6 Inventory Management Best Practices to Scale eCommerce Growth

Andrea Martinez
August 17, 2022
 Mins Read

Inventory Management is the most crucial job in an business. Through the years, industry experts have followed certain methods to manage their product inventory efficiently. This blog discusses about the 6 most important inventory management best practices.

Did you know that inventory distortion causes $1.1 trillion worth of damage globally? This sum accounts for the entire yearly GDP of Australia! Imagine how much businesses can be saved by managing inventory efficiently. Recovering even a small portion of these inventory distortion losses can significantly improve the financial condition of most companies. Through various inventory management tools, firms can fix serious issues like shrinkage, overstocking, and understocking.

Are you having trouble managing your inventory? Our practical tips will help you scale your inventory management process to greater heights.

Inventory Management Best Practices to Improve Operations

1. Use ABC Analysis

An ABC analysis determines which products are the most and the least valuable to a specific company. This analysis helps firms decide which items need their time and attention. Based on the Pareto Principle, this study finds out 20 percent of products that drive 80 percent of the business.

Here's a stepwise guide to manage your inventory efficiently: -

  1. Collect information about your products stock and prices.
  2. Find the potential revenue of each product by multiplying the individual item's price with the number of items.
  3. Arrange the products in descending order of potential revenue.
  4. Add all individual product revenue figures to compute the total potential revenue.
  5. For every product, calculate the revenue each product brings in, as a factor of the total potential revenue.
  6. Divide all products into three categories: A, B, and C. In most cases, 20 percent of your high-value items bring in 80 percent of the revenue. Categorize them as A-list products. You'll notice that the other segments occupy too much space and don’t generate enough income.

By focusing on the most valuable products, inventory management for eCommerce becomes simple. Managers can easily handle restocking, cut costs significantly, and reduce the number of obsolete stocks.

2. Keep Track of the Inventory

Inventory Tracking

Handling a single warehouse with one product cannot remain a viable strategy for high-growth firms. Such companies must plan in advance on how they want to stock and sell new products before producing them. Additionally, when companies use multiple warehouses or ship internationally, their inventory management complicates even more.

Almost one-third of firms miss a shipment deadline because they sold a product that wasn't available in stock. Through an efficient inventory management system, you can locate and restock the products in time to avoid such issues. This system also provides in-depth visibility into several distant warehouses to plan and handle them effectively.

3. Ensure Stock Information is Consistent Across Several Channels

Stock Information

To realize the maximum inventory management benefits, companies should make sure their inventory data is consistent across locations and sales platforms. Ensuring this consistency helps firms avoid overselling stock that doesn't physically exist.

Here's how you ensure cross-platform consistency: -

a) Consistency Across Physical Locations

Possessing precise inventory data available in various warehouses gives fulfillment centers the room to ship products swiftly. You can improve the accuracy of stock data through the item-level tagging process. This process is known to improve accuracy from 63 percent to 95 percent. You may spread your stock in multiple locations according to your stock carrying method.

b) Consistency Across Sales Platforms

Firms that operate through multiple sales channels must ensure their platform stock remains the same as their actual warehouse stock. Link your platform sales to ensure you don't sell the same item to two buyers.

4. Setting Par Levels

To smoothen out the inventory management process, consider assigning minimum stock levels for essential products in your systems. Setting these levels helps managers prioritize restocking items and maintain business continuity. Decide your par level after carefully analyzing the current demand. Setting safety stock builds a solid foundation for your orders by prioritizing restocking when necessary. They also enable your employees to place inventory orders even if they don't know a lot about the inventory status. Order Processing services from outsourcing companies will keep track of such services and reduce struggles during orders.

5. Eliminate Dead Stock and Wasted Inventory

Did you know that an average retailer loses 3.2 percent of revenue due to overstocking? We've looked at low stock levels as a problem. On the flip side, having too much inventory is also not a desirable scenario for most eCommerce businesses. With too much inventory, you'll always be at the risk of not selling enough.

Through various reporting tools, users can determine how much to purchase/produce to avoid deadstock or wasted inventory. Based on the actual sales data and reliable projections, managers make confident reordering decisions to reach the inventory sweet spot.

Moreover, your inventory management systems provide insights into the product's shelf life to help you avoid product wastage. Hence, you save up on storage costs and heavy discounting to get rid of excess stock. While offering discounts, ensure you use the right eCommerce framework and front-end experience. You could also attract customers by adding a separate sales section to your site that promotes purchases.

6. Review your Inventory Carrying Costs

Reviewing your costs regularly gives you a fighting chance to realize more profits and bring down any potential issues. Inventory management techniques like bulk shipping, cross-docking, back ordering, drop-shipping, and many others can help you leverage your inventory systems efficiently.

As a business owner, it's your job to use these techniques in ways that reduce the risks and costs and bring more revenue to you. As you scale further, upgrade your inventory systems to keep up with your growth and not become a liability. Avoid working towards short-term solutions or fixes and engage in the permanent fix options by investing in your systems. You may not receive immediate benefits, but you'll witness a sustained long-term growth due to these measures.


Bad inventory processes losses amount to a whopping $284.9 billion. Through effective inventory management solutions, businesses can truly prosper and realize the benefits of the digital world. Did you know that 63 percent of the time, inventory is accurate in retail eCommerce companies? Leverage this accuracy by investing in well-performing and result-oriented inventory solutions today! eCommerce outsourcing helps resolving most of the challenges in Inventory Management through their best practices. Outsource to Invensis Technologies to gain business growth.resolve

Article by
Andrea Martinez

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