Managing Your Inventory During Peak Seasons
Managing inventory is one of the most important factors in both becoming a successful ecommerce business and maintaining your operation. Along with it being one of the most important aspects, it’s also one of the biggest headaches. There’s a fine line between having enough inventory to make it through peak holiday season and having a surplus during downtime.
So how do you stay on top of managing inventory and come out in the green? Here are a few helpful tips to abide by:
1. Know the Lingo
When managing your inventory there are lots of buzzwords flying around that are incredibly helpful to have knowledge of. Just to name a few, we’ve taken the wise words of Bill Widmer’s guest post on A Better Lemonade Stand. He’s created a succinct, easily digestible list of key terms for inventory management that every ecommerce whiz should know. Here they are:
Minimum Viable Stock Levels – The minimum inventory quantity, or stock, you should keep on hand to keep up with consumer demand. Typically, if your inventory falls below this level, you want to order more to avoid running out.
JIT (Just-In-Time) Inventory – A method of inventory management in which you order the product just in time to keep up with demand. In doing so, you don’t tie up your money in unsold inventory and you don’t normally have unsold product; on the downside, you run the risk of being unable to keep up with a sudden increase in demand, thus being unable to fulfill all your orders and potentially losing customers.
FIFO (First In First Out) – The first products to be received (either at your store or your warehouse) are the first to be sent out. Basically, it’s a way of ensuring people get the freshest inventory possible. This is more important with perishable goods. If that’s confusing, maybe this image will help:
FILO (First In Last Out) – The first products to be brought in are the last to go out. Mostly unused nowadays though, as it doesn’t make a whole lot of sense (and is illegal for many products, such as perishables).
Forecasting Demand – The art (and it’s definitely an art) of forecasting demand simply means taking an educated guess (usually using past sales data) as to how many sales you’re going to make over a given period of time, then using that information to set your minimum viable stock levels (which I explained above).
Inventory Auditing – Manually counting your inventory to ensure the number you have in the computer matches the actual number you have in stock. This should be done at least once every month, maybe more depending on how much you sell and how many people you have working for you (it sucks, but you never know who might try to nab something).
2. Know Your Peak Dates
Now that you know all the essential lingo, it’s vital to know the who and then when. As a good ecommerce business owner, you know exactly the target audience and demographic that you want to market to. Taking that into account you need to plan accordingly for when you’ll need more inventory than usual. To help accomplish this, check your past sales history. If you’ve been open for at least a year, you should have sales data for all 4 seasons, including major holidays. Use that data as a “base demand”, or the starting point for how much inventory you want to order. Additionally, stack that up against your marketing efforts and see how they correspond. Now you’re on-track for managing inventory!
3. Know Your Software Options
To make things easier, many ecommerce businesses will use an inventory and/or retail management platform. These platforms have become so sophisticated that they are able to offer ecommerce business owners tools such as interactive point of sale, personalized invoicing, the ability to accept credit cards, loyalty programs and of course, inventory management. To name a few great options there is Bloomforth, Orderhive and EazyStock. Plus, whether you’re a Shopify, Magento, BigCommerce, Zoey or another retailer, check your app store as we’re sure it’s brimming with great options.
4. Know Your Warehouse
You may be housing your product in your garage, renting a space or even owning a space. One thing is for certain though, dead stock is dead weight. It could have gone out of season, out of style, or otherwise become irrelevant. By managing inventory better, you can avoid dead stock. To be running at maximum efficiency you need to know your stock inside and out. As Shopify so eloquently puts in their blog post regarding inventory management best practices, “Not only does good inventory management save you money, it also improves cash flow in other ways. Remember, inventory is product that you’ve likely already paid for with cash (checks and electronic transfers count as cash too), and you’re going to sell it for cash, but while it’s sitting in your warehouse it is definitively not cash.”
5. Know What’s on Your Website
Just as important as properly managing inventory, you want to make sure your website matches your stock room. If you’re out of a certain item, it should no longer be on your website or at least signal that it’s out of stock if you’re expecting another shipment. There’s nothing more irritating than attempting to add something to your cart only to find it’s not actually in stock. To combat this and keep your customers happy, keep a close watch that your website offerings are in stock and ready to go! Want more resources on how to be ready for peak ecommerce seasons? Check out our blog on essential holiday prep, here.