eCommerce is a rapidly growing phenomenon across the globe. Statista projects that eCommerce sales will surpass $740 billion in the US by 2023. But it’s not just the B2C sector experiencing rapid growth. B2B ecommerce sales have also accelerated; Forrester projects that 17% of all eCommerce sales in the US will be B2B by 2023.
As more and more businesses sell online, they are starting to see the impact that eCommerce has on their inventory management operations.
In this post we discuss how eCommerce is affecting inventory management strategies. Learn how to improve inventory management for eCommerce in our previous post.
eCommerce impacts inventory management in many ways. Here are five top challenges experienced by companies:
Let’s take a look at each in more detail.
eCommerce can increase price sensitivity. It’s very easy for online shoppers to conduct extensive product research and use price comparison websites before making a purchase.
While there are strategies to reduce price sensitivity, eCommerce businesses also need to have lean and efficient supply chains to keep their cost of sale to a minimum and sustain competitive prices. This can affect inventory management tactics in a number of ways.
Firstly, you need to have cost-effective inventory management processes in place so forecasting and ordering are as efficient as possible. This may include having automation to speed up manual tasks and reduce human error.
Secondly, you need to order your inventory as economically as possible. This may include weighing up the benefits of ordering in bulk for supplier discounts versus the limitations of larger order sizes, such as increased carrying costs and lower turnover rates.
Finally, inventory is a major area of investment for eCommerce businesses. The more capital you invest in stock sitting in a warehouse, the less you have for investment in other areas of your business. Plus, if the stock doesn’t sell, you risk it becoming obsolete and having to be sold off at discounted rates. Inventory management teams therefore need to balance their goal of fulfilling orders the first time without holding excessive amounts of stock.
Stock availability is the number one factor to success in the highly competitive eCommerce marketplace. eCommerce has driven customers to expect products to be in stock 24/7 and that businesses can deliver within days of the order being placed. When goods are out-of-stock, customers will simply take their order elsewhere.
In the world of inventory management, your service-level metric is the probability of not having a stockout (or the probability of not losing sales). For example a 100% service level means you’ll fulfill 100% of your orders.
Realistically, eCommerce inventory managers should be aiming to achieve a service level of 95% or more. By aiming for a high service level to ensure stock availability, you can avoid most out-of-stock scenarios and subsequently lost sales.
Customer reviews are very closely linked to online buying processes and purchasing behavior. With nearly 95% of shoppers reading online reviews before making a purchase , eCommerce companies are particularly vulnerable to negative feedback. But at the same time online reviews can also be extremely positive for businesses, because they can influence customers to buy at precisely the moment when they’re actively looking to spend money.
eCommerce makes it more important than ever to deliver a great shopping experience and generate positive feedback to boost sales. Effective inventory management is the backbone of your eCommerce supply chain strategy to make this happen.
Many eCommerce businesses sell via more than one channel including physical stores, websites or online marketplaces, such as eBay or Amazon. This makes forecasting and order management much more challenging for inventory management teams.
For starters, they have to track demand for each product across a range of channels and aggregate this to ensure cost-effective reordering from suppliers. They also need to optimize inventory levels at each stock location, whether it’s a store, warehouse or 3PL, to prevent excess stock building up across the supply chain.
As more businesses move into the world of eCommerce, they’re finding they need to digitalize their inventory management processes. Tools such as enterprise resource planning (ERP) systems, inventory optimization software, warehouse management systems (WMS) and eCommerce platforms are all important to provide accurate and transparent data and promote efficiency.
As well as the specific eCommerce challenges we’ve discussed in this post, businesses also have to deal with ‘inventory management basics’. These include accurately forecasting customer demand (which can often be erratic) and managing supply disruption, such as production or logistical delays.
With so many factors to consider, traditional inventory management processes – e.g. using spreadsheets and manual number crunching – are no longer cutting it. Instead inventory managers are turning to software to forecast demand, optimize inventory levels and automate ordering.
Find out how inventory optimization software could help you deal with the impact of eCommerce on your inventory management. For more information on EazyStock email us at firstname.lastname@example.org or call +1 (844) 416-5000.
Want to know more about eCommerce inventory optimization? Download our eGuide on inventory optimization for eCommerce below: