Best Practices for Effective Inventory Management

Inventory management is something you should pay close attention to, no matter the size of your business.

There's a lot of things you can do to turn your eCommerce business into a success. However, experience has shown time and again that building a healthy brand depends on having a grasp of traditional sales and business management strategies. Even if you're primarily operating online. This means that, in addition to investing in customer experience, you need to know how to make things run smoothly backstage. And that includes effective inventory management.

Knowing how to handle your stock won't just ensure you're always ready to meet customer demand. It will also improve your cash flow, allow you to save on storage, and prevent spoilage or dead stock.

So, are you interested in bringing your inventory management to the next level? If the answer is yes, read on for the best practices you can try to implement right away.

Plan ahead

One of the biggest risks you can take with your business is to answer to demand as it happens.

With this type of approach, you're looking at one of two scenarios. For one, your products may sell out, which means you'll be losing profits to your competition. Or, you might find yourself ordering too many of the same products and being left with dead stock. This takes up storage space and ties up your budget, preventing you from investing money where it's needed.

That's why you should always order based on par levels. Determine the minimum amount of product you need to have on hand to satisfy demand, and order whenever you dip below that level.

To effectively determine par levels, you'll need to get better at forecasting. The easiest way to do this is to combine your analytical data with seasonal search trends. Based on these, you can predict the times when consumers are likely to order a product. For example, we know that searches for Christmas gifts start to pick up in late August/early September. This is a good indicator that your stock should reflect the growing demand for holiday-related items in your offer.

Automate & adopt systems

Those with just a few products in their offer can rely on manual inventory management. However, most business owners will need to create or adopt semi-automatic systems. These will make the restocking process much more efficient.

If you're on a tighter budget, an Excel spreadsheet can work great. Just make sure to include all the necessary information. This includes the item number, name, price, stock, cost, quantity sold, etc.

Depending on the information in your spreadsheet, you can sort and filter your results. Furthermore, this type of inventory management can automatically calculate outgoing costs and create formulas that will help you better plan your cash flow.

But, if you need advanced options such as tracking by lot number, or require serial numbers to determine warranty eligibility, you'll want to invest in a professional inventory management software solution. This way, you'll avoid costly and time-consuming mistakes. The best inventory software will easily integrate with sales platforms like Shopify, Amazon, or even connect Woocommerce with eBay. So, always make sure you study the features before making a commitment.

Real-time performance tracking

Seeing that effective inventory management depends on the available data you have, you should set up systems that'll collect this data without much hassle. The best way to do this is to record your performance as you go.

Fortunately, eCommerce conversions are easy to track, as long as you set them up correctly. Whether you keep an eye on results in Google Analytics or through a specific online sales platform, the data you collect in this way will allow you to plan and manage your inventory much more efficiently.

By tracking the right metrics, you'll better connect the quantities of items you need to meet demand with your marketing strategies, promotions, and current market trends.

Strategic relationship development

In addition to setting up systems to make inventory management easier to tackle, don't forget that the relationships you build with your suppliers and vendors can have a positive impact on your business performance.

Choose your partners carefully, and even more, find ways to agree on the best possible terms of cooperation. Be clear about your expectations and proactive in your communication. Always give them a heads up about increasing demand. Address problems as soon as they arise. An open approach will create room for improvement and prevent more severe issues that could affect your customers. Open communication will also help you build a stronger, more resilient brand that will have the power to resist the inevitable ups and downs of any business venture.

Don't be afraid to seek out alternative fulfillment methods, too. Research Amazon's FBA program, or even dropshipping, both of which make for excellent ways to get into eCommerce.

Perform regular audits

Finally, no matter how good you are at managing inventory, don't forget that regular audits are necessary for a smoothly operating business.

Based on the number of items you have in stock, you'll have to perform daily, weekly, monthly, or quarterly physical counts. This will ensure that your records are correct.

To take things a step further, don't forget to continuously keep an eye on the fastest moving items in your inventory. Identify low-turn products that sell slowly (or not at all). And, of course, do quality checks to make sure you're providing a consistently high-quality customer experience.


Inventory management is something you should pay close attention to, no matter the size of your business. Whether you're doing it manually or have invested in software, keeping a close eye on the items you have in stock will help you manage any risks that may occur down the road. But even more, it will allow you to plan for growth. 

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