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Key Takeaways

Streamline Your Stock: Inventory management software is crucial for ecommerce brands to streamline operations, optimize stock levels, and monitor KPIs, significantly enhancing efficiency.

Pick What Fits Best: Ecommerce stores need to carefully assess their needs and growth trajectory before selecting an inventory management tool to ensure it aligns with their business objectives.

Beware of Shiny Objects: An inventory management solution that seems affordable and simple at first glance might have limited features that could hinder the business's growth and scalability.

Inventory management software helps ecommerce brands streamline their operations, optimize stock levels, monitor key performance indicators (KPIs), and much more.

Kinda important stuff, yeah?

Online stores, when choosing such a tool, should carefully analyze their needs and growth trajectory.

An inventory management solution with limited features may appear attractive at first due to its simplicity and affordability. 

However, its advantages could quickly vanish as you grow, whether you’re serving more areas or expanding your catalog.

You should examine all the offerings of inventory management software before considering a specific tool for implementation. This is crucial in finding out if the solution under consideration has all the capabilities you need.

In this article, we’ll look at 25 such capabilities that are deemed must-haves for ecommerce inventory systems.

25 Essential Inventory Management System Requirements

As mentioned earlier, each ecommerce store has different needs and growth strategies that necessitate an inventory management system to compliment them. 

For instance, an online shop selling internationally will look for features that simplify cross-border shipment tracking. 

Similarly, if an established ecommerce brand has multiple warehouses, an inventory management system that provides stock updates in real time across all locations is a must.

If you’re serious about finding the right inventory management software for your online store, you might want to mark the relevant requirements as you go through the list below to ease your process.

1. Real-time inventory tracking

Two of the biggest benefits of real-time inventory tracking include cost reduction and stock management. 

Various geopolitical factors such as inflation and supply chain disruptions, along with evolving customer needs, can cause the cash flow levels to become unpredictable, especially for small and mid-sized businesses (SMBs). 

In these scenarios, managing stock levels as per demand is pivotal for optimizing revenue while keeping customers happy.

It also allows you to implement just-in-time inventory management to keep just enough inventory, but never too much (more on this later).

Real-time inventory tracking can reduce storage costs by minimizing expenses related to overstocking and urgent restocking. 

Additionally, monitoring stock levels to match the present demand is essential for maximizing sales and maintaining a consistent cash flow. 

Carmit Glik, CEO of Ship4wd, an online freight forwarding platform for SMBs, summarizes this perfectly in an interview with Retail Today:

Cash flow is the lifeblood of any business, no matter the industry or company size; but current economic conditions, such as inflation, labor issues, and supply chain disruptions, continue to challenge cash flow, and in turn, retailers’ ability to plan inventory.

 

Unfortunately, small and mid-sized businesses (SMBs) are among the most vulnerable, as they often don’t have large cash reserves and increasingly struggle to secure access to credit amidst the recent banking industry crisis.

 

As companies navigate the high cost of borrowing in an effort to normalize inventory levels, seeking enhanced cash flow solutions through strategic supply chain management can aid in growth.

Photo of CEO Carmi Gilik

Carmit Glik

2. Multichannel integration

multichannel integration infographic

A lot of ecommerce businesses sell their products on various channels—marketplaces, social platforms, wholesale, etc.

For instance, it's not uncommon for companies to have their own online store and also sell their products on ecommerce marketplaces like eBay, Etsy, and Amazon.

Multichannel integration capabilities in inventory management systems make it easier to manage stock levels across all platforms. These systems synchronize inventory in real time, preventing overselling and stockouts.

Complete visibility across these channels streamlines logistics and fulfillment, enabling quicker response times and reducing errors. 

This level of integration is crucial for maintaining accurate stock levels, optimizing order processing, and ultimately, enhancing customer satisfaction.

3.  Order management and fulfillment

Order management and fulfillment encompass everything that happens after a customer completes a purchase until they receive their package. 

Ecommerce teams must handle these operations meticulously, as mistakes can lead to delayed or incorrect deliveries, impacting customer satisfaction.

Integrating order processing systems with your inventory management software ensures that sales orders are efficiently managed from purchase to delivery.

This simplifies order fulfillment by automating tasks like picking, packing, and shipping.

Also, it streamlines the management of returns and exchanges, leading to a faster order processing cycle and improved inventory turnover.

By automating these processes, businesses can reduce errors, speed up deliveries, and enhance the overall customer experience.

4. Warehouse management

Warehouses store inventory until it's picked and shipped to fulfill customer orders.

Warehouse management encompasses all processes related to inventory tracking, order processing, picking, packing, and shipping orders. It ensures products are organized for efficient storage, accurate stock level maintenance, and fast, precise order fulfillment.

Moreover, it also guides teams to move inventory around as needed (called “transfer management”). 

Such functionalities, when integrated within your inventory management solution, can drastically improve productivity and operational efficiency.

5. Supply chain management

Effective supply chain management (SCM) is crucial for tracking inventory movement from your store to customers. It provides complete visibility into orders in transit, allowing teams to be proactive in addressing any issues that may arise.

An ecommerce inventory management solution that helps handle supply chain operations can improve inventory accuracy through real-time tracking and reducing errors in stock levels across locations. 

SCM also enables better demand forecasting by analyzing historical sales data, market trends, and other relevant factors.

Improved forecasting streamlines procurement strategies, leading to significant cost savings. 

By having a robust SCM system seamlessly integrated with your inventory management software, you ensure smoother operations, better customer satisfaction, and more efficient utilization of resources.

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6. Demand forecasting

demand forecasting infographic

Demand forecasting is essential for predicting future product demand based on historical data and market trends. 

An advanced inventory management system should provide robust demand forecasting capabilities to enable data-driven decision-making and optimized inventory control.

By analyzing past sales records and current market trends, the software can precisely forecast customer demand for specific products. 

This demand intelligence aids in planning optimal inventory levels to prevent both stockouts and excess overstock situations.

With precise demand forecasting, brands can make certain they have the right products in the right quantities at the right locations and times. 

7. Just-in-time inventory

Just-in-time (JIT) inventory management is a strategy that minimizes inventory costs by receiving goods only as they are needed for production or sales. 

It reduces excess inventory and waste, ensuring raw materials and finished products are available precisely when required.

Effective JIT implementation for ecommerce businesses requires a robust inventory management solution, strong relationships with reliable suppliers or manufacturers, and accurate demand forecasting capabilities.

Strategically locating distribution centers and adopting lean warehousing practices can further optimize JIT inventory management. 

These tactics ensure products are available when needed without the burden of excess stock, leading to significant cost savings and increased operational efficiency.

8. Product categorization

Proper product labeling and categorization are crucial for efficiently managing a diverse inventory. It ensures quick product retrieval and accurate stock counts. 

Ecommerce categorization considers various parameters such as size, color, configuration, and stock keeping units (SKUs).

A robust inventory management system must support detailed product categorization, allowing businesses to streamline operations and optimize inventory tracking. 

This enables teams to quickly identify high-demand items and understand customer purchase patterns. Further, cycle counting is optimized with ABC inventory analysis to focus on the most important stock over slower moving products.

These insights are pivotal for making data-driven procurement, storage, and fulfillment decisions. Effective product categorization improves operational efficiency, enhances the customer experience by ensuring product availability, and ultimately optimizes revenue.

9. Barcode scanning

barcode scanning infographic

Barcodes, or scan codes, encode machine-readable product information in an ecommerce store's catalog. Inventory management software with integrated barcode scanning capabilities can significantly enhance operational efficiency.

Tasks like stock entry, package tracking, and processing returns become seamless and automated across the customer, store, and supplier touchpoints. 

Barcode scanning virtually eliminates manual errors, making inventory management more accurate and efficient.

This technology streamlines workflows, reduces time spent on manual data entry, and ensures real-time inventory updates.

10. Reporting and analytics

So far, we have mentioned terms and phrases like “demand forecasting” and “market trends” reflecting the importance of data. 

This is where robust reporting and analytics features in an inventory management solution become indispensable.

A few crucial metrics that you can track include:

  1. Stock levels: Current quantity of each item in inventory.
  2. Reorder points: Threshold levels that trigger restocking.
  3. Turnover rate: Frequency at which inventory is sold and replaced.
  4. Lead time: Time taken for an order to be received after placement.
  5. Carrying costs: Total costs of holding inventory over a period.
  6. Order accuracy: Percentage of orders fulfilled without errors.
  7. Backorder rate: Frequency of out-of-stock items leading to delayed orders.

Intuitive reporting tools within the inventory system help monitor these KPIs, allowing businesses to execute data-driven strategies and quickly adapt to market changes. 

By leveraging these valuable insights, companies can optimize inventory levels, reduce costs, and enhance overall operational efficiency.

11. Batch and expiry tracking

Batch and expiry tracking capabilities in an inventory management system are crucial for monitoring product serial numbers and expiration dates. 

This prevents stockouts of perishable items and reduces waste by ensuring time-sensitive products are used or sold within their shelf life.

Tracking batch numbers and expiry dates is essential for upholding consumer trust, maintaining product quality, and complying with health and safety regulations. 

When integrated into the inventory tracking software, these features enable timely notifications about impending expirations, allowing ecommerce teams to take necessary action.

12. Automated ordering and reordering

Automated ordering and reordering capabilities streamline the procurement process by generating purchase orders automatically when inventory levels reach predefined reorder points. This ensures popular items remain in stock, keeping customers satisfied and reducing the risk of stockouts.

By setting up trigger-based automation rules within the inventory management software, manual efforts and errors are minimized. 

This simplifies the reordering process, allowing ecommerce teams to focus more on strategic tasks such as expanding product catalogs or targeting new market niches.

With automated reordering, businesses can effortlessly maintain optimal inventory levels, enhancing operational efficiency and freeing up valuable time for growth-focused initiatives.

13. Inventory alerts

Inventory alerts are notifications that inform managers when stock levels are running low, prompting timely action to replenish inventory and prevent stockouts. 

These alerts help maintain optimal stock levels, ensuring sufficient inventory is available to meet customer demand.

Alert configurations can provide real-time updates, enabling businesses to respond quickly to changes in inventory status. 

This proactive approach to inventory control helps avoid potential disruptions in the supply chain.

14. Mobile accessibility

mobile accessibility infographic

Ecommerce teams are often on the move, traveling between warehouses, manufacturing plants, fulfillment centers, and other operational sites. This mobility can make it challenging to stay updated on real-time inventory status.

Inventory management software with robust mobile apps solves this issue by providing instant access to stock level updates from anywhere.

 This on-the-go accessibility facilitates efficient transfer management and improves collaboration across distributed teams.

With mobile capabilities, teams can monitor and manage inventory seamlessly from any location, ensuring uninterrupted operations and enabling better decision-making while on the move.

15. Customization and scalability

As highlighted earlier, ecommerce stores have unique operational needs, making it crucial to choose an inventory management solution that can adapt and grow with evolving requirements.

Customization allows teams to configure workflows and processes based on their specific business needs. 

Similarly, scalability ensures the system can handle increasing workloads from new product lines, expanding supply chains, and overall business growth without compromising efficiency.

 This flexibility to tailor the solution and scale with growth is essential for long-term success in ecommerce.

16. Security and user permissions

Inventory management software handles sensitive data such as vendor information, customer details, and proprietary product specifications. 

Protecting this critical data from unauthorized access or modification is paramount.

A robust solution should implement secure login protocols and allow administrators to assign specific user roles and permissions. 

This role-based access control ensures sensitive data is only accessible to authorized personnel, increasing vendor and customer confidence while maintaining compliance with data security regulations.

17. Supplier and sourcing management

Effective supplier and sourcing management is critical for ensuring a timely and cost-efficient supply of goods. 

This involves monitoring supplier performance, negotiating terms, and ensuring the quality and cost-effectiveness of raw materials or products sourced.

An integrated inventory management solution with robust supplier and sourcing capabilities can simplify these processes. It streamlines tasks like logistics tracking, purchase order management, and maintaining optimal inventory levels across suppliers.

This leads to stronger supplier relationships and smoother overall operations.

18. Purchasing

Purchasing involves reordering inventory from verified suppliers based on current stock levels and market demand. When this process requires multiple tools or manual efforts, it becomes resource-intensive and prone to errors.

Comprehensive inventory management solutions can streamline purchasing by automating the reordering process. The system monitors relevant KPIs in real-time and triggers purchase orders when needed. 

Ecommerce teams simply need to verify the order details before sending them to suppliers.

This enhanced efficiency supports better supply chain management and overall operational optimization.

19. Deployment

Inventory management is one critical component of an ecommerce business, operating alongside finance, accounting, sales, customer relationship management (CRM), and other core functions. 

To enable seamless collaboration across these interconnected areas, many businesses adopt comprehensive enterprise resource planning (ERP) systems.

ERPs consolidate data from multiple tools and sources into a centralized repository, creating a single source of truth for the organization. 

Deploying the inventory management solution as an integrated part of an overarching ERP allows for seamless data sharing and integration with existing ecommerce platforms and processes.

This centralized approach optimizes the inventory management capabilities by ensuring consistent data access, smooth cross-functional collaboration, and enhancing overall business performance through enterprise-wide process synchronization.

20. Integrations

An effective inventory management system should offer seamless integration capabilities with point-of-sale (POS) solutions, shipping carriers, accounting software, and other essential business tools. 

This connectivity helps companies optimize inventory control, reduce manual data entry efforts, and improve overall operational efficiency and data accuracy.

Many modern inventory management solutions provide secure APIs that enable seamless data exchange with external platforms and systems.

 This robust integration capability streamlines processes and ensures consistent data synchronization across the technology ecosystem.

We have listed a few of those tools further below in this article to simplify your search.

21. Dropshipping

Ecommerce businesses built on the dropshipping model rely on third-party suppliers or manufacturers for order fulfillment. When offering a wide range of products, these companies often work with multiple suppliers simultaneously.

Managing inventory accurately across numerous suppliers can become complex and labor-intensive. 

Teams may need to manually communicate stock updates to each vendor, slowing down operations and increasing the risk of avoidable errors.

Inventory management solutions with robust dropshipping integration capabilities can mitigate these challenges. With seamless supplier connectivity, ecommerce businesses can instantly inform their suppliers about real-time market demand with a few clicks. 

This streamlined communication boosts overall process efficiency and enhances customer satisfaction through reliable order fulfillment.

22. Cloud-based

cloud-based infographic

While on-premises or open source inventory management software may offer cost advantages and data ownership, they often come with significant drawbacks such as infrequent maintenance, limited capabilities, and lack of accessibility for distributed teams.

In contrast, cloud-based solutions make inventory management seamless, even for ecommerce teams spread across multiple locations. 

These solutions provide consistent support, regular product updates, and evolve with changing business requirements, ensuring your system remains up-to-date and aligned with your needs.

This model ensures your inventory management capabilities remain current, efficient, and capable of supporting future growth without friction.

23. Customer support

As you can garner from this list, modern inventory management systems pack a wide array of features and functionalities. 

This can make it challenging for new team members to quickly adapt to established workflows. Additionally, running into issues or needing assistance while performing critical tasks is common when using cloud-based solutions.

Choosing an inventory management platform that provides reliable, hands-on customer support can protect your ecommerce team from such potential roadblocks. 

Whether learning about a new feature or troubleshooting an issue, knowing that expert assistance is just a message or call away provides reassurance and peace of mind.

24. User-friendly interface

An intuitive and user-friendly interface allows team members to efficiently navigate the software, perform tasks quickly, and minimizes the need for extensive training. 

New team members can explore the tool's capabilities independently, without spending excessive time on training materials or heavily relying on experienced colleagues for guidance.

This ease of use enhances team collaboration, workflow optimization, and continuous process improvement. 

A well-designed, user-friendly interface ultimately boosts productivity and ensures a smoother onboarding and adoption experience across your organization.

25. Multi-currency and multi-language support

An inventory management system with robust multi-currency and multi-language capabilities is essential for catering to diverse international markets.

This ensures accurate financial transactions, effective communication, and seamless operations across borders.

Beyond facilitating customer interactions, these features enable businesses to work seamlessly with international vendors and manage global supply chains. 

With multi-currency support, companies can handle customer orders and financial transactions in various currencies with ease, streamlining operations across different regions.

Meanwhile, multi-language capabilities foster clear communication with stakeholders worldwide, removing language barriers that could otherwise hinder expansion efforts.

 By accommodating different currencies and languages, businesses can extend their reach, operate more efficiently on a global scale, and thrive in international markets.

Choosing Your Inventory Management Software By Features

Selecting the right inventory management software involves evaluating features against your business needs. Use the 25 essential features listed above to narrow down your options. 

Here’s a short list of top inventory management software based on the features discussed:

Final Thoughts

A well-designed inventory management software can simplify various action items and processes related to maintaining optimal stock levels,coordinating with vendors, improving team collaboration, and driving overall operational efficiency. 

When evaluating the myriad of available solutions in the market, ecommerce teams must carefully select a platform that not only addresses their immediate needs but also has the scalability and flexibility to accommodate evolving requirements as the business grows.

Finally, professionals also need to stay updated on the latest industry trends, market shifts, and technologies to continually iterate their workflows around inventory management.

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Hazel Raoult
By Hazel Raoult

Hazel Raoult has over six years of experience writing about ecommerce, technology, entrepreneurship, and B2B SaaS. Hazel's work has been published in The Future of Commerce, ChatBot, VWO, and OROCommerce.