Online Business Inventory Management System: The Smarter Way

Online business owner in warehouse checking his inventory management system.

By guest author Mikhail Ledvich, Director of Product Marketing at Monsoon Commerce.

So, you’ve been tasked with placing the reorders for inventory. You can always use the last 30 days of sales history to estimate your reorder, or you can take a different approach to inventory management to help you keep better tabs on your products.

At the end of the day, the problem you are trying to solve is inventory financing — how much inventory do I need to service my customers and minimize the quantity sitting on my shelves when it’s time to pay the supplier?

In addition to the capital, there are additional costs associated with overstock inventory, such as insurance, taxes, storage space, damage and obsolescence. By taking a smarter approach to inventory management you’ll be able to save a bundle of cash.

Here are 4 tips for optimizing your inventory management strategy:

1. Don’t Treat All of Your Items the Same

You must have a clear picture of your “A,” “B,” and “C” items. The goal is to maximize your effort on the most profitable, fastest-moving items, while minimizing resources for the slow movers. Items in each segment should have their own strategy for stock and reorder. The “A” items are extremely important to the success of your online business. So, your reorder strategy should be based on avoiding these items from being out of stock, even if they have to be reordered on a daily or weekly basis. Your “B” and “C” items are of less importance to your online business and can be handled with less stringent control.

2. Take Suppliers into Account

  • Part I: Closely monitor your suppliers’ performance. Are you getting the complete orders you’re asking for every time, or are you consistently seeing shipments coming with only 90 percent of your orders? Your inventory management system should be able to track quality, price, and delivery data points. Knowing this will help you identify suppliers that need extra attention so you can work with them on identifying a solution to the problem.
  • Part II: Many suppliers require minimum order quantities and offer price breaks at certain order sizes. This may cause larger-than-needed orders for your business, which then turns into surplus inventory. Try negotiating with your suppliers about minimums or price-break sizes. Consider an annual commitment, but ask for flexibility on orders as needed.

3. Inventory Management is a Company’s Responsibility

It’s important that you perform ongoing reviews of inventory and product segmentation. To do this, you need to get input from all the departments — including marketing, sales and operations — and synthesize their knowledge and plans as part of inventory forecasting.

4. Optimize in the Right Places

Once you’ve gotten the new inventory management system in place, look to optimize the entire supply process — not just your metrics. Work with your supplier(s) to cut down their lead-time, shipping carriers to get more visibility into your shipments, or the warehouse team to receive items into inventory more quickly.

Hopefully this is enough to get you thinking about a smarter way to manage your inventory. But do not fear — you don’t have to do any of this manually. Many of the systems available today can automatically keep track of and perform the above analysis for you.

For more online business tips, check out our Ecommerce Tips and Trends page.  

About the Guest Author:

Mikhail Ledvich – order management systems, Monsoon CommerceMikhail Ledvich leads Monsoon Commerce product management and is the chief evangelist across a multi-product portfolio. From order processing, to inventory management, to dynamic marketplace pricing, Monsoon Commerce offers the full suite of services you need to increase revenue with maximum efficiency in every channel.


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