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Key Takeaways

Inventory Party Tricks: Every ecommerce brand deals with inventory management, which varies widely in complexity. It's a critical, though often chaotic, part of running an ecomm business.

Unified Toolbox Theory: The methods of managing inventory range from basic Excel sheets to sophisticated software, indicating there's no one-size-fits-all solution but a necessity for customization.

Secret Sauce Unveiled: Improving inventory management is key to unlocking sustained success for ecommerce brands, with 15 tips offered to streamline processes and boost efficiency.

Sky's the Limit: Adopting these game-changing tips can significantly enhance the performance of your ecommerce venture, propelling it toward greater heights.

Every ecommerce brand has a complex system that handles the comings and goings of all their precious products, taking note of what flies out the door and what stagnates on the shelf.

This system we all know as inventory management varies greatly from brand to brand—everything from the simple Excel sheet to the enterprise behemoths.

But, regardless of your exact system, if you’ve ever found yourself juggling inventory chaos, you’re not alone. Learning how to improve inventory management can unlock the secret of sustained success for ecomm brands.

So, I put together 15 game-changing tips to streamline your inventory challenges, boost efficiency, and send your ecommerce venture to ever greater heights. Tailored for the modern online retailer, this list will be your tool to conquer inventory management difficulties.

Say goodbye to inventory stockpile stress and say hello to an effortlessly optimized inventory system!

Why is Inventory Management So Important?

You already know what inventory is, but do you know why you should be learning how to improve inventory management?

Well, for one, your inventory is your everything. This strategic organization of all your stocked goods, encompassing the oversight and control of raw materials, work-in-progress items, and finished products.

And, errors can have big effects on your customers. 34% of brands have shipped orders late after selling a product that was out of stock. That's not great for the customer, which isn't great for you.

At its core, it involves balancing supply and demand, ensuring that the right products are available in the right quantities at the right time. 

This complex discipline involves a systematic approach to tracking inventory levels, forecasting demand, replenishing stock, and optimizing storage to minimize costs while maximizing efficiency.

Effective inventory management is the linchpin of operational success. And, operational success means money (lots of it).

For better or worse, it influences everything from customer satisfaction to financial health within a business, making it a cornerstone of sustainable growth and profitability. So, yeah, it’s very important.

15 Tips For How To Improve Inventory Management For Ecomm Success

Since we now know why we care so much about getting inventory management right, let’s move right on into those strategies that will help you do that. 

1. Use the best inventory software

The right inventory management software will operate as a nerve center, simplifying operations, enhancing accuracy, and providing real-time inventory insights crucial for informed decision-making.

These tools do a lot for your brand, including:

  • Tracking inventory levels across multiple channels efficiently
  • Automating your replenishment processes
  • Forecasting customer demand with precision

From inventory tracking to order fulfillment, the right software features will turn your inventory management process into a thing of beauty (instead of an unwieldy beast).

Be vigilant in your quest for great inventory software.

Choosing the wrong fit for your scaling brand will hold you back in the long run. The best choice is one that will scale with you, easily handling the increasing complexity of your incredible product line.

With a powerful tool in place, you can automate many processes that were previously time-consuming and manual, maintain optimal stock levels, minimize human errors, and foster scalability in the competitive world of ecommerce.

2. Use a centralized inventory system

centralized inventory management system

Ecommerce brands like diversifying their chances at a sale. Multichannel and omnichannel selling enables them to reach audiences not really available to their owned storefront.

Yet, this diversification requires a simple unified inventory tracking system.

Using a centralized inventory management system is a game-changer for your brand as you operate across multiple platforms like Amazon, eBay, Walmart, and your own store.

This robust system is the ultimate unifier, harmonizing your inventory data across all channels with unparalleled efficiency and giving full visibility into your supply chain.

Tracking stock levels in real-time becomes the guard against overselling pitfalls and ensures a harmonious balance of consistent stock levels.

This transformative approach prevents logistical nightmares and amplifies inventory control precision, allowing your business to optimize resources, promptly meet customer demands, and maintain a competitive edge.

3. Invest in accurate demand forecasting

We all want to see into the future. We can’t, not really.

But, we can use magical data (i.e. customer order info) to help us forecast the products we should stock up on and those we should slow down with.

Accurate demand forecasting serves as a compass for brands wanting to avoid out-of-stock and overstock situations.

By utilizing historical sales data, deciphering market trends, and dissecting seasonal nuances, you can predict future demand with some level of precision.

Really powerful demand forecasting systems incorporate external variables like economic shifts and industry trends to come away with an even more accurate outlook. 

This comprehensive approach transcends mere prediction; it becomes a strategic cornerstone.

Going back to tip number one, the best inventory management software will actually help you with demand planning so you can align your stock levels to your customer needs.

Done right, your ecommerce brand will be ready to meet demand spikes and navigate market fluctuations easily, paving the way for enhanced customer satisfaction and optimized operations.

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4. Keep some safety stock

A safety stock strategy is key for great ecommerce inventory management.

Without veering into overstocking, you protect yourself from sudden surges in demand or disruptions in the supply chain.

Building the idea of safety stock into your reorder point logic will ensure you never go to zero, yet still don’t end up tying up too much cost into inventory.

It’s a calculated approach that ensures readiness to weather uncertainties while optimizing inventory levels. 

By using safety stock, you steer clear of shortages, keeping your operations smooth and your finances in check. It's a smart strategy to buffer against the unpredictable, ensuring you're always ready but not over-invested.

5. Do regular audits

regularly audit your stock with cycle counting

Taking stock of your stock is essential to good inventory management. Enter regular inventory audits.

By conducting periodic inventory counts, you can reveal discrepancies that would have later proved troublesome. The frequency of your cycle counts—monthly, quarterly, annually—depends on your company and the size of your catalog.

While you may have to shut down warehouse operations for a day, the benefits of this practice will far outweigh the temporary stoppage of order fulfillment.

That one day will help mitigate the risks of inventory inaccuracies and uphold the integrity of your operational data. 

Plus, it’ll allow you to more accurately track important metrics like inventory turnover.

6. First-In-First-Out (FIFO)

Though it may sound like the misspelled name of some poor pup, FIFO is actually a valuable inventory strategy, helping you avoid holding on to old or expired inventory.

This inventory valuation approach prioritizes the sale of older stock ahead of newer merchandise, hence the name. The first stock in should be the first stock out the door after a sale.

Not only does this help keep expired goods from hanging out on your shelves, it also maintains the value of purchased products as inflation affects more recently purchased goods.

This requires that your warehouse management strategies mimic your inventory management techniques.

FIFO optimizes inventory turnover and safeguards against financial losses due to wasted or outdated stock. Further, for brands with perishable products, it ensures that your products stay fresh, thus enhancing customer satisfaction and maximizing profitability.

7. Go the dropshipping route

Some small businesses may prefer to skip the whole inventory management aspect of running an ecommerce brand. For that, dropshipping exists.

By adopting an ecommerce dropshipping model for select products (while, of course, using the best dropshipping software), your brand can bypass the need to stock and manage inventory altogether.

Instead, your products can easily move from supplier to customer, reducing warehousing hassles and inventory holding costs. Plus, when your money isn’t tied up in inventory, your cash flow improves mightily.

While it isn’t for every ecommerce brand, dropshipping allows you to expand your product offering without the constraints of physical inventory. With this more agile approach to meeting customer demands, you can start focusing your resources on other core business processes.

It could just be the key to unlocking a more efficient, cost-effective, and versatile inventory management strategy.

8. Build better supplier relationships

create better supplier relationship to get benefits in ordering

Good relationships are required for any successful business. You can’t pay the bills with grudges, after all.

Who better to develop a great rapport with than your suppliers? Without them, you’d have nothing to merchandise, sell, and ship. That would be super sad.

Beyond the surface level “getting along” with your suppliers, building a stronger bond can pay off in the form of more favorable terms, expedited delivery lead times, and priority access during shortages.

This symbiotic partnership not only ensures smoother purchase orders but also secures reliability in the supply chain. You should also look into a backup supplier for critical items to mitigate risks and fortify against potential disruptions.

Leveraging innovative supplier relationship management tools can empower your brand to streamline communication, track performance, and foster collaborative partnerships for sustained operational excellence.

Nurturing these alliances will help develop agility, resilience, and optimal inventory control.

9. Analyze and optimize your lovely data

Without great data, how can any brand improve their processes?

It’s through good inventory and sales data analysis that ecommerce brands can continually improve and optimize the products they keep on hand.

Consistently scrutinizing inventory turnover rates, holding costs, and occurrences of stockouts yields invaluable insights into operational efficiency. 

Armed with this data, your business can pivot strategies, fine-tuning stock levels and allocation to align with market demands.

This agile approach ensures your products are available when customers want them. 

Embracing this iterative process of analysis and adjustments means your business can achieve an equilibrium—balancing stock levels and costs to meet customer needs while optimizing resources for sustained profitability and competitive advantage.

10. Clear old stock with clearance sales

sell off old stock with clearance sales

Who doesn’t love a good sale?

For shoppers, it’s a chance to finally buy that thing they’ve been putting off because of the cost. For brands, it’s a surefire way to sell off overstock and slow-moving products while boosting cash flow.

Not only do clearance sales swiftly move stagnant inventory, freeing up precious storage space, but these sales create room for newer, in-demand items and prevent the tying up of capital in old stock. 

This approach alleviates storage constraints and bolsters financial liquidity, paving the way for agility and resilience in adapting to market dynamics.

11. Set reorder points for stock stability

By defining precise stock thresholds for reordering products, your business can secure a safety net against stockouts for its best-selling items.

Adding reorder point logic to your inventory management process ensures you never run out of products in high customer demand, keeping them and your finances happy. 

By combining data-driven forecasting insights with market trends, you can proactively replenish inventory at optimal levels, sidestepping the perils of lost sales due to product unavailability.

This safeguards against stockouts and streamlines operations, allowing your brand to thrive throughout fluctuating demand.

12. Batch tracking and RFID

use batch tracking and rfid technology to get real-time insights on inventory

Using batch tracking, with the help of barcodes and RFID, boosts your inventory tracking abilities, especially for items that might expire or need a recall.

It's all about keeping a close eye on each batch of products throughout their lifecycle, using unique codes. With a scanner, you can quickly get detailed insights into where each product is, in real-time.

This not only meets regulatory standards but also protects your brand's reputation and keeps your customers safe.

Plus, by integrating barcode and RFID technology, you can act fast on any recall or expiry issue, making your inventory management sharper, more reliable, and always up-to-date.

13. Diversify your suppliers

As we’ve discussed, it’s great to have a go-to supplier with whom you have a strong relationship.

But, you have to think about number one (that’s you). Overreliance on a single supplier for any product can come with inherent risks.

By utilizing multiple suppliers, your business can fortify itself against the domino effect of supplier-side issues that could lead to detrimental stockouts.

This diversified approach to supply chain management mitigates vulnerability to disruptions and builds in flexibility and negotiation leverage.

Balancing supplier partnerships spreads risk, ensuring continuity in the supply chain and safeguards against potential hiccups that can otherwise disrupt operations.

14. Train up your staff

Your people are the heart of your operation, so you need to make sure you train them to do their best work.

Human error is a reality in warehousing, but you can head that off at the pass with the right procedures and training. Without it, mistakes in ordering, receiving, or cycle counts can be costly.

From picking and packing methods and lean processes to inventory management app skills and spreadsheet know-how, doing the job right saves everyone time and your brand money.

Empowered with the right skills, your staff can uphold accuracy, minimize discrepancies, and adhere to standardized procedures. Continuous training will help you avoid operational risks and foster a culture of efficiency and excellence for streamlined inventory operations.

15. Consider Just-In-Time (JIT) inventory

Having developed a more sophisticated inventory management system means that your brand has the data and agility to use strategies that are adaptable and forward-thinking.

One such strategy is just-in-time inventory.

Just-in-time (JIT) inventory strategy revolves around ordering inventory precisely when needed for sales, slashing holding costs by minimizing excess stock.

However, the success of JIT hinges on precise demand forecasting, steadfast supplier relationships, and integrated technologies (such as your ERP).

By using this methodology, your brand can reduce inventory costs, boost warehouse efficiency, improve cash flow, and enhance customer satisfaction.

Yet, it doesn’t come without its challenges.

It requires a reliance on on-time delivery from suppliers, it leaves you somewhat vulnerable to supply chain or demand disruption, it takes great coordination between you, your teams, and your suppliers, and it takes the right technology to do right.

Integrating JIT demands foresight and precision, but it rewards your business with heightened efficiency and agility in meeting customer demands while optimizing inventory investment.

Inventory Management Case Study: Walmart 

walmart website screenshot
Walmart is one of the best-known online and brick-and-mortar stores in North America.

Walmart is a global powerhouse in the retail sphere, reigning as the world's largest retailer and second-largest company by a staggering margin.

Operating across all 50 US states and spanning numerous international territories, Walmart's colossal footprint is underlined by its global presence spanning continents from North America to Asia. 

Its operations encompass three key segments: Walmart Stores, comprising discount stores, Supercenters, and Neighborhood Markets; Sam's Club, offering warehouse membership clubs; and McLane Company, Inc., a critical arm providing distribution services. 

With an expansive network comprising over 8,416 retail units under 53 banners, Walmart boasts an unparalleled reach, serving 200 million customers weekly.

This is all to say that if anyone knows how to do effective inventory management, it’s them.

Inventory management improvements at Walmart

Over the years, Walmart has spearheaded significant strides in inventory management, leveraging tailored strategies and cutting-edge technology to revolutionize its operational efficiency.

Cutting edge tech

Investing heavily in IT and comms, the retail giant pioneered innovative approaches, exemplified by establishing a proprietary satellite communication system in 1983. 

This system, a precursor of real-time data and seamless communication, granted Walmart unprecedented insights into sales and inventory across its vast network.

It set the stage for agile decision-making and optimized inventory control.

Tailored delivery plans

The company's commitment to precision extended to the very foundation of its stores, where tailored delivery plans were crafted to address individual store needs.

By empowering stores to manage their stocks and implementing strategic measures like reducing pack sizes and timely markdowns, Walmart successfully curtailed unproductive inventory.

This move not only streamlined store-level management but also bolstered the optimization of stock levels across the board. 

Technical collaboration FTW

Collaborations with industry leaders like P&G led to the establishment of automated reordering systems, revolutionizing inventory maintenance while leveraging technological innovations like the 'Magic Wand'—a handheld barcode scanner linked to in-store terminals—empowering employees to track inventory swiftly and accurately.

Technology integration at every operational facet was evident. Walmart utilized Point-of-Sales (POS) systems for efficient order management and store replenishment.

Centralized inventory data and RFID

The company's adoption of a centralized inventory data system allowed for real-time monitoring of stock levels and locations, ensuring agility in responding to market demands.

Embracing barcoding and RFID technology further optimized inventory control, driving efficiencies and accuracy in tracking and managing stock. 

Walmart's commitment to technological prowess culminated in creating the retail link system, a $4 billion investment in 1991.

This system, utilized by over 10,000 suppliers, streamlined sales monitoring and inventory replenishment, setting new benchmarks in the industry.

Subsequent upgrades underscored Walmart's unwavering dedication to innovation and operational resilience. These include integrating internet-enabled technologies in 2001 and owning the most extensive private-sector computer system equipped with advanced satellite communication.

Comprehensive contingency plans fortified the company against system breakdowns or interruptions, showcasing Walmart's commitment to ensuring seamless operations despite challenges.

Better Inventory Management is Possible

Efficient inventory management builds agility, precision, and profitability for ecommerce and retail brands. Do it right and you’ll be rewarded.

Improving the way you manage inventory comes down to the right processes, the best technologies, and good data.

Many of the tactics flow out from finding inventory management software that simplifies the processes you build out with your team and integrates with your existing systems.

Knowing how to capture, analyze, and use inventory data and sales data to forecast and order stock more efficiently is a skill that will continue to pay off for you, your team, and your brand in the long term.

Aspiring ecommerce entrepreneurs can harness these strategies to fortify their inventory management systems. 

You can stay ahead of the curve with the latest insights and strategies for ecommerce success by subscribing to The Ecomm Manager newsletter and unlocking a treasure trove of invaluable resources and industry expertise.

Inventory Management Improvement FAQs

While we try to cover everything in a post, sometimes questions linger. Here are a few Qs with their requisite As for you.

Why is a centralized inventory system important for ecommerce businesses?

A centralized inventory system harmonizes inventory data across multiple sales channels, offering real-time tracking of stock levels. This prevents overselling and ensures consistent stock levels across platforms like Amazon, eBay, and your own store, optimizing resources and maintaining a competitive edge.

How can choosing the right inventory management software improve ecommerce operations?

The right inventory management software acts as a central hub for tracking inventory levels across multiple channels, automating replenishment processes, and providing real-time insights for decision-making. It simplifies operations, enhances accuracy, and supports scalability in ecommerce by transforming complex inventory landscapes into streamlined processes.

How do you handle overstock and understock situations?

To manage overstock, consider clearance sales or promotions to move excess inventory quickly. For understock situations, enhance your forecasting methods and maintain safety stock to prevent stockouts. Regularly reviewing inventory levels and demand predictions can help balance stock more effectively.

Carmen Broder
By Carmen Broder

Carmen has worked with online sellers to take their digital storefronts to the next level since 2015. She's helped sell everything from books, shoes, events, software, and beauty products online. She has a special interest in digital marketing and how software-as-a-service (SaaS) tools fit into the bigger ecommerce picture. You can connect with her on LinkedIn.