Companies and e-commerce retail stores have fundamentally changed their approach to inventory management over the past five to seven years.
Previously, everything was managed manually, and the company could afford write-offs. But today, due to declining margins, increased competition, and centralised management, tracking inventory and carefully minimising human error risks is essential.
Inventory management systems help automate these processes. They help reduce costs, rationalise warehouse space and optimiae company operations.
Why use an e-commerce inventory management system?
Several factors influence inventory management evolution. First, the company’s staff may be interested in purchasing certain goods.
Secondly, the performance of specific employees may differ from the indicators laid down on business management’s basis. Third, no one has canceled the human factor and the possibility of mistakes.
The most common problem is dealing with goods that have expiration dates. Often balances are subject to write-off. Many retail chains are forced to order them in short supply since they cannot calculate customer needs and accurately predict sales. The inventory management system copes with this task.
The problem with manual inventory management and human intervention is also a factor of financial interest influence. For example, the e-commerce store knows which group of goods is more profitable.
Consequently, it refuses to take other items in the assortment matrix. As a result, some goods cease to be in the e-commerce store, losing the demand and objectivity in assessing the trade.
Just because some goods are simply not profitable for the e-commerce store to sell due to lower margins or rarer purchases.
Many companies try to implement automation using Excel spreadsheets or similar tools. But, in essence, it’s just regular sales reporting.
Then there’s the employee’s estimated judgment and the generation of an inventory management plan. This reduces efficiency and loads the manager with routine tasks. Inventory management tools allow for automated billing processes.
A business needs to understand how many days of inventory are sufficient, what the deferred payment parameter is, and how operating funds are generated that remain for the company’s development.
The tool lets you see a clear picture of business processes and form a sales plan. The capabilities and parameters of inventory management software allow you to work with the following business processes:
● Timely replenishment of e-commerce store with an assortment
● Analysis of sales of promotional goods, sales efficiency control, formation of assortment matrix
● Analytics of all key parameters that help to assess the efficiency of sales and inventory
● Analytics of sales indicators with the introduction of additional conditions and parameters, real-time inventory revaluation
● Tools to develop strategies for emerging problems and unplanned changes
The main task of inventory management software is to organise inventory and goods movement management in automatic mode, with minimum human involvement.
This will help to avoid errors, minimise risks and reduce costs. E-commerce stores often use inventory management software as a growth marketing tool.
What to look for when analysing your current inventory management system or choosing a new one
There are many solutions available to automate inventory management. There are out-of-the-box solutions that just need to be implemented into the system.
Many e-commerce stores already have some tools in place. But the best choice is still to develop your solution. Custom development allows you to implement unique tools to meet your company’s needs. Analysis of the order management system becomes more efficient and accurate.
Whether an out-of-the-box solution is used or a custom product is developed, it is essential to understand what tasks the inventory management system should solve.
Correctly calculate target inventory
This is one of the main functions. It is essential to properly understand how much product is left in an e-commerce store to have information on each item and to understand when it needs to be replenished.
In addition, the system should automatically notify about running out of stock and form orders for delivery. With accurate calculations, the e-commerce store understands the performance of each item.
Preparedness for fluctuations in demand
Seasonal promotions and sales, new product introductions, promotions, and holiday sales all affect fluctuations in demand.
Christmas trees don’t sell in the summer, and carved pumpkins don’t hit store shelves until late October. That’s about how demand metrics work. Controlling market fluctuations manually is difficult. That’s what inventory management tools are for.
Provide KPI analytics for inventory management
Analytics is one of the main tools that enable successful e-commerce. Without evaluating its performance, it’s difficult to make predictions. And without forecasts, an understanding of market demand, and customer behavior, it’s impossible to trade successfully.
The inventory management system collects data on various parameters and generates reports. With their help, it is possible to assess performance indicators for a product, a group of goods, a store, and even an entire direction.
To effectively manage inventory, it is necessary to select high quality software. The parameters of the inventory management system must meet modern requirements. In this case, it will be an effective and reliable software.
About the author:
Kevin White is a freelance blogger. He’s got experience in writing quality pieces on various topics. You can reach out to him at GuestpostingNinja@gmail.com for collaboration suggestions.