Why is Inventory Management crucial for e-commerce sites?

Why is Inventory Management crucial for e-commerce sites?
July 05 2017

Inventory management is all about those steps which ensure that the optimum level of required resources is maintained. It avoids the shortage and overabundance of resources and enables you to function smoothly without any time lag. A proper inventory management is crucial for e-commerce sites, keeping in mind the hyper-competitive landscape and zero patience level of customers who can easily switch to your competitor in the case of cancellation of order due to the shortage of stock.

Businesses that implemented thorough inventory management reported that 95.4% of their orders are delivered to customers on time, 94.6% of orders are received by suppliers on time and there is a decrease of 7.5% in the frequency of out of stock situation. On the other hand, the businesses on the other side of the boat appear to lose the customer, reputation and money. Further, the following attributes of e-commerce sites make it more crucial to have proper inventory management system in place.

E-businesses often offer a wide variety of products; for example, different sizes and many colours of a particular garment or shoe and it becomes very difficult to handle such matrix products offering without effective management of it.

Another common offering of e-commerce sites is bundled. These are multiple related products offered to customers at reduced prices and give a lot of value to customers. However, they are a little complicated in nature and therefore require a proper inventory management system.

E-commerce sites need to sell across multiple channels and boundaries and therefore require to maintain an efficient centralised inventory management system so that the operations become convenient, cost-effective and error-free. Further, it is beneficial for e-commerce and online retail brands to partner with third-party logistics (3PL) provider who has the experience in managing inventory and also the necessary tools, equipment and software to manage it effectively.

Inventory management is a must for:

  1. Accurate order fulfilment

    Imagine you receive an order, send it to the warehouse and then find that it is out of stock or you just land up shipping the wrong item to the customer. All these are common when inventory is not managed properly. Therefore, the more managed the inventory is the more accurate the delivery will be.

  2. Better planning and ordering

    At times owners end up ordering extra stock of one product and fall short on another fast-moving item. A managed inventory system mitigates all these issues, allowing the managers to refill the inventory as per the requirements.

  3. Increased customer satisfaction

    A good inventory management system ensures a quick and correct delivery to customers which ultimately results in increased loyalty, sales volume and a better brand image of the e-commerce store.

The choice of inventory management system entirely depends on your business needs. A system good for an industry leader may not work effectively for a start-up, small and medium enterprise or a niche provider. However, businesses should always consider certain attributes before selecting a management system. A system should be able to synchronise inventory across multiple channels, geographical locations and offline. It should automatically identify the real-time inventory count and disseminate this information across all office locations and on your website. This is significant because e-commerce platforms need to provide accurate information to their customers about the availability of products.

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