In the simplest sense, inventory management pertains to the purchase, storage, and sale of stocks – both raw materials and finished products. In business, it means having the right stocks, at the right amounts, stored in the right place, kept for the right period, bought at the right cost, and sold at the most profitable yet acceptable price so the question is how to manage warehouse inventory or your eCommerce inventory.
Proper inventory management is crucial for all businesses, no matter how big or small they are. It helps save costs, prevent wastes, and save time. Understanding how to do it allows you to comprehend the movement of your stocks and, in turn, will help you decide about the following aspects:

• Timing of Order Placement
  A good inventory allows you to monitor your current supplies, which in turn will save you from reaching a point when you cannot provide goods for your customers.
• Amount of Order
  An accurate inventory can help you decide how much and when to order by projecting future sales.
• Period of Storing Items
  A complete inventory will help you keep track of your current items so they won’t perish, be left unaccounted for, unsold, or go out of fashion.

Effective Inventory Management

The following are the key points to consider and keep in mind to develop an effective inventory system and how to utilize it to the fullest:

1. Choose the Right Software.

Manual methods of managing inventory are good enough for some businesses, but they are very vulnerable to errors and mistakes. Hence, it is better to capitalize on inventory software to do the job. The best software must be able to perform the following:

● Analyze data in real-time
● Consider overstocking and understocking in the analysis
● Account for seasonality of items

2. Audit, Audit, Audit.

Performing constant auditing allows you to check and monitor the current stock you have. It is usually performed manually to verify the accuracy of the inventory software you are using.

3. Monitor your Safety Stock.

Safety stock acts as a buffer when there is a sudden and irregular shift in the demand and supply balance (e.g., due to panic buying). An inventory of your safety stock helps you prepare for unforeseen events.

4. Maintain Stock Balance.

Aim to balance your stocks, which means avoiding overstocking and understocking. Both may lead to lower profits due to selling items as clearance sales.

5. Use Kitting Technique.

Kitting is a technique where individual but related items are sold together as a bundle. It increases the sales of the items and helps get rid of overstock items without decreasing their value.

6. Track Past Purchases.

Tracking allows you to understand the sales trend of a certain product during a certain season. You can then use this analysis to decide whether to increase or decrease your orders of a certain item.

Next read: Accounting Basics Every eCommerce Business Owner Should Know