Inventory Management System in E-Commerce
The terms “stock management” or “inventory management” refer to the process of determining how much stock a company should have at any given time. An effective stock management balances customer satisfaction and company profits. Stock management; It may be affected by factors such as customers’ shopping behavior or changing demands, the economic situation of the firm, available capital, relations with suppliers and warehouse capacity.
Expectations from the Stock Management System
Stock management; It is the act of controlling the volume, variety, price and location of an enterprise’s available products. If a product is in stock, it is counted as part of the business’s inventory and can be managed once it enters the supply chain. The availability or availability of the product is indicated on the product page of the e-commerce site. So stock management is responsible for maintaining optimal levels at all times.
Stock management system helps to manage stocks efficiently. An ideal stock management system, for example; It should warn when stock levels decrease, and automatically process the returns from customers into the system; should speed up stock functions.
Some of the basic features expected from the stock management system are as follows;
- It should be able to follow stock levels.
- It should be able to determine inventory costs.
- It should be able to determine the costs associated with shipping, handling and storage.
- It should be able to determine the storage locations.
- It should be able to analyze past sales data.
- It must be able to predict future demand.
- It should be able to determine when to replenish stock and how much stock is required.
Things to Consider in Stock Management System
Some of the important elements to be considered in an effective stock management system are as follows;
- Stock costs: Refers to additional costs such as replacement or replacement of products that are out of stock. Some factors affect inventory costs, such as extra payments for emergency shipments, switching suppliers for fast delivery, and less profitable stock integrations. These costs should be considered together with the total costs of shipping the product to the customer.
- Time to take stock: In an effective stock management, a new stock item enters the inventory with the previous one being sold. This form of stock management eliminates the need for extra storage space. It will be difficult to determine when stocks should be taken without proper stock management. If the new stock arrives early, storage space is needed and this increases shipping costs. If the new stock arrives late and there is demand for the product during this time, there is a loss of revenue; you face the risk of losing customers. For this reason, it is important to get stocks on time.
- Stock analysis: There are hundreds or even thousands of data items in the stock management system. Which data stock management system is suitable? What data stocks are used to measure? How much stock can be processed with existing data? Answers to these and similar questions should be given with stock analysis.
- Stock limit: The amount of product available in stock management should be well known. For this, a lower stock limit should be determined and a stock management strategy that will not fall below this limit should be developed.
- FIFO: “First in first out” means “FIFO”, in Turkish it means “first in first out”. This international principle should also be taken into account in stock management. In other words, the first product to enter the stock should be the first product to come out after sales. The FIFO principle prevents new stocks from being sent for sale while old stocks remain. This principle is particularly important for product categories with expiration dates.
- Integrations and interfaces: E-commerce site integrations form the basis of many customer-oriented applications. The stock management system should be built in accordance with the integrations that support the site. Interfaces, on the other hand, allow to keep track of many information such as the total value of the stock and inventory costs in the general ledger system.
- Crisis scenarios: Every organization may encounter unexpected crisis scenarios. Economic crises, natural disasters and technical problems can shake the organization’s structure. It is important that the company’s stock management is ready for such situations.
Advantages of Stock Management System
Stock is the most important item in a business’s current assets. It is important to follow up correctly. In order to determine the profit or loss of the company, the stock is counted at the end of each accounting period and the current and future status of the stock is evaluated.
The stock management system allows for e-commerce, retail and multi-channel companies to purchase products, evaluate sales and control the stock and liquidation activities on hand. In the e-commerce industry, daily stock management increases workflow and visibility. Thus, e-commerce business owners can have a more effective control over stock.
Other advantages of the stock management system for online retailers are as follows;
- It helps ecommerce store owners measure their product sales.
- It allows e-commerce companies to manage order increases without selling products that are in stock.
- It allows keeping product information up-to-date.
- E-commerce site decision makers have more control over the omnichannel order flow.
- Inventory management software can be used to integrate background stock status with on-site optimizations.
- Stock data can be synchronized in real time across all platforms.
- The stock of the best selling products can be updated according to the sales.
- E-commerce sales increase; because the business knows which products can or cannot be sold in a given time.
Disadvantages of Poor Inventory Management
One of the biggest challenges for many ecommerce businesses is inventory management. For this reason, many mistakes can be made in stock management. Poor stock management or mistakes made in stock management negatively affect the performance of the e-commerce site and customer relations. For example; The customer who sees that the product he wants to buy is not in stock, is likely to turn to another e-commerce site that can meet his order on time.
Poor stock management leads to some disadvantages. These disadvantages are;
- Having more products in stock leads to high costs, product spoilage and waste of resources.
- Keeping inventories low will cause a supply problem if orders increase.
- Stock management mistakes can result in losing potential customers. Lost customers turn to competitor e-commerce sites.
- Failure to consider crisis scenarios in stock management may result in the loss of some or all of the existing stocks.
- Errors in stock software may result in incorrect product shipment or failure to supply the product.
- As a result of not checking stocks periodically, there may be difficulties in meeting orders.
- Failure to clearly indicate the stock status of the product on the e-commerce site causes a loss of trust in the customer.