How to track inventory successfully for your ecommerce business

Managing inventory is a bit like juggling—it looks easy when you watch someone else do it, but it’s easy to drop the ball when you try it yourself! But with the right approach, there’s no reason tracking inventory can’t be straightforward and stress-free. 

Also, like it or not, it’s a skill you must master. Why? Because in the competitive world of ecommerce, effective inventory tracking isn’t just a nice-to-have feature. It’s a necessity. 

In this guide, we’ll reveal how to keep track of inventory for small business operations and growing enterprises alike. 

So, join us as we take a whirlwind tour of inventory tracking methods and best practices, and outline how you can put them into practice on the most popular ecommerce platforms. 

What is inventory tracking?

In a nutshell, tracking inventory involves managing and monitoring the quantity and location of all of your stock items. The primary goal from a customer-facing perspective is to help shoppers find what they’re looking for—preferably without being on the receiving end of a disappointing “out of stock” message. 

From a business perspective, monitoring stock levels and managing orders more efficiently helps you to understand:

• What products you have on-hand.
• What needs to be reordered.
• How to optimize stock levels.

The bottom line? When you track inventory right, it’s easier to maintain smooth operations and meet customer demands while simultaneously nailing your revenue and customer satisfaction goals. 

Why is inventory tracking important? 

Accurate inventory tracking can make or break your ecommerce business. That’s a cold, hard fact. Yet, research shows that 43% of small businesses fail to monitor inventory.

Here’s a comprehensive list of the bottom-line busting benefits you’ll discover once you learn how to track inventory like a pro:

• Reduce stockouts: Not having the items shoppers want leads to lost sales and missed opportunities, which can harm your brand reputation.
• Prevent overstocking: Holding excess stock ties up your capital and wastes money on unnecessary carrying costs.
• Improve cash flow management: Knowing the exact value of your on-hand and in-transit inventory at all times allows you to make smarter purchasing decisions.
• Boost customer satisfaction: Providing shoppers with accurate inventory information means they get the products they want every time, without delays.  
• Get more business: Happy customers are repeat customers who can generate even more revenue through recommendations and referrals.
• Analyze business performance: With up-to-date stock insights, you can make better decisions about inventory investments and pricing strategies.
• Enhance preparedness: Setting the right safety stock levels and reorder points ensures you’re prepped for seasonal fluctuations and holiday season peaks.

What are the different methods for tracking inventory?

The reasons you need to track inventory should now be clear. However, the question remains: precisely how do companies keep track of inventory? After all, there’s no denying it can be a challenge—especially for those selling across multiple sales channels. 

The truth is, there’s no one-size-fits-all solution. Different methods suit different business sizes, types, and operational complexities. Here’s a rundown of traditional and automated inventory tracking options. Whether you’re a small startup or a scaling enterprise, understanding these methods will help you choose the best approach for your needs. 

Manual inventory tracking

Manual tracking involves keeping tabs on your inventory by hand. Is it old-school? Yes? Does that make it foolproof? Heck no! It may seem straightforward, but this approach often comes with a whole host of challenges. Let’s dig into the details. 

Paper-based systems

We won’t spend much time on this, as it’s a pretty outdated, unreliable, and inefficient methodology. Sure, it can work for very small operations, but it’s not really feasible for ecommerce businesses that want to grow. 

The drawbacks of physically counting stock and recording it on paper forms should be fairly obvious, but we’ll give you a quick overview anyway:

• Significant risk of loss or damage.
• High potential for inaccuracies.
• Lack of real-time data.

Using spreadsheets (Excel) 

If you’re just starting out and looking to learn how to keep track of inventory in Excel, here’s how to get started:

1. Create Columns for SKUs, product names, quantity on hand, reorder level, and supplier information.
2. Update your spreadsheet every time you receive or sell stock to maintain accuracy.
3. Analyze trends using Excel’s data analysis tools to make informed purchasing decisions.

The primary benefits of tracking inventory using Excel are the low cost and ease of implementation. However, a spreadsheet system is susceptible to many issues that can lead to big headaches—and some pretty significant business losses:

• Manual input increases the chance of human error. Just one wrong figure or broken calculation can cascade throughout your accounts, compromising the accuracy and integrity of your data.
• Spreadsheets are time-consuming to update and manage, especially as your business scales and you begin dealing with larger inventories.
• As with any offline system, there’s a huge potential for data loss if a file becomes corrupted, your PC dies, or your data storage devices get lost or damaged. 

Need definitive proof that Excel sheets are not the way to go? Take it from these two former Excel aficionados that now rely on SkuVault Core to do the heavy lifting on record-keeping:

• Case Study: How Golfio improved order fulfilment time by 87.5%
• Case Study: How Chrome Battery achieved $300,000 in annual savings

Automated tracking

As you scale and find yourself with your ecommerce fingers in an increasing number of juicy, revenue-laden pies, utilizing dedicated inventory management software becomes a no-brainer. After all, automated systems solve the most significant issue of manual inventory tracking: how to keep track of stock inventory in real time.

“The implementation of an automated system has enabled us to streamline our operations by providing real-time data on stock availability and replenishment needs across all locations. Additionally, we have established regular communication with suppliers to maintain transparency about their production schedules and delivery times. This approach allows us to plan for any potential delays or disruptions proactively.”

Vaibhav Kakkar, CEO of Digital Web Solutions

Inventory management software 

Using dedicated systems like Linnworks Inventory Management and Skuvault Core makes light work of learning how to track inventory because they’re specifically designed to simplify your processes and keep things running smoothly. Here’s what you can expect:

• Real-time updates: Automated updates ensure reliable access to accurate inventory data, helping you respond swiftly to customer demands.
• Automated reordering: With reorder points that notify you when it’s time to restock, you’ll never be caught short when demand spikes.
• Reporting and analytics: Powerful data analytics dashboards reveal insights on sales trends, inventory turnover rates, campaign effectiveness, and more.

With these dynamic tools in your corner, you can save time, trim labor costs, boost accuracy, and dance circles around customer demands—all while streamlining operations, making better decisions, and dodging stockouts and overstocking. Before you know it, tracking inventory may even become, dare we say it, fun!  

“Linnworks has reduced manual tasks and saved on wages. Without Linnworks we’d have to employ more staff, which has an impact on our overall bottom line.”

Arthur Martin, MD and Co-founder, Buy Wholefoods Online

Integration with ecommerce platforms (e.g., Shopify, eBay)

If you’re going to make it big in ecommerce, chances are you’ll need to sell on multiple platforms. After all, the more channels you’re on, the more you’re likely to sell. Plus, research shows that:

• When shoppers are exposed to multi-channel marketing campaigns, they spend about 10% more.
• 72% of consumers find it easier to remain engaged with brands that have a multichannel presence.
• Shoppers using various channels have lifetime customer values that are 30% higher.

At Linnworks, we’re dedicated to making inventory management straightforward so you can focus on growing your business. Here’s how our integration system works:

• Capabilities: Effortless channel integration with hundreds of global marketplaces, D2C platforms, and shipping providers keeps inventory data consistent across all sales channels.
• Dashboards: Accessing all your inventory information in one place makes managing stock levels, orders, and shipments easier.
• Management: Managing multiple sales channels simultaneously helps you avoid overselling and stockouts, regardless of where your customers are shopping.

The result? Less manual work with more accuracy. It’s a winning combination! 

“Linnworks integrations with Etsy plus apps that let you sell directly on Walmart, managing and selling on different platforms is so much easier.”

Ira Cohen, Founder, Fantastic Sports Store

Best practices for tracking inventory in ecommerce

As your business grows, the methods you use to track inventory should evolve with you. Here’s a list of strategies you should consider to ensure you’re well-placed to respond swiftly to market changes and keep things running smoothly. 

Real-time tracking

Let’s be honest. Real-time tracking is non-negotiable in the modern ecommerce era. Only when you’ve got a clear and accurate view of your stock levels across all channels can you avoid the perils of overselling and stockouts, make swift adjustments, and keep on top of customer notifications.

“The ability to quickly update SKUs and accurately sync inventory levels across channels means I don’t have to worry about overselling or underselling, freeing up my time to focus on the business.”

Shaun O’Brien, Company Director, Direct Plants

Regular audits

Regular inventory audits are the only way to reconcile actual stock with recorded inventory, keep your finger on the pulse of discrepancies like misplaced items or unrecorded sales, and address issues before they escalate into major headaches. 

FIFO vs. LIFO

Utilizing the First-In, First-Out (FIFO) method to track inventory is the best way to sell older stock first. This approach reduces the risk of obsolescence and can also help you manage cash flow during periods of inflation. On the flip side, a Last-In, First-Out (LIFO) strategy is easier to maintain while ensuring your stock reflects current market values, which may result in a lower tax bill. 

Barcode and RFID technology

Technology like barcodes and RFID scanners are the 007s of your organization, empowering you with a license to kill stockouts, solve warehouse mapping mysteries, stop human errors in their tracks, and fulfill orders with ruthless efficiency. 

How to keep track of inventory on popular ecommerce platforms

Every marketplace comes with its own set of quirks and requirements, but with the right strategies in your arsenal, you can keep your inventory game sharp and responsive. Let’s explore how to track inventory effectively on some of the most popular ecommerce platforms.

eBay 

Here are our top tips for keeping your eBay inventory in tip-top shape and effortlessly organized:

1. Use eBay’s inventory management tools: Leverage eBay’s built-in features to monitor stock levels and automatically update listings when items sell.
2. Sync with inventory management software: Integrate your eBay store with tools like Linnworks to centralize your inventory data to ensure eBay sales automatically update your overall stock levels.
3. Set alerts for low stock: Establish alerts that notify you when items are running low so you can restock promptly and avoid disappointing customers.

Shopify 

Looking to supercharge your Shopify selling game? Like eBay, Shopify has built-in inventory tools that can be integrated with software like Linnworks to help you track stock levels, set reorder points, and manage variants seamlessly. 

However, you’ll need to stay alert for common issues and learn how to update your settings to fix them. Here are a few frequent hiccups to watch out for:

• “Inventory not tracked” errors: This means your product’s stock levels are not being monitored.
• Listing discrepancies: Sometimes, the quantities shown on your product listings don’t match your actual stock, leading to overselling.
• Outdated product information: If your inventory settings aren’t regularly updated, you might miss sales opportunities or run into unexpected stock issues.

Amazon

How you track inventory on Amazon will depend on which fulfillment method you use. Here’s a quick breakdown of your options: 

1. Fulfilled by Merchant: Fulfilling customer orders yourself can save time and money. However, to sync inventory and streamline orders across multiple channels effectively, you’ll need to invest in a robust inventory management system with Amazon integration.
2. Supply Chain by Amazon: This is a complete end-to-end solution comprising a fully automated set of supply chain services to get products from manufacturers to your customers. Automated inventory replenishment takes care of all stock control tasks on your behalf, albeit with a significantly limited degree of control.   
3. Fulfillment by Amazon (FBA): Outsourcing order fulfillment to Amazon means picking, packing, shipping, customer service, and returns are handled on your behalf. Less worry, yes. But also, even less control. Interested in learning more about Amazon FBA? Here’s everything you need to know, explained by Jim Mann, VP of Europe at GETIDA.

Common challenges in inventory tracking and how to overcome them

Even with a solid stock management strategy in place, tracking inventory is not without its hurdles. However, most are easy to vault over and continue running when you know how to approach them. Here’s a breakdown of the three most common recurring issues and solutions. 

Inventory discrepancies

There are several reasons your recorded stock levels and actual quantities may differ. The usual suspects include data entry errors or wastage due to theft, damage, or misplacement. Don’t get us wrong, perfection is a lofty goal. But you can inch closer to it by:

• Conducting regular physical counts.
• Utilizing barcode or RFID scanning technology.
• Establishing alerts for unusual stock changes.
• Swiftly investigating any anomalies.
• Implementing standardized procedures for receiving and storing inventory.
• Training staff on best practices to reduce human error.

Overstocking and stockouts

Finding the sweet spot between overstocking and stockouts can feel like a tightrope walk. Here’s a list of tactics that can help you avoid the most common pitfalls:

• Use historical sales and stock turnover insights to make data-driven decisions about optimal stock levels.
• Consider implementing a just-in-time (JIT) inventory system, which minimizes stock on hand and reduces the risks of overstocking.
• Maintain a safety stock of high-demand items to cushion unexpected spikes in demand or supply chain disruptions.
• Regularly review and adjust inventory levels based on seasonal trends and market changes.
• Establish strong relationships with suppliers to ensure quick restocking options when needed.

Seasonal fluctuations

Ignoring the influence of seasonal variations is a surefire way to be left watching your competition race ahead while you linger in the dust. Here are our recommendations for staying ahead of the curve—and your competitors:

• Real-time inventory tracking: Increased visibility is essential when orders are pouring in at a faster-than-average rate.
• Batch picking and packing: By grouping orders for efficient picking and packing, your teams will save time and reduce the likelihood of mispicks.
• Shipping integration: Effective shipping integration auto-selects the most suitable carriers based on speed and cost, then generates and prints the shipping label for you.  
• Reporting and insights: Historical data and stock forecasting models can help you predict inventory needs more accurately. 

How to track inventory successfully: summary and key takeaways

Looking for a quick TL;DR version? You’re in luck! Here’s what it all boils down to…

Effective inventory tracking is essential for companies looking to minimize stockouts, prevent overstocking, ensure optimal cash flow, delight shoppers, and thrive in the competitive ecommerce landscape. 

To succeed, you’ll need to:

• Find the inventory tracking method that best fits your business size and operational goals.
• Leverage real-time inventory management and innovative multi-channel integration software to streamline your workflows.
• Stay up-to-date with audits and FIFO/LIFO methods.
• Consider implementing barcode technologies to optimize your inventory management processes.
• Learn how to address common inventory management challenges quickly and efficiently.

Need help synchronizing your stock levels? With Linnworks by your side, taking control of your inventory and positioning your business for long-term success has never been easier. Our comprehensive suite of inventory management solutions guarantees smooth stock flow, enhanced operational efficiency, and boosted profitability. 

Book a demo today to get going and keep growing! 

FAQs

Feeling energized and ready to dive in? Great! To help you get started, we’ll leave you with this recap of some of the most frequently asked questions about how to track inventory. 

How do companies keep track of inventory?

The most successful ecommerce companies invest in automation software that allows for effective inventory tracking with a more hands-off approach, freeing up more time for business development.

How to keep track of stock inventory in real-time?

The best solution is to choose an inventory management system that integrates with all your sales channels and utilizes barcode or RFID scanning technology to double down on accuracy.

How to keep track of eBay inventory? 

Utilize eBay’s built-in inventory management tools and integrate with inventory management software like Linnworks for centralized data and automatically updated listings between your website and other platforms.

How to keep track of inventory for small businesses?

Start with a simple system, but be wary of sticking with manual tracking for too long as you grow. The sooner you transition to automated inventory tracking, the more real-time visibility you’ll gain.

How to keep track of inventory in Excel? 

Set up a spreadsheet with columns for SKUs, product names, quantities, and reorder levels, and update your records carefully after every sale to avoid costly data input errors.

What does inventory not tracked mean in Shopify?

It means your product’s stock levels aren’t being monitored by the system. You’ll need to enable the “track quantity” option in your product settings to fix the error.