Learn Why Inventory Management System is Critical for an eCommerce Business

Inventory Management System

Globalization has completely changed the business model and having an online store is crucial if you want to stay ahead of your competitors.

In today’s competitive marketplace, the inventory management system is often overlooked but important phase of any eCommerce business. The inventory management system must be efficient, secure, and cost-effective. If you do not have these components intact you may fail to meet customer demand and lose sales impacting your eCommerce efforts.

Since 2020, the whole world seems to be experiencing countless hardships. The list is too long and disgraceful to even mention. But, one thing that is quite clear to everyone — being prepared for uncertainty is essential.

That’s why we’ve discussed this guide on inventory management systems, to help you understand how you can handle and get the most out of your stock.

Introduction to Inventory Management System

Inventory management is the process to track the goods available in stock. It includes a different set of activities ranging from ordering, restocking, storing, and predictive analysis.

Managing inventory in a detailed manner becomes even more challenging with the growth of sales and product addition. The right inventory system aid in managing inventory, and is a critical element of supply chain management.

Many businesses think that outsourcing order management and product storage to third-party logistics means completely handling the inventory management process. The truth is third-party logistics can provide valuable tools that will support a merchant to successfully manage their inventory securely and cost-effectively.

What is Inventory Management System? 

An inventory management system is a software solution that helps both startups and established organizations manage all incoming and outgoing stock. Moreover track inventory levels, sales, and deliveries, and serve the daily processes to meet customers’ demand.

According to a survey, 90% of participants said that data visibility and insights are crucial to their organization’s success.

One of the key features of why eCommerce development companies suggest integrating this software is it gathers data and metrics to improve the decision-making process. In addition, merchants use technology to solve problems and eliminate routine tasks, and finally empower organizations to predict future outcomes.

Types of Inventory Management System

There are several types of inventory management systems available to meet specific business needs and operations. Some systems have capabilities that benefit smaller brands to compete with big brands.

Barcode Systems

Barcode Systems

Studies have shown that a person commits at least one data-entry mistake in every 250 keystrokes while a computer makes an error in every 40 trillion characters scanned.

Businesses use barcode systems to assign a number to each product, fasten tasks, and efficiency. Inventories are by default updated when a product is scanned, adding data related to the supplier, product dimensions, weight, and even real-time data. This helps to make proper business decisions.

For improved mobility and flexibility, the wireless scanner can be used in the form of mobile scanners with all the necessary features.

Barcode Systems Benefits

  • Lesser mistakes than human manual entry
  • Automatic and real-time inventory updates
  • Speedy scanning process
  • Systematic documenting and reporting work
  • Fast and transparent stock movement

Radio Frequency Identification Systems

Radio Frequency Identification Systems.

RFID automatically collects data and identifies an object. Next, data is sent and received with a system having RFID tags. Later the tag sends digital data which can be used to track inventory stocks. As per B2B eCommerce solution providers, RFID tagging can boost business operations by 30%.

RFID Systems Benefits

  • Tags start alarm and inform you when moved
  • Assist in automatically reading and storing data
  • Items are given separate identity and can be read in group
  • Tag data is compatible with ERP systems
  • Stop possible fraud as tags are difficult to counterfeit

Features of Inventory Management System to Consider

Before the growth of technology and digital platforms, every business was somehow dependent on manual tasks. But with the technology advancement business organizations particularly eCommerce store can now manage their inventories by integrating inventory management software.

These days software can control daily business operations and manage complete inventory-related functions.

Every business operates differently. And there are several Inventory management software present in the market having a diverse set of tools to help businesses manage their stock. It is a daunting task to select a software application to serve your business needs. To make the selection job simple we have discussed key inventory system features:

Cloud Infrastructure

Cloud Infrastructure

Cloud-based software offers on-demand availability of technical resources without the need for dedicated staff to manage virtually. It supports data storage, assists automated backups, secure access, and real-time collaboration from any corner of the world.

Digital Label

Digital Label

Pressure-sensitive labels are made with the use of cutting-edge digital printing technology. GPS-enabled RFID tags and barcode allows brands to track databases in real time and create paperless documents.

IoT Integration

IoT Integration

Integration of IoT aids in gathering data from smart devices and collaborating it into business applications. This helps to automate inventory controls, reporting, digital labels, and GPS tracking. The technology is helpful to prevent fraud, building additional security layers, support real-time monitoring, and analytics for insights.

Mobile Apps

Mobile Apps

Mobile apps enable eCommerce stores to track shipment and stock, and give immediate inventory alerts and notifications. Another benefit is front-end office employees and back-end office employees easily communicate to improve the business operation and give better customer service.

Machine Learning and AI

Machine Learning and AI

Integrating AI helps organizations work in an efficient manner through Chatbots. It also boosts revenue, lower operational expenses, and customer engagement.

ML supports small and big organizations to record stock inventory, makes suggestions based on user history, and automates order tracking. It also helps to market their products better and predict sales forecast. ML and AI integration allows you to mange internal inventory and prevent shortages.

Point-of-Sale (POS) Systems

Point-of-Sale (POS) Systems

Managing inventory using a POS system is quite easier for retail businesses. It ultimately saves money, simplifies daily tasks, and facilitates your daily operations. Using the right Point-of-Sale (POS) Systems for business inventory management is a success-oriented vision and decision.

Benefits of using POS systems for inventory management:

  • Improved Inventory Management
  • Simple Invoicing
  • Better Customer Management
  • Secure Payments
  • Higher Customer Orders

Top Benefits of Inventory Management System

Poor order management can severely impact your business reputation. First, if there’s an issue with stock management, it means your customers don’t get products by the time they expected. All of this will damage your reputation and drive away customers to competitors.

With that said, here are the key benefits of an inventory management system:

Accurate Inventory Forecasting

Accurate Inventory Forecasting

Quality inventory management systems can help with the forecasting of stocks. By tracking and studying stock storage levels and output, you will be better prepared for the demand. With monitoring of inventory trends on a monthly, quarterly, or unit-to-unit basis will keep you updated with sales.

Make Smart Business Decisions

Make Smart Business Decisions

It is difficult to predict the future, but with inventory management, it becomes easy to get prepared for unexpected supply chain issues, such as:

  • Delayed inventory from the manufacturer
  • Out-of-stock product
  • Low storage space
  • Cash flow problems

By knowing your inventory on a prior basis you can create a preventive plan for problems that might appear. This preparation will boost your business when you face adverse situations that otherwise could have a major impact.

Improve Customer Satisfaction

Improve Customer Satisfaction

With appropriate knowledge of product inventory that gets shipped, you can make valuable decisions regarding your customers’ preferences.

Is there any peak time for purchase? Any specific location that buys your product frequently? Additionally, any changes in inventory after a product launch will aid in getting necessary feedback on your promotional efforts.

This can lower the lead time as purchase orders come in as well as simplify operations at your POS. This can assist with both inventory tracking and inventory control and is important for an eCommerce store.

Save Storage Fees

Save Storage Fees

If you have too much inventory it will cost a lot in terms of storage charges. And that money can be used on branded shipping materials or meeting growing shipping fees. Storing goods depends on how much physical space your products take up in a warehouse.

Fees depend on how many units you have to put in stock. Placing your inventory at the right amount depends on your customer needs. This will eventually save money on storage fees and put it for your business expansion.

Clear Stock Related Concerns

Clear Stock Related Concerns

One of the most significant roles of inventory management is identifying the right amount of SKUs required at any given time in stock. If your stock dips too low, you will face the risk of products running out which can lead to missed sales and customer service issues.

On the other side, if you have too much inventory available, it can result in products that are no longer in demand or are outdated. This is the situation of “dead stock”. Having analytic features integrated with proper order management can also help with your warehouse management activities.

Increased Revenue

Increased Revenue

Poor stock management results into revenue losses. You can address errors like stock-outs and overstocks by forecasting the actual amount of your inventory. You can reduce your product cost by lowering supplier lead time. It can be made possible by advancing inventory management in the supply chain.

In simple terms, an inventory management system improves efficiency in all areas of the eCommerce business. If you operate an eCommerce website that uses cutting-edge, real-time technologies, you will be able to stay ahead in customer satisfaction.

When to Upgrade your Inventory Management

Every digital product is technology supported and technology needs regular updates so as the inventory management system. The system becomes advanced every year as the older solution eventually becomes outdated.

Upgrading your inventory solution at regular interval makes you stay ahead of competitors and help you drive more profits. We have mentioned a few checkpoints that you can analyze that it might be the time to upgrade.

Flexibility

Flexibility

Spreadsheets help your employees to manage inventory and limited storage availability restricts you from managing the operations. This eventually results in losing business. Then this is a crucial sign to upgrade and shift your inventory to a Cloud-based application. This will give liberty to add extra spreadsheets and keeps you flexible in adding and removing the sheets as per requirement.

Growing Inventory costs

Growing Inventory costs

When you lack enough stock the cost will automatically rise and it will be tough for you to keep control of it. A professional Magento development service provider will suggest an advanced inventory management system to keep you updated with the availability of the stock. Real-time access to the stock will be present from every warehouse. This enables you to take quick decisions regarding stock to meet customers’ requirements.

Accuracy

Accuracy

It is challenging for both small and big businesses to keep track of stock without an inventory system. Without a proper technology solution businesses face consequences in terms of higher operational costs. Having a dedicated inventory management system for your eCommerce store will empower you and your employees to access information in real time. Data can be accessed from any place, any time, and get the latest insights on your inventory.

Sluggish Growth

Sluggish Growth

When the salespeople are dependent on the back-end team for the availability of product stock the process becomes slow and ultimately sluggish growth. This is the sign that you need to upgrade or have a specific inventory system to instantly bring your business back to growing days.

Your inventory management software will be integrated into the eCommerce website. As the inventory system needs to update the same way your website needs it to fulfill business goals.

If you own a Magento-supported eCommerce website, then there take care of these points:

  • Update your Magento website to the latest version to prevent any security-related problems.
  • Update the PHP version of your website as Magento is built in PHP.

You need to prioritize these points before planning to upgrade the inventory management system. To give it the final touches with an updated technology version you can hire Magento developers from a recognized and dedicated service provider.

Software Suit of Inventory Management

There are several types of software categories serving inventory management functionality such as:

Accounting Software

Accounting Software

The software offers key insights into the overall financial performance of the business. It manages all financial parameters and offers proof of their financial standing. Ledger accounts received, billing and invoicing, and accounts payable are managed by accounting software.

ERP Systems

ERP Systems

Build for the manufacturing industry to plan and run manufacturing processes from the start, providing complete visibility and access over the business. All the resources being part of the enterprise are planned to meet the business goal.

Retail Management Systems

Retail Management Systems

This software is a combination of different useful tools comprising POS, inventory management, and CRM to support running an eCommerce store and improve your business.

Distributed ERP Systems

Distributed ERP Systems

The software manages logistic operations including front-end and back-end related activities. This plays a crucial role between sellers and consumers. It is mainly used to track product demand and ensure that products are delivered on time.

Warehouse Management Systems

Warehouse Management Systems

A software designed for warehouse functionality offers multiple benefits. It offers business visibility, manages supply chain fulfillment operations from the distribution center.

Challenges with Inventory Management in eCommerce

Every eCommerce business experience inventory management challenges. Knowing these challenges ahead of time with solutions to succeed in a business venture.

Here is a list of the most common inventory challenges that can impact the growth and profitability of an eCommerce business.

Overselling & Overstocking

Overselling & Overstocking

These days, shoppers look for transparency when collaborating with eCommerce brands. When you oversell inventory, chances are high of delaying product delivery and potentially damaging the trust. A possible solution for this is to add products in out of stock so customers can see themselves.

In eCommerce, having proper knowledge of your inventory and the buyer’s shopping habits will help you sell accurately. If you don’t prioritize your customers’ needs, your supply will surely not meet demand. If you overestimate your product requirements, you’re likely to spend more than your earnings.

Manual Inventory Management

Manual Inventory Management

Another key challenge for eCommerce store owners is related to business scalability. In the early stages of an eCommerce business, it’s easy to manually track and fulfill orders. But it becomes a nightmare as you work to scale your business to meet the growing customer demands.

For several business owners, scaling means selling products on different eCommerce channels. It also means collaborating with different partners, merchants, and manufacturers. It even includes storing stocks at different warehouses around the country.

Performing such steps and hoping to grow your eCommerce business is impossible. With a manual strategy, you also stand the chance of experiencing data mistakes that impact inventory management. To avoid and address the challenges discussed earlier, take the time to investigate scalable inventory management processes.

Lack of insights

Lack of insights

Another inventory-related challenge that many businesses come across is a lack of data insights. Data analysis will benefit to identify areas of improvement that can increase revenue.

To generate profits, boost growth, and cater to the customer’s needs, use data to learn how your inventory is fluctuating over time. Your insights can benefit in forecasting inventory-related decisions like when to reorder products and when to scale back.

Oftentimes, a situation comes when you need to access and act on inventory data within a few hours or days to meet business operations. Without a centralized system that provides real-time inventory information 24/7 basis, it’s virtually impossible to make these kinds of decisions.

Conclusion

For an eCommerce store inventory is the biggest asset. Treat it like one. Focus on inventory management strategies mentioned earlier to make smart stock purchasing decisions, and build a smart warehouse. And to access in real-time what exactly is available in your stock list and where it’s located.

If you focus on the best technology practices like Multi-warehouse management solutions it can help in running your business. It is highly crucial to make the right technology choices that can grow your business. A robust & secure inventory management system will save money, and time, and focus on customer service.

Timely assistance for inventory management from experts is one of the many benefits of working with Magento India. If you are seeking Magento-related support we’d love to hear from you. You can explore the list of eCommerce development services, or check out our portfolio to ensure great support. Send us your query to connect about how we can help your eCommerce store grow.

Frequently Asked Questions

1. What is inventory management in eCommerce?

 Inventory management is an approach to sourcing, storing, tracking, and shipping an order. Strong inventory management strategies can be a source of leverage for eCommerce brands looking to improve efficiency and reduce operational costs.

2. What is the role of inventory management?

 The job of inventory management is to keep a check on appropriate stock levels for the business’ needs, lowering wasted inventory, funds associated with stock, and lost income from stocks dropping too low. Manufacturers, wholesalers, and small retailers all follow inventory management to achieve different goals.

3. Why is inventory management important for your eCommerce store in 2023?

 Ultimately, effective inventory control results in better storage management, which means that products are easily located, collected, and packed as well as supplied to buyers in a quick and efficient manner. When you have the right amount of inventory present, you will be able to fulfill orders faster.

 4. What are the functions of inventory management?

 The key functionalities of inventory management is

  • To provide and maintain good customer service
  • To streamline the flow of good through the productive process
  • To offer security against the challenges of supply and demand
  • To reasonably utilize people and equipment.

 5. What are the benefits of inventory management? 

  • Better Accuracy of Inventory Orders.
  • Improved Warehouse Organization.
  • Higher Warehouse Productivity.
  • Save Time and Money.
  • Higher Customer Retention and Engagement.

 6. Do you sign NDA?

Yes! When you reach us for inventory management system related concern, we sign a strict NDA and other legal documents for data security.

7. Can I see my inventory management system process?

Yes! In fact, we provide timely reports related to it. We configure and customize your inventory management system on our development server and provide you all credentials so that you can monitor the progress.

8. Do you offer support after deployment?

We provide our clients with extended maintenance plans. We also fully support any solution we design and develop if you encounter any problems or require any enhancements.

9. Do you assure about security & confidentiality of the solution idea?

Yes, we sign a strict NDA to protect your solution idea & data. Hence, we ensure complete security and privacy of your inventory management system project.

10. How much time is needed for inventory management system implementation?

The time to implement an inventory management system is based on several factors ranging from features, scalability, hosting server and functionality.

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