3 Ways To Improve Inventory Management For Ecommerce

September 25, 2014
2 min read
3 Ways To Improve Inventory Management For Ecommerce

In this article

The following is a guest post by Ruoshan Tao from TradeGecko, a cloud-based inventory software firm. Ruoshan specializes in helping businesses grow in emerging markets; particularly in China, Southeast Asia, and sub-Saharan Africa. She's also a huge fan of kittens.

Inventory management might seem boring, but it can make or break businesses.

The fundamental principles that define good inventory management are deceptively simple:

  1. Have enough stock to satisfy demand,
  2. But not so much that you’re tying up too much capital in the process.

However, many businesses fail to integrate their inventory management into their processes. This has serious negative repercussions for long-term growth, and here’s why.

Poor inventory management can rob you of sales, ruin your customers' experience and tarnish your brand.

Think of an online shopper who proceeds all the way to checkout, only to be told that the product they want is no longer in stock. Or even worse, the shopper who places her order and receives an email several days later that the item isn’t available.

Not only do stockouts affect the sale that would have taken place, they also damage your brand and reputation - which is what cost you customers in the long run, dearly.

How to think about stock management:

Most ecommerce retailers know that they should closely monitor and refine their inventory management techniques, but what are some specific inventory-related issues that businesses should look out for and work on?

1. Ensure stock information consistency across all channels

  • Consistency across physical locations: Having access to precise stock information across various warehouses and consignment locations is critical for you to be able to fulfill orders in a timely fashion. Depending on your stock carrying method, your inventory may be spread out across multiple locations.
  • Consistency across sales platforms: For ecommerce sellers that operate on more than one platform (Shopify, Amazon, Magento, etc), it’s important that you keep track of stock across all sales channels. Consolidate this information so that you don't accidentally sell the same product to more than one customer.

2. Periodically review your inventory carrying costs

If you neglect to periodically review your costs, you'll miss out on opportunities to boost profits. Here are just some of the examples of inventory management techniques that could work well for your business:

  • Bulk shipping
  • ABC Analysis
  • Cross-docking
  • Backordering
  • Just-in-time
  • Consignment
  • Dropshipping

Different techniques carry with them corresponding risks, inventory holding costs, and potential profits. It’s up to you, the business owner, to decide which option works best for you.

Remember, a process that works for servicing 100 customers might not scale to one that works for 10,000 customers! Find solutions that work for your business model and be sure to include future plans to scale up your operations if necessary.

3. Make demand forecasts, and plan your stock accordingly

One of the biggest problems facing ecommerce retailers is the lack of available data to make solid business decisions. A frequent mistake that many businesses make is to make purchasing decisions purely based on sales information.

Although using sales information is a good starting point, a comprehensive strategy will:

  • Incorporate stock data
  • Calculate safety stock levels
  • Figuring out reorder points
  • Prepare for and prevent stockouts

Ecommerce retailers operate in an incredibly competitive landscape, and effective inventory management can often make or break a business. It’s important that you make sure that your inventory works for you and not against you.


ReferralCandy is a customer acquisition tool used by hundreds of ecommerce retailers and business owners around the world.

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