11 Expert Tips for Successful Inventory Management
Few things are more challenging than having proper inventory management, especially when you’re already wearing dozens of eCommerce hats to keep your operations running. This is why nearly half of all small businesses don’t track their inventory, or rely on manual counts and guesswork to stay in stock.
Unfortunately, this often comes with increased labor costs, backorders and wasted storage space when the wrong thing gets restocked. If your online store’s margins are already tight, that might make the difference between a great month and struggling to keep the lights on next week.
Thankfully, there’s an established practice for understanding your products and goods, keeping the right levels and not disappointing customers. It’s called inventory management. If you’re struggling with the right mix of products, warehouses that are too large or small, or just want to make the most of your eCommerce software—keep reading. You’ll learn more about the methodology and get expert-level advice on how you can make things more affordable and profitable.
What is inventory management?
Inventory management is a system and practice for how you control all of your goods and products, covering both raw materials and finished products. With eCommerce platforms like Wix Stores, inventory management can also cover the boxes, filler, tape and other items you use to pack and ship orders to customers. Inventory management covers the entire process, including how you source, receive and store these goods, as well as the way products move when you sell them.
The mission of inventory management is to have the right amount of stock in the correct locations to meet your order demand at any moment, all while controlling costs so you’re making a profit.
To meet this level of precision, many companies now turn to software to help them control several aspects of inventory management. Some eCommerce tools and standard warehouse management systems (WMS) come with inventory control and order support as their core functionality.
Whether you’re using advanced software or just writing things down in an Excel spreadsheet, successful inventory management can mean a profitable, sustainable business that doesn’t drive you crazy trying to run.
Why is inventory management necessary?
Inventory management is a system designed to protect your business by ensuring you can afford to meet the orders that customers make. Getting the system correct means most of your supply chain is working together hand-in-hand, keeping products and materials moving without having to rest on shelves too long.
One significant benefit of inventory management practices is that they help you understand how and when to reorder your products and supplies. They can make it easy to avoid stockouts, which not only cost you but can also disrupt your supply chain, keeping your operations running smoothly and efficiently.
At the same time, when you get inventory management done right, you’re more likely to be picking orders correctly. Typically, this is due to scanning barcodes as your team or third-party logistics provider (3PL) picks and packs orders.
High order accuracy reduces costs associated with refunds, returns and reshipments, while also enabling you to use all of your inventory. Mis-shipments also waste labor and run up costs because you’ve got to reshelve returns.
Mistakes with inventory cost you money in the short-term and can lead to negative reviews and poor word-of-mouth, harming you in the long-term, too. Let’s look at ways to avoid these issues.
11 tips and techniques for managing your inventory efficiently
Everything in its right place
Put commonly ordered items near packing stations
Make gaps between items that look similar
Check orders multiple times
Standardize as many processes as you can
Invest in repeat training
Involve the whole company
Track travel time
Automate par levels
Outsource when it makes sense
Let data guide you
01. Everything in its right place
For you (us) older warehouse teams, it’s time to fire up your inner Radiohead fan and sing a little bit of “Everything in Its Right Place”. That simple mantra is the guiding light for inventory management because it encompasses two key points. First, everything needs a specific place to go in your warehouse. The floor doesn’t count. Second, this refrain reminds you that having a place for things only counts if teams put them away correctly. So, put everything away like you have to clean your room and your mom is checking.
Organizing your warehouse like this will make everything easier, from counting goods and inventory to grabbing the right items when you ship, and using WMS or other tools to count inventory correctly for resupply needs. Knowing when something is missing—from damage, theft or other loss, also helps you prepare to keep your business going.
02. Put commonly ordered items near packing stations
Some inventory management policies can help your warehouse in its other operations. One of our favorites is moving your bestsellers closer to packing stations. This serves a few purposes, the best of which is it can make picking and filling orders faster because your team has to move less.
Beyond that, it can also make it easier for your team to see and count these goods as they’re used. You may have a sharp-eyed associate who notes inventory levels are low and can alert you, prompting managers to reorder or to verify that a shipment is on its way.
Managers also like this practice because it can help reduce overall travel time and labor costs. If you apply this practice to products that have more significant time constraints, such as perishables or goods frequently expedited, you’re eliminating time and worry with this move.
03. Make gaps between items that look similar
Proper inventory management is about understanding what you have and using it correctly. That means correctly counting and picking inventory is an absolute must.
If you have products that are similar or sell the same objects in packages of assorted sizes, ensure that there is some variation between them. When you can’t control the coloring on boxes, try adding physical space. This reduces the chance that someone accidentally picks up the 12-pack of batteries instead of the 24-pack.
One problem we’ve seen is that stacking multiple options near each other can even fool scanning systems. This happens because the picker will scan the correct barcode, but then grab the wrong item from the shelf unintentionally. There’s always a risk that some products may be put away incorrectly, too. When things that look similar are on top of each other, the risk here increases.
04. Check orders multiple times
There are multiple scanning options you can use in a warehouse, though many eCommerce businesses and their warehouse partners opt for barcode scanners. These handheld items are easy to use and can give teams direction for how to do their tasks.
If you built your site with Wix, you can easily add SKUs, as well as track, locate and manage inventory using the barcode scanner on the mobile app.
Checking orders multiple times is designed to protect your inventory knowledge and counts. Scanning an order sheet and each product as it’s picked can update counts and match the right product to the right order. Rescanning everything when it goes to a packing station verifies that orders are going out accurately and that your inventory counts are correct.
Checking procedures like this will help your team get into a good rhythm for how they operate and meet broader accuracy goals. Once you get that under control, it’ll be easier to adopt more advanced inventory processes, like just-in-time production that has materials or products arrive based on production and order schedules, minimizing the amount of inventory you have to hold at any given moment.
05. Standardize as many processes as you can
Routine and standards make it easier for managers and employees to knock out tasks quickly and correctly. It’ll protect your people and your business, plus make it easier to control and respond to outside factors.
In the warehouse, this is important for safeguarding people and stock. If you use perishable goods or those with other timetables, start with the way you store and label goods. FIFO (first-in, first-out) is a widespread practice here where the goods added to your inventory first are sold first. It helps avoid major spoilage that eats into your profitability.
The key is standardization. You can trust that your team knows how to accomplish tasks, use the software you have and is prepared to spot something out of place. Ultimately, standardizing processes makes it easier to keep things running and adapt to more advanced control systems, such as advanced analytics and forecasting.
When a process is standardized, it can be repeated by multiple people correctly because you can train them on exactly what to do. That requires a smart investment on your part.
06. Invest in repeat training
When you standardize a process and teach it to your teams, they can learn and repeat while reducing errors. However, one-time training can fade, and people sometimes slip back into habits that aren’t good for them or inventory.
Training on processes and reviewing these training requirements is a must-have for managing your inventory. It’ll help ensure that people aren’t cutting corners, misstacking or mislabeling inventory and operate safely in your warehouse. Repeat training also reduces the chance of an accident or harm.
During busy times, such as the holiday season or perhaps in response to events like the COVID-19 pandemic, you may need to scale staff. Proper training for your team plus these temporary workers can keep your facility running smoothly while meeting time and labor requirements.
Repeat training and meetings also give everyone a chance to be heard and can lead to a wide range of warehouse improvements. Training and opportunities for feedback will help your team work together and create a more enjoyable work environment for them.
07. Involve the whole company
Here’s one tip that’ll get you out of the warehouse briefly. Everyone in your company needs to have some idea about your inventory management strategy. Teach them the entire process and their specific role in your strategy, too. Not only should teams get some training on what the concept includes, but you’ll want to share how they can get real-time information and give you feedback or support.
A comfortable place to start is your marketing and sales department. If you’re not communicating about inventory, marketing may not realize that a specific product is slowing down—many companies prioritize bestsellers in weekly meetings. If you’ve got something gathering dust on the shelves, let marketing and sales know that this stuff can be moved at a lower price to save your company storage costs.
Sharing warehouse costs, such as storage or maintenance, gives your sales team a better idea about when things may want to move or what they should be willing to try. At the same time, offers like buy-1-get-1-free or giving away items when an order reaches a specific value will impact warehouse operations.
You might even score big by combining these offers with special packaging and inserts. To make sales and packing smooth, you’ll want coordination.
Sales can also have useful insights for your warehouse team. Let’s say you offer a variety of umbrellas and the hot color of the year is blue. Sales may identify this potential trend ahead of your big selling season. Sharing that data can help you adjust inventory levels accordingly and even proactively change how you restock goods—you’ll see those par levels in number 9.
When everyone is involved, you have the best chance to position your products to sell and alleviate cash flow burdens. Liquidity is beneficial to any eCommerce business, and company-wide training can make it a priority at yours.
08. Track travel time
Everything takes time in a warehouse. Reducing time involved in activities helps businesses get more done and reduces the need to rush, allowing your team to take their time and ensure accuracy in what they do.
One way to control the time spent in the warehouse is to review how far your team has to move to pick orders and accomplish tasks. If you’re tracking this based on orders, you might find that some goods in your average order are put too far apart.
Alternatively, your warehouse layout may cause forklifts and workers to backtrack, instead of being able to move forward continuously. It can be worthwhile to separate racks and shelves where a forklift or cart is required because you’ll protect workers from accidents when two people are trying to get into the same aisle.
Your WMS and eCommerce tools can be a tremendous help here. Look for solutions that help you optimize both warehouse layout and the order your pickers are giving goods. A system-aided picking process can help you significantly reduce walking, which takes up about half of the time used during normal picking.
09. Automate par levels
Your eCommerce software and inventory management tools should help you establish a par level—a quantity of inventory you should have at all times. This threshold ensures that you meet all of the orders you have on hand and expect to receive for a product before you can restock.
A par level system identifies the amount and will tell you to reorder these products or materials as soon as you fall below that threshold. Generally, par levels are set so that you still have time to place the order with a supplier and wait for standard freight shipments to arrive, plus a little extra time just in case.
Automating your par levels and reorders can significantly protect operations. You have accurate inventory counts that don’t need to be hand-checked or spotted with just an eyeball. Because par levels vary by product, you’re also eliminating the risk that someone mixes up two inventory counts, and you end up reordering the wrong goods.
Automation and cloud tools stand out here because they can ultimately leverage your order history. Knowing that your busy season starts in August can mean the system is smart enough to tell you to change par levels starting at the end of July. Plus, it can help you spot and respond to changes that may occur this month compared to the same time last year.
From a more practical benefit, par levels also mean you can worry less about over-ordering. So, you can allocate the right space to some products and make more room for bestsellers. You can also operate efficiently in your warehouse without necessarily needing to increase shelving or rent a bigger space.
10. Outsource when it makes sense
Many eCommerce businesses like yours will outgrow their initial warehouse space. You might have moved from a garage to a small retail shop or industrial location as you grew, and then once again need to shift. (Congrats, by the way!)
When you’re facing the decision to move your locations to manage inventory and order needs, there’s a lot to consider:
Staffing increases and potential turnover if the new location is far
Space costs, including increased parking, breakrooms and bathrooms
Disruption to fulfillment when moving
Costs for new racks, shelving, sprinkler systems and more
Potential costs for breaking ground and building your facilities
Inspections at the new facility
Installation of electronics, equipment and IT infrastructure
On top of that, you still have plenty of costs associated with your old site. These include moving existing inventory, crates, pallets, boxes and equipment, plus ending agreements and notifying suppliers and carriers of the changes.
These costs can climb rapidly, and you might be in a place where you need more room but can’t afford a costly move or to staff up to handle the larger warehouse. This situation is when many eCommerce businesses turn to 3PLs to take care of fulfillment for them.
3PLs design their business to be more affordable than expanding for most companies. They handle labor and inventory costs, space rent/mortgages, carrier relationships and more. You pay only for the space you need and the labor you use, plus you can often get a better carrier rate because the 3PLs have negotiated deals based on their order volume.
Determining when this is right for you can get a little complicated. It’s always best to speak with multiple vendors and use a common system to judge their responses. There’s significant potential to protect your operations when you find a partner who’s a great fit.
11. Let data guide you
If you’re reading this, you’re likely using or considering Wix Stores as your eCommerce solution. This puts a lot of eCommerce data at your fingertips. If you’re coming from another platform, you likely already have some of that information, too.
Use it and rely on it to help you make informed business decisions.
Your business data can help you optimize a wide variety of your operations. Workforce and order tracking help you determine the best design of your warehouse, equipment to use and how big of a staff you need to pick and pack orders. Inventory counts can keep you from running out of stock while also limiting the chances of ordering too much.
Monitoring data up and down your supply chain can help you understand if a certain supplier is late more often than others or when it provides great savings. Even something like pairing a dimensional weight calculator with your order list can optimize carrier selection, or identify when it’s cheaper to send a single order via two boxes instead of one.
Take advantage of the tools and information your platforms provide. Build forecasts, analyze spending, audit processes and quadruple-check your inventory. Hopefully, that’s something you can do right now.
The expert tip for you here is to prioritize solutions that communicate with each other to share this data. Look for ways to integrate information and minimize the places you need to go to understand your operations. When a single system or dashboard grants visibility into your entire operation, it minimizes the chances for mistakes or running out of time in the day to check what you need.
Improving your inventory management and warehouse controls is a never ending process. There’s always new risk and new opportunities to grow. Embrace the flexibility required and plan for what you can, and your eCommerce business will be best-prepared for whatever comes next.
Ready to start selling? Create your online store today.
Director of Marketing for Red Stag Fulfillment
Jake Rheude is the Director of Marketing for Red Stag Fulfillment, an eCommerce fulfillment warehouse that was born out of eCommerce. He has years of experience in eCommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.