The fundamentals of e-commerce inventory management

On an e-commerce site, inventory management is the least enjoyable part and the most headaches. Most e-merchants will tell you … and they’re not wrong. However, neglecting this aspect of your e-commerce business or wanting to go too fast can cost you dearly, very dear even. Optimizing your inventory and supply management will save you money. If you think about your inventory management system up front, it is better. But it’s never too late to change the way you manage your stocks and supplies.

In this article, we present you the fundamentals to set up a simple but robust e-commerce inventory management system. We will successively discuss the different inventory management methods used by companies, the common obstacles encountered and the best inventory management solutions suitable for small and medium-sized businesses (and how to set them up).

The different POS system with inventory management methods used by companies and large groups

To begin with, here is a quick but fairly comprehensive overview of the different methods that traders use to manage their stocks and supplies:

The minimum stock method: This method consists of restocking when the stock of a product falls below a certain threshold. This method makes it possible to manage a minimum of stock while avoiding as much as possible the shortages of stock and the reductions in sales that this can generate.

The Just-in-Time (JIT) method: This method consists of waiting for the customer’s order to obtain supplies. You source from your supplier on the date of the customer’s order. The advantage of this method is that it limits inventory as much as possible and saves you from buying products that you are not sure to sell.

The problem is that it can cause stock shortages and lengthen delivery times. If you market products that other e-merchants are selling at the same price point, you risk losing customers using this method.

The “First In – First Out” (PEPS) or “First in First Out” (FIFO) method: This method consists of selling (= leaving your stock) first the products that entered your stock first. This is the method used for perishable products. This method of inventory management assumes a certain organization in the arrangement of the products on your shelves.

The “Last In – First Out” method (or “First in Last Out” in English, FILO): as its name suggests, this method is the reverse of the FIFO method. The last product that entered your inventory comes out first. Therefore, the first products come out last.

This is a method less and less used and which, of course, is illegal if your products are perishable. The only advantage of this method is logistics: if you store your products in boxes, it is easier to recover the product above the stack than the one at the bottom of the box.

Demand forecasting methods: methods that consist of managing stocks and supplies based on a study and forecast of demand (analysis of trends, cycles, seasonality, surveys, market studies, etc. This involves anticipating, over a given period, a forecast sales volume and matching your supply to this forecast. The goal, of course, is to have a small stock of goods but sufficient to meet demand.

The inventory method: the inventory of stocks makes it possible to ensure the state of your stock and possibly to remove from stock products that have depreciated (expired, deteriorated products, etc.). The physical inventory of stocks is an accounting obligation for all traders. It must be carried out at least once a year, shortly before the closing of the accounts for the financial year.


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