Steps to Effectively Manage Your Inventory

By:  Maggie M. Barnett, Esq., COO at ShipHero

Technology and automation have dramatically streamlined modern business processes. The logistics industry in particular has grown tremendously thanks to modern advancements. 

Where tedious inventory management tasks once required human labor, you can now automate the tasks using inventory software and better utilize your workforce for more specialized operations. 
Despite the power of technology though, eCommerce brands still need to have effective inventory management systems in place to optimize their order fulfillment processes.

Technology should complement your efforts; it can’t thrive under a poorly managed system. To optimize your inventory management, it’s important to use a combination of the best practices and industry-leading software solutions. By streamlining your inventory management, you can cut back on unnecessary expenditure, fulfill orders quicker and increase your bottom line.

What is Inventory Management?

Inventory management includes processes and management tasks pertaining to your inventory. These include tracking stock, monitoring inventory levels, identifying problem areas (such as inventory theft) and placing reorders.

What is an inventory management system?

An inventory management system is a strategic system in place that streamlines and optimizes your inventory control efforts. 

An effective management system accurately monitors and reports inventory levels, defines strategic reordering points, accurately forecasts demand and increases picking efficiency by strategically organizing your inventory, among other tasks. 

The Benefits of Effective Inventory Management

An effective inventory management system streamlines your fulfillment process and cuts back unnecessary expenditure. The specific benefits include:

Fewer lost sales

With an effective management system in place, you stop losing sales to problems like shortages, overstocking and wrong orders. Delivering incorrect items or delaying orders puts you at risk of losing loyal customers, who are vital to your brand’s growth. 

A management system helps organize your inventory better to guarantee accurate order picking. Additionally, inventory management tools let businesses set automated reorder points to prevent shortages and overstocking. You can also avoid overstocking by monitoring your stock levels in real-time, reducing unnecessary expenses. 

Improved reporting & demand forecasting

In demand planning, your inventory management software gathers previous data and analyzes current industry trends to accurately predict your inventory needs. It makes sure you have in-demand products stocked in the right quantity. 

If your inventory management fails to accurately record information, the forecast carries that inaccuracy and delivers erroneous predictions. You can improve the predictions by reporting stock and ensuring precision and accuracy, to help the algorithm work effectively.

Better cash flow

A data-driven inventory management system streamlines your internal operations and encourages a streamlined order fulfillment process. 

Low inventory results in lost customers; overstocking invites liquidity issues and unnecessary storage costs. An overstocked inventory means you have idle goods taking up storage space. Your labor force also has to monitor these items, taking up time and resources. 

Additionally, if you’re stocking perishables (like fruit/vegetables) or temperature-sensitive items (like cosmetics), the overall maintenance costs are even higher.

Inventory management systems use demand forecasting and automated reorder points (through software) to prevent understocking and overstocking, guaranteeing better cash flow.

Happy customers

Inventory and warehouse management systems are behind-the-scenes heroes for delivering good customer experiences. With an organized inventory stocked with trending items, you can accurately and efficiently fulfill purchase orders without delays. 

Optimizing your order fulfillment process is vital to keep customers happy, and a reliable inventory management system makes up the backbone.

Reduce inventory theft & damages

Thefts and damages shrink your inventory and result in lost revenue, but monitoring their impact isn’t easy. Without a proper inventory management system in place, you might underestimate or overestimate the problem at hand. 

Moreover, without a transparent view of your inventory levels, identifying theft is difficult. You can implement a double-check system to guarantee accurate reporting, or leverage inventory management software to monitor inventory levels in real-time and track your inventory.

Know when to re-order products

Knowing exactly when to reorder is crucial to maintain a balanced inventory. Otherwise, you risk running out of trending goods, or overstocking ones that aren’t in demand. 

Closely monitoring your inventory levels and keeping up with industry trends helps determine accurate reorder points. Alternatively, you can streamline the process with effective inventory management software. The software uses demand forecasting and real-time inventory tracking to determine accurate reorder points, ensuring optimal inventory levels.

Theft and loss reduction

Abnormal loss of inventory thrives on a mismanaged inventory system. When you don’t have your records in order, it’s more likely that your company will be taken advantage of. Further, when you fail to accurately count inventory, many thefts could go unnoticed. However, when you’re on the top of the system, effectively seeing inventory in and inventory out, you automatically reduce the chances of theft or loss.  

How to Create an Inventory Management Process That Just Works

Here are the best practices for creating an inventory management process that works for every successful business. 

Data is your hero

Accurately reporting your relevant inventory data is a vital part of an effective inventory management system. All the data including your beginning inventory, how many finished inventory items were shipped out, your cost of goods sold (cogs), product returns, and deadstock, inventory quantity, need to be accounted for.

To report data accurately, your team needs to be actively engaged in supply chain management. Make a point to count inventory and compare the value with the figure on the GRN (Goods Received Note). If you deal with perishable items, you need to be especially careful about expiration dates. You should pay attention to any stock damage or returns and keep a comprehensive written record.     

Implement a warehouse management system

A warehouse management system is a collection of software and processes that enable a business to control and monitor all operations within the warehouse. 

A warehouse management system gives businesses real direction and control over their warehouse processes. With a system in place, you can optimize each process and use analytics to monitor performance. 

Warehouse management software lets you monitor assets from the time they’re delivered from the manufacturers to the time they reach your customers.

A strategic warehouse management system streamlines restocking and logistics operations and uses demand forecasting tools to balance your inventory levels. WMS software tools take care of important calculations like your economic order quantity. 

They also integrate well with any system, whether it’s the periodic inventory system or the perpetual inventory system.  

Or work with a 3PL

As your eCommerce store grows, keeping up with order fulfillment becomes increasingly difficult. Brands reach a point where to keep up with demand, they have to decide from:

  1. Hiring more, specialized logistics personnel to handle the increasing demand.
  2. Hiring less experienced staff and training them up.
  3. Working with a third-party logistics provider (3PL)

Initially, many businesses shy away from option (3) because of the significant upfront costs. However, in the long run, the third option cuts back your expenses and optimizes your fulfillment process.

With option 1, the costs of hiring specialized personnel add up. Moreover, as your brand continues to grow, you might have to hire even more employees to keep up with the demand. 

On the other hand, option 2 puts you at risk of heightened expenses due to inexperienced team members and more mistakes. An inexperienced team translates to delays and incorrect orders.

Third-party logistics providers, on the other hand, give you access to a team of experienced professionals without you having to pay salaries and benefits. They’re partners; not employees. About 86% of Fortune 500 companies and 96% of Fortune 100 companies use 3PL services.

Audit your existing inventory management processes to discover and analyze issues

An audit of your management processes identifies problems in your management processes that you can improve to streamline inventory processes. 

For example, is your picking team finding it difficult to locate items? Then it’s time to organize your inventory better. A ratio analysis where you compare your current financial year to the last helps identify potential performance issues too.

If last year’s numbers were better, you might be losing revenue on unnecessary expenses, like storage costs due to overstocking. 

After discovering problems in your management processes, you can take proactive steps to solve them and streamline your fulfillment process.

Implement an ERP

An enterprise resource planning (ERP) system is software designed to help organizations manage their daily business tasks. An ERP can manage a multitude of business activities ranging from accounting and HR to risk management and supply chain operations. 

You can move your financial data over to the software after installing it. The inventory software is then free to organize warehousing operations and manage inventory logistics. 
With an ERP, you can monitor your operations through your mobile devices, and the software facilitates integrations with popular eCommerce applications including eBay, Amazon and Shopify. 

Use multiple fulfillment centers

While a single fulfillment center seems more cost-effective because of the reduced storage costs, there are some additional expenses you need to consider.

Having multiple, strategically located fulfillment centers cut down your delivery times and costs. This is because your business can fulfill orders from the center nearest to the recipient. It also means you can offer expedited shipping, which consumers have come to expect as standard practice.

Since small businesses can’t always afford the overheard that follows using multiple centers, many turn to a 3PL provider instead. Leading 3PLs have their own network of distributed fulfillment centers that you can utilize by partnering with them.

Change your inventory system 

It is crucial to choose an inventory valuation method that best aligns with your business model. With the first in, first out method there are certain advantages, such as a reduced risk of obsolete inventory and a reduced inflationary impact. 

The valuation method you select can significantly influence your inventory management process. You need to choose one that best suits your business. 

The first in, first out (FIFO) method offers certain advantages, like reduced risk of obsolete inventory and less inflationary impact. But some businesses choose to swap from FIFO to methods like JIT.

The ‘just in time’ (JIT) method requires less storage space, because you buy stock on an immediate-need basis. Using this method also means you have working capital to invest elsewhere, rather than having it tied up as stock. 

JIT also reduces your chances of overstocking significantly. But, at the same time, JIT doesn’t leave much room for error or delays. If your supplier runs late, and customer orders are coming in, orders may end up delayed or unfilled altogether.

How ShipHero Improves Inventory Management

ShipHero is an industry-leading warehouse and inventory management solution that optimizes your inventory management. The cloud-based software solution offers:

Dedicated suite of inventory management tools

Including inventory tracking, custom barcoding, batch picking, real-time inventory adjustments, comprehensive analytics and reporting (including turnover rates and sales margins) and reorder rates. 
With ShipHero, you don’t need to put spreadsheets together or manually monitor inventory levels. The all-in-one integrated system takes care of it for you.

Powerful data & analytics

ShipHero’s inventory and warehouse management system provides useful data and analytics including:

  • Shipment reports on every item that’s shipped
  • Actual costs of shipping (what the carrier charges you) and listed costs (how much you charge customers)
  • Inventory value reports
  • Cost of goods (The prices when you bought the products)
  • Replenishment needs (is it time to reorder?) 
  • Team-specific reports, including picking and packing reports and logs of any packing errors.

Order management

With ShipHero’s order management features, Shopify merchants can track orders, determine the best shipping routes, automatically assign new orders to distribution centers and optimize your picking and packing processes. 


Effectively managing your inventory improves the efficiency of your entire fulfillment process, leading to faster deliveries, accurate orders, reduced costs, and happier customers. 

You can optimize your inventory management by implementing the best practices, including leveraging distributed fulfillment centers, implementing an EPR, and taking a data-driven approach. 

However, managing your inventory processes isn’t easy, especially if your eCommerce brand is growing rapidly. If you’re struggling with inventory management, ShipHero’s warehouse management software and team of experts can help streamline your operations. 

Schedule a meeting with us to optimize your order fulfillment process.

If you’re new to ShipHero Fulfillment, please schedule a meeting today with our experts to learn more about how we can help you get your orders picked, packed, and delivered with our fulfillment service. No setup fees, simply pay as you go. ShipHero works to ensure that organizations invest in the solutions that match their needs, to improve productivity, revenue, and success.
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Maggie M. Barnett, Esq., COO
About the author:  Maggie M. Barnett, Esq., is the COO of ShipHero. She is responsible for planning and executing the overall operational, legal, managerial and administrative procedures, reporting structures and operational controls of the organization. Barnett’s greatest strengths are leadership, risk mitigation, change management and a passion for business transformation. She is known for her expertise in delivering operational excellence and an ability to provide guidance and mitigating risk. Her leadership of ShipHero is grounded in a servant mentality, always doing the right thing for our stakeholders. Her passion for ShipHero comes from the ability to drive operational excellence throughout the organization impacting the lives of our employees, customers, and partners.

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