Inventory management is fundamental to the success of any eCommerce business. It is a part of the supply chain that helps you ensure the right amount of stock at the right time, at the right location. The right approach to inventory management helps you reduce the cost associated with the product, optimize the order fulfillment process, and as a result, provide better customer service to the end-user. You have to find the perfect balance between holding too much inventory and too little inventory.
Role of a 3PL in Inventory Management
Partnering with a third party logistics (3PL) provider can help you better manage your inventory and let you focus more on the other key areas of your business.
3PL service providers tend to have more advanced technology stack and solutions to help you better determine the demand forecast, seasonal fluctuations, distribution network, and market coverage. You can avoid the long-term and expensive warehousing leases, reduce the shipping costs dramatically, and get access to the newer markets by outsourcing your fulfillment process to a 3PL service. With a build-in technology stack, information dashboard, and powerful inventory reporting, a 3PL partner can significantly improve your inventory management for your business. A 3PL partner can handle a large portion of your supply chain process, from eCommerce fulfillment to inventory management.
5 Stages in The Inventory Management Process
There are 5 key stages in the inventory management process that you need to track and report carefully in order to make the process efficient and effective.
Purchasing Purchasing the raw material or finished goods is the first stage of inventory management. You make a demand & sales forecast in order to assess the right amount of purchasing the stock. Suppliers set a MOQ minimum quantity order to get rid of the inventory faster and increase their profitability. As a store owner, you should be prepared to handle a MOQ.
Production If your business is converting the raw material into finished goods, this is an important stage in the process. If you are not in the manufacturing process, you can skip this stage completely.
Holding the Stock Holding and warehousing the stock comes with a cost, too much inventory can also hurt your cash flow. If you are using 3PL services, your service provider charges you the holding and warehousing cost for your stock, hence you have to work with an ideal number of stock units in order to optimize this cost.
Sales & Fulfillment Successful sales happen when your product gets in the customer’s hands-on time. Using a 3PL can help you streamline the fulfillment process at an overall reduced cost.
Reporting Reporting helps you in tracking your sales and making better decisions regarding the inventory management process.
Strategies to Optimize Inventory Management
Through multiple strategies, you can optimize the level of your inventory keeping in mind the demand forecast and other factors affecting your sales.
Just In Time Inventory Management
You align your orders from the supplier in a fashion that ensures the minimum stock availability and avoids the excess cost related to the warehousing. You order the amount you have previously sold in order to replenish your stock
LIFO & FIFO Method
LIFO (Last In First Out) and FIFO (First In First Out) helps keep the inventory moving. They are used to keep the inventory fresh and avoid any loss on the perishable items.
Economic Order Quantity (EOQ)
EOQ helps you to lower the per-unit holding cost of your product. You determine that ideal number by analyzing the demand, keeping the expenses at a minimum. This helps you to avoid overstocking and understocking situations.
Product bundling helps you to sell multiple SKUs together as a bundle. This highly effective product pricing strategy helps you to move your inventory faster and helps you get rid of the dead stock too.
Dropshipping has been really popular recently. It is a method where you don’t really have to keep any inventory. So you can skip all the costs related to the fulfillment of the order. In dropshipping, you let your supplier ship the product directly to the end customer.
Perpetual Inventory Management
This technique helps you to continuously update and replenish your inventory as they are sold. You always maintain a certain amount of inventory to avoid any overstocking or understocking.
In this technique, you always keep extra stock in order to meet any unexpected demand in order to avoid any unfortunate event of the stocking out scenario.
All these techniques have their pros and cons. Inventory management is critical for the success of any eCommerce business, so it is highly recommended to design inventory management systems that suit your business needs.
How Do 3PLs Like ShipBots Help Create an Efficient Inventory Management Process?
3PL companies can help you with an efficient inventory management system in which you can leverage real-time data and reporting to make better inventory management decisions for your businesses. They can also help in reducing the huge startup and fixed costs related to warehousing, logistics, and technology stack related to your inventory.
At ShipBots, we use our customizable inventory management portal to provide analytics to study past trends and help you make data-driven decisions. We help our clients effectively forecast customer demand and offer various eCommerce fulfillment solutions at competitive pricing. To learn more about how ShipBots can help optimize your inventory management process, contact us here.