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3 min read

8 tips to save money in the inventory management of your e-Commerce

3 min read

8 tips to save money in the inventory management of your e-Commerce


Inventory management is key to a business, since it could interfere with the amount of money your company earns or loses. At Imagineer, we focus our consulting strategy on understanding customers' business processes which are often nonexistent in some departments or simply inherited without questioning whether it's the right way to do them.

The tips described in this article collect some of our findings as we examine a company’s processes of purchasing and in its inventory department.

The Inventory Management Process

Inventory management means your products should be ready for use as soon as the order is received. While it sounds quite simple, the inventory management process has much more to it than meets the eye. This process is needs to maintain a secure stock and have a contingency plan for when things don't go as planned.

Defining an inventory management process will help you save money, optimize resources, and increase your sales. It's no use having items in stock if they're not sold, or having new orders in your e-commerce without these items in stock. These factors make it clear why a  mismanaged process of inventory is bad for business. By defining an inventory management process, we are able to sort the ordering and replenishment steps of the product, define the indicators in your eCommerce B2B or B2C, and the associated business rules, and manage the rules in your warehouses.

Avoid unnecessary costs because of common errors in your e-commerce inventory management with these recommendations: 


8 Inventory Management Tips To Save Money

        1. Centralized Inventory

Your eCommerce needs to have a centralized inventory management system. Relying on Excel to manage your inventory is not convenient if you expect your e-commerce strategy to be successful. An inventory system will allow you to track, forecast, analyze, calculate, and control your actions in real time, at anytime, anywhere.


       2. Set Minimum Stock Levels

Also known as its "even levels", a Minimum Stock Level (MSL) is the minimum amount of product you must always have at hand. When inventory falls below this number, it's time to sort more. This number will vary depending on expected demand and how quickly a product is sold.


  1. Method FIFO - First In First Out

The First In First Out (FIFO) strategy focuses on getting your oldest stock (first in) sold first (first out). This is especially important if you sell perishable items. To follow the FIFO method, your warehouse must be in order. An order preparation system will ensure that your oldest items are the first to ship. Be aware of your items’ due dates!


  1. Demand Plan

Forecasting the demand for your products may be easier than you think. First, you'll need to review past sales and trends to get a rough estimate of the amount of inventory you need to have in stock. Observe last year's data to set a "base demand" level for each season and use this information to predict what the future demand will look like. If you don't have this data to use as a benchmark, things might be a little harder, but not impossible.

You can also make an estimate based on your marketing efforts and average conversion rates. This will help you determine the amount of inventory you have in stock for a certain amount of time.


  1. Have a Contingency Plan

A contingency plan may be considered as a "hope for the best, plan for the worst" scenario. This is especially true for business and even more in inventory management.

You can prepare some contingencies based on these “what ifs”.

  • What if there are cash flow problems?
  • What if I miscalculate the inventory I have?
  • What if my supplier runs out of product?
  • What if I’m running out of space for the products in my warehouse?
  • What if the manufacturer suspends my product?
  • What if my sales increase and I'm out of stock?
  • What if there’s an unexpected withdrawal?

  1. Prioritize Your Products (ABC Analysis)

Prioritizing your products helps you keep costs down because it identifies which products should be ordered most frequently.

You can do this by following ABC analysis:

  • Items A: Items that are sold most frequently, with the highest value in your business.
  • Items B: Totems that are not sold regularly but that cost more to maintain, which gives them importance
  • Items C: All products that make up the bulk of your inventory costs.
  • In the ABC analysis, you'll devote the most attention to your A-list  items when it comes to maintaining inventory. For the other categories, you don't have to be so proactive. In fact, you may want to avoid storing too much of these items as they are sold less frequently.


  1. Open Communication with Customers and Suppliers.

Be honest with your customers. If an item is out of stock, make sure the numbers on your website are up to date. If a product is withdrawn from the market, notify your customer in a timely manner. Be honest and direct about your delivery times, especially during peak seasons and make sure customers are aware of your refund policy.

On the provider's side, ensure you have a good relationship that promotes honest and open communication. If a supplier runs out of products, increases prices, or develops manufacturing problems, you'll be the first to know, allowing you to adjust inventory accordingly.


  1. Consider Drop Shipping

In recent years, drop shipping has established a reputation as an excellent backup solution for e-commerce companies. Drop shipping means that instead of carrying inventory yourself, the manufacturer retains and delivers that inventory to you. Drop shipping, thus, eliminates the costs associated with maintaining and storing inventory.

If you're not sure if a manufacturer offers direct shipping options, just ask. This can save you a lot of money and headaches, as it can eliminate the inventory management task of your business operations.



We hope you are doing everything you can to avoid costly inventory errors. If you are new to inventory management, we will be happy to help you.



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