How SMEs Can Effectively Manage eCommerce Inventory In 2024

In 2024, the competition in the eCommerce industry is fierce, and every penny counts. So, understanding how to effectively manage inventory is crucial for small and medium-sized enterprises (SMEs) to prevent product waste, save costs and time, and give customers access to the products they want.

eCommerce inventory management is more than just keeping track of your stock so you don't sell out; it's about effectively managing all the procedures and processes behind ordering, receiving, storing, tracking, and accounting for the products a business sells online.

This article explores the importance of inventory management and six best practices for SMEs to effectively manage their eCommerce inventory in 2024.

The Importance of Effective Inventory Management

Effective inventory management is essential for meeting customer demands and achieving long-term success. Here's why it’s is important:

Avoid overstocking. Having too much inventory at once can tie up your capital and limit how much you can invest in new products, emerging technologies, or marketing campaigns.
Ensure products are in stock. By forecasting demand and tracking stock levels, you can minimise the chances of being out of stock of popular products and frustrating customers.
Enhance customer satisfaction. You can ensure you have products available when customers want them, leading to higher customer satisfaction, repeat orders, and a positive brand image.
Improve your decision-making. Real-time data on your inventory levels improves your informed decision-making about purchasing, pricing, and product offerings.
Reduce risks. Effective inventory management allows you to mitigate risks like product damage, expiration, and theft.
Streamline operations. You are able to streamline operations across various business aspects, including improved order fulfilment times.
Save on supplier costs. By forecasting demand, you can negotiate cost-saving deals with suppliers for accurate bulk purchases that will sell.

6 Ways To Effectively Manage eCommerce Inventory In 2024

Track inventory data

Whether you store the stock yourself, use a fulfilment partner, or rely on dropshipping suppliers, keeping close tabs on inventory data is the key to effective inventory management. The inventory data you'll want to track includes:

Product numbers. A Stock Keeping Unit (SKU) is a unique number for each of your products that makes it easier to track inventory. They are vital for retailers and wholesalers to identify products and monitor stock levels.
Quantities on hand (QOH). The current amount of stock per item available in your inventory.
Product storage location. The areas where your items are stored or displayed.
Supplier information. This includes contact information, order minimums, case quantities, and delivery times (also known as lead times).
Product costs. Wholesale costs per supplier and quantity discounts.
Retail pricing. Current and promotional sale prices for your products.

SMEs that stock less than 100 items can create a spreadsheet on software like Google Sheets, for simple inventory tracking needs.

However, integrated inventory management systems such as Lightspeed or Clover are an excellent option for tracking inventory, supplier data, purchase orders, and stock receipts within one cost-effective system.

Use inventory forecasting

Forecasting is predicting how much inventory you'll need to meet upcoming demand. Demand is based on a range of factors, including:

Product sales velocity. How quickly are your products selling?
Upcoming promotions. Do you have discounts or offers coming up that will entice more customers?
Market trends. Are the products you sell becoming more popular due to market trends?
The season. Are your products more popular in the winter months or during summer?
Business growth. Is your customer base growing?

However, the goal of forecasting is to have just enough inventory available to cover the predicted sales without overstocking. This is ideal for SMEs with less storage space.

Understanding sales velocity - a measurement that indicates how quickly you're selling your goods - and supplier lead times - the time it takes for your supplier to have goods ready for delivery - are both critical to effective inventory forecasting.

Working with reliable and timely suppliers allows you to stock fewer items and order more often, which helps with cash flow. Meanwhile, slower shipping suppliers or those used for seasonal purchases will require you to make fewer, larger purchases, which ties up more cash in inventory.

Luckily, many inventory management systems have built-in forecasting tools.

Utilise inventory management plugins

If you use WooCommerce for your online store, you will notice the built-in inventory management tools and features that help with basic inventory management.

However, as your SME grows and your online store expands, a specialised inventory management plugin may become essential for enhancing the platform's stock management functionality.

WooCommerce inventory management plugins such as Smart Manager, Stock Sync, and ATUM Inventory Management add advanced functionalities like bulk management, detailed reporting, and real-time stock updates.

A WooCommerce inventory management plugin can streamline your online store's operations by automating time-consuming tasks, reducing errors, and saving time.

Be clever with storage space

If you aren’t using a dropshipping supplier, it's essential to consider where you will physically store your inventory items.

SMEs often have limited storage space compared to larger eCommerce businesses. Here are some simple but effective storage space tips:

Whether keeping your stock in a spare room of your house or a large warehouse, make sure all of it is easy to locate when needed. Losing or misplacing stock will waste time and money.
Keep your stock at a location where you can quickly pack and post it after receiving an order. This will keep customers satisfied.
If you have limited storage space, optimise your vertical space by installing shelves, racks, bins, or hooks.

Understanding your storage space lets you set your minimum and maximum stock levels. The highest stock level you can maintain often depends on storage space limitations and whether you have room for overstocking.

Utilise RFID and Barcode Technology

Both Radio Frequency Identification (RFID) and barcode technologies accurately track products from the time they are scanned in at the warehouse until they are sold to a customer.

By utilising these technologies, SMEs can:

Ensure stock levels are accurate.
Reduce the chances of human error when managing inventory.
Speed up the process of counting stock, ideal for SMEs with less staff.
Improve overall operational efficiency.

Set up low-stock alerts

Some website builders and retail operating systems (ROS), such as Strikingly and Brightpearl, offer low-stock alerts to eCommerce businesses. You set a minimum stock threshold and receive an automatic notification when your stock levels reach that threshold.

Low-stock alerts allow you to contact suppliers and top up your inventory before you run out of stock. This prevents potential lost sales and customer frustration when something they want isn't available to buy.

Conclusion

It's easy for eCommerce business owners to begin sourcing products and selling them without an inventory management plan. However, SMEs must know how to effectively manage their inventory to balance supply and demand and earn profits from day one.

Poor inventory management can result in a significant financial loss, a critical factor to SME failure. However, by implementing these six best practices, you'll be on the road to learning how to manage inventory effectively and improve overall operational efficiency.

The future of inventory management will be centred around technology, forecasting demand, and maximising warehouse efficiency.