{"id":1513,"date":"2021-02-15T19:24:21","date_gmt":"2021-02-16T03:24:21","guid":{"rendered":"https:\/\/www.agiliron.com\/blog\/?p=1513"},"modified":"2025-09-25T05:30:57","modified_gmt":"2025-09-25T12:30:57","slug":"your-essential-guide-to-retail-ecommerce-inventory-management","status":"publish","type":"post","link":"https:\/\/www.agiliron.com\/blog\/your-essential-guide-to-retail-ecommerce-inventory-management\/","title":{"rendered":"Your Essential Guide to Retail &#038; eCommerce Inventory Management"},"content":{"rendered":"<h2><strong>How to optimize your inventory tracking &amp; management strategy.<\/strong><\/h2>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter size-full wp-image-1516\" src=\"https:\/\/www.agiliron.com\/blog\/wp-content\/uploads\/2021\/02\/1.png\" alt=\"How to optimize your inventory tracking &amp; management strategy\" width=\"750\" height=\"500\" title=\"\" srcset=\"https:\/\/www.agiliron.com\/blog\/wp-content\/uploads\/2021\/02\/1.png 750w, https:\/\/www.agiliron.com\/blog\/wp-content\/uploads\/2021\/02\/1-300x200.png 300w, https:\/\/www.agiliron.com\/blog\/wp-content\/uploads\/2021\/02\/1-600x400.png 600w\" sizes=\"(max-width: 750px) 100vw, 750px\" \/><span style=\"font-weight: 400;\">\u00a9designer491 via Canva.com<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When it comes to your eCommerce and retail business, gaining the ability to track, optimize, and regulate your inventory can mean the difference between surviving and thriving in an increasingly competitive landscape.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Knowing how to track and manage your inventory effectively will drive down unnecessary costs while fulfilling more orders successfully (and when you do that, you will boost your bottom line).\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Studies show that most businesses\u2019 inventory management processes are accurate just <\/span><a href=\"https:\/\/www.prnewswire.com\/news-releases\/gs1-us-survey-shows-manufacturers-and-retailers-embrace-rfid-to-enhance-inventory-visibility-300052870.html\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">63% of the time<\/span><\/a><span style=\"font-weight: 400;\">. And, a <\/span><a href=\"https:\/\/www.peoplevox.com\/blogs\/2017\/9\/20\/6-surprising-stats-about-warehouse-efficiency\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">third of businesses<\/span><\/a><span style=\"font-weight: 400;\"> will miss a shipment deadline by selling an item that isn\u2019t even in stock.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Inventory management is important, and to guide you to success, here we\u2019ll look at essential tips and best practices.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But first, let\u2019s consider the benefits.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>The benefits of a solid inventory management strategy<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">By understanding inventory management best practices and optimizing your supply chain to ensure you fulfill the right products in the right quantities and at the right time, you will see your <\/span><a href=\"https:\/\/www.agiliron.com\/blog\/10-ways-to-encourage-ecommerce-retail-customer-loyalty\/\"><span style=\"font-weight: 400;\">customer loyalty <\/span><\/a><span style=\"font-weight: 400;\">rates soar.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">By handling, managing, and tracking your inventory with pinpoint efficiency, you can:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Reduce costs, improve cash flow, and enhance your bottom line.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Make informed, accurate forecasts and predictions based on stock or product demand.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Order stock in a smarter, more cost-effective way.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Optimize your processes to improve communication and save your staff time.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Track the state of your inventory processes in real-time with dedicated software.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><b>What to <\/b><b>avoid<\/b><b>: common inventory management mistakes<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Before we look at tips and best practices, it\u2019s important to understand what to avoid when it comes to successful eCommerce and retail inventory management. Steer clear of these two common mistakes and you will significantly improve your inventory management and tracking processes.<\/span><\/p>\n<h3><b>Excess stock<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">While this sounds obvious (why would you want to buy too much stock?), it\u2019s an issue that echoes through stockrooms across the nation.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Many growing eCommerce or retail business owners get concerned that they won\u2019t be able to handle sudden surges in demand on certain sale items, and they overstock. This \u2018playing it safe approach\u2019 usually works out to be a waste of time, money, and space.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Another issue with buying excess stock, known as safety stock, is that it can cloud your judgment. When you panic-buy specific items, you narrow your vision, increasing your chances of making poor investments on stock that is unlikely to sell at all.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To avoid crowding your stockroom or investing in the wrong items, you should take the time to analyze your stock levels and sales at set timeframes. It\u2019s also best practice to conduct data-driven demand forecasting so you can make accurate, informed ordering decisions.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The just-in-time approach, where you only order inventory items when needed, is often effective. The reorder point formula (ROP) is also worth considering as you can set a minimum level notification for various items to keep your store well stocked without overdoing it.<\/span><\/p>\n<h3><b>Poor communication<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">When it comes to fluid stock management, communication is key. One of the most progress stunting errors in inventory management is a lack of effective communication between your internal departments as well as your partners and suppliers.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Remember, inventory management is about maintaining order and efficiency while keeping your supply and fulfillment chain running. Without frequent communication, clear-cut processes, and the right tracking processes, you will become flooded with errors, delays, and mistakes that will cost your business dearly.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But don&#8217;t worry; in the next step of our inventory management journey, we\u2019re going to discuss how to overcome these common challenges.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Essential inventory eCommerce &amp; retail inventory management best practices<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The importance and benefits of effective inventory tracking and management are clear. Here is a rundown of essential inventory management best practices to help you streamline your strategy and improve your business operations.<\/span><\/p>\n<p><img decoding=\"async\" class=\"aligncenter size-full wp-image-1515\" src=\"https:\/\/www.agiliron.com\/blog\/wp-content\/uploads\/2021\/02\/2.png\" alt=\"Essential inventory eCommerce\" width=\"750\" height=\"500\" title=\"\" srcset=\"https:\/\/www.agiliron.com\/blog\/wp-content\/uploads\/2021\/02\/2.png 750w, https:\/\/www.agiliron.com\/blog\/wp-content\/uploads\/2021\/02\/2-300x200.png 300w, https:\/\/www.agiliron.com\/blog\/wp-content\/uploads\/2021\/02\/2-600x400.png 600w\" sizes=\"(max-width: 750px) 100vw, 750px\" \/><span style=\"font-weight: 400;\">\u00a9SDI Productions via Canva.com<\/span><\/p>\n<h3><b>Create a stock hierarchy with the ABC system<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">To prioritize your stock effectively and create a hierarchy that will allow you to store and manage your products better, you should adopt the ABC system:<\/span><\/p>\n<p><b>A:<\/b><span style=\"font-weight: 400;\"> High-value products with a lower sales frequency.<br \/>\n<\/span><b>B: <\/b><span style=\"font-weight: 400;\">Moderate value items with a medium sales frequency.<br \/>\n<\/span><b>C: <\/b><span style=\"font-weight: 400;\">Low-value products with a high sales frequency.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Usually, in eCommerce or retail, the high-value items require the most attention when it comes to stock handling, management, and analysis as the turnover is notably lower than products in category C.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Working with the ABC model, you will create solid foundations for your various inventory management processes, saving time and reducing unnecessary errors in the process.<\/span><\/p>\n<h3><b>Nurture your supplier relationships<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">In addition to categorizing your inventory for improved stock management, nurturing your supplier relationships is something you should focus on consistently.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Whether you need to fix an issue with a faulty batch of stock, replace poorly selling stock with alternative products, or solve a fulfillment problem, maintaining a solid relationship with your third-party suppliers will increase your chance of responding to challenges in the best way possible.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To keep your supplier or vendor relationships happy and healthy, you should focus on these two core areas:<\/span><b><\/b><\/p>\n<ul>\n<li aria-level=\"1\"><b>Communication<\/b><span style=\"font-weight: 400;\"> &#8211; Communicate with your suppliers regularly, sharing any relevant information or updates on a weekly or bi-weekly basis, if possible. Contact your suppliers leading up to annual holidays like Christmas and Thanksgiving\u2014doing so will demonstrate your commitment while building rapport.<\/span><\/li>\n<li aria-level=\"1\"><b>Partnership <\/b><span style=\"font-weight: 400;\">&#8211; Treat your supplier as a partner rather than a transactional relationship. Where possible, you should hold meetings or catch-ups where you share ideas or strategies on how to improve your processes and create emergency response initiatives.<\/span><\/li>\n<\/ul>\n<h3><b>Adopt the First-in-first-out (FIFO) or last-in-last-out (LIFO) approach<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">A powerful framework for managing your inventory, the FIFO or LIFO approach will improve your handling efficiency while reducing unnecessary costs or expenditure. Here\u2019s how it works:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">With <\/span><b>FIFO<\/b><span style=\"font-weight: 400;\">, your oldest stock (first-in) is sold first (first-out), rather than your most recent stock items. With<\/span><b> LIFO<\/b><span style=\"font-weight: 400;\">, the opposite applies.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The FIFO approach is ideal for keeping your inventory flowing efficiently, and the LIFO approach is perfect if you deal with a range of perishable goods sporting a short shelf life. Either approach will optimize your system and help you keep an accurate handle on costs.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Choose which approach is best for you, depending on your business model. Whichever approach you decide to adopt, ensure your stockroom or warehouse is well organized, with a tracking or labeling process that allows you to keep everything safe, well stored, and easy to locate. Which brings us to our next point.<\/span><\/p>\n<p><img decoding=\"async\" class=\"aligncenter size-full wp-image-1514\" src=\"https:\/\/www.agiliron.com\/blog\/wp-content\/uploads\/2021\/02\/pexels-tiger-lily-4483610.jpg\" alt=\"warehouse\" width=\"1280\" height=\"853\" title=\"\" srcset=\"https:\/\/www.agiliron.com\/blog\/wp-content\/uploads\/2021\/02\/pexels-tiger-lily-4483610.jpg 1280w, https:\/\/www.agiliron.com\/blog\/wp-content\/uploads\/2021\/02\/pexels-tiger-lily-4483610-300x200.jpg 300w, https:\/\/www.agiliron.com\/blog\/wp-content\/uploads\/2021\/02\/pexels-tiger-lily-4483610-1024x682.jpg 1024w, https:\/\/www.agiliron.com\/blog\/wp-content\/uploads\/2021\/02\/pexels-tiger-lily-4483610-768x512.jpg 768w, https:\/\/www.agiliron.com\/blog\/wp-content\/uploads\/2021\/02\/pexels-tiger-lily-4483610-600x400.jpg 600w\" sizes=\"(max-width: 1280px) 100vw, 1280px\" \/><a href=\"https:\/\/www.pexels.com\/photo\/warehouse-with-concrete-floors-4483610\/\" target=\"_blank\" rel=\"noopener\"><i><span style=\"font-weight: 400;\">Image Source<\/span><\/i><\/a><\/p>\n<h3><b>Work with the right data<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">To keep your stock room, warehouse, or retail store well organized and consistent, you need to work with the right data.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">By tracking and analyzing the right inventory management key performance indicators (KPIs) and metrics, you will be able to manage your supplier relationships effectively, create stock forecasts, measure your performance, and keep on top of your ABC, FIFO or LIFO initiatives.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As a guide, here is the essential inventory management KPIs and metrics you should track for ongoing growth and success:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Stock to sales ratio: <\/b><span style=\"font-weight: 400;\">The ratio of stock for sale compared to the stock you have sold over a certain timeframe.<\/span><\/li>\n<li aria-level=\"1\"><b>Sell through rate: <\/b><span style=\"font-weight: 400;\">The percentage of items or units sold during a specific timeframe.<\/span><\/li>\n<li aria-level=\"1\"><b>Weeks on-hand: <\/b><span style=\"font-weight: 400;\">The length of time it takes for specific items or products to sell.<\/span><\/li>\n<li aria-level=\"1\"><b>Inventory turnover rate: <\/b><span style=\"font-weight: 400;\">A clear-cut ratio of how many times items of stock were sold and replaced over a specific timeframe.<\/span><\/li>\n<li aria-level=\"1\"><b>Backorder rate: <\/b><span style=\"font-weight: 400;\">The number of backorders as a percentage of total orders demonstrates how well you stock products that are currently in demand.<\/span><\/li>\n<li aria-level=\"1\"><b>Rate of returns: <\/b><span style=\"font-weight: 400;\">The percentage of sold and shipped items that your customers return.<\/span><\/li>\n<li aria-level=\"1\"><b>Costs of carrying inventory: <\/b><span style=\"font-weight: 400;\">A percentage that represents cents per dollar spent on inventory overhead each year.<\/span><\/li>\n<li aria-level=\"1\"><b>Economic order quantity (EOQ): <\/b><span style=\"font-weight: 400;\">A formula that calculates the ideal quantities of stock you need based on a range of common inventory management variables.<\/span><\/li>\n<li aria-level=\"1\"><b>Minimum order quantity (MOQ): <\/b><span style=\"font-weight: 400;\">A calculation of the minimum amount of stock your suppliers will expect you to order before permitting a sale to your business.\u00a0<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h4><i><span style=\"font-weight: 400;\">\u201cWhat gets measured, gets managed.\u201d\u2014<\/span><\/i><b><i> Peter Drucker<\/i><\/b><\/h4>\n<p>&nbsp;<\/p>\n<h3><b>Work with the right inventory management software<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">To track and analyze your data in a way that offers real value to your retail or eCommerce business, working with the right tools is essential. Fortunately, we live in a tech-driven digital age.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Modern inventory management tools offer a wealth of insights that will empower you to make accurate stock forecasts and cost-efficient improvements to your inventory management initiatives, while also responding to unexpected issues and fluctuations with confidence.<\/span><\/p>\n<p><iframe src=\"https:\/\/www.youtube.com\/embed\/a5ZKcpD9CFg\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p><span style=\"font-weight: 400;\">Our intuitive and fully integratable <\/span><a href=\"https:\/\/www.agiliron.com\/solutions\/inventory-management.html\"><span style=\"font-weight: 400;\">inventory management app<\/span><\/a><span style=\"font-weight: 400;\"> makes it easy to track, analyze, and fulfill orders across your website as well as all third-party marketplaces from one simple dashboard. You can also use the app to drill down into important data, analyze trends, make accurate orders, and streamline every aspect of your fulfillment processes.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To find out more about how we can help you improve your inventory management strategy, <\/span><a href=\"https:\/\/www.agiliron.com\/about\/contact-us.html\"><span style=\"font-weight: 400;\">contact us<\/span><\/a><span style=\"font-weight: 400;\">. For more business-boosting advice, <\/span><a href=\"https:\/\/www.agiliron.com\/blog\/the-art-of-upselling-how-to-maximize-your-profit-improve-the-shopping-experience\/\"><span style=\"font-weight: 400;\">read our definitive guide to the art of upselling<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>How to optimize your inventory tracking &amp; management strategy. \u00a9designer491 via Canva.com When it comes to your eCommerce and retail business, gaining the ability to track, optimize, and regulate your inventory can mean the difference between surviving and thriving in an increasingly competitive landscape. Knowing how to track and manage your inventory effectively will drive [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":1517,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1513","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.agiliron.com\/blog\/wp-json\/wp\/v2\/posts\/1513","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.agiliron.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.agiliron.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.agiliron.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.agiliron.com\/blog\/wp-json\/wp\/v2\/comments?post=1513"}],"version-history":[{"count":0,"href":"https:\/\/www.agiliron.com\/blog\/wp-json\/wp\/v2\/posts\/1513\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.agiliron.com\/blog\/wp-json\/wp\/v2\/media\/1517"}],"wp:attachment":[{"href":"https:\/\/www.agiliron.com\/blog\/wp-json\/wp\/v2\/media?parent=1513"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.agiliron.com\/blog\/wp-json\/wp\/v2\/categories?post=1513"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.agiliron.com\/blog\/wp-json\/wp\/v2\/tags?post=1513"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}