The nature of selling is to supply what customers demand. To sufficiently meet the customers’ demand, the quality and quality of products need to be taken into careful consideration. That’s why we need effective eCommerce inventory management.
Approaches To Optimize Inventory Management
Predict The Demand Of Products
As we usually buy products from distributors and wholesalers before selling them again to final customers. To avoid goods surplus or shortages which can lead to considerable loss, we need to consider the quantities of products to optimize the inventory system.
Forecasting the demand for products is usually based on selling records, tracking customers’ behaviors, and new trends. Moreover, the demand for products varies from season to season. To ensure accurate predictions, we need to use some automatic application to track and follow up our eCommerce business activities, then analyze and detect.
Seasonality Inventory And Promotions
Products demand can dramatically surge in a particular season like Christmas, Black Friday, or product-favored season. To prepare for rush hours, besides fulfilled warehouses, you may take advantage of Backorder. It is inevitable to face out-of-stock status, and Backorder will allow customers to purchase products even if they are unavailable at that time. Customers can buy as a pre-order and receive the shipment on a particular day like normal.
If you are a BigCommerce merchant, be sure to try out the BackOrder App!
Your promotion campaign will directly affect the product demand as it can drive customers’ choices. Therefore, promotion is also a crucial element that you need to pay attention to when forecasting upcoming demand and thus optimize inventory management.
However, the highest profit is gained at a certain level of reserves. That is why there are some concepts you need to interpret to optimize inventory before establishing a restock plan. They are service level, lead time, safety stock, reorder point, and optimum order quality. The graph below illustrates their relationship:
Consider What Product Need To Be Priority
Depending on different seasons, customers’ tastes, and other factors, not all products are stored in the exact quantities. Therefore, you need to consider what products should be a priority over others. To have an accurate detection, you need to use some cost-benefits models.
For instance, ABC Inventory Analysis classifies inventory in terms of the extent of importance and allocates control accordingly. There are three categories to evaluate the level of products’ priority:
- A group item: 15% to 20% of items account for 75% to 80% of annual inventory value. This group is the most important one to optimize inventory.
- B group items: 30% to 40% of items that account for 15% of annual inventory value
- C group items: 40% to 50% of items that account for 10% to 15% of annual inventory value
We have suggested some steps that you need to go through to optimize inventory management. When you can adopt them into reality, you can gain the expected revenue and desirable profits.
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