Key takeaways:
- Customers want a seamless and consistent shopping experience no matter where they shop. Good inventory management gives customers a consistent experience across all your sales channels, improving customer satisfaction and loyalty.
- To improve your multi-channel inventory management, identify your core products, set reorder points and safety stock levels, focus on demand forecasting, centralize your inventory, sync offline and online inventory, and regularly audit and optimize your inventory management processes.
If you sell products on multiple sales channels, you need effective inventory management to ensure products move through every stage of the supply chain to the final customer efficiently. However, this process can be challenging for many ecommerce business owners.
By understanding what your customers want and how much inventory is available, no matter the sales channel, you can give your customers a seamless shopping experience. Good inventory management also minimizes the risk of missed sales opportunities.
Read on as we examine six effective ways to improve your multi-channel inventory management, enhance your customers’ shopping experience, and increase sales opportunities.
Why is multi-channel inventory management important?
Your inventory is the heart of your business. With poor inventory management, you can lose out on sales opportunities, potential customers, and thousands of dollars. With this in mind, effective multi-channel inventory management becomes an inevitable part of your ecommerce business. Here are some reasons why multi-channel inventory management is crucial:
Monitor inventory
With a good multichannel inventory management system, you can monitor all inventory across sales channels in a centralized location. By monitoring your inventory, you can avoid running out of stock, identify best-selling products and slow-moving products, and analyze sales patterns for improvement.
Good customer experience
Your customers want a seamless and consistent shopping experience no matter where they shop. Whether they are shopping on your ecommerce website, an online marketplace, or in a physical store, they want to find the products they need and see that your brand remains consistent. Good inventory management gives your customers a consistent experience across all your sales channels, improving customer satisfaction and loyalty.
Efficient order fulfillment
With good multichannel inventory management, you can ensure that your order fulfillment process is seamless. You can streamline your workflows, improve the accuracy and speed of your delivery, and overall improve your customer satisfaction.
Reduced costs
Managing inventory on all your sales channels can be time-consuming. Poor inventory management can also lead to unnecessary costs. With a good multi-channel inventory management system, you can reduce the risks of errors, manual effort, and costs.
Business growth
As your business expands and you include new sales channels, the need for multi-channel inventory management becomes even more important. With a good multi-channel inventory management system, you can integrate new sales channels, handle increased volumes, and manage inventory across all platforms.
8 ways to improve your multi-channel inventory management
Here are six strategies that can help you improve your multi-channel inventory management, increase customer satisfaction, and boost sales:
- Identify your core products
- Set reorder points and safety stock levels
- Focus on demand forecasting
- Centralize your inventory
- Review your supply network
- Sync offline and online inventory
- Outline multi-channel inventory KPIs
- Regularly audit and optimize
Identify your core products
Have you ever heard of the 80/20 rule in sales? Well, there is a high chance that 80 percent of your online sales come from just 20 percent of your products. These products are typically your best-selling products or the most popular products on your website.
To effectively manage your inventory and ensure you never lose revenue, you need to identify what those products are. Once you can separate your core products from the rest, you can manage them and ensure you never run out of stock.
One inventory management technique that can help you identify your core products is the ABC analysis.
This inventory technique categorizes your products into three categories - A, B, and C, based on volume and revenue generated.
‘A’ signifies the products with the highest value, ‘B’ signifies products with a moderately high value, and ‘C’ signifies products with the least value. After conducting the ABC analysis, your core products will fall under ‘A’.
Set reorder points and safety stock levels.
You want to avoid stockouts by setting automatic reorder points and keeping safety stock for high-demand or high-risk items. Your system can alert you or even auto-generate when stock falls below a predefined threshold.
Focus on demand forecasting.
When selling across multiple channels, you want to maintain a balance. You don’t want to have too much inventory that you can’t sell, or run out of stock, either. This is where demand forecasting plays a critical role.
Invest in demand forecasting by monitoring your historical sales data. This will show you how your sales fluctuate and help you buy inventory according to that data. You also want to factor in your lead time. How long does it take for your inventory to arrive from your supplier?
Several multi-channel inventory management software programs can help you with accurate demand forecasting. However, you also want to back this up with research to ensure you’re making data-driven decisions.
Centralize your inventory
Managing your inventory becomes complex and time-consuming as you expand to more sales channels. If you want to become effective, you will need to invest in a multi-channel inventory management system to centralize your inventory.
Inventory management systems come with multiple features that make the process seamless. Some inventory systems provide real-time inventory counts, multi-warehouse inventory management to prevent overselling or underselling, multiple pick locations to restock and maintain inventory quantities, and other features.
Review your supply network.
Since the global pandemic, maintaining supply chain efficiency has become a dicey situation. To ensure there are no hitches, it is important to review your supply network. You can decide to diversify your supply network to reduce the risk of using one supply source. You can also find suppliers close to your business location to reduce costs. If you sell raw materials or imperishable goods, you may want to tie up some stock during peak seasons to avoid stockouts.
Overall, review your supply chain strategy and ensure it works best for your business.
Sync offline and online inventory.
If you have an offline and online store, you want to ensure you have an accurate and holistic view of your stock. You want to invest in a multi-channel inventory management system that connects both offline and online data. With offline and online data synced, you can easily analyze offline and online sales and look out for trends that may differ between both channels. This can also increase visibility and business growth.
Outline multi-channel inventory KPIs
Being able to measure your inventory performance is one sure way to improve it. You want to set the KPIs you want to monitor and use to measure your performance. Here are some multi-channel inventory management KPIs you want to consider:
- Inventory Turnover Rate: Your inventory turnover rate measures how quickly your products sell through within a period (typically a year). A good inventory turnover rate indicates that you are generating sales and moving through your inventory quickly. Here’s how to calculate your inventory turnover rate: Inventory Turnover Rate = Cost of Goods Sold/Average Inventory OR Sales / Average Inventory.
- Cost of Carrying: Cost of Carrying measures how much it costs to store your inventory every year as a percentage of your total inventory value. This gives you insight into the efficiency of your inventory management operations. It will help you identify storage costs for products that are obsolete, large, or delicate, and so on. Here’s how to calculate the Cost of Carrying: Cost of Carrying = (Inventory Storage Costs / Total Inventory Value) X 100%.
- Customer Order Fill Rate: With this metric, you can ensure your orders are delivered to your customers on time. With the customer order fill rate, you can measure your customer satisfaction and work to ensure you’re providing good customer service. Here’s how to calculate your Customer Order Fill Rate: Customer Order Fill Rate = Orders that are Shipped in Full/Total Number of Orders.
- Inventory Accuracy: This metric measures your recorded inventory side by side with your actual inventory. Not having an accurate representation of your inventory can lead to higher costs, poor accuracy, and a decrease in customer satisfaction. With this metric, you can identify unreported damage, potential theft, and other discrepancies. Here’s how to calculate your Inventory Accuracy: (Items Counted / Items Counted in System) X 100%.
Regularly audit and optimize
Ensure you run frequent cycle counts and full inventory audits to align both your physical and digital stock. Review your performance reports to identify slow-moving or dead stock, variations in performance across channels, fulfillment delays, or stock inaccuracies. Make adjustments regularly based on data.
Final thoughts
Managing your inventory across all your sales channels is no easy task. However, with some best practices, you can streamline the entire process and generate revenue more than ever before. You can examine and implement some of our strategies above for better inventory management. How do you go about managing your inventory across multiple sales channels?
