Looking for a major profit killer for your e-commerce store?
Poor inventory management. The good news? There are a lot of business finance solutions that fix this!
Ideally, you want to have an ideal flow. You’ll want to order as you sell. Neither too much nor too little.
In real life, it’s a lot trickier than that, though. Most e-commerce stores struggle with this one way or another. They either find themselves flooded with stock, forcing them to mark down prices… Or they run out of the things they need to refill inventory, causing stockouts.
Optimization is the solution to these problems. Innovative solutions like the Netstock inventory optimization software provide insights that help you make the right buying decisions and streamline ordering, reordering, and more.
Want to see what it can do for your store? Check out some of these advanced inventory optimization solutions.
In this post, we’re going to cover:
- The Real Cost Of Poor Inventory Management
- Why Traditional Methods Don’t Work Anymore
- How Inventory Optimization Solutions Drive Growth
- Real-Time Visibility Changes Everything
- Choosing The Right Solution For Your Store
- Making The Investment Work
- Bottom Line
The Real Cost Of Poor Inventory Management
Poor inventory management is pretty much the worst for businesses. For most e-commerce businesses, it’s a company’s #1 killer in terms of potential revenue. It’s caused by things like stockouts, overstocking, poor picking processes, and more.
Let’s talk about the costs of poor inventory management for a second.
First up… Lost sales.
If something’s out of stock, 69% of shoppers won’t wait to buy it elsewhere instead. If you’re an apparel store, that can seriously hurt your profit. Not to mention how it affects your store’s brand perception.
Stockouts = lost customers
It’s a massive expense that you can quickly avoid by making sure everything’s in stock.
Stockouts are only half the problem, though.
Too much stock is just as damaging. Holding too much inventory is like flushing money down the toilet. It ties up your working capital and sits on shelves, going unsold. Every dollar is one less that you can use to:
- Market your store
- Develop new products
- Grow your business
Overstocking also incurs storage costs. Warehousing isn’t free, and the more unused space there is, the more you’ll have to pay for it.
Finally, inefficient inventory management can lead to delayed order fulfillment.
Customers expect fast shipping. If it takes you too long to fulfill an order, the customer may just cancel or shop elsewhere next time.
Delaying an order because of poor inventory management is just more lost profit.
Why Traditional Methods Don’t Work Anymore
Here’s the thing.
The traditional way of doing things simply doesn’t cut it anymore for most e-commerce stores.
Things like spreadsheets, gut instinct, and other manual methods don’t work with the demands of modern e-commerce.
If they did, you probably wouldn’t be looking for solutions like this.
E-commerce is a dynamic beast that can change on a daily basis. Trends, seasons, sales campaigns, and many other factors have a direct impact on demand. These changes aren’t always easy to track manually.
Inventory optimization solutions are better equipped to handle these fluctuations.
E-commerce warehousing will increase by 50% by 2025, for example, as businesses expand to keep up with demand. That’s going to require more stock, more complexity, and more SKUs.
How Inventory Optimization Solutions Drive Growth
Inventory optimization solutions exist to help you with just this issue.
Automation, machine learning, and big data take the hard work out of streamlining and improving your buying decisions. Here’s how they work.
Inventory optimization software will help you predict demand by using machine learning and other tools to improve accuracy. Historical sales data, seasonal trends, and many other factors are taken into account. They’ll be able to see and understand patterns that would take a human months to calculate.
In businesses with inventory optimization solutions, demand prediction allows them to meet 30% more orders on time. Order accuracy is massively improved, which means better customer experience and increased customer loyalty.
Predictive demand can also automate your purchasing process. When stock hits a certain level, you can be automatically sent a purchase order. No more rushed orders at premium prices because you forgot to reorder.
These solutions also improve forecasting. You’ll be able to see exactly what’s moving fast, what’s not, and the right time to reorder. You can free up your working capital by having a more accurate prediction and reduction of overstocking.
Finally, you’ll also benefit from real-time inventory visibility.
Real-Time Visibility Changes Everything
We mentioned this above, but we just want to hit it home.
Real-time visibility is a game-changer.
Businesses with real-time visibility are able to react immediately to changes in demand. You can scale up orders on a trending product in seconds and downscale on items that are flagging.
It’s agility like this that separates top-performing e-commerce stores from the rest.
Failing to invest in an advanced inventory optimization solution could set your store back years in the competition. It’s worth the investment, especially if you want to expand or go into new product lines.
Choosing The Right Solution For Your Store
How can you tell if a solution is a good fit for your store?
Start with integrations. Your inventory optimization software should be able to integrate with your existing technology like your accounting software and your e-commerce store.
It’s also good to know if a solution is scalable.
Are they able to grow with your business as your needs change? If they don’t, you may find yourself looking for a new system sooner than you’d like.
Look into the automation features, too. The more automated, the better.
Reporting and analytics are also a good place to check. Raw data is just that. Raw. Pick a system that has the tools to turn it into actionable insights.
And lastly, check out their support and training. They should be able to walk you through it all.
Making The Investment Work
Inventory optimization solutions require investment.
This is important. This won’t be free.
The good news?
They usually pay for themselves.
Think about the expenses you’re saving:
- Lower holding costs through less overstocking
- Less stockouts
- Lower emergency shipping fees
- Free time by automating manual inventory management
If you choose the right software, most will pay for themselves in a few months at the latest. Everything after is a return on your investment.
And what about ROI that you can’t measure? Optimization gives your store a competitive advantage. Competitors will still be juggling spreadsheets while your store is running lean and mean, adapting on the fly to market changes.
Which e-commerce store do you think is going to come out on top?
Bottom Line
Inventory optimization isn’t just important. It’s essential for sustainable e-commerce growth.
Imagine what you could do if you had the right amount of the right inventory at the right time every time. Sell more without running into stockouts or tying up your working capital.
New tools make this possible, with innovations in software solutions streamlining the entire process of forecasting demand to reordering to the rest.
The time to invest in inventory optimization solutions is now. E-commerce is more competitive by the day, and stores that optimize properly are going to dominate. The ones that don’t will just continue to hemorrhage profit to inefficiency.
You have to choose which side you want to be on.
Amanda Dudley is a lecturer and writer with a Ph.D. in History from Stanford University. After earning her doctorate in 2001, she decided to pursue a fulfilling career in the educational sector. So far, she has made giant strides by working as an essay writer for EssayUSA, where she delivers high-quality academic papers to students who need them.
