Inventory Optimization: Why Is It Important for Your Online Store?

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If there’s one thing we’ve all encountered as consumers over the last few years, it’s empty shelves. Supply problems seem here to stay for the time being. And this “empty shelf” problem isn’t just in physical stores – online stores have been affected too. Disruption happens, and the less prepared your online business is for it, the worse off it can be.

This article will help those of you who are online business owners and entrepreneurs get to grips with what ecommerce inventory optimization is, how it works, and why it will benefit your online store. Combine this with ecommerce best practices and you’ll be well on your way to new heights of ecommerce success!

What Is Inventory Optimization?

Simply put, ecommerce inventory optimization is “the process of maintaining the right amount of inventory required to meet demand, keep logistics costs low, and avoid common inventory issues such as stockouts, overstocking, and backorders” for an online store.

In short, it’s about staying on top of your goods and ensuring they are easily orderable, available to send out, and best reflect what your online customer wants.

With some current supply chain delivery times at record highs, your online business needs as much help as possible to keep your customers happy and your profits as high as possible. So how can it work for your online business?

How to Optimize Your Inventory

Here are some tips to help you get ready:

Be organized – There’s no point in inventory optimization if your inventory’s all over the place. Ensure everything is put in a place that makes sense – like with like, category with category. It will ease things when you implement your plan.

Make the plunge to software – Optimization doesn’t work well with analog communication. Paper gets lost. People have terrible handwriting. You’ll need a good setup for cutting-edge software. Some popular choices include Skubana, EasyStock, and TRXio.

skubana inventory optimization software
Skubana is a popular choice of inventory optimization software.

Upgrade your scanning equipment – Consider both one and two dimensional barcodes for scanning so that you can cut down the incidents of error, sync up with your buying process, and get your data in a split second. Scanning apps help too – some of the most popular include Wasp Barcode, Shopventory, and Vend Scanner.

wasp inventory optimization barcode scanner
Wasp is one of the scanners popular with businesses.

Advice from the Experts

TOP TIP: If your products are easily damaged or expire quickly, consider factoring in a first in, first out approach to continue to maximize profits.

Why Optimize Your Inventory?

Once you understand the reasons why optimizing your inventory will work for you, it’s a lot easier to put it in motion. You probably already know the importance of acing the basics of managing ecommerce inventory, but what are the benefits of optimizing your inventory? Here are six of the top reasons:

#1 Boost Your Competitiveness

When you implement ecommerce inventory optimization, your processes become more streamlined.

Communication improves throughout the supply chain – from the suppliers to your warehousing or storage and distribution. Improved communication means that you can be faster, cheaper, and more responsive than competitors who will inevitably face inventory and fulfillment problems which turn off their customer base.

Advice from the Experts

TOP TIP: Be proactive with your communication and prioritize your relationships with the suppliers most essential to your online business.

#2 Improve Customer Satisfaction

For a business, reputation is everything. Customer satisfaction needs to be at the heart of every business, especially in this age of online reviews. You need every bit of help possible, and fortunately inventory optimization can radically improve customer satisfaction.

You’ll get faster delivery times because you’re more likely to have the required items in stock. The more efficient you are, the better your prices. And for customers who like to see how many pairs of those shoes you’ve got left before they’re gone, they know exactly when they have to take action!

Advice from the Experts

TOP TIP: If something goes wrong, automated software will let your affected customers know as soon as possible. No one likes to deliver bad news, but customers appreciate transparency.

#3 Reduce Costs

We can all use as many money-saving practices as possible – especially those of us with an online business. Fortunately, there are many ways that inventory optimization can reduce your costs, such as:

  • Automatic reorder points for your most popular items
  • Strategically dropshipping some of your items with companies like Vida Dropshipping XL
  • Finding manufacturers who operate “just in time” manufacturing

Adopting these practices means you’ll need less storage because you’ll be storing fewer items over smaller periods of time. That open communication is also less time spent on management tasks like chasing and clarification, which frees up time to further improve your business.

vida droppshipping xl inventory optimization
Dropshippers like VidaXL offer plenty of options.

Advice from the Experts

TOP TIP: If you’re considering partial dropshipping, make sure you know the difference between dropshipping and ecommerce fulfillment – it’s easy to confuse the two!

#4 Increase Turnover

Low turnover is a common problem for business owners. They can get caught out when under marketing and over-ordering. And an increase in competition forces them to sell items at a loss.

But ecommerce inventory optimization keeps track of all your inventory. It prioritizes best selling items and tells you which items need extra digital marketing on your channels. It also processes your orders faster and predicts upcoming trends so that you know what will be hot in the future.

Advice from the Experts

TOP TIP: If you’ve got photogenic products, why not make part of this optimization process stand-alone content on one of your marketing channels?

fenty product image example inventory optimization
Fenty uses its photogenic images to engage its customers

#5 Better Inventory Visibility

Who wouldn’t want to know what they’ve got in stock at any time? When you see problems, you can do something about them.

Low inventory notifications are a great example of visibility. Rather than send someone to manually check inventory, you get automatic notifications and re-orders. Inventory optimization brings you better overall control. Apps like Sortly help you keep on top of everything.

sortly inventory optimization app
Sortly is a useful inventory app.

Advice from the Experts

TOP TIP: You can also set-up sending automatic purchase orders which further saves time and working hours as well as getting your payments sorted faster.

#6 Better Supply Chain Management

No matter how small your online business, there’s never just one person involved in it. You’re still in a supply chain with other people. And with so many external factors like transport challenges, strikes, inflation, and shortages, supply chains can go wrong very fast. Though it’s not necessarily anyone’s fault, the impacts of supply challenges are the same.

Clear information and communication is key to supply chain success (and damage control). Inventory optimization can help you notify your suppliers of your upcoming needs and last-minute adjustments faster and more accurately. This gives them more time to respond and fulfill your requirements. It also saves you money because there are fewer mistakes and relays between you.

Advice from the Experts

TOP TIP: No matter how good your relationships with suppliers, make sure they are on top of their compliance and legal obligations. You don’t want your reputation damaged by a bad supplier.

Summary

With all these advantages, it’s easy to see why ecommerce inventory optimization for your online store would be an attractive prospect. With a clear idea of what you want to sell, and the commitment to put the right optimization plan into place, you will save money and time, improve your customer relationships, strengthen your supply chain, and basically make things much easier for yourself.

Sounds great, doesn’t it?

FAQs

Ecommerce inventory optimization works with all kinds of products! Google Trends, Meta Ad Library, Amazon Suggest, and even Reddit threads are all useful tools for finding trending products – our article on How to Find Trending Products explains how to use these channels to source hot products for your business!

There’s plenty you can do, but establishing safety protocols, cleaning and auditing your current stock, and making the most of the physical layout are a great place to start.

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