What to Know About Inventory Management

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Learn about ecommerce inventory management

What Is Inventory Management?

Inventory management includes the processes of ordering, allocating, and storing products. A main concept in those processes is demand forecasting. Put simply, it is the management of a company’s inventory and supply chain.

Key Concepts of Inventory Management

  • Inventory management: Method of ordering, storing, and selling of products.
  • Inventory control: Meet demand while reducing inventory costs.
  • Demand-forecasting: Necessary to avoid both surpluses and shortages.
Predict inventory needs to improve sales

Why Is Inventory Management Important?

Why Is Inventory Management Important

Inventory is a core part of any business that supplies products. Therefore, it’s crucial that inventory is managed correctly.

Successful inventory management will allow you to fulfill orders on time, meet demand, prevent returns and spoilage, reduce costs, and provide a better customer experience.

It does this by keeping track of future trends, customer behaviors, financial standing, and other crucial aspects.

Steps of inventory management

What Is the First Step of Inventory Management?

In dealing with inventory management, the first step is to determine what inventory you already have. Knowing what inventory is in your warehouse, how much there is, and whether those products are in good condition will help you determine your next step.

Step two is to do demand forecasting and planning. This is where you examine trends in customer behavior and sales data to determine how much inventory you need to meet future demand.

Also examine your history—when was your inventory out of sync with demand? What went wrong then? How would you fix that issue, or improve upon your process?

Step three is to evaluate the costs for inventory and supply chain processes. There are costs throughout the supply chain, including transportation and warehousing, and possibly special deals.

Analyze how your current system is working in terms of expenses, and see where you can reduce some costs. You might want to cut out certain operations, automate additional processes, or renegotiate with your suppliers.

Step four is determining what processes to automate. The best practice is to automate as much as possible, as much as is feasible for your business. Manual processes leave more room for human error, and these mistakes can be costly.

Step five—denote categories to your inventory. This will help you stay organized and control different types of inventory. eCommerce inventory management software can help with this (and most other aspects of inventory management). Customizable eCommerce software is especially helpful for this task.

Step six—form your policies and priorities for inventory management. Since there may be several areas that need improvement, you’ll need to prioritize those. You’ll also need to create a plan to execute on those changes.

Then, you’ll need to have a set of inventory management policies to abide by. This will help everyone stay on track and prepare for the future.

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Expert eCommerce Development

Learn more about Clarity eCommerce Framework™, the customizable eCommerce platform with numerous integrations available for inventory management optimization.

Key concepts for ecommerce inventory management

Important Concepts for Inventory Management

Inventory management is a crucial part of running a business successfully. While implementing an inventory management system, keep in mind these key concepts:

Demand Forecasting

Demand Forecasting

This is about knowing when and where inventory will be needed before it happens. Machine learning enables analysis of past data to make predictions.

For example, from past experience, we know that gift bag sales increase before Christmas time. After, we see a sharp decrease.

Your company needs to be able to predict patterns like this to have the right amount of inventory in stock at all times.

Not enough inventory means loss of sales, when someone wants to buy the item but it isn’t in stock, so they go elsewhere.

Too much inventory can be a liability as well. There’s risk of spoilage, damage, and theft the longer the products sit in a warehouse. You may have to opt for clearance prices to clear out extra products.

Price Changes

price changes

Another crucial aspect of inventory management is pricing. Depending on the demand for a product, and the availability of that product, the price will need to change.

Prices can also change based on customer-specific pricing rules, where some customers get discounts based on certain parameters.



When is the best time to launch a new product? When should you promote your products? These are all questions of timing.

Getting the timing right is a key part of demand forecasting and planning, but it is also about experience and having the right technology.

Sometimes, it may also take a bit of trial and error, especially if you’re just starting out and don’t have all the tools yet.

Or you can work with an experienced partner who already has the software tools you need, and can implement them into your eCommerce platform.

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Benefits of Using an Inventory Management System

  • A simple and highly automated inventory management system makes things easier to handle and reduces errors.
  • Having proper information about your inventory means you can deliver on your promises and manage customer expectations. This leads to greater customer satisfaction. It also allows you to maintain control of operations and helps you stay on track.
  • When you examine all aspects of your inventory operations, you can identify areas that are lacking or inefficient so you can know what to improve. This will save you a lot of money and time in the long run.
  • Keep track of trends to form predictions. This will enable you to be prepared for the changes in demand. You’ll be able to have just the right amount of stock at the right time, and not over- or under-supply at crucial moments.
  • Awareness of these factors and a good understanding of your inventory will help you make better business decisions. These decisions include inventory turnover rate, warehousing costs, supplier performance, and more.

These are some of the benefits that you can gain out of your inventory management system. Clarity’s eCommerce inventory management system is customizable, so you can make better decisions and control inventory your way.


Build Your Inventory Management System

If you’re looking for an eCommerce inventory management system, you’ve come to the right place. We can help you optimize your inventory management, whether you’re just starting out or further along in development. Our eCommerce platform has built-in and customizable capabilities so you can fit it to your exact needs.

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