If you’ve ever shopped somewhere just to realize that you don’t have the items you need, you’re familiar with stock status (or lack of stock status).
A key part of supply chain management is meeting demand while optimizing inventory and related costs, but it is also one of the most difficult parts of running an e-commerce business.
If you don’t know how much inventory is available at any given time, your logistics costs can be high and you can lose profits.
Fortunately, there are approaches to enhance your stock control process, so that you can understand how a whole lot of inventory you need to meet demand, develop your business, and keep a wholesome delivery chain.
Why Stock Availability is Important for E-Commerce Supply Chain?
Stock availability is knowing how much e-commerce is in stock to meet customer demand. In today’s complex and dynamic retail environment, managing real-time inventory availability can optimize inventory levels, reduce costs, and increase profitability.
As the e-commerce supply chain becomes more complex with the advent of on-demand logistics, advanced technologies and automation tools are being introduced to improve inventory visibility by providing real-time inventory tracking capabilities.
This allows companies to expand to a variety of distribution channels and effectively allocate inventory to distribution centers.
Challenges in E-Commerce Stores Stock Availability
The usual challenge for online retailers is real-time visibility into inventory levels. This is especially true when expanding logistics activities. The common challenges faced by online businesses in understanding inventory status are:
- Growing Inventory Carrying Costs
Storage costs make up about 30% of total inventory costs and depend on your storage needs, the number of SKUs you sell, the geographic location of your inventory, your inventory turnover, and whether you do it in-house or externally.
It is not uncommon for online brands to have excess inventory to ensure that they always have enough inventory to meet demand. However, if excess inventory is not sold, you risk paying to store “deadstock” or unsellable (damaged, expired, or obsolete) inventory.
Investing in cost coverage can be used in other areas of the business that are not impacting business growth. For this reason, it is important to know how much inventory you have at all times so that you can decide when to restock.
- Slow-moving Inventory Turnover
If you don’t have the right inventory to fill your orders, your sales may decrease and your inventory turnover may be below (that is, your inventory isn’t sold out fast enough). In most cases, a turnover of 2 to 4 is ideal, indicating that replenishment frequency covers the average sales cycle.
Knowing how much inventory you want to buy before a customer’s order arrives will always ensure you have enough inventory to meet your demand. However, it is difficult to understand the required inventory without knowing the inventory level. For this reason, it is important to implement tools and processes that provide a complete real-time view of your inventory.
- Daily Stockouts
Lack of inventory visibility can lead to out-of-stocks that delay retail performance or, worse, risk customer loss, order cancellations, and negative online customer reviews.
If you underestimate customer demand, do not plan significant shipping delays, or run out of funds to buy new inventory, your product may run out of stock. However, inventory status insights provide insights to prepare for unforeseen circumstances.
To avoid out-of-stocks, you can implement technologies that improve inventory planning by collecting and recording historical inventory data to improve inventory replenishment decisions.
By using technology to track inventory and gather insights, you can prepare for unforeseen circumstances, from manufacturing delays to spikes in demand.
- Keeping Customer Expectations
Almost all customers surveyed avoid shopping in online shops after a bad experience.
Customers not only expect fast and cheap delivery, but also insight into inventory levels. If an item in your online store says it’s in stock and your customer makes a purchase, you’re probably disappointed when you send an email notifying you that the item is back-ordered (or out of stock).
Through integrating real-time inventory management technology, you can better manage your inventory to meet customer expectations.
Ways to Enhance Stock Availability
Stock availability requires monitoring the entire supply chain, from forecasting demand to understanding production lead times.
Many Direct-to-Consumer (DTC) brands are hesitant to grow their business due to a lack of supply chain transparency. However, as e-commerce continues to grow, there are some tools and resources that can help build supply chain resilience so that the DTC brand can grow it’s business faster.
Here are some of the helpful ways to enhance stock availability oversight:
- Go with a Good Inventory Management System
When it comes to warehouse management across multiple warehouses, it’s important to implement a warehouse management system that provides both transparency, data, and real-time tracking.
Inventory software helps you automate time-consuming inventory tracking tasks and save time while reducing human error. To avoid being out of stock, the right software can calculate the ideal amount of inventory you need based on inventory trends and past buying behavior.
- Execute Demand Forecasting
Demand forecasts are never 100% carefully selected, but with the right tools and systems, you can reduce out-of-stock items, save time, and make better decisions to keep your business running smoothly.
A clear understanding of inventory status, such as current inventory levels and past trends, allows you to backorder times, where certain SKUs are in stock in your network, and promotion or flash sale to stock old ones to run out of stock.
- Utilize Inventory Reorder Points
Once you have real-time inventory status, you can predefine inventory reorder points to get an accurate picture of when to reorder based on historical trends and forecast data.
Here’s how can you can calculate order points:
Reorder Point (ROP) = Demand during lead time + safety stock
Calculating is easy, but manually calculating report points can be a time-consuming process, especially as demand fluctuates.
Luckily, many inventory apps are planned to help you determine the best inventory reorder points, so you can set up automatic alerts when your inventory is not high.
- Disperse Your Inventory
Distributing inventory across multiple fulfillment centers can make it difficult to track inventory availability. However, if you want to reach more customers and provide fast and affordable delivery options, optimized inventory allocation across your network is essential.
If you have customers all over the world and have large orders, it is a good idea to spread your inventory across multiple warehouses. To do this, you need to have access to real-time inventory data so that you can strategically stock the right amount of SKUs at each location to meet demand.
By distributing your inventory to the location closest to your customers, you can ensure that your orders are delivered faster and at a lower cost. In addition, in the event of an emergency (such as bad weather or a warehouse closure), you can process your order from another location as a backup.
- Conduct Inventory Audits
Warehouse staff, storage, inventory reduction, and depreciation costs should always be closely monitored and calculated.
Regular inventory checks ensure that the inventory recorded in the system matches the managed inventory. This helps identify inefficiencies. For example, you can optimize product availability while keeping costs down because you have inventory that sells too late or too fast.
However, if you use a spreadsheet to run the process manually, the inventory check can be time-consuming and difficult to scale.
- Work on Healthy Relationship with Suppliers
A healthy relationship with a supplier is beneficial because it helps you track inventory status. After all, you can rely on the supplier to provide consistent delivery times. However, manufacturing delays are common, so maintaining good relationships with multiple trusted suppliers is always a good idea.
By speaking properly together along with your suppliers, you could greater collaborate on order volumes and timing, and negotiate greater terms to keep on costs.