your warehouse operation and sales performance more effectively. 

Your stock will always be at the right level, never dips too low or rises too high. Hence, you can ensure never run out of stock which leads to missed sales and customer complaints. On the flip side, with the right stock amount, you can minimize the likelihood of a “dead stock” situation, where products become outdated and hard to sell due to decreased demand.

6. Forecast for the future and plan for the unexpected 

Forecast for the future and plan for the unexpected

Proper inventory management can assist you with inventory projection. It tracks your stock storage levels and output flow, and analyzes the data to suggest a future estimate for product demand. If you monitor your inventory trends on a monthly, quarterly, or unit-to-unit basis, you can align inventory with sales better. 

In addition, inventory management can help you prepare for the unexpected supply chain problems or deficits, for example: 

  • Delivery delay of inventory from vendors 
  • Products unexpected sold out 
  • Run out of storage space 
  • Cash flow issues 

You can analyze the inventory over time to create a contingency plan for problems if they happen. Good preparation will help you alleviate the impact when you encounter adverse circumstances and bolster your business.

To wrap up 

In short, an inventory management system boosts efficiency in all aspects for eCommerce companies. Great inventory with cutting-edge technology and real-time management will save you time, and cost, and enhance customer experience. It will guide you to make better decisions and grow your business.


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