How do you determine optimal inventory levels for your e-commerce business?

Finding the optimal inventory level for your e-commerce business is a delicate dance between minimizing costs and maximizing customer satisfaction. It's like walking a tightrope between two cliffs: too much inventory means wasted storage space and lost capital, while too little leads to stockouts and frustrated customers. Here's how you can navigate this tightrope and find the sweet spot: 1. Understand key metrics 2. Analyze your data 3. Use inventory optimization methods 4. Leverage technology 5. Continuously monitor and adjust Additional tips: - Collaborate with your suppliers to improve lead times and increase reliability. - Implement clear communication processes to avoid stockouts during peak demand periods.

Optimal level of inventory is dependent on many factors. Any single number for this will lead to underperformance . The factors that a brand needs to consider are - Margin Profile of the product - Lead Time - Salvage Value - Carrying cost - Seasonality profile of the product For fashion business managing inventory is probably the single most important metric that can make a difference between success and failure. For large fashion business old ways of managing inventory decision based on excel are not sustainable. Creating tech for managing inventory decision is a must. Our experience has been that Off the shelf SAAS products usually do not measure up. Developing tech based on the company process is the only long term solution

Optimize your inventory metrics and methods according to your business goals and constraints. 1. Analyze sales data Use historical data, market research, and statistical tools to forecast demand. 2. Analyze sales trends Consider factors that might affect the global supply chain network. 3. Forecast demand Anticipate sales figures and inventory stock levels to avoid out-of-stock or overstocking. 4. Measure inventory turnover This ratio shows how many times inventory is sold and subsequently replenished in a given period. 5. Consider lead time

The amount of inventory you hold should be related to the reorder time. A product that can be sourced in 2 weeks domestically needs a lot less weeks or days of coverage than orders that are sourced abroad. Just in time inventory levels for e-commerce sits between 4-8 weeks depending on how efficient the supply chain is. Inventory in fulfillment warehouses kept longer than 4-8 weeks incurs high costs and generally longer term storage is used to hold additional weeks of coverage.

e-commerce inventory levels should be determined by 1) your rate of sale forecasted across all your channels, 2) how long it takes you to reorder or manufacture your products, and 3) any seasonality or promotional spikes / slow downs expected in the next period you are forecasting for. Combine those data points with the facts of how much it costs to store good in warehouses / 3PLs etc. Triangulate these data points to determine your optimal weeks of supply.

Categorize products based on their contribution to revenue. Apply different inventory management strategies for high-value, medium-value, and low-value items. Use inventory management software to automate tracking, reordering, and maintaining accurate stock levels. This enhances efficiency and reduces the risk of human error. Conduct regular reviews of inventory performance. Monitor key performance indicators (KPIs), adjust parameters as needed, and stay agile in response to market changes.

In unserem Bereich nutzen wir vorrangig die FIFO-Methode, da sie uns hilft, unsere Lagerbestände stets aktuell zu halten und schnell auf Trends und Kundenwünsche zu reagieren. LIFO und die Durchschnittskostenmethode sind auch interessant und regen zum Nachdenken über alternative Strategien an, besonders in Hinblick auf die Verwaltung unserer saisonalen und limitierten Kollektionen.

Closely monitor sales trends, analyze historical data, and stay attuned to market demand. It will ensure a balanced inventory.

ABC Analysis: Divides inventory into three categories (A, B, and C): A-items = High-value products/low sales frequency. B-items = Moderate value/moderate sales frequency. C-items = Low-value/high sales frequency. The focus is typically on A-items to ensure availability while minimizing holding costs. A-items represent a significant portion of inventory value. Just-In-Time (JIT): JIT inventory aligns orders with demand, minimizing holding costs. JIT requires accurate forecasting and reliable suppliers to avoid stockouts. Dropshipping: Suppliers directly ship orders to customers, allowing sales without holding products in inventory. It is flexible and reduces costs, but you lose control over shipping speed and inventory.

First In, First Out (FIFO): Sell oldest inventory first. Ideal for perishable goods like food or trendy items like fashion. Last In, First Out (LIFO): Sell newest inventory first. Good for non-perishable items. Average Cost Method: Uses average cost of inventory to price items. Suitable for similar, indistinct products. Just In Time (JIT): Stock items as needed, reducing storage costs. Requires precise planning. ABC Analysis: Categorize inventory by value and importance for focused management. Economic Order Quantity (EOQ): A formula to find the optimal order quantity, balancing ordering and holding costs.

I agree, and as per me, forecasting by segment by day is the key that will ensure the right allocation of e-commerce channels. The objective is to ensure an optimal and sustainable segment mix that leads to higher revenue and profitability without losing revenue opportunities.

Leveraging an e-commerce ERP with reorder points, supplier mapping, and built-in lead times can help streamline your process for generating purchase orders and ensuring your inventory is optimized to avoid back orders and excess inventory on hand.

In the dynamic world of e-commerce, maintaining the right inventory levels is crucial. A key strategy is conducting regular sell-out analyses to understand which SKUs are performing best over specific periods, like a month or a week. This insight, combined with assessing our supplier's immediate stock availability or planning purchase orders for the upcoming 1-2 months, enables us to accurately determine the ideal stock levels and necessary buffers for each SKU. However, market trends are ever-changing. That's why it's essential to revisit and adjust our stock strategy every quarter, ensuring our inventory aligns with the latest sales trends and customer demands.

Collaborate with sales and marketing teams to align inventory levels with promotional activities, product launches, and other events that may impact demand. Also, consider implementing JIT principles for certain products to minimize holding costs while ensuring products are available when needed.

Demand Forecasting: Accurate forecasts are vital for maintaining optimal inventory levels. Techniques can range from simple moving averages to complex predictive analytics models, considering trends, seasonality, and promotional activities. Safety Stock Calculation: Safety stock is additional inventory to prevent stockouts caused by inaccurate forecasting or unexpected demand. Base the amount of safety stock on historical demand variability and lead time variability. Reorder Point Formula: This is the inventory level at which you should place new orders, considering the lead time to replenish and safety stock. The formula typically includes demand during lead time plus safety stock.

Technology: An Inventory Management System (IMS) can provide real-time data and offer insights through analytics. Supplier Relationships: Building strong relationships can lead to more favorable payment terms, reliability and quality, bulk discounts, and better return policies. Customer Feedback: Listening to customer feedback and reviews provides insights into what products are well-received, trending, or facing issues, guiding inventory decisions to meet customer needs better. Seasonality and Market Trends: Understanding and anticipating changes in demand based on seasons, holidays, or current events can prevent overstocking or understocking situations. You must adjust inventory levels in anticipation of these changes.

A Warehouse Management System (WMS) can be a powerful tool for effective inventory management due to its ability to enhance accuracy, efficiency, and overall operational control. One key benefit is. Real-time Visibility and Tracking. A WMS provides real-time visibility into inventory levels, locations, and movements. This allows businesses to track inventory in real-time, minimizing the risk of stockouts or overstock situations. Accurate and up-to-date information enables better decision-making, improves order fulfillment accuracy, and enhances overall supply chain visibility, leading to increased efficiency and customer satisfaction.

Aqui estão algumas dicas adicionais para determinar os níveis ideais de estoque: Faça uma análise de suas vendas históricas: Analise suas vendas históricas para determinar a demanda média para cada produto. Considere as variações sazonais: A demanda para alguns produtos pode variar sazonalmente. Considere essas variações ao determinar os níveis de estoque. Faça uma análise de seus custos: Considere os custos de compra, armazenamento e obsolescência ao determinar os níveis de estoque. Teste diferentes níveis de estoque: Experimente diferentes níveis de estoque para ver o que funciona melhor para o seu negócio.

Sem dúvida metodologia, cálculos estatísticos, reuniões de S&OP, S&OE fazem parte do dia a dia de quem precisa gerenciar e determinar níveis de estoque adequados, mas precisamos destacar dentro dessa equação a qualidade de entrega dos fornecedores, por esse motivo um canal aberto e transparente com os parceiros pode fazer a diferença entre ficar com ou sem estoque, consequentemente perder ou não vendas.