Stock management in ecommerce: Methods, problems, & best solutions

When you talk to e-merchants, most of them will tell you the same thing: “I love my job, but stock management is a real headache.” However, they’re obliged to take care of this aspect, which is one of the most important in ecommerce.

If you don't optimize stock management, or worse, if you neglect it, it’ll cost you time and therefore money.

In contrast, you’ll gain some if you take control of managing your inventory before you launch your ecommerce business.

However, and this is the good news, it’s never too late to change the way you manage your stock.

In this article, we’ll start by presenting you with the main methods used by merchants to manage their inventory of goods efficiently.

Then, we’ll detail the problems frequently encountered in stock management by ecommerce businesses. Finally, we’ll offer you concrete solutions to help remedy them.

Stock management methods

To begin this article, here is a quick summary of the six main methods of stock management.

• Minimum stock: When the stock of a product falls below a certain threshold, you have to restock. The advantage here is that you’ll always have a minimum number of products in your inventory and that you won’t run out of stock. A real positive point to ensure the continuity of your business’s sales and therefore the satisfaction of your customers.
• Just in time (JIT): Here, you only restock when a customer places an order. Again, your stock will be limited and you’ll only buy the products that your customers buy. No unsold items or damaged stock in your supply of goods. On the other hand, if your supplier isn’t very reactive, the delivery time for your customers to receive their orders is going to be longer. This is a system to be used sparingly—only if you are sure of your supplier’s reliability. Otherwise, your reputation as a merchant may suffer and cost you future sales.
• First in, first out (FIFO): Here, your products bought first will be sold first. For example, perishable food stores use this method of inventory management. If you use FIFO, be sure to have a very organized process for storing your products.
• Last in, first out (LIFO): As you may have guessed, this method is the exact opposite of the FIFO method described above. The product that arrived last in your inventory will be the first to leave. Conversely, the product that arrived first will leave the stock last. This method is rarely used today, unless your products are delivered in boxes, as it’s always easier to take the product on top of the stack first.
• On-demand forecasting: Managing inventory based on forecasts (trends, seasonality, etc.) is possible! The advantage is that you can anticipate a higher or lower sales volume and manage your supply according to these forecasts. The objective is always to have a stock that’s as low as possible, but still high enough to satisfy the demands of your customers.
• Vendor-managed inventory: By taking inventory of your stock, you make sure that it’s in good condition. This process serves as an opportunity for you to sort out and remove damaged, outdated, or destroyed products. In many parts of the world, the law requires that businesses do this at least once a year, just before the closing of the accounts. Think of it as an opportunity to help improve the overall state of your stock and not as an “obligation.”

As an e-merchant, it’s important to know these inventory management methods to help you to better run your business.

Before you create your online store and start managing your inventory, you need to be aware of the problems that businesses frequently encounter. This is what we’ll see in the rest of this article.

Common problems in stock management

Unfortunately, just like with other aspects of selling online such as ecommerce returns management, things don’t always go according to plan with inventory management. The key is to be consistent and structured with your process.

Here are some common issues you may encounter:

Overstocking and understocking

What is good inventory management? It's not overstocking or understocking. It's storing just what your company needs!

You don't want to build up a mountain of inventory or run out of a product when a sale comes along.

Storing your merchandise for a long time will tend to make it lose value, which is going to result in the reduction of your cash flow. Products stored for a long time can also deteriorate. Furthermore, storage costs can add up, quickly eating away at your business’s bottom line.

In short, the consequences are multiple.

As for understocking, although you’ll have a little more cash, as you’ll have lower up-front costs, you risk running into an "out-of-stock" situation, which is often very unpleasant for your customers and can actually result in missed orders and a higher cost for your business over the long term.

In the long run, it’ll have a very negative impact on your company’s reputation and therefore on your revenue.

The solutions that we’ll give you later on will help you avoid these situations of overstocking and understocking the items that you sell.

Inventory errors

This is one of the most problematic situations when it happens to you.

For example, if you sell candles on your ecommerce site and you indicate an inventory of 20 candles, you must actually have 20.

Imagine that someone wants to order all 20 candles at once before you realize that the remaining quantity on your site is actually only 17.

An error of judgment or a missing or damaged product…it happens! But, the delay in delivery, no matter how small, may displease your customer who, after this unpleasant experience, won’t want to order from you in the future or recommend you to others, which can cost you additional sales in the long run.

Having a good stock management system in place and regularly taking inventory of your business’s products can help you to avoid this situation.

Lack of a centralized inventory management system

The mistakes described above are the result of the lack of centralized inventory management. Some people still use a notebook and pen or an Excel file filled in by hand.

By using these time-consuming methods, you can be sure that an error will happen at some point throughout the process of managing your stock of goods.

Another option is to choose an automated system. You can also opt for an inventory management platform designed for physical merchants.

However, the functioning of a traditional store is so different from an ecommerce store that the tool in question may not be suitable at all.

The most effective solution is to use ecommerce website creation software that will automate the processing of orders and the updating of your inventory.

Wizishop’s stock management tool does this perfectly.

With just a few clicks, you can set up your inventory management system. Enter the stock quantity of each product and don't touch anything else!

It’s the ecommerce solution that will automatically calculate the stock of each of your products.

By opting for this solution, you can manage the delivery as well but also automatically update your product pages with the corresponding stock quantity.