Stock management in e-commerce: 2024 guide

To ensure that your online shop is sustainable, you must master the art of stock management. To do that, you need to choose the right stock management method for your business. If you sell perishable foodstuffs, your storage methodology won’t be the same as it would be for phone cases. Here are five processes to consider to help you manage your stock as efficiently and economically as possible.

What does stock management entail for an online shop?

Stock management in e-commerce involves monitoring and checking incoming and outgoing product flows. It will enable you to see when stocks of a product are getting low and which products aren’t selling.

This will then help you to plan your supplies in advance and avoid selling out or, on the contrary, being overstocked.

In this article, we’re going to talk about stock management strategies and the challenges to be overcome.

Five successful e-commerce stock management strategies

The ABC method

The ABC method ranks products by their importance to the company (their economic contribution). The resupply of stock is therefore determined by the value added by each product rather than by its retail price.

For example, if a cup costs €5 but earns the company €3,000 per month, it will be ranked in category A. An €800 sofa that remains unsold will be ranked in category C because it earned €0 for the company. Between the two, in category B, there might be a wooden chair priced at €25 that earned the company €1,400 over a month.

This method enables e-commerce managers to understand which products are most popular (those that are worth the most time and energy).

The ‘Just in Time’ or JIT method

The ‘Just in Time’ or JIT method dates back to the 1940s. This technique is based on a lean supply chain. It has a dual objective:

1. to save storage space
2. to minimise manufacturing and delivery times

To apply the JIT method, raw materials and products must be supplied only when absolutely necessary. With this technique, stocks are optimised and waste avoided (deterioration, expiry of products…)

This technique is often used in the aviation and automotive industries: two sectors that require the stocking of a huge number of components. A garage would never stock tyres for every make of car. The garage owner would restock as and when, depending on customer demand.

Drop shipping

Everyone’s heard of drop shipping, domestic or international. This way of working requires no product storage. The use of this technique only requires the creation of an e-commerce website, offering products from a wholesaler for sale and waiting for orders to come in. When you receive your first order, you transmit it to the wholesaler (or drop shipper) who processes it and sends it to the consumer on your behalf.

The advantage of this method is that you won’t need a warehouse to stock your goods. You don’t have to worry about shipping either. These two advantages represent a significant saving in time and money.

First in, first out (FIFO)

FIFO stands for ‘first in, first out‘.

Meaning the first item to come into stock, should be the first to be sold. This is an accounting technique for valuing a company’s stock, used for perishable products (those with a sell-by date).

Buffer stock

Unlike ‘just-in-time’, buffer stock gives the security of a store of back-up products ‘just in case’. This technique helps deal with the unexpected: a rapid rise in demand or a delayed delivery from a supplier.

Brands consider three criteria when deciding on the number of products to include in this buffer stock:

1. storage costs and opportunity costs (cost of a non-sale)
2. contingencies
3. the desired level of service

For example, high-end hotels couldn’t allow themselves to run out of towels or soap. They should have such items in stock to avoid upsetting their guests. It is therefore essential to hold a substantial buffer stock, so they never find themselves in an embarrassing situation with their guests.

The challenges linked to logistics and storage in e-commerce

Lack of visibility of the Supply Chain

Some online sellers have no visibility of the journey of parts, products or assets. However, it is impossible to control what you can’t see.

Delays in shipments, bottlenecks and delivery deficits must be planned for to avoid creating frustration in customers and handlers.

Product flows must therefore be synchronised and shared with the team, and shared at every stage in the supply chain, from being added to the shopping basket to the final delivery.

Overstocking

Storage warehouses face a frequent problem: overstocking or an excess of stock. This problem can be the result in:

• an increase in fixed costs (premises, machines, storage space…)
• a rise in variable costs (electricity, maintenance, staff…)
• deterioration of perishable products
• food waste

It is therefore essential to manage e-commerce stocks in a sustainable, intelligent manner. To do that, it is crucial set up a consistent storage strategy (e.g. the JIT method) and use tracking software to ensure stock traceability.

Understocking

Out of stock products are every online seller’s nightmare. The aim of all online sellers is to enable consumers to find the perfect product in the right size and the right colour. To avoid understocking, we advise you to precisely monitor the quantities available for sale.

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When a product is out of stock, add a ‘notify me’ button below the price, so customers can add their email address. Then, you can email them when the product is once again available.

Manual stock management via Excel

Another problem linked to stock management in online sales is manual management via Excel. It’s OK when you’re just starting out, if you’re selling handmade jewellery through your website, for example. However, this technique isn’t viable in the long term. Apart from being a waste of time, the risk of error is too great, as is the risk of loss of data if there’s a computer bug, or you forget to back up the data.

Stock management in e-commerce: summary

As a reminder, here are the five stock management techniques you can use in our online business:

1. the ABC method
2. the ‘Just in Time’ method
3. drop shipping
4. the ‘first in, first out method’
5. buffer stock

And to deal with the above challenges, we advise you to use an e-commerce stock management tool and to carry out regular stocktaking checks.

Still got a bit of time to spare? Here’s how to optimise your e-commerce site for M-commerce.

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