Inventory Managment & Analysis- How you do it in your eCommerce store?

Inventory management is a critical task for eCommerce merchants. It’s a good practice to track and control the inventory orders, analyze the process, and keep up with the usage and storage of the readily available stocks. For eCommerce websites such as Amazon, Flipkart, there is huge management of stocks in the backend. Without proper solutions to the inventory, no eCommerce technology is sufficient. Magento, Shopify and BigCommerce are some popular eCommerce technologies and content management systems that have excellent solutions, plugins and integrations that aid in managing the complicated problems of inventory. It is, indeed, a task to manage proper data of in-stock and out-stock. For any eCommerce websites, there has to be multiple product lines or various product categories of different brands.

To consistently show the real data, the analysis of stocks coming in and going out saves a lot of bucks, helps you in strategizing the marketing strategies, improve customers services and other improvements.This blog post covers some of the best inventory analysis techniques and best practices  for your online store. 

Before we start the analysis of inventory management, let us first understand the entire concept of inventory management. 

What is Inventory Management?

Inventory management is a process of tracking down the supply chain, tracking of all in and out stock quantities. It involves knowing exactly where you need certain stocks to fulfil customer demands. If you’re already in the business, it’s not new for us. But for individuals, the first time experiencing an eCommerce business has a sure need to understand this mechanism to avoid the last-minute rush. 

Necessary Analysis for Better Inventory Management in Your eCommerce Store. 

ABC Analysis 

It is a data analysis technique to check the performance of inventories. There are two types of inventory performances. 

1. Best performing inventories 
2. Worst performing inventories 

The aim of this technique is to have more control over inventory and identify the particular products performing good and not performing at all. eCommerce stores development platforms like Shopify have the functionality that shows you a month long report of your best and worst performing products. 

It basically classifies the inventory into three parts. 

A grade. 

It includes the best performing products. This is the one where you get your most and fastest profit from. It covers your approximately 80% of your total revenue. This helps you prioritize the products. In online stores, the landing pages for these products should be optimized on a priority basis. The optimization of high-priority landing pages makes the customer experience better and pushes the products selling doubling the profits.

B grade. 

B grade represents the medium category of selling. It accounts for nearly 10-15% of the revenue. This slab of seeling falls under the A and C category of products selling. 

C grade. 

C grade category is the last priority of products. This product section is the lastly desired by the customers. Merchants might consider it as dead stock. The demand for this product line is not fixed. The possibility of emerging demands in this section is rare and business should not look up to put more effort into this, since the revenue is sometimes less than or equal to 5 per cent. 

FSN Analysis

FSN analysis means fast, slow, moving and non-moving inventory management analysis. This technique is used for controlling purposes. The products are being segregated based on consumption, quantities and other factors such as selling ratio. As the name of the technique suggests, it is fast, moving and non-moving products technique so it will consider products that are selling fast to not moving at all. Based on the selling rates, bifurcation and optimization will take place. 

It is useful for eCommerce merchants to make some critical decisions on occasions such as festival offers and other discount days. The technique not only focuses on good or worst scenarios but also on the products that are slowly moving towards the supply chain. eCommerce merchants can filter out the product options in well-versed eCommerce platforms like Magento or Shopify for the fast-moving as well as slow-moving products on certain personalized content for users. 

Minimum Safety Stocks

This inventory management technique involves keeping minimum safety stocks. This is used to avoid the out of the stock situation. Mostly for the giant eCommerce platforms like Amazon, Etsy uses this analysis technique to not come up as out of stock or sold out labels for their customers. The impression of these popular eCommerce stores among customers is valuable and do not affect the customers’ buying decision. The eCommerce store managers keep a minimum margin of a certain number, when the stock limit reaches that level, they consider reordering it from the seller/distributor. This technique comes to use when you have some idea about good performing products. It means you can use this optimization technique over the results of the above two mentioned techniques.

Economic Order Quantity

Economic order quantity is formula based technique. This is calculated based on certain entities such as total costs of production, demands and supply rates and other factors using business intelligence tools. This technique promotes higher order of purchase to minimize the multiple attempts of buying. It reduces the overall costs of the purchasing department for online stores.