How to Improve Your eCommerce Inventory Management (Infographic)

There’s no doubt, eCommerce has all but replaced regular wait in line, mall-rat old-school commerce. The global end-customer eCommerce industry is expected to reach one and a half TRILLION dollars this year alone. Whether your store was built online or you’re bringing your brick and mortar to the cloud, you need to focus on how that is going to affect your inventory management. Today we pair up with TradeGecko to talk about the techniques you need to optimize and automate your eCommerce Inventory Holding.

What is an Inventory Holding?

Let’s start with the bottom line, your inventory cost also called your inventory carrying cost is perhaps the most frustrating cost of your business. It’s whatever you have to spend to store and maintain a set of goods before they are sold. This includes the physical space, insurance, climate control, and security against theft.

You need to manage your inventory holding properly, as it often includes unfortunate extra costs, including shrinkage aka lost or stolen items, spoilage, items that are never popular and become obsolete before they have a chance to be sold, items are damaged and other factors that add to this often most expensive part of running an eCommerce store. Plus, the way you control inventory management affects your supply chain which certainly affects your entire cost and process structure.

With an appropriate inventory holding technique, you are able to uncover opportunity cost, as a way to re-appropriate that gathering-dust inventory in order to sell and ship more, use less.

“Whether you’re running a brick-and-mortar store or an eCommerce business, your inventory will always be the most vital asset of your operations. And selecting the right Inventory Holding Technique can often be a crucial make-or-break decision impacting the long-term success of your company,” said Cameron Priest CEO and cofounder of TradeGecko inventory management software .

What is the best inventory holding technique for your eCommerce business?

TradeGecko offers you a selection of common inventory management techniques. Read on to check out which stock control techniques could be suit your business and then check out the Inventory Holding Cost Barometer to guide your choice!

• Just In Time Inventory Management: As its name suggests, just in time (JIT) allows you to have a smaller amount of inventory by ordering just a few days before you are planning to sell pr distribute. This starts by doing market research and a strong analysis of the buying habits of your customer to be able to make JIT predictions. Then, you need to organize your team with a sticky note style of Kanban for lean manufacturing, inventory or project management where you follow each group of items from empty to refill to back again. (This can be a literal post it or a cloud-based tool that does it all for you.) Everything in JIT is redesigning your manufacturing and inventory to respond specifically to needs, without creating excess.


• ABC Analysis: As easy as ABC, with this technique, you label and prioritize based on a balance of overall value and number of items. It’s based around the Pareto Principle which you probably know better as the 80/20 rule, most often applied as 20 percent of people do 80 percent of the work, or that you get 80 percent of value out of 20 percent of the items in your inventory. However, with ABC, you usually maintain three levels of categories which are given a high, moderate and low value. Once assigning value, each category is managed separately, prioritized in terms of fund allocation, as well as even staff needed to maintain, attention given most to Category A.


• Dropshipping: Here you essentially eliminate the middle man that inventory creates. As customer orders come in, you offer shipping and order details to the manufacturer or wholesaler who then ships out.


• Cross-docking: Similarly, to dropshipping, you don’t have inventory, but you still are in control of the delivery process, picking up from the source and delivering to the customer.


• Bulk Shipments: We all know and love the Oriental Trading Company, where you can order just about anything in the world you don’t need in gross quantities (144 items, to be exact.) Bulk shipping is one of the most common inventory management techniques when goods sold are in high customer demand. While profit can be potentially high, you certainly have to delve out more shelf space to store it all.


• Back-ordering: Potentially annoying for the consumer who is used to getting everything right away, but you put everything in your eCommerce store on back order, only ordering to meet demand.


• Consignment: Aka the pawn shop effect. You put your goods inside brick-and-mortar or online retailers, maintaining the ownership until these items are sold, usually paying commission out of your profits to the seller.

There’s an app for that!

Don’t forget, as with all things wonderful and SaaS (software as a service in the cloud,) if there’s a way to make your business more efficient, there’s an app for that. Check out how TradeGecko is changing the face of inventory management or see how it compares against a thorough list of inventory management solutions .

How to Improve Your eCommerce Inventory Management (Infographic)