Inventory and warehouse management are different, but they do overlap. Warehouse management includes a broader range of processes, where inventory management is related to stock. Using a 3PL for your e-commerce fulfilment will help you manage both and grow your business worry-free.
What is inventory management?
Inventory management is the part of supply chain management in e-commerce that aims to always have the right products in the correct quantity for sale at the right time. When done effectively, businesses reduce excess inventory costs while maximizing sales. Good inventory management can help you track your inventory in real time to streamline this process. The order fulfillment process runs smoothly and keeps your customers happy.
What is warehouse management?
Warehouse management has a wider set of processes than inventory management, and it means knowing which products are outgoing, which are incoming, and where they are located in the warehouse. This critical element of your e-commerce business provides information on product quantity, locations and your 3PL partner performance.
Warehouse management includes:
- Receiving and tracking inventory
- Picking and packing
- Shipping
- Returns processing
- Inventory management
- Reporting
Why have inventory management in place?
A lot of issues can pop up related to inventory management
- your sales spike unexpectedly, and you oversell your stock
- you run into a cash flow shortfall and can’t pay for a product you desperately need
- your warehouse doesn’t have enough room to accommodate your seasonal spike in sales
- a miscalculation in inventory means you have fewer products than you thought
- a slow-moving product takes up all your storage space
- your manufacturer runs out of your product, and you have orders to fill
- your manufacturer stops the production without warning
It’s not a matter of if the problem arises but when. That is the reason you need to have a reliable inventory management strategy in place.
How to rule your inventory management
Accurate forecasting of e-commerce demand
A huge part of good inventory management comes down to accurately predicting demand. Make no mistake; this is incredibly hard to do. So many variables are involved, and you can’t be exact in what’s coming — but you can get close.
Pay attention to trends in the market and look into last year’s sales during the same week and this year’s growth rate. Analyze your guaranteed sales from contracts, subscriptions, upcoming promotions, seasonality, and the overall economy. If there’s something else that will help you create a more accurate forecast, be sure to include it.
First-in-first-out (FIFO)
“First in, first out” is an essential inventory management principle. It means that your oldest stock (first-in) gets sold first (first-out), not your newest one. It is particularly important for perishable products so you don’t end up with unsellable spoilage. It’s also a good idea to practice FIFO for non-perishable products. If the same boxes are always sitting at the back, they’re more likely to get worn out. Plus, packaging design and features often change over time. You want to avoid ending up with something obsolete that you can’t sell.
Maintain good relationships with suppliers
Part of successful inventory management is being able to adapt quickly. Whether you need to return a slow-selling item to make room for a new product, restock a fast seller very quickly, troubleshoot manufacturing issues, or temporarily expand your storage space, having a good relationship with your suppliers is essential.
Minimum order quantities are often negotiable. Don’t be afraid to ask for a lower minimum so you don’t have to carry as much inventory. Let your supplier know when you expect an increase in sales so they can adjust production. Have them let you know when a product is running behind schedule so you can pause promotions or look for a temporary substitute.
Prioritize inventory with ABC
Use an ABC analysis to prioritize your inventory management. Some products need more attention than others. Separate out products that require a lot of attention from those that don’t. Do this by going through your product list and adding each product to one of three categories:
A – high-value products with a low frequency of sales
B – moderate value products with a moderate frequency of sales
C – low-value products with a high frequency of sales
Items in category A require regular attention because their financial impact is significant, but sales are unpredictable. Items in category C require less oversight because they have a smaller financial impact and are constantly turned over. Items in category B fall somewhere in between.
Work with a 3PL for professional warehouse management
Use your 3PLs’ experience, expertise, and technology programs to have warehouse management fit your needs.
At SMS fulfilment, we know one size doesn’t fit all in e-commerce. Use the advantages of our safe and efficient warehouses to excel in your inventory management. Our bonded and regular warehouses have separate pick and pallet storage and high-value storage for premium goods. Your inventory is safe and secured 24/7 at all times.
Easy Commerce for easy fulfillment and inventory management
Inventory management is a highly customizable part of doing business. The optimal system is different for each company. However, every business should strive to remove human error from inventory management as much as possible. Take advantage of inventory management software.
With Easy Commerce, you can check your stock availability from any device – computer, tablet or mobile phone. Have a real-time overview of your inventory, the most-selling products per month, products that are low in stock, etc. Easy Commerce will help you improve seasonal planning and facilitate budgeting fluctuation.
