How to Master Inventory Management on Shopify

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Proper inventory management is crucial to building a thriving Shopify store. Statistics from Shopify reveal that sellers accrue almost $2 trillion in costs due to inventory mismanagement. The losses are spread among overstocking, out-of-stock items and preventable returns.

Interestingly, these aren’t the only problems associated with inventory management. Shopify store owners still have to battle missing items, misplaced inventory, wrong product packaging and delivery, among others. If you can establish a solid foundation for tracking inventory on your Shopify store, you’re on your way to building a genuinely agile eCommerce business.

What is Inventory Management?

Inventory management refers to how businesses manage goods as they move along the supply chain. eCommerce inventory control ensures that companies know their products are in stock and are notified when inventory needs to be replenished.

Ultimately, a good inventory management system should minimize costs, satisfy customer demand and help you maintain optimal inventory levels. It should also centralize your data, making it accessible to the appropriate point persons.

Part of stock management is inventory control, which is the process of handling existing inventory, while the former primarily involves forecasting, ordering and receiving goods.

Why is Inventory Management Important?

Inventory management is the key to any eCommerce business’ success. It ensures customer satisfaction, keeps businesses profitable and minimizes operational costs. Other benefits of having an effective inventory management system include the following.

No Spoilage or Dead Inventory

When your inventory moves faster and your product lines stay healthy, you don’t put anything to waste. Regular inventory updates can help you avoid spoilage with perishable goods like food and beverages. Similarly, automatic stock updates can prevent dead stock, which are non-perishable products that are no longer in season.

Early Detection of Low Stocks

Most American retailers without powerful inventory software only have an inventory accuracy level of 65%. The more warehouse locations they have, the more this percentage falls. 

Fortunately, perpetual inventory systems inform you of available inventory items in real time, preventing stockouts and missed sale opportunities. Instead of scrambling to increase your stock flow, early stock alerts can remind you to make refills in advance.

Improved Cash Flow

Cash flow shortfall is a persisting problem for businesses without perpetual inventory systems. The best way to increase cash flow is to turn inventory into revenue. When you factor inventory into your business operations, you get insight into how much you can sell and buy at any given time.

Remember, inventory flow can directly impact your future sales. Projecting when you’re about to run out enables business owners to accurately plan and increase sales.

Minimized Warehouse Costs

Efficient inventory counts tell you what items are selling fast and which don’t. You can free warehouse space up and store items that sell more by keeping up with sales volumes. 

In addition, you can monitor every single product that doesn’t sell, potentially cutting them out of your inventory. When you stock only what is necessary, you can downsize your warehouse and save on costs.

Improve Shopify Fulfillment Network

By employing effective inventory management methods, you can hasten the fulfillment process. For instance, if you have multiple fulfillment partners, inventory management techniques like distribution ensure that you are close to buyers and can keep customers happy. Doing so also ensures that customer returns are seamless and you can easily re-enter usable inventory into circulation.

What is an Inventory Management System?

Inventory management systems enable users to track inventory quantity and streamline processes from purchasing to end sales. Key features of a stock management system include: 

  • Barcode scanning
  • Detailed reports
  • Labeling and documentation
  • Purchase and supplier management
  • Low stock alerts
  • Stock turnover rates
  • Bills of material (BoM) management

What is Inventory Management for Shopify Stores?

Inventory management for Shopify stores is the systematic approach to sourcing, storing and tracking your inventory. With a proper inventory management system in place, you’ll have the right stock at the right levels, in the right place, at the right time and at the right price.

Plus, it’ll reflect on your Shopify store listings. That way, you can avoid preventable losses due to out-of-stock items, overstocking and returns, and your brand has a better shot at survival, growth and profitability.

Why Inventory Management Matters for Shopify Stores

Inventory management is crucial to the success of Shopify stores. If you can get this aspect of business right, you’ll reduce overall inventory costs, optimize order fulfillment and position yourself to serve your shoppers better. Below are some of the benefits of proper inventory management:

Accurately Track Inventory and Prevent Stockouts

Shopify store owners understand that meeting customers’ needs is crucial to profitability. If you frequently run into stock management problems like overstocking, out of stock or overselling, you’re likely to have many dissatisfied customers. Ultimately, they would go elsewhere to make a purchase, and you may never see them again.

Better Cash Management and Inventory Accounting

If you have too much stock that you can sell within a reasonable period, you’re leaving your capital idle while wasting precious storage space. Knowing how much product to stock helps minimize the amount of dead stock on your shelves and levels out cash flow.

Improve Multi-Channel Selling and Demand Forecasting

Proper inventory management facilitates seamless selling across multiple marketplaces. For example, suppose you’re selling on Shopify, Amazon, eBay, Etsy and your business website. In that case, you’ll need to stay on top of your stock levels to convey accurate information to customers across these platforms. Inventory management also helps you accurately forecast demand, so you’ll always have what your customers need in stock.

Save Inventory Dollars

Virtually every task involved in inventory management helps you manage your resources efficiently. If you stock the right amount of the right products, you won’t waste inventory dollars on storage space. There’ll also be fewer cases of spoiled or expired inventory since your turnover rate will be optimal. Furthermore, the potential gains of having what your customers need in stock whenever they need it is unquantifiable.

Inventory Transfers

Due to varying demand levels, you may frequently have to transfer inventory from one marketplace to another when selling across multiple channels. If you do not follow the right inventory management practices during the transfers, tracking each channel’s inventory levels gets harder.

Shopify Inventory Management Challenges

Shopify has built-in inventory management software that’s adequate for tracking your inventory and managing sales on Shopify. However, the native Shopify app can’t cater to retailers’ unique needs who sell on multiple channels. Here are three common problems you’re likely to experience with Shopify’s native inventory management solutions:

Products That Don’t Integrate Into Shopify

Shopify has a long list of restricted and prohibited items. If you sell one of these products on other platforms, you’ll be facing a significant challenge with multi-channel inventory management.

Often, the only viable option is to have separate inventories for Shopify and other platforms. This complicates the inventory tracking process and can lead to inaccurate or inconsistent stock levels across the different channels.

Automated Inventory Replenishment

As your SKU library expands, your inventory management process will likely become more complicated, and there’ll be more opportunities for inventory management errors. To prevent these problems, you need inventory management software that automatically replenishes depleted stock from suppliers.

Such a program should recommend order quantities by factoring in your sales volume on Shopify and other channels. Unfortunately, the native Shopify app may be unable to carry out the task effectively.

Functionalities Across Channels

The native Shopify inventory management software does not fully support multi-channel selling. For example, the app cannot estimate all the product variants in your online stores. This information is vital to evaluating the performance of your products on channels other than Shopify.

Phantom Inventory

When your system reports items that don’t exist in your store, you risk creating phantom inventory. Without accurate and powerful reports, your business can become susceptible to errors and shrinkage. 

While enterprise resource planning has its advantages, it does come with a steep learning curve, so always brush up on your inventory management tips.

How Do Shopify Merchants Handle Inventory Management?

How you utilize the different types of inventory management will ultimately depend on your business goals, existing systems, retail locations and other requirements. You can implement several strategies when using inventory management for the Shopify app.

FIFO Principle

The first-in, first-out (FIFO) principle prioritizes selling the old stock first, which is an ideal method for retailers that sell perishable goods. To achieve a FIFO system, warehouse management begins from the back, pushing older products to the front.

LIFO Method

Opposite the FIFO method is last-in, first-out or LIFO. This method involves selling your newest stock first, which benefits businesses that want to curb rising prices. While this method will lower taxable income, it will also yield lower profits and can negatively impact your retail business’ bottom line. 

Regular Auditing

Facilitating a regular inventory and supplier audit can put the current state of your business into context and pinpoint areas of improvement. There are several ways to keep track of low or excess inventory:

  • Physical inventory count: A physical inventory count refers to year-end inventory reporting. Count your stock to pinpoint discrepancies, update accounting and file income tax.
  • Spot check: Count products in stock one by one throughout the year to ensure you have enough of that particular item. Spot checking is best for fast-moving items.

On top of physical audits, supplier audits can help identify areas of risk, improve your standards, enhance supplier communication and increase customer satisfaction. 

Relationship Management

Relationship management is imperative to adapting quickly, especially if you have more than one retail store location or a thriving online business. 

If you have a bad supplier, you could have insufficient inventory or too much of it. The better your relationships, the easier it’ll be to bring up issues with suppliers and resolve them. Keep your suppliers in the loop by letting them know when you’re expecting a sales increase, if you’re experiencing inventory dips or if a specific product is running behind schedule.

Accurate Forecasts

Accurate forecasts are challenging to achieve but not impossible. If you want to ensure you’re stocking the correct inventory, keep an eye on: 

  • Your average growth rate
  • Market trends
  • Upcoming deals and promotions
  • Predicted ad spend
  • Daily, weekly and monthly sales
  • Sales comparisons

Noting these metrics can help you make more informed inventory decisions and prevent miscalculation in inventory mean.

What to Look For in a Shopify Inventory Management App

The Shopify App Store boasts numerous third-party inventory management tools that can make up for the native app’s shortcomings. Brands that sell on multiple channels typically layer these inventory apps over Shopify’s inventory management software to deliver the best results. 

But how do you know the right app to choose among the scores of available options? Here are the nine inventory management features eCommerce store owners should look for in any app.

Multi-Warehouse and Multi-Channel Functionality

A good inventory management app must be capable of syncing your inventory across all sales channels and fulfillment centers. When you update your inventory, it should reflect in real-time or at most within fifteen minutes.

Order Routing and Automation

The app you want to choose should automatically route orders to the nearest fulfillment center to save on shipping costs. The order routing will be based on inventory availability across fulfillment centers, destination zip code and delivery date. Your inventory management app should direct the order to the warehouse, guaranteeing cost-effective and timely delivery.

Inventory Control Features

You want an app that allows you to adjust the number of units on your listings across channels. The inventory adjustments should reflect in real-time to prevent overselling or processing the payment for an order you cannot fulfill.

Comprehensive Analytics and In-Depth Reporting

You should be able to generate real-time data about stock level, inventory turnover, sales margins, profitability, etc., from your inventory management app. All these metrics can guide your purchase decisions and help you satisfy your customers better.

Shared Inventory Across Listings For the Same Product

The ideal app should be capable of tracking inventory across multiple listings for the same product. This is one of the shortcomings of the native Shopify app, as it cannot effectively manage multiple inventory listings that rely on one source.

Automated Inventory Replenishment

Your inventory management system should be able to generate purchase orders once you have the lowest inventory levels automatically. Furthermore, it should recommend order quantities based on previous sales data. These capabilities will significantly streamline your stock replenishment process.

Locked Inventory

If you offer special promotions or pre-order sales, you may want to prevent the items from showing on listings. However, you’d still want them to show on your total inventory since you’ll be processing pre-orders and promotional sales orders. The best Shopify inventory management apps have a wide range of features for locking such products.

Cross-Channel Capabilities

As mentioned earlier, brands that sell across multiple channels will benefit significantly from having a bird’s eye view of their inventory and sales data across each channel. For example, they should know how each SKU is shared across listings, the quantities of inventory in each warehouse at any given time, the amounts appearing on the listings across each channel, etc. Not all inventory management software can provide these vital pieces of information as desired.

How ShipHero Makes Inventory Management Easy on Shopify

If you’ve been looking for an all-encompassing Shopify inventory management app that allows you to fulfill orders expediently and manage inventory while still giving you the best shipping rates, ShipHero is the future of inventory management. Our inventory planner serves over 4,000 eCommerce brands and third-party logistics (3PL) companies, and you’ll no doubt enjoy our custom workflows. Below are a few advantages of ShipHero over its competitors:

All-in-One Inventory Tracking

With ShipHero, inventory management doesn’t stop at knowing what’s left in your warehouse or fulfillment center. Our all-in-one inventory tracking feature gives you limitless capabilities, including but not limited to tracking a product’s shelf life, tracking movement across warehouses, monitoring sales data across each sales channel, figuring out the best shipping routes and even providing customer experience insights.

These features allow you to monitor inventory movement in and out of your fulfillment centers while ensuring you give your customers the best shopping experience.

Easy to Set Up Shopify Inventory Integration

ShipHero is available on the Shopify App Store, and it seamlessly integrates with all the essential Shopify features. For example, the app easily connects with Shopify POS and allows you to swiftly and securely process customer orders as they come in. Beyond Shopify native apps, ShipHero also boasts numerous integrations that make it easy to connect shipping carriers, other eCommerce platforms such as WooCommerce and other essential business software like Inventory Planner.

And it still doesn’t end there. ShipHero further boasts over 20 partners that provide systems expertise and integrations to help you get more out of the app. FedEx, Hermes, LaserShip, DHL, USPS, WooCommerce, Walmart and Shippo are just some of ShipHero’s illustrious partners.

Inventory Reorder Alerts

As already emphasized, the ideal inventory management app should be capable of automatically reordering inventory based on your sales records. ShipHero also ticks this box, and it can significantly streamline your stock replenishment process while helping your in-house buyers make better decisions.

Also, since the app can have multi-channel integrations, it monitors your stock level across all the warehouses and factors in your sales data across each sales channel before placing the order. So, you can rest assured it’ll suggest just the correct quantity you need to satisfy all your customers and not just your customers on Shopify.


The native Shopify inventory management app can satisfy your needs if you only sell a few items on Shopify. However, the app’s limitations become more glaring when you explore other channels and expand your SKU library. 

You’ll have to manually input SKUs into individual listings and update your stock levels, which can lead to poor inventory management. Doing this is akin to going back to managing stock using excel spreadsheets, and there’s no doubt your stock managers can make better use of their time.

Thankfully, ShipHero, an all-encompassing option for inventory management that integrates seamlessly with Shopify, is the commerce solution you need. The software possesses the much-desired multi-channel inventory management capabilities to streamline your inventory management tasks, get real-time location data, achieve strong sales and improve operational efficiency. 

What’s more? You’ll be incurring significant cost savings while leaving your customers pleasantly satisfied. ShipHero helps you spend less time on inventory and has just the attributes you need to stay ahead of the competition.

Get started with ShipHero today by clicking the button below.

Shopify Inventory Management FAQs

Is there inventory management in Shopify?

Yes, there is built-in inventory and warehouse management on Shopify. You can track inventory history, stock transfers and product variants, adjusting stock levels as necessary.

Which is the best inventory management software integrated with Shopify?

The best inventory management for Shopify is ShipHero, which is ideal for growing and high-volume brands. ShipHero provides real-time tracking for stock transfers, levels, sellouts and replenishments. It also offers full warehouse management, enabling users to automate repetitive functions that contribute to a complex workflow.

In addition, ShipHero provides advanced reporting and personalized dashboards that make it easy to share data across teams. Other advanced features besides direct integration with Shopify include multi-location inventory, barcode scanning and supplier management. ShipHero also serves 10% of Shopify Plus stores globally.

How do I add a stock to Shopify?

You can add stock to your Shopify account by following these steps:

  1. Click on Products from the Shopify admin page.
  2. Click Add Product.
  3. Entitle your product and add a description.
  4. Save your product.

There are additional options for updating your stocks on Shopify, including duplicate, tags, edit, barcode scanning, delete and archive.

About ShipHero: We make it simple for you to deliver your eCommerce. Our software helps you run your warehouse, and our outsourced shipping solutions eliminate the hassle of getting your products to your customers. With over 5,000 brands and 3PLs relying on us daily, we’re here to help with all your logistics needs.

Let us know how we can help you today by scheduling a call HERE.

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