By Chris Gates, Senior Product Manager 

Inventory management is a process that oversees, controls, and optimizes the flow of goods and materials within a business. 

It involves the planning, procurement, storage, tracking, and distribution of inventory to ensure that the right products are available in the right quantities, at the right time, and in the right place. It’s a big deal for a growing ecommerce business.

In this article, I’ll be sharing practical ways that you can improve your approach to inventory management. Let’s dive in! 

What’s the difference between inventory management and warehouse management?

Online sellers shouldn’t confuse inventory management with warehouse management. It’s one step removed from that process. Warehouse management looks after goods in your warehouse, enabling you to move stock around efficiently so that your pickers and packers can fulfill orders. 

Inventory management is much more granular than that, answering questions like:

• Do we have enough stock to fulfill orders in that location?
• Do we need to move stock to another warehouse? 
• Do we need to move stock to a fulfillment center?
• Do we need to buy more stuff from our suppliers?
• How much stock do we need to buy? 
• When do we need to buy it?

When does an online seller need an inventory management solution?

After a business scales beyond a certain point, it becomes impossible not to use something to manage your inventory. For example, if you sell on multiple channels, you need something to help you manage the process. It becomes impossible to do it any other way. You can forget about using spreadsheets and manual intervention. That won’t work anymore.

If you don’t manage your inventory well and know how much you have to sell, you will start disappointing your customers. The last thing you want to do is start overselling. This is when you list a product on your website or an online marketplace and take your customers’ money, but you can’t fulfill the item.

This is a terrible situation in terms of reputation management. You don’t want to sell what you don’t have. You’re going to get bad reviews, you’re not going to get repeat customers, and you won’t be able to build that brand because you have a reputation for failing to fulfill orders.

But reputation management is just one side of the story.

When people are eager to buy your products, you don’t want to run out of them. So whether you are selling what you don’t have or not selling what you could be selling, those are both problems that can be solved by better inventory management.

How modern ecommerce businesses utilize inventory management

Inventory management is an essential part of any modern ecommerce business. This is true even if you don’t own your own warehouse and fulfill your own orders. Maybe you sell and fulfill out of Amazon FBA or have other third parties fulfill on your behalf. There’s still a lot of inventory management you will have to do.

It is still your responsibility to ensure that the channels you sell on are advertising the right amount of stock and that those warehouses have enough stock to fulfill your orders. 

How can online sellers use inventory management to build a more efficient business?

The more information you have about your inventory, the better. Systems like Linnworks tend to be where all that data sits, so the more you use that system, the more you will know about your business.

For example, suppose you have a history of raising purchase orders in Linnworks and receiving orders into Linnworks from eBay or Amazon. In that case, Linnworks suddenly knows how much you usually sell.

It also knows how long it typically takes you to get stock back in, how much that stock costs, and how much you sell it for. With this information, it can figure out your consumption rate, how many items you will sell in a given period, and how long it will take to get more of those items shipped over from China in a shipping container.

With all that historical data, we can tell you that you need to order 100 units of a specific product on Thursday. We call that “slot forecasting”. This demonstrates the benefit of storing all that information in a single system and not jumping between platforms or juggling spreadsheets and paper trying to figure it out yourself.

Inventory management for growing ecommerce businesses

Any investment in inventory management is an investment in growth. If you’re only selling on one channel, it’s less of an issue because that channel probably already has built-in inventory management capabilities. 

If you think you just want to sell on Amazon, that’s fine. However, ambitious online sellers will want to expand onto other online marketplaces and potentially their own ecommerce store via a platform like Shopify or Magento.

New opportunities like TikTok Shop or Back Market are popping up every day, which you will not want to miss out on just because you’re not syncing your inventory.

Be the entrepreneur you always wanted to be

Business owners don’t want to waste time micro-managing every aspect of their business. They want to leave that stuff to other people and have a system to help them manage it.

When the right systems are in place, they can start making more interesting decisions about how to grow their business. Should they start selling on new channels like TikTok shop? It’s their job to make those decisions. It’s not their job to ensure everyone knows they have ten units of a specific item in stock.

How inventory management helps reduce risk

Inventory management also helps online sellers reduce risk in their business operations.

Many large companies tell us that 90% of their sales come through Amazon. That’s pretty scary. You can’t have all your eggs in one big Amazon basket. However, you can only confidently expand onto additional sales channels if you have an inventory management system.

An unbiased solution to managing multiple sales channels

When using a system like Linnworks to manage your inventory, it treats every channel you integrate with in the same way.

You already have a warehouse that knows how to fulfill TikTok orders because they’re not TikTok orders. They’re Linnworks orders. They’re all the same once they get into a centralized system. 

You don’t have to teach your staff how to log into TikTok, pick and pack a TikTok order, or manage inventory on TikTok. You don’t have to do any of that because Linnworks has it all figured out. You just have to commit to selling on TikTok. We’re trying to lower that barrier to entry to get on as many channels as possible to make as many sales as possible. 

Adding new channels becomes much less scary because you know that the inventory management piece has been taken care of.

How can online sellers manage inventory across multiple warehouses

We typically consider moving stock between locations when discussing inventory management across multiple warehouses. So, if one warehouse is running out of stock, will they buy more from the supplier, or will they request that stock the company already owns be transferred from another warehouse? It’s about making decisions around moving stock to fulfill orders in the most efficient and profitable method.

On the inventory management side, we have something called “Warehouse transfer,” which allows somebody to log in and say, “I am going to send 500 of this item from Warehouse A to Warehouse B; make sure Warehouse B is aware that it’s coming.”

So they can see that they’re running low in Warehouse A but decide that they’re not going to buy more from the supplier because Warehouse B has 500 on their shelves. They don’t need that many because they only fulfilled two orders from that stock last month.

Commercial decisions may influence the movement of stock between warehouse locations.

For example, you might be shifting so many units through Amazon that it makes sense to ship those products by FBA. However, sending that same product from FBA might be less cost-effective if it’s a Shopify order. This means you’ll need to hold stock in two or more locations. If there’s a sudden run of products from a specific channel, you may need to transfer stock between warehouses. 

On the flip side, this problem can also be solved by an order management solution. That basically says, let’s route the order to be fulfilled from a warehouse that already has stock. You’re doing the same job. You’re making sure that you can fulfill an order. 

Crisis management

The ability to quickly change your fulfillment process can help you manage unforeseen circumstances. I recently spent some time with a customer based in Wales. They fulfill from their warehouse in a fairly rural area and Amazon FBA.

While they would prefer to fulfill from their own warehouse, they had a few days of heavy snow and weren’t sure how many staff could make it to work or if their couriers could even reach them. They asked Linnworks to take all the orders they received on those specific days and asked how many could be fulfilled by FBA. 

The company had around 200 orders, and FBA was able to fulfill 150 of them, dramatically reducing the pressure on the in-house warehouse team and the potential knock-on effect on the customer service team.

A single source of truth

When everyone across your organization has access to the same high-quality inventory data, they can make quick decisions based on the certainty that they know the stock is available and can be fulfilled.

Your customer service team can look at your inventory with the same confidence as your buyers or fulfillment team. Similarly, your marketing team can view real-time stock availability and plan campaign activities, your finance team can understand how much revenue is tied up in current stock levels and items in transit, and your leadership team can quickly review strategies and make more agile decisions about the direction of your business. 

To learn more about how Linnworks can give you the peace of mind to know that when you make a sale, you can fulfill that order, and your inventory will be up-to-date everywhere, schedule a call with one of our inventory management specialists or book a demo today.