Managing inventory efficiently is one of the most critical elements of running a successful e-commerce business. With online shopping continuing to gain market share across all product categories, having the right systems and processes in place to optimize your inventory is more important than ever. 

In this blog post, we’ll explore why E-commerce businesses cannot afford to neglect their inventory management – especially as they scale and add more SKUs. We’ll look at key inventory management challenges in E-commerce and how expert solutions can help you overcome them. Read on to learn why your growth depends on getting inventory management right.

The Rising Complexity of E-commerce Inventory

As an E-commerce e-commerce business grows, its inventory management needs become far more complex. What starts as a few dozen SKUs can soon grow into thousands of products. With a catalog that size, spreadsheet-based inventory systems or manual processes simply cannot cope. 

Some key statistics highlight the inventory challenges facing e-commerce retailers:

The average e-commerce business has over 3,000 SKUs in its catalog. Enterprise players often have over 1 million SKUs.

67% of e-commerce brands currently use spreadsheets or legacy software to manage inventory. But these tools cannot scale.

Out-of-stock items result in an estimated $1 trillion in lost e-commerce sales every year.

Clearly, the inventory challenges are large for e-commerce businesses. Having so many unique products across multiple warehouses and sales channels makes inventory visibility and efficiency difficult. This is why you need robust, automated inventory management suited to e-commerce.

The Costs of Poor Inventory Management  

Inventory mismanagement in e-commerce can come at a high cost in various ways. Here are some of the consequences of using inadequate inventory management processes and systems:

Lost Sales from Out-of-Stocks

If customers visit your e-commerce store but cannot find the products they want to buy, you lose sales directly through out-of-stock. Customers end up buying from competitors instead. 60% of shoppers will head to another site if the product they want is out-of-stock.

Excess Inventory Carrying Costs

Carrying too much inventory also has a direct cost. It ties up working capital while also incurring storage and warehouse handling fees. Obsolete stock that just gathers dust is a wasted investment.  Consumable products that do not comply on the freshness date cannot be sold online on marketplaces.

Order Errors and Stock Outs to Customers

Another downside of poor inventory oversight is more errors in order fulfillment and stock-outs to customers. If visibility into inventory across warehouses is lacking, orders may ship incomplete or contain wrong items. The resulting returns and exchanges create added costs.

The Need for Advanced Inventory Management

E-commerce inventory management has to track stock accurately across multiple locations. This includes:

• Inventory stored locally in distribution centers and warehouses
• Inventory in transit from suppliers or between warehouses  
• Inventory allocated to pending orders not yet shipped
• Inventory reservations from back-orders  
• Incoming purchase orders from suppliers
• Incoming inventory shipments and lead times

With thousands of SKUs and daily changes in inventory as orders ship out, returns come back, and new stock arrives, keeping on top of it all is enormously challenging. This complexity explains the need for next-generation inventory management solutions purpose-built for e-commerce.

Signs You Need an Inventory Management Upgrade 

If any of these issues sound familiar, your e-commerce business likely needs an inventory management upgrade: 

• You still use spreadsheets to track inventory but are struggling to manage thousands of SKUs  
• Your inventory visibility is limited or orStock-outs frequently occur unexpectedly
• Fulfilling orders becomes difficult due to misallocated inventory  
• You lack insights into your best/worst selling items and optimum inventory levels
• Inventory errors lead to poor customer service and lost sales

Expanding e-commerce businesses simply cannot afford these expensive consequences and lost opportunities. Modern inventory management technology can help avoid them.

Core Capabilities of Inventory Management Software

A feature-rich inventory management system designed for e-commerce provides well-integrated capabilities:

• Centralized inventory visibility across all warehouses and sales channels
• Automated, real-time inventory tracking and order reconciliation 
• Configurable re-order points and stock-level alerts 
• Forecasting and analytics for demand planning by SKU
• Inventory optimization to reduce excess stock

This allows much greater control and insight compared to manual approaches or generic accounting software. Leading solutions also integrate with order management, 3PL warehouses, and even marketplace channels like Amazon for unified commerce.

Key Benefits for E-commerce Inventory Optimization

Implementing a smart inventory management information system delivers multiple commercial benefits:

Increase In-Stock Rates to 99%+ 

Comprehensive inventory tracking across your supply and distribution chains increases the availability of listed products for sale. This reduces lost sales and lifts revenue from higher conversions.

Cut Excess Inventory by 30% or More  

Better visibility allows for identifying and liquidating slow-moving stock. This frees up working capital otherwise trapped in low-turnover inventory. Keeping just the optimal level of inventory also lowers warehouse handling costs.

Reduce Order Fulfilment Errors by 50%+

Accurate, real-time tracking of inventory availability when orders are placed cuts down incomplete shipments and order errors significantly. Doing so also lowers costly returns & exchanges.

Sales and Margin Uplifts from Above 10% to Over 30%  

The compound impact of the above 3 factors leads to powerful sales and margin growth. More available inventory enables higher conversions and fewer errors means fewer costly returns/exchanges.

The above highlights why e-commerce sellers need the enhanced capabilities of dedicated inventory management platforms. The improvements directly translate to top and bottom line growth.

Expert Solutions for Inventory Optimization 

Managing e-commerce inventory properly is complex – but expert solutions exist to streamline it:

• Employ predictive analytics to calculate safety stock levels and minimize risk of stock-outs while also cutting excess inventory.  
• Use workflow algorithms to optimize replenishment plans across the supply ecosystems.
• Build integrations to order management and warehouse systems for straight-through processing. 
• Unify inventory data feeds from suppliers, 3PLs, and marketplaces into one central database accessible across the company in real-time.

While the capabilities vary by vendor, these technology platforms form the nucleus companies need to gain end-to-end visibility and control over e-commerce inventory.

Rather than building from scratch, leveraging the inventory management models and technical connectors of established solutions via cloud SaaS accelerates optimization. Domain expertise around inventory planning for omnichannel retail is hard to recreate.  

Proven solutions also continue advancing with new features like machine learning-based forecasting. Relying on seasoned technology partners allows focusing innovation efforts on what makes your e-commerce operation truly differentiated in the marketplace.

Take the Next Step Toward Inventory Optimization

E-commerce success depends greatly on excelling at inventory management. The costs of inadequate inventory control only compound as online sellers grow and add more products, channels and locations. 

Conversely, expert solutions unlock powerful upside through better stock availability, lower excess inventory, and fewer stock-outs to customers. Investing in robust inventory management capabilities including predictive analytics pays major dividends.

We encourage e-commerce executives to self-audit their current inventory practices and platforms. For most brands still running on manual processes and spreadsheets, upgrading to an automated system purpose-built for omnichannel retail is now an urgent priority. 

Peak holiday demand will further stress poor inventory management – don’t leave sales on the table for lack of inventory optimization. As shown above, a capable system can deliver very rapid ROI through higher conversions, fewer back-orders, and less trapped excess stock.

To discover your full upside potential from transformed inventory planning and management, contact our experts. At Assiduus we are here to provide an objective inventory capabilities assessment and fact-based upgrade recommendations tailored to your e-commerce operation. Now is the time to seize the major performance improvements and cost efficiencies astute inventory management delivers.