September 30, 2022   / Uncategorized
Various Methods for Inventory Management in Ecommerce Stores
2 minutes Read

For an ecommerce business to be successful, there are various factors involved. For example, a good website, a shipping system, and an inventory management system as well. Keeping track of the location and number of items available in the store. 

However, many times ecommerce business owners don’t invest in inventory management systems while trying to cut costs. But, this tends to harm the store as the system helps streamline the warehouse and helps in making better financial decisions. 

Naturally, not every way of managing an inventory suits everyone. Every business has unique needs, and those require different inventory management strategies. Here are the various methods. 

ABC analysis

In this type of strategy, every category is based on its profitability. For example, category 1 can consist of items with high value but not required in as much quantity. Category 2 can be for items that are required moderately and are valued moderately as well. The third category can be items that are of low value but required in higher quantity. 

This type of inventory management strategy helps when there are various types of products to sell. It is also helpful when it is time to restock these products. The ABC analysis allows us to have more control over each product. 

Just-in-time inventory

If your ecommerce business doesn’t require you to have a lot of inventory ready beforehand, then the JIT method is suitable for you. Here the inventory is filled as the orders are placed. So, the inventory has as many items as the number of filled orders. 

This type of strategy is useful for seasonal merchandise. As the demand goes up, the store can order enough products to fill these orders. This way, there are no remaining products after the season ends, thus saving money. 

Dropshipping

It is one of the most accessible inventory management systems. Here the ecommerce store doesn’t actually come in contact with the product. When an order is placed, they directly fulfill it from the manufacturer and send it to the customer. 

This can be for businesses that don’t have a warehouse or storage facility of their own and cannot invest in one. 

First in, first out

As the name suggests, the item that arrived first will be the one to be sold to the customer first. This way of inventory management is specially made for products with an expiration date or perishable items. But anyone who wants to clear out old products first can use this technique. 

However, a word of caution for the FIFO technique. Be aware of the pricing pattern for these materials. You might end up with inflated profits due to the difference between the cost price and the selling price of the material. 

Safety stock

In this inventory management system, the business owners keep an extra stock of some of the items so as to meet increased demands.  This method helps in dealing with unaccounted delays and demand fluctuations. 

With the safety stock, business owners can be prepared for such unforeseen circumstances, as it manages extra inventory to overcome these obstacles. 

So, these are the types of inventory management systems. Which one of these suits your business the most? 

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