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How to plan your inventory cycles to avoid headaches

At first glance, determining the products you plan to sell online and what platform you’ll sell them on may seem like the most important part of getting your online store set up but managing your inventory cycles over time is one of the most critical components of selling.

Inventory management and planning your inventory cycles is an ongoing process that requires sharp attention to detail. When properly managed, your inventory cycles keep your business running smoothly.

Terms and definitions

Before we dive in, it’s important to recognize words and phrases you’ll need to become more familiar with the following terms.

Inventory: tangible items, products, or goods you sell to customers

SKUs: stock keeping unit (SKU) is an identification code used to classify and organize products

Variants: variations of a product, such as different colors or sizes

Units of Measure: whatever you use to measure your stock (items, pieces, bundles, weight, etc.)

Supply Chain: the processes/systems involved in producing, managing, and distributing products

Dead stock: inventory you have in-stock but can’t necessarily sell

Buffer stock: the amount of extra stock you have on-hand used to limit risk if supply and demand are uncertain

Minimum viable stock: the minimum amount of product you must have in order to keep up with normal consumer demand and fulfill orders without delay

Re-order Point (ROP): the predetermined level inventory must drop to before ordering additional inventory – this can differ widely based on your business needs

Lead time: the time delay between when your inventory is ordered from your supplier(s) and when it arrives

Dropshipping: a method of fulfillment whereby you don’t store inventory on-site and instead have orders fulfilled and shipped directly from a third party to your customers

ABC Analysis: a method for prioritizing existing inventory using three categories:

  • A) high-value products with low sales frequency
  • B) moderate value products with moderate sales frequency
  • C) low-value products with high sale frequency

Just In Time (JIT): a fulfillment method whereby orders are made “just in time” to keep up with customer demand. This allows you to avoid tying up money in unsold inventory but creates potential risk in not being able to fulfill a sudden surge of orders.

Inventory Auditing: the act of manually counting or checking inventory to make sure it matches the numbers within your tracking or automation systems

Inventory Forecasting: making informed decisions about orders and reorders based on historical data, facts, trends, and seasonality

The importance of inventory cycle planning

There are two (very opposite) scenarios you want to avoid as a seller. You don’t want to have a surplus of product you can’t move, and you don’t want to run out of your best-selling items.

For a retailer, the inventory cycle is the process of understanding, planning, and managing inventory levels, including:

  • Accurate ordering of required inventory based on demand and terms, by product
  • Reduced time to reorder products on a periodic basis
  • an accurate history of individual product sales and category sales
  • Increased customer satisfaction

Inventory management is important for any retailer to ensure a constant and healthy supply of products. When inventory management is not closely monitored,

What are the functions of inventory management?

“The biggest challenge and also opportunity facing eCommerce brands today is that we’re living in a direct-to-everywhere world, which makes it difficult to obtain a holistic view of your data. There are so many sales channels, and there’s stock moving across every single one.” – Chad Rubin, Skubana

The main function of inventory management is to determine the appropriate volume and type of products to facilitate sales operations and minimize costs by keeping your product numbers at an optimal level throughout the year.

Efficient inventory management is essential to ensuring your business has enough products stored to meet the ongoing consumer demand. When handled improperly, it can result in the loss of potential sales that cannot be satisfied or a waste of money on products you don’t need.

Managing inventory when you sell in multiple places

Selling across multiple sites? This is where it can get hairy! It’s crucial you pay close attention to sales across each platform you sell on to stay on top of your inventory needs.

For example, if you’re seeing regular sales volume on Shopify and eBay but your Amazon store is selling at double the normal rate, you rish running out of Amazon stock because you didn’t analyze inventory cycles by channel.

Not surprisingly, one of the biggest pain points for multi-channel sellers is managing inventory when selling on multiple platforms.

Common challenges for business owners

Every eCommerce business owner will run into inventory management challenges from time to time. Knowing the challenges ahead of time and how to address them can make all the difference in achieving your inventory management.

Below are some of the more common challenges that ultimately impact the growth and profitability of an eCommerce business, customer experience, and retention.

1) Overstocking & Overselling

If you don’t have a good grasp on your inventory and the habits of your consumer audience, it’s easy to end up with either too much or too little product.

Although it can be helpful to have a large supply of inventory in-stock, especially as you approach a busy season such as Christmas, it comes with challenges all its own:

  • It can be expensive to store products you’ve ordered from suppliers or manufacturers.
  • You increase the potential of having dead stock on-hand.

On the flip side, if you don’t have enough product on-hand, you could accidentally allow customers to buy products that are out of stock – particularly if you sell on multiple platforms.

When you oversell, you create customer service and reputation challenges that can take time (and money) to overcome and repair. You also risk delaying fulfillment and damaging relationships with your customers. A quick fix? Flag products as out of stock online or list quantities.

2) Lack of visibility across channels and warehouses

A lack of visibility is a common issue eCommerce business owners may face as demand increases and inventory management becomes more complex.

  • Lack of visibility across multiple channels can cause you to oversell. If you’re not using inventory management software, you could easily find yourself having sold out of an item while sales are still taking place across multiple eCommerce platforms.
  • Lack of visibility across multiple warehouses can make it difficult to keep track of orders, inventory, and relationships across warehouses, partners, and manufacturers.

Without complete visibility across all elements of your inventory management process, it’s hard to know what decisions need to be made and when to boost sales and meet customer demand.

3) Lack of Insight

In order to boost your profits, support growth, and meet the needs of your customers, it’s important to understand how your inventory fluctuates overtime and make more informed decisions.

As demand for your product ebbs and flows throughout the year, it’s important to be able to forecast and plan for the future to complete re-orders, know when to scale back on products, and understand where breakdowns are occurring and why.

Be sure to look at historical data and order more product during high-demand times, like Christmas, Black Friday, Cyber Monday, Easter, or Grading Day. You’ll also need to scale back during slower times, such as January and February, when many people take a break from shopping and buying.

Key elements of an inventory management strategy

In the early days of selling, having a formal inventory management system may not have seemed like a critical piece of your eCommerce puzzle but as you grow and sales increase, an inventory management system becomes absolutely necessary.

While there’s no doubt that having good inventory management software and great partners is a good first step in keeping your inventory in-check, having a solid strategy to manage your inventory cycles over time is extremely important to your success.

1) Improve your supply chain visibility

Coordinate with your suppliers on the necessary quantity of goods to be delivered at specific times. Track and measure how long it takes different supplies to go from a purchase order to getting inventory into your warehouses or fulfillment network.

2) Keep accurate financial records

It seems like a no-brainer, but keeping accurate records and, subsequently, accurate financial statements is key to your inventory management strategy – especially if your business spans multiple channels, has a large supply chain and/or a diverse customer base.

3) Optimize inventory

Any good inventory management strategy should include inventory optimization at its core. This means determining the exact amount of inventory your business needs at any given time and ensuring the systems are in place to maintain it.

If inventory is low, it can lead to shortages which, in turn, can lead to loss of customers and a drain in your profits. Alternately, if other products are overstocked, you could be eating up profits via raised expenses like warehouse rent, heat, lighting, or security.

4) Improve efficiency and productivity

Greater productivity is always a goal in any business. Implementing inventory software, training staff to use it properly, and committing to continuous improvement will help ensure your business and its people are using time more wisely and eliminate manual processes.

Software can also enhance efficiency by making it easier to spot incidents like theft, warehouse accidents, etc., which can be accomplished by viewing real-time inventory data.

Inventory management integration and software

There are plenty of great options for software and integration possibilities to help you manage your inventory more smoothly. SaaS solutions can help you manage your inventory across multiple challenges and boast tools like bulk upload, price changer, and integrations with shipping partners and more.

Here are a few that we integrate with.

SellerActive is a multi-channel management software that helps businesses automate tasks to expand your marketplace presence. Upload listings to multiple sales channels, and use automated repricing to set pricing rules that capture the Buy Box an average of 72% of the time.

Sellbrite helps brands and retailers list and sell products on various online marketplaces. Sellbrite offers automations to simplify listing, prevent overselling, and optimize fulfillment. Use their Bulk Listing tool to get your listings up and running with fewer steps, or ship items across multiple channels easily.

GeekSeller is a multi-channel eCommerce platform that helps sellers manage their product data, inventory levels, and orders from one place while synchronizing quantities across online marketplaces.

Check out more multi-channel listing tools that we integrate with below.

Take a look at the all listing tools and inventory management software we integrate with here.

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