Picture two scenarios: In the first, customers are going crazy over one of your products, which is flying off the shelves. Revenue is great and customers are happy.
Now picture another scenario: Demand is high for that same product, but you don’t have it in stock, and your suppliers can’t assure you when your next shipment will be delivered. Frustrated customers turn to competitors to make their purchases, and you miss out on sales.
As an ecommerce business, inventory can be one of your biggest assets, as well as a potential liability. That’s why it’s so important to take a strategic approach to inventory management, following best practices and using the right tools.
This article covers everything you need to know about ecommerce inventory optimisation, including:
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The information about all the tools discussed in this article was collected between 11 March 2024 and 13 March 2024. This article was written and approved by Juni and is intended as marketing material.
Building out an inventory management strategy is no easy feat—with so many moving parts, like supplier relations, replenishment times, seasonality, fluctuations in demand and manual error, optimising inventory takes extensive knowledge and expertise.
But you don’t have years to get your approach to inventory management right—your business needs effective stock management now. For more immediate guidance, follow these seven best practices and inventory management techniques.
Your inventory starts with your suppliers, which is why it’s so important to take your time finding the right ones and fostering good relationships with them. In one of his podcast episodes, Oman Zenhom of The $100 MBA Show recounts his experience selecting suppliers for his ecommerce business.
He states that he spent about six months trying over a dozen suppliers to find “the right materials, the right product, the right quality, and the right system.”
Once he landed on the right suppliers, he explains that he was intentional about building meaningful relationships with them, investing time and money into fostering trust. Doing this, according to him, makes a difference “because people will actually prioritise you based on relationships, and this is the bloodline of an ecommerce business.”
He also mentions the importance of diversifying your suppliers instead of just relying on one or two. Doing this “bolsters supply chain resilience, shielding against disruptions like natural disasters or labour strikes that could affect a single source.” This ensures a consistent flow of stock if one of your suppliers is facing production and order fulfilment delays or quality issues.
In order to keep track of your inventory, understand trends in demand and optimise stock, you need to use the right method (or methods) for your business.
JIT, FIFO, ABC, EOQ…the list of acronyms for inventory management methods goes on and on. Here are brief explanations of a few of the most common approaches for ecommerce businesses:
When you use an inventory management system like the ones mentioned above, it will be easier to predict demand based on historical data and purchase inventory strategically. This includes factoring in how seasonality, like Black Friday sales or Christmas shopping, will impact your inventory buying behaviours.
To do so, you have to calculate various factors, including:
The longer you operate, the easier this is to do. But keep in mind that, in the beginning, you’ll have little data to work with. In this case, it’s better to order a little too much than not enough—having safety stock helps you avoid running out (and losing what could become loyal customers).
“A lot of brands order the smallest amount possible. It’s not their fault, they just don’t have a partner to enable financing. It’s the most expensive part. So, what we did was get a lot of credit, as well as a partner that was able to finance this inventory. Those are the two areas that saved us at the start.”
-Nick Shackelford, serial ecommerce entrepreneur
In inventory management, anything you can automate, the better. Automated systems mean less human error, which becomes more and more of a risk as your business grows and you expand to more warehouses.
By implementing a scanning system, you can keep track of products as they arrive to your warehouse, are moved or altered in any way and finally when you ship them out to customers. A good scanning system won’t be free, but it’s an investment that can help you prevent costly errors.
Additionally, a scanning system will help you track stock in real time and get accurate data about your existing inventory and historical demand, preventing you both from overstocking and being caught without stock.
Even if everything seems to be going smoothly, take the time to audit your operations and ensure you’re not leaving money on the table anywhere. You should run audits at least twice a year to evaluate your operations and compare your inventory management process against competitors and industry standards.
Take a look at every step in your supply chain, evaluating lead times, the frequency of backorder situations, and overall costs. Also, be sure to take a look at possible issues, like return rates—this could uncover an underlying problem resulting in your customers receiving an incorrect or defective product.
No matter how well you predict demand, you won’t be able to buy inventory if you don’t have enough money on hand to do so. That’s where managing cash flow comes into the picture—you never want to be stuck in a situation where a product is on backorder but you don’t have the capital to pay for a new shipment.
Be proactive with cash flow forecasting to ensure you have enough runway to ramp up orders to suppliers before times of high demand, and plan ahead when creating your budget.
If you’re looking to optimise your cash flow management, consider adding Juni to your finance tech stack. The platform provides valuable insights into your spending patterns, giving you greater visibility over trends in cash flow.
What’s more, Juni gives you access to financing on both cards and invoices*, helping you extend your runway and use your capital however your business needs it most, whether that’s replenishing inventory levels or running ad campaigns.
Even if you can develop sophisticated manual systems yourself, there’s no replacement for specialised software to help you optimise your inventory management. So take a look at five platforms designed specifically to help ecommerce businesses streamline stock management.
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Linnworks is designed for ecommerce sellers, helping them manage multiple sales channels, keep track of stock across multiple warehouses and automate inventory forecasting. The platform integrates with platforms like Amazon, BigCommerce, Shopify and Etsy and comes with other helpful features like:
inFlow Inventory helps ecommerce businesses optimise stock by providing real-time inventory and order information in one place. The tool helps you stay on top of restocking, ensuring you never run out of an in-demand product, and tracks stock across multiple warehouse locations. Other key features of the platform include:
Veeqo integrates with all major ecommerce platforms, including Shopify, BigCommerce, Magento and WooCommerce, as well as marketplaces like Amazon and Etsy. The software automatically updates and tracks stock levels, plus comes with shipping capabilities like label creation, order management and order scanning/packing. Other features include:
Zoho Inventory helps ecommerce businesses automate inventory management with features like centralised cloud-based stock control, automatic re-ordering and batch and expiry date tracking. It connects seamlessly to other Zoho products to help with informed business decision-making and comes with additional features like:
Sellercloud is an ecommerce growth platform with comprehensive inventory management tools, including a centralised catalogue, full life cycle inventory tracking, and predictive purchasing and restocking. The platform integrates with an extensive list of channels, as well as ecommerce platforms like Shopify and WooCommerce. Other noteworthy features include:
If you have any ambitions to scale your ecommerce business, efficiently managing inventory is a need, not a want. To summarise, these best practices can help you do that:
Every business will take a unique approach and need distinct tools, but what remains a common theme, whether you’re a small startup or an established mid-market company, is the importance of properly managing cash flow.
Juni helps companies in digital commerce do just that—by providing you increased visibility over your finances, in-depth insights for better decision-making and flexible financing* to extend your runway.
*Juni Capital for cards is available for companies registered in UK, NL, SE, DE, FR, ES, IT, NO and FI, upon eligibility. Juni Invoices is available for EU-based companies only. Media financing is available for companies registered in NL, SE, DE, FR, ES, IT, FI and NO, upon eligibility. Fees and terms and conditions apply. Click here for more details.
Inventory optimisation is a strategy that helps businesses balance stock levels in line with demand. It involves analysing data and forecasting sales to ensure there's enough inventory to meet customer needs without overstocking, which ties up capital and increases storage costs.
Best practices for inventory optimisation include:
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