Guest Post: How E-Commerce Businesses Can Manage Their Product Inventory Efficiently

Sep 01, 2022

Managing product inventory is an essential part of managing an e-commerce business. An efficient inventory management system provides a business with lots of benefits to make the most out of its logistical efficiency. 

But first, let’s define product inventory.

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What Is Product Inventory?

Product inventory is the account of goods from raw materials to finished products. While there are many types of inventory, the four most common ones are raw materials and components, work-in-progress (WIP), finished goods, and maintenance, repair, and overhaul (MRO). 

It is vital to keep track of all the inventory as it directly affects a business’ financial health. An organization must have enough stock on hand and recognize when there is a shortage to keep a steady supply of goods. 

Here are eight ways e-commerce businesses can manage their product inventory:

1. Avoid Spoilage and Unnecessary Storage Fees

Avoid breakages and spoilage by implementing procedures that help reduce unsellable spoilage. A good example is the first-in, first-out (FIFO) strategy. In this technique, you move your oldest stocks first, then the new ones. 

This enables you to prevent products that have a sell-by or expiration date from becoming obsolete. Identifying which ones are perishable soon can also allow you to run promotional discounts on them to increase profit further while minimizing expense.

Avoid unnecessary storage fees by knowing your reorder points and amounts. Identify which items are fast-selling and don’t store unnecessary stocks. If you end up with extra stocks that you can’t sell, you might end up keeping them for months or years. 

Another tip is to find a warehousing facility that allows you to take a short or long lease and change capacity depending on your company’s needs. With the proper techniques, spoilage and inventory storage fees can be reduced.

2. Implement a Centralized Inventory Control System

A centralized inventory system is about keeping all stocks in one place, through which businesses ship their inventories to customers across different websites such as Amazon, eBay, and Etsy. 

All inventory is stored in the same manner and managed by the same people and methods of transportation. It is a standard method for e-commerce businesses to use this technique for their ventures. 

A lot of businesses centralize their inventory control system as it seeks operational efficiency, allows multichannel management, and reduces expenses. An inventory system that operates in a single location removes the discrepancies in the inventory data between different people’s views, as all those involved in your business can come up with decisions based on the same information. In multichannel management, centralizing your inventory simplifies processes. Thus, reducing the risk of fulfilling an order twice, to name one. 

Moreover, a centralized inventory control system provides more accurate data resulting in a more efficient operation. Therefore, reducing the amount of time and resources needed to complete specific tasks in your business operations.

3. Keep an Inventory Safety Stock

Safety stock is simply the extra product of a business stored in the warehouse to anticipate out-of-stock situations, such as in the event of unexpected delays from suppliers. It is always held in warehousing as effective insurance against fluctuations in supply and demand, resulting in stockouts. 

Keeping an inventory safety stock prepares the business for unforeseen events such as running out of raw materials inventory, finished goods inventory, or packaging. It lets business transactions proceed according to their schedule. It results in increased revenue for the business and better service for the customers. 

4. Use a Reliable Inventory Management Software

Inventory management software is a tool that automates your inventory and warehousing management. 

A good inventory tool provides a real-time and complete view of your entire inventory, even if it is distributed across multiple storage locations. It controls the inflow and outflow and maintains the inventory.

Inventory management software lets you track your inventory in real-time. This reduces the risk of human error. Another benefit of a good inventory management system is it ensures that you never run out of essential items. It helps you order enough items to continue fulfilling and prevents you from holding dead stock. Having the right database management support is also necessary. 

Many inventory management software also comes with accounting capabilities integrated into them. This prevents the risk of human error and lessens double-entry of data, to name a few errors. 

5. Keep an Eye on Your Margins

Profit margin is the number of sales that turned into profits expressed in percentages. It is the indicator of a business’s profitability, management skill, and growth potential. It is essential to know your profit margin because it shows how many cents of profit is generated for each dollar of sale. 

Having data management support enables businesses to store, organize and maintain the data they created and collected. Data analysis increases profit margins significantly, helps gain a larger market share, and increases the overall profit of an organization.

Keeping an eye on your margins helps you determine and correct pricing errors resulting in overall expense reduction. 

6. Restock Popular Products Right Away

Stock replenishment is a combination of techniques and technologies that help businesses manage the movement of their stocks in different channels. It is a vital part of inventory management as it guarantees the correct items are reordered to meet the proper customer demand. 

Knowing which of your products are fast-selling helps you restock your inventory based on demand. This lets you know which items to reorder and which ones would save you money by discontinuing reordering. 

One way to forecast demand is to check historical sales trends. Check where there is the most demand. It keeps you away from the snowball effect of a stockout where a customer can’t purchase an item because you don’t have it on hand. 

Losing out revenue from a couple of stockout orders seems relatively harmless, but over time it adds up. It is also a huge blow to your reliability and consistency that can affect your reputation in the eyes of your customers. Even marketplaces like eBay.

7. Strictly Follow the FIFO system

FIFO is the shorter term for the “first-in, first-out” inventory valuation method where the oldest stocks acquired or produced are used, disposed of, or shipped out to customers before the newer inventory. 

The FIFO system is one of the most widely used methods as it is simple and logical. It simply follows the natural cycle and flow of goods where the oldest inventory gets moved first before the newer stocks.

The FIFO practice allows your business to match the costs to inflation. Newly purchased stock can be sold at a higher price reflecting the current market value so your company can keep pace with the effects of inflation. Companies utilizing the FIFO inventory management method minimize their losses caused by products getting obsolete. 

8. Rely on ABC Analysis

ABC analysis is an inventory management approach that classifies the value of stock items based on their importance to the company. This analysis lets businesses know where to utilize their resources best.

The ABC tool ranks the usefulness of items in achieving business goals. It helps to manage working capital costs better and boosts inventory turnover rate, to name a few benefits. 

This analysis is generally used to support strategic decisions in areas such as pricing and sourcing identification. It maximizes the advantages to the organization by optimizing the use of data management. 


To summarize, managing your product inventory efficiently significantly affects the growth of your business. Some of the ways to manage it are through reducing spoilage and inventory storage fees, storing all the items in one place, having a safety stock, and investing in reliable inventory management software. 

Moreover, good data management support to watch out for your profit margins, stock replenishment, the FIFO system, and the ABC analysis are some strategies to achieve your business goals. 

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