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How Online Businesses can Master Inventory Management to Impact Operations

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As an online business, your sales numbers won’t matter if you can’t deliver your customers’ orders efficiently. There’s an inventory sweet spot you’re always looking to achieve — not overstocking, not understocking, and still managing to keep up with changing buyer demands.

Learning to master your inventory management processes can net significant bottom-line results in your ecommerce business. Explore these common challenges and discover how to overcome them so you can position your online business for big results.

5 Most Common Inventory Management Challenges

1. Inventory visibility: Knowing what you have and don’t have.
On-time delivery of your various products is possible when you have complete visibility of your inventory. If your items are off-site, hiccups can occur, misplacements happen and what you think is available may not be. Also, without robust inventory visibility, you may not realize you’re overstocked on low-demand products or understocked on high-demand products.

2. Inefficient processes and software: Not harnessing the right tools.
If your ecommerce business has been around for a while, you might still be processing orders or managing your inventory with manual methods. Or you could still be using outdated inventory software solutions that aren’t providing you with the actionable insights you need to be more effective in inventory management.

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3. Obsolete inventory: Unsold, unused and expired goods.
Depending on your niche business and core offerings, you could have redundant inventory to contend with in your arsenal. This means products that no longer generate buyer demand, have gone unsold or have outlived their expiration dates. Inventory waste and defective items stacking up in your inventory will only bog down your management efforts.

4: Identifying inventory: Mislabeling items.
Another challenge for ecommerce businesses involves labeling and categorizing inventory. Without a good system for tracking materials, products or equipment, you’ll be weighed down with time-consuming, tail-chasing efforts to keep track of your inventory. Mislabeled stock can snowball into a customer service dilemma — with wrong items shipping out to buying customers.

5: Shifting customer demands: Keeping up with buying trends.
Whether you’re selling keychains or high-value watches online, knowing what your customers want is a top priority. Your buyers’ preferences can change at any time, meaning an item that was once popular may suddenly no longer be a top seller. Proper inventory management involves knowing what your buyers want and consistently keeping the right amount of inventory to meet those wants.

Identify Software Solutions

A real-time inventory management system will allow you to have increased inventory visibility and get in-the-moment details about stock availability, location and labeling.

There are plenty of software solutions out there specifically designed for small, startup and medium-sized ecommerce businesses. Still, it can be daunting to sort through these options to find the best fit. Consider these factors before choosing an inventory management software solution:

  • First, identify whether you need an inventory management system or an enterprise resource planning solution;
  • Make sure the inventory software solution you choose can scale with your ecommerce business over time and isn’t being implemented simply to fix current problems;
  • Determine what inventory metrics and data are most valuable to your business and identify software with robust applications for collecting and analyzing it for you;
  • Recognize that some software solutions are better suited for warehouse management, while others are more plug-and-play for drop-shipping models;
  • Evaluate a software solution’s support network should you have questions or need help getting started;
  • Look for inventory software that supports other ecommerce retailers like you to quickly see if it’s a good fit for your model. You might even ask to see a customer success story;
  • Talk with your suppliers and existing vendor partners about which inventory management solutions they recommend; and
  • Perform a cost analysis of your current expenses to justify your budgetary investment in a software solution. Compare potential cost savings with the right-fit solution in place.

Mastering inventory management is crucial for any ecommerce business aiming to thrive in today’s competitive landscape. Efficiently managing your inventory means not just meeting current demands but also preparing for future growth. By addressing common challenges such as inventory visibility, outdated processes, obsolete stock, mislabeling and shifting customer demands, your business can ensure smoother operations and higher customer satisfaction.

Leveraging the right software solutions tailored to your specific needs can significantly enhance your ability to track, manage and optimize your inventory. Take the time to carefully evaluate and invest in an inventory management system that aligns with your business goals and can scale as your operations grow. By doing so, you’ll be better positioned to meet your customers’ expectations, reduce waste and ultimately drive greater profitability for your online business.


Eric S. Youngstrom is the Founder and CEO of Austin-based Onramp Funds, an innovative funding provider that supports the growth of ecommerce businesses. He leads a team steeped in ecommerce, providing financing and other resources to empower online merchants to scale their businesses and achieve their dreams.

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