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Maintaining an edge over your competitors is vital in the fast-paced world of eCommerce, where consumers have their desired products at their fingertips. As online shopping continues to grow rapidly in popularity, businesses have to increasingly navigate a complex landscape where customer expectations are higher than ever. One key aspect that can make-or-break eCommerce success is effective inventory management.
While inventory management might not be the most enchanting of topics, it holds incredible power to revolutionise how businesses operate and serve their customers. Whether you are a plucky new start-up or a major multinational, the ability to efficiently handle your inventory can significantly impact your financial returns and customer satisfaction levels. It involves the strategic control and organisation of your stocked products, ensuring optimal availability, minimising stockouts, and striking the delicate balance between supply and demand.
This guide will explore what inventory management is, the processes involved, and the benefits of using a 3pl inventory management firm. So, if you're ready to unleash the full potential of your e-commerce businesses and gain an advantage in a fiercely competitive market, let's dive into the world of inventory management.
What is 3pl Inventory Management?
Inventory management is tracking a business's inventory from the manufacturers to warehouses to the point of sale. Inventory management aims to have the correct products in the right place at the right time so that a business can satisfactorily fulfil customer orders. To do this, they require inventory visibility which is knowing when to order, how much to order, and where stock needs to be stored.
Many eCommerce businesses choose to outsource their inventory management to third-party (3pl) order fulfilment partners to handle the intricacies of inventory control and movement. This arrangement allows businesses to leverage the expertise, resources, and infrastructure of the 3pl provider, enabling them to focus on their key competencies while streamlining their logistics operations.
The core components of 3pl inventory management include:
- Warehousing - A 3pl company can offer warehouse facilities, managing the storage and organisation of inventory in strategically located warehouses. They optimise space utilisation, implement efficient tracking systems, and ensure proper handling and security.
- Order fulfilment - They take care of order processing, picking, packing, and shipping. They manage the entire eCommerce fulfilment process, from receiving orders to delivering products to end customers, ensuring timely and accurate order fulfilment.
- Inventory tracking and control - A 3pl Company can employ advanced inventory management systems to track inventory levels, monitor stock movement, and maintain real-time visibility. This allows businesses to control inventory, reduce stockouts, and optimise replenished cycles.
- Transportation and logistics - Third-party firms can also handle transportation and logistics tasks, including managing carriers, optimising shipping routes, coordinating deliveries, and tracking shipments. They have established networks and expertise in logistics operations, ensuring efficient and cost-effective transportation of goods.
With a significant 85% of online shoppers saying that a negative delivery experience would stop them from using that eCommerce business again, the pressure is on for retailers to match their customers' expectations. Furthermore, major eCommerce businesses such as Asos and Amazon, which can provide next-day or even same-day delivery, have set the bar incredibly high for the rest of the eCommerce market.
Businesses can significantly improve delivery times by leveraging the expertise, infrastructure, and optimised processes of 3pl providers. With reduced transit times, efficient order processing, optimised transportation, and the ability to scale operations, a 3pl company can help businesses meet customers' increasing expectations for faster and more reliable deliveries.
5 Key Benefits of Effective Inventory Management
The ultimate aim of using a 3pl company is to gain expertise and increase the efficiencies of your inventory management. So, what are the benefits of elevated inventory management? Here is a selection of the main advantages.
1. Optimised stock levels
Effective inventory management practices allow eCommerce businesses to balance having enough stock to fulfil customer orders and reducing excess inventory. This helps ensure that products are readily available for customers to purchase without spending money on excessive inventory. Having optimised stock levels reduce carrying costs, such as storage fees and the risk of product obsolescence, helping to drive profitability.
2. More Accurate Demand Forecasting
Effective inventory management allows you to analyse historical sales data, market trends, and customer behaviour enabling you to forecast demand more accurately. This means you can carry out proactive inventory planning, ensuring the right products are available in the right quantity levels at the right times, for example, during the Christmas holiday period. Accurate demand forecasting can also help you reduce excessive products or stockouts, leading to cost savings and increased customer satisfaction.
3. Improved Supply Chain Management Efficiency
With the implementation of effective inventory management strategies, businesses can improve their coordination and communication with distributors, suppliers, and eCommerce fulfilment partners. In addition, tracking and managing the inventory enables you to identify areas where increased efficiency can be made along the supply chain. For example, if a product has to be recalled, inventory management systems allow businesses to track damaged inventory faster to isolate and replace faulty merchandise.
Improved supply chain management leads to quicker replenishment, reduces lead times, and ensures more seamless operations throughout the supply chain. This, after the significant problems global events have brought to supply chains, can be vital to the growth and survival of businesses.
4. Automates Time-Consuming Tasks
Most businesses continuously focus on finding new ways to save time and reduce staffing costs. Effective inventory management provides an opportunity to achieve these goals.
Automating tasks such as barcode scanning and inputting individual products into the system, which can be highly labour-intensive when done manually, can reduce costs and save valuable time, which can be used by staff to concentrate on other important business goals.
5. Elevates Customer Experience
The ultimate goal of effective inventory management is to provide a better service for your customers. With the intense pressures of being part of a uber-competitive market, businesses need to fulfil customer orders promptly and to their expectations.
By doing this, you will increase your chances of retaining customers and spreading their positive experience through word-of-mouth or an online review, ultimately leading to increased profits. To highlight this, 72% of customers satisfied with the delivery service will increase their purchase levels by 12%.
In addition to improved delivery timeframes, inventory management will ensure that products are available to purchase and reduce stockouts, leading to an improved customer experience, increased chances of unprecedented future success, and putting you ahead of your market's competition.
These benefits show that inventory management has become a vital strategy for businesses seeking to thrive in the fiercely competitive eCommerce market. By harnessing the expertise and resources of specialised 3pl order fulfilment providers, businesses can streamline their supply chain operations, accelerate delivery times, increase customer satisfaction, reduce costs, and focus on their core strengths.
This allows eCommerce firms to gain a crucial competitive edge, drive future success, and expand into new markets across the powerhouse, which is the online retail sector.
Need Expert Support with Your Business's Inventory Management?
Looking for your eCommerce business to grow whilst elevating customer experience? Our purpose is to help you better serve your customers by providing an effective order fulfilment service for ambitious eCommerce brands, from start-ups to multinationals.
If you would like more information about how we can become a trusted partner, visit our dedicated order fulfilment page for details on our processes and contact details. We're ready and waiting to start our journey together.