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The management of inventory plays an essential role in the success of an e-commerce business. Businesses should then ensure that they have the correct practices in place to avoid the unpleasant consequences that could result from either having too little or too much stock at hand.


Functions of Inventory Management

Inventory management refers to how the business keeps track of its inventory and the control of the merchandise from the point where it is manufactured, bought, stored and then used. Inventory management ensures that there is always sufficient stock at hand to meet their customer’s demands. Lack of proper inventory can result in the business losing money due to wastage or the inability to fulfil orders because of lack of inventory. Some of the functions of inventory management include:

1. Sales

The first aspect of inventory management is ensuring that customer demands are met and that they are done in the fastest time possible. This means that the business must always have the correct inventory levels at hand to meet their market demand and any additional unexpected requests that may arise.


2. Production

The process between production and delivery is not something that occurs instantly. This means that there needs to be enough stock to ensure that it is readily available to meet sales demand without having to wait for the production process to be completed.


3. Purchases

Whenever businesses anticipate price increases that could arise for basic raw materials, they must ensure that they are well prepared by ensuring that there are sufficient quantities stored of those raw materials while they are at the lowest price at that current moment. In the event that there are shortages of those raw materials, the business would have sufficient material at hand to continue with their production operations.



Inventory Management in eCommerce

The most important thing when it comes to inventory management is ensuring that balance is maintained for inventory. Good inventory management methods are required to manage e-commerce. Below are some of the methods that can be used to optimise this aspect.

1. Understand product demand

The best way to implement the best inventory management practices for your business is by firstly understanding how the product’s demand fluctuates over time. You can do this by analysing the trends in the product’s demand over the last 12 months. The results from analysing these trends will help you determine when you will need to order fewer or more products that your business usually sells.

Another method that you could use involves analysing your e-commerce site to determine the products and pages that are most viewed by people and the time they spend doing so. This will assist you in deciding what your most popular products are, ensuring that you have more buffer stock available.


2. Use past sales to forecast demand

One of the most effective methods that you could use to forecast your future demand is by looking at your past sales and looking at when the level of demand and interest for specific products was the highest. By looking through your past sales, you will be able to find the major selling opportunities for all your products during different seasons of the year. This ensures that you can prevent stock shortages, especially during times when those products peak demand. For businesses that do not have their sales history, they could refer to their Google Trends and Google Analytics analysis for how they performed.


3. Have safety stock

When it comes to avoiding product shortages, businesses need to ensure that they have safety stock. Since all products have different demand levels, you should first determine the lowest possible inventory you can store to meet product demand while also eliminating the delays that could occur in fulfilment. Many other issues could result due to unexpected demand and such as panic buying; therefore, safety stock ensures that there is always enough stock even when there are unforeseeable circumstances.


4. Balance your inventory

There are always negative consequences that could arise due to either under-stocking or over-stocking, so businesses must get the right balance of products at all times. Whenever companies have too much stock at hand, it could lead to liquidating the business. However, understocking means that you could push away your customers, and they could end up supporting a competitor. All these things negatively impact your business’s profit margins, and they could also lead to your business receiving negative reviews. Therefore, you can use software that ensures that you manage your inventory correctly and avoid any potential issues that could arise from not balancing your inventory.


5. Prepare for seasonality

There are times when your business will experience more demand than usual, such as during holidays or seasons of the year like summer. This requires you to be prepared for these changes in demand. One of the most effective methods you could use is ensuring that your inventory levels are low during your slower months. When there is leftover stock after the peak season, you could have special offers to avoid having too much inventory at hand to avoid having too much dead stock. The times when there is slower demand you can ensure that you have all the things you will need to ensure that things run smoothly  to have a successful sales period.


6. Inventory management software

Technology is known to improve any business, and inventory management software can do the same for your e-commerce business. Inventory management software can assist in achieving all the practices mentioned in this article, such as ensuring that you always have the perfect amount of stock at hand and that you can effectively track all the products you sell. You can do all these things from one system, which makes the process convenient, while also guaranteeing the growth of your e-commerce business.





Using the correct inventory management methods can make the daily operations required for your e-commerce business easier. By implementing the methods mentioned in this article, you can guarantee the success of your business while meeting customer expectations.



See How to Choose the Right eCommerce Delivery Software for You!