Lesson 5: Best practices on how to manage your E-Commerce inventory effectively

By: e-Commerce Coach / e-Commerce / Comments Off

E-Commerce warehouse management is one of the key tasks for an eCommerce business. Thanks to efficient management, we gain control over our orders – what we order, how much we order, what sells and what should be cancelled, how to complete an order and so on. I could go on for a long time, but I hope I have shown how important warehouse management is for a successful business. We can be sure that this is not an easy task. Managing a large multi-store warehouse can be a breakneck task. How to do it successfully? This article will try to answer this question as concretely as possible by giving you six tips that we believe are the most important for the efficient management of both the warehouse and orders – and not only because many related processes have a big impact on the process of warehousing and managing eCommerce per se.

Prioritize your products
Use an ERP system
Make sure you have dedicated integrations
Use CRM systems
Anticipate and check product demand
Create an unforgettable experience for your customers

1. Prioritize your products

The basis of warehouse management is to be aware of what products you have in your warehouse and divide them up to optimize costs and increase profits as much as possible. To do this, you need to prioritise the products in your warehouse. One of the basic methods of order prioritization is the ABC principle. ABC analysis is based on the procedure of determining three product groups. The first step is to order the suppliers according to decreasing cost ratios. The next part is the calculation of percentage ratios of purchase costs in total purchase costs. The last step is the designation of groups A, B, and C. The division of goods into groups A, B and C is done according to annual cost and consumption values.

Based on the analysis of your warehouse, you will determine the following:

Group A – vital few – products constituting 5-20% of the stock assortment count but have a significant value share, reaching 75-80%. This group, with high value and a high share in total material costs

Group B – stocks have a share of 15-20% in both the stocks’ assortment count and value. Goods in this group can be managed using the periodic re-ordering system.

Group C – Stocks of a bulk character having the highest share in the assortment (60-80%) and a very low share in value (about 5%). Goods in this group can be managed using a two-pool system.

After analysis and division, you will know which products you have to pay the most attention to and to which you have to direct particular attention and resources. Product prioritization will help you set the optimal demand costs and look at the company’s overall needs.

Key takeaways:

Keep up with the newest eCommerce trends – Do not delay in designing and adapting your warehouse to the needs of your business
Ensure that your warehouse has the right office and profound IT infrastructure
Automate your storage processes as much as possible using available IT technologies

2. Use an ERP system

Can you imagine managing a large multi-level warehouse in a completely manual way? Don’t worry. I haven’t even tried. Dozens or even hundreds of orders a day are to be stored, completed, and handled, and accounting records and other important processes can happen along the way. It sounds at least breakneck, if not deadly. It’s a Sisyphean task that takes up a lot of time and, therefore man-hours to pay for, generating unnecessary costs when it could be automated. Using an ERP system will make it easier to keep track of orders and create and manage files of goods. This will prevent you from getting lost when managing dozens of orders in real-time. It will also significantly reduce labour costs, allowing you to plan warehouse tasks with much less effort. What’s more, a good and effective ERP system will work in the commercial, payroll and accounting areas simultaneously, allowing for the automatic integration of commercial data with accounting data, which will allow the accounting offices or accounting departments to keep tax records of your company, automating issues such as settling tax returns, entering and posting bank statements and calculating exchange rate differences where necessary.

As you can see, the benefits are many. Using ERP systems in the case of eCommerce is becoming a standard, especially if, as a shop, you already have many customers and the management of processes in the company is becoming an increasing logistical challenge. For large warehouses, it is even an obligation.

Key takeaways:

Find the right ERP system for your company and implement it.
Automate key company processes to save valuable working hours.

Make sure you have dedicated integrations

In addition to ERP systems themselves, there are integrations written by external companies to further improve processes in the company. There are solutions used to support eCommerce shops. The largest ERP systems have dedicated integrations with major websites or plug-ins used in eCommerce. Integrations of ERP platforms with systems such as Woocommerce, Shopify or Shoper are becoming a standard. The main advantage of such integration is to avoid double work. If done correctly, integrations of merchandise files in the ERP system and product fields on the website save your employees valuable time. Products placed on the website can be seen as goods in the ERP system, meaning that adding a product is carried out only once instead of twice. This means that twice as many man-hours are available. We do not need to employ as many people to manage the extensive stock of your shop. Thanks to the automatic replenishment of goods, you also win the favour of your customers, as you can satisfy their needs faster. What’s more, by introducing eCommerce integration, you add an extra algorithmic layer to check for errors that occur during the various warehouse management processes. Wrongly completed orders and quickly detected out-of-stock are just some of the aspects of warehouse management that, by introducing integration, can be controlled automatically again, saving you valuable time.

Key takeaways:

Find out if there are suitable automatic integrations for your ERP system on the market
Ensure an integration that minimises the errors that occur during the manual management of the storage process.

Use CRM systems

If we talk about automating processes in eCommerce, we cannot forget about managing our customers and their relationships. CRM (Customer Relationships Management) software has been developed to automate customer relationship management. This software is designed to efficiently collect data on your customers, analyze them to adapt your actions, and in some cases, generate sales prospects leading to future leads. Regardless of your CRM system, its task is to improve and enhance the processes related to your customer relations – to offer and sell goods and services faster. The CRM will automatically collect data on your orders, customers and invoices. On such a basis, it is often possible to generate reports and sales statements for a given period (month, quarter), depending on a given contractor, his location, or a given product; in this way, we can find out which of our products is selling, and which sales have failed and we have to, e.g. temporarily limit its production or stop buying the product from our supplier. From such reports, we can find out in which location a given product sells most frequently. Depending on the level of sophistication, our CRM system can serve as a specific tool for business intelligence analysis, allowing us to make efficient decisions to optimise both sales-related and warehouse-related processes. Logistical and time savings achieved in this way may prove invaluable and necessary for further scaling of our business.

Key takeaways:

Invest in the right CRM system for your business
Make business decisions based on careful analysis, not spontaneous movements. Use your past events as data to make good decisions in the future.

Anticipate and check product demand

Let me repeat – Make business decisions based on careful analysis, not spontaneous movements. Use your past events as data to make good decisions in the future. At first, this may sound like a slogan, but it is a fundamental practice to optimize your warehouse and supply chain management. You must audit your warehouse regularly, especially if you have many products in your range. Warehouse space costs money, importing and buying products costs money, shipping costs money, and keeping unnecessary products – also costs money. Often the money you spend on this is large, and cost optimisation is necessary. This becomes even more apparent the more multi-component our orders are. For example, if we produce jewellery, we need to coordinate the supply of raw materials (gemstones, gold, silver etc.), accessories (clasps, pins), packaging etc. Each of these supply chains is coordinated separately. Each of them has to work properly to result in the final product. From time to time, we need to monitor this process to optimize costs. Like many procurement management processes, monitoring prices or alternative materials on the market is time-consuming. You must frequently observe market trends of what your competitors are doing. There are too many variables, and ignoring them can be costly. Use reports and technology to anticipate trends, uncover the competition and make your business decisions as optimal as possible. Optimizing demand and cash flow will translate into faster growth for your business.

Key takeaways:

Track current trends and optimize as many costs as possible
Take care of efficient cash flow by reducing unnecessary decisions to a minimum

Create an unforgettable experience for your customers

This entire chapter focuses on cost optimization. Overstocking and understocking negatively affect the profits made in our online shop. If the demand for goods is too low and we have too many of a given commodity in stock, this will cause us to incur large storage costs for what does not sell. Losses are also caused by a shortage of goods for which demand exceeds the amount of a given product in stock. We do not sell what we could sell indirectly, losing the capital that we could earn. Even with IT systems in place, it can be difficult to control the demand for your products. In this case, you can go a step further and take the help of artificial intelligence. Artificial intelligence (AI) helps eCommerce companies minimize losses while managing inventory. AI helps forecast demand for products based on previous orders doing so much faster and more efficiently than a human would. AI can help us both forecast demand for individual products by product type and location. It can tell us which products will increase and decrease demand, maintain optimal production levels, and improve cash flow in your eCommerce shop. The ideal situation is a prediction in which you have no stock other than what you need to use. Successful systems can predict demand with greater than ninety per cent accuracy. Using AI will allow you to manage your warehouse efficiently with measurable savings and profits.

Key takeaways:

Use the system to predict demand for your products
Don’t be afraid of artificial intelligence. It is often more effective than a human being in performing single, even extremely difficult, tasks