Ecommerce Inventory Management Guide

The days of retailers relying solely on a single warehouse have faded in the industry’s rearview mirror. Competing for market share in the ecommerce age requires multiple product access and delivery channels interconnected by advanced technologies and software.

Despite the fact that companies need to acquire innovative methods to track, stock, and ship goods and materials, 43 percent of small businesses do not necessarily know their inventory numbers at any given moment. What may be equally concerning is that upwards of 67 percent of inventory managers are still using Excel sheets, with companies only posting a 63 percent accuracy rating concerning their inventory. However, 22 percent of organizations use a proactive supply chain network consistent with an effective e commerce inventory management system.

If lagging enterprises have a chance to gain equal footing with the proactive ones, decision-makers will need to pivot and embrace a savvy ecommerce inventory management approach and adopt the necessary software to meet customer demand.

What is Ecommerce Inventory Management?


Inventory Management

Ecommerce inventory management provides retailers and professionals working in the supply chain with invaluable insight. The process involves tracking products across channels with the goal of knowing where, when, and how many of a given item are available. A knowledge-based approach to managing inventory across channels, it provides real-time transparency.

Companies that know when stockpiles need to be replenished or which items are becoming overstocked can take proactive measures to adjust. Much of the success inventory managers gain is driven by partnering with 3PL firms and next-gen software applications that track all the moving parts.

Why is Ecommerce Inventory Management Necessary for Business Success?

Imagine a chain of pharmacies that offers its customers no aisle signage or estimated times of prescription fulfillment. If it sounds like chaos and a recipe for bankruptcy, that’s largely because your assessment is accurate. It’s a fairly accurate metaphor for the way companies continue to approach inventory management in the ecommerce age.

Should a brick-and-mortar store actually forego signage and customer service, it would surely fail. That same holds true for operations that cannot accurately predict re-ordering needs and provide customers with accurate pickup locations or delivery schedules. Instead, old-school inventory personnel with Excel sheets and delayed intel foster unnecessary overstocking and product shortages. Needless to say, just like the Twilight Zone-esque pharmacy, sales decline and customers lose confidence in the brand.

But failure is not necessarily a given, even for organizations that have lagged behind the software and technology curve for decades. By embracing the key elements of ecommerce inventory management systems right now, waste reduction and improved revenue streams are within reach.

Key Elements of Ecommerce Inventory Management

Conducting a thorough review of your company’s operational needs before implementing an inventory management system is important. This type of due diligence provides a baseline for what is to follow. Once the ecommerce inventory management system and software have been adopted, decision-makers will enjoy the following.

  • Inventory Planning: Stocks will be estimated based on hard metrics showing trends and in-the-moment inventory levels.
  • Order Management: Clipboards and Excel sheets offer little more than rough inventory estimates. With the right software in place, companies can accurately order products and materials based on consistent trends.

Warehouse management has also become a driving reason why companies desperately need improved inventory controls. During the last 10 years, warehouse space has boomed from 1.52 trillion square feet in 2013 to nearly 3 trillion square feet in 2023. It may be a hard pill to swallow, but warehouse availability hovered at 4 percent during 2023. The margin for inventory error is slim, and ordering mistakes cost companies money.

Inventory Planning and Forecasting

One proven benefit of software-driven inventory management approaches involves better planning and forecasting. The metrics required for accurate forecasting are readily available due to ongoing analysis and data collection. Proper planning reduces the unnecessary cost of additional warehouse space.

Order and Stock Management

The benefits of e-commerce inventory management seem to grow over time. That’s primarily because the more information tracking software accumulates, the better it becomes at predictive stock management. Having the appropriate volumes of products allows companies to deftly fulfill orders and improve confidence in the brand.

Warehouse and Fulfillment Management

Retail fulfillment begins long before consumers actually select an item and move it to a platform’s cart. It’s a system of how to pick, pack, store, and ship items. There’s also a backend to consider in which consumers return products for a variety of reasons. All of these processes must revolve around efficiency and accuracy. An operation that has its front- and back-end aligned typically performs better in terms of getting the right products where they need to go on time and on budget.

Effective Ecommerce Inventory Management Strategies


The popularity of ecommerce inventory management and its critical software generally requires organizations to introduce a variety of sub-approaches. The idea is to maximize the potential of this product management methodology by tailoring it to the unique facets of your operation. Rather than try to make round pegs fit into square holes, these are refined applications that businesses use to thrive.

ABC Analysis

The ABC Analysis approach splits inventory into three respective groups. The first group involves goods and materials considered high value, but the company needs more volume. Group two includes moderately valued and accessible inventory. The final group typically consists of items you have in bulk that are not necessarily of high value. In terms of inventory management, the ABC system calls for ranking items based on importance and replenishment based on demand, risk, and cost. The following rule is usually applied: Annual usage value per product = Annual number of items sold X Cost per item.

Just-in-Time Inventory Management

Low-overhead operations may opt to employ the just-in-time (JIT) approach. In these cases, companies that only stock products as consumers buy them can excel. Replenishing inventories generally balance the outgoing items or fulfilled orders. This approach is common among organizations that rely on seasonal cycles, knowing that clearing the way for about-to-be-popular items presents little risk. For the right company, JIT can reduce waste, minimize investment, and require low warehouse commitment.


Ranked among the more cost-effective and convenient ways to fulfill orders, dropshipping empowers third parties to complete purchases. Consumer information is shared with others in the supply chain. In many cases, a manufacturer or supplier ships the purchased product to the consumer. Although retailers take little inventory expense risk, they also relinquish order fulfillment control, to a large degree.

First In, First Out (FIFO)

The FIFO strategy ranks among the more efficient and cost-effective ways to manage inventory and drive revenue. It relies on merchants to sell or dispose of the first goods or materials in their inventory.

For organizations that deal with perishable goods, this approach helps avoid spoilage and waste. The inability to differentiate between recently stored produce, for example, and aging items sets the company up for failure. By using superior tracking software, businesses sell fresh foods at a premium and prevent avoidable losses.

Safety Stock

Online retailers are tasked with maintaining a fallback inventory in the event consumers make a run on a particular item. Back orders and failures to fill orders promptly often result in people going elsewhere. Along with your brand taking a reputational hit, consumers are likely to stick with a competitor that had what they wanted. Effective ecommerce management requires a specific level of safety stock to dip into during seasonal rushes or unexpected high-value periods. With the right software, real-time analytics, and automated ordering, your operation consistently maintains the inventory needed to succeed.

Benefits of Inventory Management for Ecommerce

Using specialized software for inventory management gives ecommerce platforms a competitive edge. The right product can sync all the moving parts and provide ecommerce business professionals with actionable intel to maintain inventories, re-order on time, and make strategic forecasting decisions. With everything you need to know at the tip of your fingers, these are benefits e-commerce inventory management software users routinely enjoy.

Improved Stock Control and Accuracy

Industry-leading inventory management software delivers exceptional stock control. The products offer ongoing updates that allow an ecommerce inventory manager to know precisely how much of any given item they have on hand. This helps eliminate unnecessary stockouts and overstocking.

Enhanced Order Fulfillment Efficiency

Having the appropriate software package allows companies to streamline order processing and maximize workflow efficiency. These benefits, in turn, help fast-track order fulfillment. When consumers receive goods and materials quickly, they are more inclined to think about your platform as a go-to resource.

Streamlined Warehouse Operations

Software that can bring wide-reaching data together helps an ecommerce management system flourish. For example, consider the way software and barcoding work together. With inventory software in place, ecommerce operations can assign a barcode to items. Barcoded items are tracked in the system, and fulfillment staff members always know where they are located. These inventory management tools keep inventory data up to date and inventory management methods running smoothly.

Real-Time Inventory Visibility

Ecommerce software allows managers to know how much inventory they have on hand, calculate new orders, and understand where items are in the supply chain. Shuffling products and goods based on changing consumer demands is a lot easier when you know all the moving parts. Essentially, ecommerce inventory software provides the inventory visibility needed for operational agility, good inventory management, and the prevention of too much inventory.

Automated Reordering and Demand Planning

Human errors and oversight account for a high degree of revenue losses. Whether stocks weren’t re-ordered due to a lead person taking vacation, sick leave, or another reason, the result remains the same. Your organization came up short with customers. Reliable inventory management software packages can automate the demand planning process.

Common Challenges in Ecommerce Inventory Management


Business outsiders sometimes believe a household name corporation possesses the “special sauce” that distinguishes it from others. Truth be told, companies that improve market share simply provide goods and services at a lower price. Ecommerce organizations face the same fundamental challenges as brick-and-mortar ventures. Overcoming the following is the key to delivering an experience that garners loyalty and helps increase your customer base.

Inventory Overstocking

Even seasoned professionals cannot accurately predict how much inventory to carry without critical data. When items sit in warehouses taking up costly space, the proverbial red ink builds up. Having accurate data based on consumer trends and inventory reviews helps companies maintain precise product levels.

Inventory Stockouts and Back Orders

Basing inventory levels on percentages or available cash doesn’t address the reality that consumers want products in a timely fashion. Failing to have items ready to ship from the warehouse hurts a brand’s image and drives customers elsewhere. The right inventory software package can be set to automatically maintain a safety net.

Inaccurate Demand Forecasting

Predicting demand accurately calls for accurate intelligence. Without hard data to base inventory levels, decision-makers are gambling. Overstocking products that don’t sell typically causes companies to purge them at a discount. Not having enough means you will miss out on revenue streams. The ability to accurately forecast inventory and predict sales is mission critical.

Poor Warehouse Organization

A well-organized warehouse supports efficient order processing. That, in turn, allows companies to minimize their storage footprint and hire only the fulfillment personnel they require. By contrast, a poorly organized warehouse slows order fulfillment as ecommerce operations pay people to ferret out products.

Inefficient Order Fulfillment

It’s important to keep in mind that consumers are not interested in why products are delayed. Your order fulfillment capabilities are competing across the internet with other companies trying to do it faster and at a lower cost. Inventory management software helps maximize your order fulfillment efficiency, so you can gain prominence in the global marketplace.


1. What are the key components of effective ecommerce inventory management?

Ecommerce management relies on effective inventory control, forecasting, safety stock, and highly efficient order fulfillment. Real-time data and analytics elevate companies in every phase.

2. How does ABC Analysis aid in inventory management for ecommerce businesses?

By ranking items based on demand, cost, and risk, ecommerce managers can make more informed decisions about which products will likely deliver financial success.

3. What are the benefits of using Just-in-Time inventory management in ecommerce?

Knowing exactly how much product to order and keep on hand helps businesses minimize waste and avoid overstock. This practice also reduces expenditures such as warehouse space.

4. How can ecommerce businesses effectively manage warehouse and fulfillment operations?

Ecommerce businesses typically need a warehouse management system that provides real-time data and actionable intelligence regarding inventory. Without barcodes and warehouse organization information, the fulfillment end slows.

5. What role does inventory forecasting play in ecommerce success?

Consider ecommerce inventory as if it were a physical retail outlet with shelves. Not having products to place on those shelves is tantamount to lost sales. Reliable inventory forecasting prevents companies from running out.

6. How does ecommerce inventory management software improve order fulfillment efficiency?

Superior e commerce inventory management software brings everything together and puts real-time data at decision-makers’ fingertips. From automated ordering to safety stocks and warehouse efficiency, companies gain an advantage in terms of providing better service at a lower cost to consumers.


Competing for customers in the digital age does not need to be a hit-or-miss proposition. Ecommerce inventory software can unite every operation phase by providing accurate data. When ecommerce managers can click on a screen to gain insight into consumer demand and predict critical next steps, the operation can advance its revenue-generating interests. By integrating best practices and tying the enterprise together with next-gen inventory software, positive growth may be a foregone conclusion.

Get in Touch

ShipCalm’s inventory management software and services are proven to help businesses handle logistical operations smoothly and efficiently. With our industry-leading expertise, commitment to innovation and scalable pricing, we’re here to optimize your inventory control and help drive your business toward a successful and profitable future. Contact us today to learn more about how a partnership with ShipCalm can alleviate logistical stress and increase earnings.