Introduction
Inventory problems can damage an eCommerce business in two ways. Running out of stock means losing potential sales, while ordering too much inventory ties up money that could be used for marketing, operations, or product development.
Shopify provides inventory tracking features, but successful inventory management also requires planning.
1. Track Inventory Accurately
Maintain accurate quantities for every product variant, including different sizes, colors, and bundles.
Record stock received, damaged goods, customer returns, and fulfilled orders. If products are stored in multiple locations, make sure inventory records reflect the correct location.
Schedule regular stock counts to identify discrepancies.
2. Calculate a Reorder Point
A reorder point estimates when you should order additional stock.
Reorder Point = Average Daily Sales × Supplier Lead Time + Safety Stock
For example:
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Average sales: 8 units per day
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Supplier lead time: 10 days
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Safety stock: 30 units
Reorder point = 8 × 10 + 30 = 110 units.
When inventory approaches 110 units, you may need to reorder, assuming demand and supplier lead times remain reasonably stable.
3. Prioritize Important Products
Use ABC analysis to classify products according to their contribution to sales or another meaningful business metric.
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A: Highest-priority products
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B: Medium-priority products
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C: Lower-priority products
Review high-priority items more frequently.
4. Forecast Demand Carefully
Look at sales trends, seasonal demand, promotions, and supplier delays. Avoid assuming that last month’s sales will always continue.
For new products, start with controlled purchasing quantities when possible.
Conclusion
Good inventory management improves cash flow and customer satisfaction. Accurate tracking, sensible reorder points, and regular forecasting can prevent expensive stock problems.
