15-step ecommerce inventory management checklist
Small Business Guides
6 min read
Every retailer has to master inventory management – the process of ordering, storing and supplying stock. It doesn’t matter if you do it on paper, using a spreadsheet or using online software. There is always something to learn and new ways to improve ecommerce inventory management.
How to improve ecommerce inventory management
Making sure you have the right quantity of product in stock to meet demand can take a fair bit of number-crunching and forward planning. You need to allow for seasonal changes. You also need to account for new spending trends. Use this 15-step list as your guide for improving the way you manage inventory.
Use data to plan ahead
Use data to plan ahead and calculate the right quantity and range of stock to have on hand throughout the year.
Start with these two steps.
- Look at your historical annual customer order numbers. Break down the figures into daily, monthly and quarterly volumes to help you identify the peaks and troughs of customer demand. Will you, for example, need extra stock in early December to meet Christmas demand?
- Identify how much additional stock you are likely to need if customer demand increases for any reason (this is your buffer). For an accurate forecast, look at what’s happened in previous years. Check the latest consumer trends. Review industry data to work out the right volume of safety stock for your business.
Also, think about how much equipment you’ll need to ship stock throughout the year. At certain periods, you may need additional boxes or bubble wrap; at other times you may need less. Plan for this too.
Stay on top of stock supply
Check you have a good process in place for maintaining optimal stock levels. Ask yourself:
- How quickly can I replace declining stock levels?
- Do I have sufficient safety stock for an unpredictable spike in customer demand?
Consider storing inventory off-site
Consider storing some of your product off-site to bring it closer to customers and to reduce shipping time. Think about setting up regional hubs. And strike up a storage deal with a national retail chain or the postal service.
Allocate the best warehouse space to in-demand products
Set up your warehouse so the most in-demand products are within easy reach. Make good use of all the space available by storing less popular products in the harder-to-reach areas.
Plan to hire more staff during busy periods
Most ecommerce sites do 40 percent of their business during the Christmas holidays. If you get busy at this time of year, start planning in June. It takes time to recruit and train new staff.
Use online, real-time inventory software
Using online, real-time inventory software will give you accurate stock data at the press of a button. Choose software that allocates a unique barcode to each item in stock.
Make sure it:
- updates your stock levels as soon as an item is taken off the shelf and the barcode is scanned by staff
- identifies when a product is out of stock and updates your website immediately
- tracks an item during shipping and gives you and your customers an accurate delivery time.
Respond quickly when stock runs out
Ideally, you’ll never run out of stock – because every time a product is not in stock, it becomes a lost order and, potentially, a lost customer. Respond quickly if you do run out of stock.
- removing out-of-stock product from your website to prevent orders and setting up a message that says the product will be back in stock shortly
- taking backorders and fulfilling the orders when stock comes in again
- monitoring your best-selling products very closely, and quickly replenishing stock as it gets low.
Add product handling and shipping costs to your inventory system
Make sure the cost of handling and shipping stock is linked to your inventory system. You want to see clearly how much handling and shipping affects revenue.
Do a weekly stock take
Ask an employee to manually count stock regularly – perhaps once a week – to cross-check your online tally. Do it as good practice. Use the same employee each time (if you can). It’ll speed up the process.
Review safety stock volumes
Having too much stock on hand is just as bad as having too little. Extra stock takes up room in your warehouse and it costs you. The longer it sits there, the more it decreases in value.
Keep an eye on the turn-around rate of your product. Note how long it takes to get product from your seller. Use this information to review the volume of safety stock you have on hand and adjust the volume accordingly. Aim to have 30 days of inventory on hand at any one time.
Use an inventory system tailored to your business
It makes good sense to use an inventory system that suits you and your business. There are several on the market. Select the one that best meets your needs. Ask the manufacturers or a consultant for advice if you need it. Look for one that links to your accounting and payroll software and any other relevant systems.
Keep company records accurate and up-to-date
It seems obvious. But it’s easy to let record-keeping slip. You’ll manage your inventory more effectively with accurate, up-to-date information. Keep an eye on the status of your inventory. Check it daily or even several times a day during busy times.
Keep your customers informed
Customers appreciate good communication. They like to know what’s happening to their order from the time it’s paid for through to the time it is delivered. Use a system that acknowledges receipt of payment, and shipping and delivery details. Give customers the ability to track their order online using unique tracking details.
Be aware of trends and seasonal events
Be aware of trends and events that are likely to influence your customers’ buying behaviour. Christmas and the start of the school year may cause surges in buying. A hurricane warning may see people wanting to stock up on necessities like food, first-aid kits, raincoats and sandbags.
Consider selling your products through Amazon’s webstore
Using a well-established like Amazon can be a great option for smaller businesses. You can sell directly through the or reach their customers through display advertising. Either option is straightforward to set up. can be a good way to see how the market responds to your product, and gives you access to tens of millions of Amazon customers.
Ecommerce inventory management is a balancing act
Managing your inventory can feel like a balancing act at times. On the one hand, you want enough stock to meet demand. On the other, you don’t want too much that it costs you.
The key lies in doing your research and using data to make informed decisions. For well-established small businesses, it’s a good idea to use historic sales figures to guide you. For new businesses, you’ll need to delve into industry trends and data to get a feel for what’s on the horizon.