Multichannel Inventory Management: Benefits, Best Practices & Top Tools
More Channels, More Fun!: As your business expands, adding various sales channels can enhance your reach and growth potential. From a single shop, you may grow to include social commerce, new locations, or online marketplaces.
Inventory Control Tightens: Revisit your inventory management to accommodate the added channels. Multichannel inventory management ensures you always know your stock levels, avoiding overselling and maintaining control.
Unified Stock Awareness: Keep track of incoming and outgoing stock across all channels. This gives you better visibility of where your products are and helps in efficient stock management.
Implement Systems Wisely: Understand the best practices for implementing multichannel inventory management. This involves knowing how to track and manage your inventory effectively across various locations.
Software Solutions to the Rescue: Explore different software options that can aid in managing multichannel inventory smoothly, helping in tracking and maintaining stock levels efficiently.
As your business grows, it’s likely that you’ll add more and more sales channels to your business plan.
While you might start with a single online shop or brick-and-mortar location, you may choose to add additional social commerce channels, open new locations, or add your products to other online marketplaces.
When that time comes, you’ll need to revisit the way you manage your inventory. Multichannel inventory management helps you keep track of incoming and outgoing stock across the board.
Need expert help selecting the right tool?
With one-on-one help, we guide you to your top software options. Narrow down your software search & make a confident choice.
This ensures you’re always aware of your stock levels and where it’s located, are able to mark products out of stock to avoid overselling, and have much better visibility and control over your inventory.
Read on to learn more about multichannel inventory management, how to implement it, plus which software can help.
What is Multichannel Inventory Management?
Multichannel inventory management is the process of tracking inventory that is bought, sold, and stored at different locations.
While this can be simple for a single location, brands selling across different channels need a different approach—and cloud-based inventory management systems can centralize this data to make it available no matter where you are.
Let’s look at an example.
You’ve been growing your homemade candle business, Flamethrower.
You started off selling products at a local market before getting to the point of opening a brick-and-mortar location that houses all of your inventory.
When someone comes in to shop, they can easily determine what’s in stock—if it’s on a shelf, it’s available. And if it’s not, then it’s not.
However, you recently created an online storefront as well in order to grow your business even further.
And it’s just as important to give online customers an accurate idea of what’s in stock so they know what they can purchase.
Nothing is more frustrating than getting to checkout and finding out a product they were excited about isn’t available—or worse, having an order canceled after the fact due to no available inventory.
But with multichannel inventory management, you can accurately reflect what’s left in stock in all areas, whether it’s in-store, online, in your TikTok shop, or on Amazon.
Why does multichannel inventory management matter?
If you’re selling your products via multiple channels, having inventory control across those same channels is a must for multiple reasons.
Multichannel inventory management matters because it helps:
- Avoid overselling
- Improve customer satisfaction
- Optimize stock levels across all of your channels
- Streamline order fulfillment
There are even more benefits—which we’ll be covering next—but the bottom line is this: if you’re selling on multiple channels, your inventory management system has to be able to keep up.
6 Benefits of Multichannel Inventory Management
Managing your inventory across multiple channels comes with its own set of challenges—something we’ll be talking about shortly.
This means that the right system comes with a number of perks that will make running your ecommerce business go even more smoothly.
Follow along so you understand just how beneficial this process can be to your online store.
1. Real-time visibility
Multichannel inventory management ensures you have up-to-date inventory data across all channels.
This keeps customers from buying the last product in-store while that same product is still showing “in stock” online.
Instead, once that last product has been scanned and checked out in-store, your inventory system automatically marks it out-of-stock across all channels.
That way, when someone buys Flamethrower's last apple cinnamon candle, your POS system updates your online store and other channels in real-time to ensure it isn't over-ordered.
2. Better inventory insights
Having the right system makes sure you get the right insights and data right in front of you.
Clear insights on your sales allows you to make better business decisions, like ordering the right amount of inventory and improving your overall forecasting.
For example, you recently created a new floral candle for Flamethrower that was a bit of an experiment.
With your multichannel inventory management process in place, you get immediate insights into the fact that this candle isn’t performing as well as your other products.
With that in mind, you can cease production of the candle and offer a sale on remaining inventory so you don’t take a total loss on the product.
3. Increased business growth
By investing in a multichannel inventory management system, you’re able to grow your business more quickly.
This switch facilitates even more expansion to new channels and markets, providing you with even more opportunities.
4. Optimized product shipping
Locate products closest to customers for faster product shipping, providing even better customer experiences—and reducing shipping costs for your company. Win-win, right?
Look at it like this.
If you’re selling to customers across the United States, but you only have one warehouse on the East Coast, it’ll take more time and be more expensive to ship to the West Coast.
However, if you have warehouses on each side of the country, multichannel inventory management can help you ship the product from the warehouse closest to each customer location.
Third-party logistics (or 3PL) companies can also be a big help in instances like this.
By outsourcing your shipping to a 3PL company, you can enable cheaper, faster shipping options (similar to Amazon Prime) by shipping from closer warehouses.
5. Improved customer support
Better inventory management means better customer satisfaction.
We already talked about how frustrating it would be for a customer to have an order that they were excited about canceled on them because your website didn’t properly showcase that the product was sold out.
Being on top of your inventory count across channels leads to fewer customer complaints, as you can ensure anyone shopping with you has the full scope of your stock before they buy.
And when your customer support team is dealing with fewer complaints, they’re able to be more proactive about other things, leading to an overall improvement.
6. Higher cost savings
Finally, a multichannel inventory management system helps to reduce expenses related to problems like overstocking (buying or creating more stock than you can sell) and stockouts (running out of stock).
These issues can cost your company in spoilage costs, labor costs, and loss in sales.
Save more money with proper multichannel management so you can focus on growing your business and expanding to even more sales channels.
Common Challenges With Multichannel Inventory Management
There can be a number of challenges that come with multichannel inventory management.
Understanding what these potential pitfalls are can help you combat them with the right inventory management system.
Outdated manual processes
If you don’t have the right processes or software in place, you’re stuck with outdated manual processes.
Imagine using a manual inventory management system to track stock across multiple sales channels and warehouses—it’s painful to even think about.
That could mean manually marketing a sold out product or even updating stock changes location-by-location, both of which can quickly spin out of control.
Overselling and stockouts
Overselling is a common problem businesses face as they venture into multichannel selling.
When you don’t have the tools to mark products sold out on your other channels as they’re purchased in-store, you’re opening the door to a plethora of problems.
First, it doesn’t give you an accurate idea of how many products you’re selling, so you don’t always know exactly how many to buy or create.
Plus, not only does it lose your business sales when you have to continuously mark items out-of-stock, selling more stock than you have can quickly lead to customer support issues.
Think about it like this: if customers are constantly having issues with your products being sold out, they’re going to lose faith in the fact that they can actually buy what they want from your business.
They’ll quickly head over to a competitor that does reliably keep their products in stock.
Overstocking
On the other hand, poor inventory planning can lead to overstocking as well. Having too much stock, especially perishable stock, can cause major losses for your business.
This can be the case even for our fake candle business, Flamethrower.
Say you created 500 seasonal candles expecting to sell out. Yet, you didn’t do so based on insights into how many seasonal products you typically sell across all of your channels.
So, at the end of the season, you still have a bunch of those candles, and you’re losing a ton of money in labor and materials costs now that those products are virtually unsellable.
Data integration issues
If you’re not using the right software, you could face problems syncing data across different platforms.
This can lead to inaccurate stock reporting, causing even more issues across your store’s sales channels.
Inaccurate sales forecasting
Without the right inventory management solution, you can face difficulties in predicting future sales.
If you don’t know how to accurately forecast upcoming sales trends, you can again deal with over or understocking your warehouse(s).
Inefficient warehouse management
You may also face challenges in organizing and managing your warehouse operations, leading to lost stock and inaccurate inventory reporting.
This can then cause difficulties with maintaining accurate inventory data across your channels.
Incorporating the right tools—more than just the right inventory management system—can help improve this.
For example, using a barcode scanner or RFID tags that can sync with your IMS and keep better track of your inventory can improve your overall warehouse performance.
Higher order defect rate (ODR)
Order defect rate, or ODR, is a metric that measures the number of orders that customers have issues with, are defective, or lead to chargebacks.
Continuously canceled orders due to stockouts can lead to a higher ODR, which can get you suspended from certain online marketplaces.
These marketplaces also don’t have a very forgiving threshold. Amazon starts suspensions at a 1% ODR rate, while marketplaces like eBay and Walmart allow up to 2%.
Unhappy customers
Finally, if your customers are consistently facing the above issues, they're going to be unhappy. Which leads them to leaving poor reviews and sharing their bad experiences with their friends and families.
Reputation is everything for a fledgling business, so ensuring you get your multichannel inventory management together is essential so you can avoid these challenges.
Key Features to Look for in Multichannel Inventory Management Software
Want to take advantage of the benefits while simultaneously combatting the challenges that multichannel inventory management can pose?
You need to find the right multichannel inventory management software.
To do that, you first need to have a good grasp on the software features you should be looking for. These key features can be a huge help when managing your store’s inventory across multiple channels.
Inventory control
If you’re looking to improve your inventory management, you need a tool that allows you full-scale inventory control.
You need complete insights into your inventory count, including the ability to see out-of-stock patterns, trending issues in your management or fulfillment processes, and more.
Automation capabilities
Your multichannel inventory management tools should have automation capabilities so that you’re no longer relying on manual processes for updating inventory numbers.
As soon as something is sold, either online or in-store, your company-wide inventory count is updated to reflect that sale.
More than that, you want a tool that can also automate processes like reorders as soon as inventory starts to get low.
As a part of that, it should also be able to automatically create purchase orders so that your company isn’t relying on you to manually put those together in order to buy more stock.
Demand forecasting
Inventory demand forecasting, or the ability to use historical data to accurately predict future sales, should also be a key component of any inventory software you choose.
This, in conjunction with other important features, can help you avoid stocking issues across your warehouse spaces.
Real-time updates
Real-time inventory updates ensure the immediate reflection of any changes in stock across all of your channels.
If something is bought from your Amazon marketplace, your online store stock is notified as well. If something is bought in-store (especially if your physical location is where all of your inventory is housed), the change is immediately reflected in any of your online channels.
Streamline your multichannel inventory management—see how a perpetual inventory approach ensures accurate stock tracking across all platforms.
Analytics and reporting
You should also make sure you have access to in-depth analytics and reporting. This helps provide insights into inventory performance.
For example, knowing if certain stock isn’t performing provides you with the insights needed to offer sales or discounts in order to get rid of existing inventory.
Order management
Streamline the process of handling orders with your inventory management tool. Order management capabilities should include:
- Processing orders
- Collecting payments
- Preparing shipping labels
- Fulfilling orders
- Tracking shipments
The whole process should be seamless, so your customer doesn’t even need to think about what’s going on behind the scenes.
Barcode scanning
Having this feature helps facilitate accurate tracking and management of inventory.
By virtual scanning product barcodes, you’re able to monitor inventory movement as it moves from the warehouse to your customer.
Location tracking
Tagging inventory by location helps ensure that products are shipped from the warehouse closest to them.
This cuts down on shipping times and costs, improving overall customer satisfaction.
Bundling
If you want the ability to offer product bundles to your customers, look for an inventory management software that offers bundling as one of its features.
For example, if you sell bath products, but want to let customers create their own kits as well, some software can help ensure this happens smoothly on the warehousing end.
Ease of use
Of course, be sure the multichannel inventory management tool you choose has a user-friendly interface that simplifies the process of managing your inventory and product stock.
Although inventory management can be complicated, the right software shouldn’t make it so.
Pricing
The cost of your inventory management tool of choice is important. You don’t want to overspend on a tool with functionality that you simply don’t need.
Instead, focus on the features that are a must-have for your business and pick a tool that fits in your budget.
Integrations
And finally, check for compatibility with platforms like Amazon, eBay, Shopify, and any other sales channels that you use or plan to use in the future.
If a tool doesn’t work with one of your sales channels, it’s simply not going to be the right tool for your business.
How to Choose the Right Multichannel Inventory Management Software
Need help choosing the right multichannel inventory management software? Keep these four considerations in mind as you shop around and test different tools.
- Assess your business needs: Look at things like your business model, the products you sell, and the sales channels that you use currently and that you plan to use in the future. Find a multichannel tool that aligns with your business as a whole.
- Look for the right integrations: Select a software that integrates seamlessly with your existing systems and each of the channels you sell on.
- Choose for scalability: Choose a solution that can grow with your business. This may mean you need to invest a bit more upfront, but if you have big plans to grow, it’ll be important in the long run.
- Consider user reviews and case studies: Research and evaluate based on real-world usage. Find tools that have proven success stories with businesses just like yours before signing up.
Our Top Picks for Multichannel Inventory Management Software
The best multichannel inventory management software offer seamless integrations with the top ecommerce platforms and marketplaces like Shopify, BigCommerce, Amazon, Etsy, and more.
This is so they can help as many businesses as possible stay on top of their inventory management.
Start shopping around by checking out our top picks below:
10 Best Practices for Multichannel Inventory Management
Want to manage your multichannel business inventory the right way? Keep these 10 best practices in mind—after you select the right software for your needs.
1. Centralize inventory data
The first thing you need to do is create a centralized hub for all of your inventory information.
As orders come in, no matter what channel they’re coming from, you should have a single system that allows you to view all incoming and outgoing inventory from all sales channels.
This ensures consistency and ease of access to your inventory data. But it also ensures accuracy and makes the process easy to monitor.
2. Implement real-time tracking
We’ve mentioned the importance of real-time inventory updates in almost every section we’ve covered throughout this article—that’s how important it is.
If someone is currently buying the last product available, that needs to be reflected in your inventory management system immediately so that no one else can make that same purchase.
Utilizing tools that update inventory levels in real time across all platforms is the only way to avoid overselling and stockouts, thus improving the overall customer experience.
3. Leverage automation
The only way to properly manage inventory across multiple channels is through automations and workflows.
As I mentioned, manually tracking inventory isn’t really an option as you go multichannel.
You can (and should) automate repetitive tasks across your multiple channels, such as:
- Reorder points
- Inventory updates
- Purchase order generation
- Shipping label printing
- Order tracking notifications
- Inventory reporting
- Out of stock product updates
- Back to stock notifications
Giving these jobs to the robots will help to reduce manual errors, save your precious time, and keep you from doing boring stuff.
4. Optimize warehouse operations
Warehouse optimization should be another major practice on your list.
Organize your warehouse efficiently so it can streamline product picking, packing, and shipping processes.
You’ll want to consider things like:
- Warehouse design: Is the warehouse set up to maximize productivity?
- Space utilization: Are you using the space to its fullest potential? Warehouse shape can have a big impact on productivity, so make sure to maximize the space.
- Product placement: Have you strategically placed your products in categories or based on popularity so they’re easy to find and package?
- Packing processes: Do you have the right pick and pack processes in place to make packaging orders as easy as possible?
- Technology: Are you using the right tools for accurate tracking? Consider things like barcodes, SKU numbers, and RFID tags to ensure you’re working with a fully up-to-date process.
5. Forecast demand accurately
Use historical sales data and analytics to predict future inventory needs, helping to balance stock levels and avoid overstocking or stockouts.
By using a data-driven approach, you should be able to accurately predict your stock needs to ensure you’ve always got enough—but not too much—inventory to meet demands.
When done right, your customers should always find their favorites in stock, and you avoid locking up your cash in too much stock.
6. Train your team
Get everyone on board with the new system.
This will include ensuring that all staff members are trained on the multichannel inventory management system and understand their roles in maintaining accurate inventory records.
But more than that, you need to create documented processes so that your team can always refer back to how everything should work—and it’ll make onboarding and training new employees even easier in the future.
7. Conduct regular audits
An inventory audit is a process that dives deep into existing inventory records to check it alongside financial records.
While a physical inventory count will likely only need to take place annually, cycle counting throughout the year using processes like ABC inventory analysis helps ensure that product listings remain active as they should and that nothing has fallen through the cracks.
Although your multichannel inventory management software should have everything covered, conducting regular audits helps to identify discrepancies and adjust the process accordingly.
8. Monitor performance metrics
A good cross-channel inventory management system will help ensure healthy sales.
When you’re able to keep a closer eye on your performance, you can make adjustments that will improve sales or focus on better performing products.
Through your software, consistently track key performance indicators (KPIs) to monitor and improve inventory management processes, such as:
- Inventory turnover
- Order accuracy
- Fulfillment times
- Supplier lead times
- Carrying costs
- Days sales of inventory (DSI)
- Return rate
- And more
9. Integrate with key platforms
Ensure your inventory management system seamlessly integrates with your sales channels, marketplaces, and other ecommerce platforms.
Then, get those integrations set up. Connect your new software to each of your channels to get the full omnichannel experience.
Then, explore other integration options to see if there are additional software you should bring on to further streamline the process, or if there are additional channels you should consider to grow your business.
Some tools you might need to look into include:
- Point-of-sale (POS) software
- Ecommerce platform
- Warehouse management software
- Customer relationship management (CRM) software
- Enterprise resource planning (ERP) software
- Product information management (PIM) system
- Third-party logistics (3PL) software
- Order management software
- Shipping software
Want to learn more about keeping your tech stack connected? Read our guide to ecommerce integration so you’re able to scale without growing pains.
10. Stay agile
Inventory management is not a one-and-done setup.
Be prepared to continuously adjust your inventory management strategies based on changing market conditions, customer preferences, and sales trends.
Going in with the mindset of staying flexible will help make it easier to adjust as needed, and even make major changes to your overall process as you dive deeper into the inventory management side of things.
Final Thoughts
Multichannel inventory management is a must-have process if your business is selling on different channels.
Otherwise, you’re going to run into issues like overstocking or running out of products due to not having a good scope on your overall inventory.
Many companies have made the switch to multichannel inventory management software in order to help run multiple sales channels successfully and productively.
One company, Harmony Lab & Business Supplies, experienced its own set of challenges as it branched out onto multiple channels.
Sean Clough, Principal at Harmony Lab & Business Supplies, explains:
Expanding from our website to multiple sales channels was both exciting and challenging.
Our biggest hurdle was keeping track of inventory across different platforms. We'd often oversell items, leading to backorders and unhappy customers.
His team enlisted the help of enterprise inventory management tool Brightpearl due to its comprehensive features and user-friendly interface.
The software allowed Harmony to sync their inventory in real-time across all channels, including their website, Amazon, and eBay stores.
Clough shares, “The impact was immediate. We saw a 40% reduction in overselling incidents within the first month. The system also helped us identify our best-selling products across different channels, allowing us to optimize our stock levels and reduce carrying costs.”
Want results like this?
Find the right multichannel inventory management software to help ensure your business can get these same results, stay organized, and keep up with inventory demands.
The world of ecommerce moves fast—and so do you. Subscribe to our newsletter with the latest insights for ecommerce managers from leading experts in ecomm.
Multichannel Inventory Management FAQs
Before we bid you adieu to live your best multichannel life, let’s quickly answer a few final questions you may (or may not) have.
How do you manage inventory across multiple locations?
To manage inventory across multiple locations, you need to enlist the help of the right software and tools.
Having the right process—which often includes useful software—is the only way to ensure you’re able to stay on top of your inventory management.
What is the best multichannel inventory management software for small businesses?
There are a number of choices when shopping for inventory management software, and the best one will depend on your needs. However, our analysis has found that the best option for small business is Zoho Inventory.
How can multichannel inventory management improve customer satisfaction?
With multichannel inventory management, you’re able to ensure that inventory is accurate across every channel you sell through.
This can avoid complications with orders, stockouts, overselling, and more, which improves customer satisfaction overall.
How do you synchronize stock levels in real-time across multiple online marketplaces and physical stores?
Real-time stock synchronization across different sales channels is possible with the right inventory management software. It keeps your stock levels updated, whether you’re selling online or in physical stores.
