Inventory Management Guide for eCommerce: Leveraging 3PL for Efficient Operations


Inventory Management Guide for eCommerce: Leveraging 3PL for Efficient Operations

Effective inventory management is a critical aspect of running a successful eCommerce business. Properly managing inventory helps meet customer demands, minimize costs, and optimize the supply chain. In this blog post, we will provide a comprehensive guide on how to manage inventory effectively in the eCommerce industry.

Businesses thrive because of inventory management. First, it reduces stockouts, capital tie-ups, and customer discontent by reducing excessive inventory levels and storage costs. Second, satisfied consumers are the direct result of efficient inventory management that makes things readily available when needed. Customer loyalty and repeat business result from this. Businesses may streamline operations, increase cash flow, and make educated decisions about purchasing, production, and distribution by precisely estimating demand and maintaining ideal inventory levels. Inventory management helps businesses stay competitive, maximize profits, and build customer loyalty.


How to Manage eCommerce Inventory?


1. Categorize and Classify Your Inventory


To begin, it is crucial to categorize and classify your inventory. By grouping products based on sales volume, demand patterns, and product characteristics, you can allocate resources more efficiently. Consider dividing your inventory into categories such as fast-moving items with high sales volume, slow-moving items with low sales volume, perishable goods, seasonal products, and high-value items. This classification enables you to prioritize stock and allocate resources accordingly, improving overall inventory management for eCommerce.


2. Establish Inventory Policies


Setting clear inventory policies is essential for effective eCommerce inventory management. Define policies based on safety stock levels, reorder points, and lead times. Safety stock represents a buffer inventory that ensures you can handle unexpected fluctuations in demand or supply chain disruptions. Reorder points help determine the inventory level at which you should replenish products to avoid stockouts. Consider lead times when calculating reorder points to account for supplier delivery times accurately.


3. Adopt Inventory Tracking Systems


Utilize eCommerce inventory management software or dedicated eCommerce platforms to track inventory levels, sales, and fulfillment. These automated systems provide real-time visibility into stock levels, generate alerts for low inventory levels, and facilitate accurate demand forecasting. By integrating inventory tracking systems, you can streamline the management process, reduce errors, and make data-driven decisions regarding inventory replenishment and order fulfillment.


4. Implement Demand Forecasting


Demand forecasting plays a crucial role in managing inventory effectively. Analyze historical sales data, market trends, and customer behavior to accurately forecast future demand. Utilize forecasting models or software to estimate product demand for different time periods. Accurate demand forecasting helps optimize inventory levels, minimize the risk of overstocking or understocking, and ensure timely product availability for customers.


5. Employ Just-in-Time (JIT) or Safety Stock Strategies


Two common inventory management strategies are Just-in-Time (JIT) and safety stock. JIT strategy involves maintaining lower inventory levels by ordering products from suppliers just in time to fulfill customer orders. This approach minimizes storage costs and the risk of excess inventory. On the other hand, safety stock strategy involves keeping additional stock on hand as a safety net to accommodate unexpected spikes in demand or supply chain disruptions. Both strategies have their advantages and should be employed based on your specific business needs and industry requirements.


6. Optimize Fulfillment and Warehouse Operations


Efficient warehouse operations and order fulfillment processes are crucial for effective inventory management. Organize your warehouse inventory management to streamline picking, packing, and shipping activities. Utilize barcode or RFID systems to enhance inventory accuracy and enable faster order processing. Implement efficient picking and packing techniques such as batch picking or zone picking to minimize fulfillment time. Streamlining these operations ensures prompt and accurate order fulfillment, reducing the risk of stockouts and customer dissatisfaction.


ALSO READ: How can a 3PL Support a Business’ Seasonal Sale Cycle?


7. Leverage Third-Party Logistics (3PL) Providers


Collaborating with third-party logistics (3PL) providers can greatly assist eCommerce businesses in managing their inventory. 3PL companies specialize in warehousing, order fulfillment, and logistics operations, allowing you to focus on your core business activities.


How a 3PL can Help?

  • Standard and Bespoke Connections. Third-party fulfillment providers offer pre-built connections with popular eCommerce platforms, marketplaces, enterprise resource planning (ERP), accounting, and analytics platforms. It can be difficult and time-consuming for eCommerce brands to integrate with these programs. 2-step integrations make it easy for online retailers to integrate with popular third-party tools quickly and easily.
  • Technology. Third-party fulfillment companies allow eCommerce brands to take advantage of their cutting-edge technology rather than investing in cutting-edge technology themselves to maintain a nimble supply chain. As a result, they are able to fully automate their eCommerce processes, from taking orders to processing refunds and managing stock.
  • A Dispersed System of Distribution Centres that Handle Orders. The fulfillment centres used by third-party providers are spread across the country. By storing inventory in multiple areas, eCommerce companies can increase their “geographical footprint,” which in turn boosts their stock turnover, shipment times, and visibility in online marketplaces.

    In addition, eCommerce companies can take advantage of a 3PL that is tech-enabled by:
    – Analyzing past data to figure out the best way to split their stock without having to do any extra work.
    – Reaching every distribution centre and provide instantaneous data on stock levels.

  • Regulating Stock. Third-party fulfillment companies make it easy for eCommerce brands to keep tabs on and manage their stock. Third-party logistics providers (3PLs) assist you in a number of ways, including but not limited to:
    – Keep your stock levels in sync across all of your sales channels at least once every 5 minutes to avoid overselling.
    – Don’t let your stock get too low or too high; instead, keep it where it should be.
    – Replenish stock in a timely manner to avoid shortages.
    – Fast processing of returns and replenishment of in-stock items are guaranteed.
  • Warehouse Inventory Management. Due to their efficient warehouse management, eCommerce enterprises commonly engage third-party fulfillment suppliers. 3PLs follow standard operating procedures (SOPs) for every warehouse operation, helping their clients solve common warehouse management issues. Even in the best warehouses, things might go wrong, but third-party fulfillment firms are always ready. For instance, fulfillment centers use the latest technologies to ensure safety. These include surveillance cameras, biometrics, key cards, metal detectors, many backup power sources, fire extinguishers, and other safety equipment.
  • Streamlined Order Handling. ‍A single insignificant oversight or slip-up in the order management process has the ability to disrupt the entire workflow of the fulfilling process. Fortunately, third-party fulfillment services are able to automatically combine orders sent through several sales channels into a single, consolidated view. Because of this, eCommerce firms are able to have real-time inventory tracking of the order processes, including the status of each and every order.
  • Ability to Sell the Same Products Through Different Distribution Channels. A third-party fulfillment partner offers a multichannel solution to help eCommerce retailers streamline their fulfilling operations. When you use fulfillment centers to store your inventory, you can use the same pool of inventory across numerous sales channels.
  • Picking and Packing with Maximum Efficiency. Order selecting and packing is essential yet difficult. With a third-party fulfillment partner, you can fine-tune selection and packing to ensure amazingly precise deliveries. To optimize picking and packing, third-party logistics providers follow SOPs. 3PLs use barcode scanners, conveyor belts, intelligent robots, and more to reduce mundane but costly human errors.
  • Robust Shipping Infrastructure. For most online stores, shipping is one of their biggest headaches. Therefore, it is crucial to develop a reliable shipping plan that facilitates order fulfillment while controlling expenses. eCommerce firms can benefit from a reliable shipping network provided by third-party fulfillment partners. 3PLs make use of a robust shipping network to help eCommerce firms save 45% on shipping expenses while reaching clients. The extensive network of partner courier services, ecommerce retailers can take advantage of special shipping rates and volume savings.
  • Interaction with Customers. The success of a company hinges on how happy its consumers are. Delighting customers requires a concentration on their needs and wants. Using a third-party fulfillment service, online retailers may provide a customer-friendly, Amazon-like experience through a self-service interface. The gateway aids them by allowing them to:

    – Provide on-the-spot order monitoring.
    – Notify clients about shipments in advance.
    – Make the return process easier.

    ALSO READ: Questions Retailers Should Ask About Split Shipment


  • Adjustment for Variations in Demand. ‍Brands in the eCommerce world might take a major hit if they aren’t ready to handle a spike or decrease in order volume. Fortunately, the scalable storage and knowledge of third-party logistics partners may aid eCommerce firms in effectively managing sales unpredictability. 3PLs adjust the allocation of fulfillment resources based on the current order volume, making it possible for an ecommerce company to better handle demand swings.
  • Permission to Sell on Online Marketplaces. With the help of a technologically assisted third-party fullfilment provider, eCommerce firms may better compete for Amazon Prime and the coveted Amazon purchase box. To illustrate:

    – It accommodates the demanding parameters of Amazon and Flipkart’s fulfillment processes.
    – Able to guarantee next-day shipping because of its strategically placed fulfillment centres.
    – These seller protections will aid eCommerce companies in gaining their customers’ confidence, which in turn should lead to more sales.

  • Superior Analytics and Reporting. ‍eCommerce firms can have access to robust reporting tools from third-party fulfillment partners with technological capabilities. As a result, eCommerce companies can see how they’re doing and make better choices. For instance, the intuitive dashboard provides e-commerce companies with access to analytics, reports, and critical indicators such as conversion rate, average order value, and more. In addition, if you have a lot of information (like orders), you can apply intelligent rules to sort it all out.
  • Handling of Returns.Efficient returns management is possible for eCommerce firms with the assistance of a third-party fulfillment provider by allowing them to:

    – Make starting a return as quick and easy as possible.
    – Coordinate the product’s return shipment and inspect any returned items for defects.
    – Get the returned item back into stock and ready to sell as soon as possible.
    – Use simple, one-click exchanges to convert refunds into purchases.

  • Cost-Efficiency. eCommerce inventory management process can benefit from working with third-party fulfillment providers since they help them become more efficient at every stage of the order fulfillment process. While it’s commonly believed that working with a third-party logistics provider will drain an eCommerce company’s budget, the reality is that this is rarely the case.
  • Straightforward Accounting for All Distribution Channels. Tech-enabled third-party fulfillment services assist ecommerce companies manage finances by reconciling payments and fees across sales channels. Online markets abound. Brands can track expenditures and revenue from service providers with automatic reconciliation. They’ll recognize:

    – Invoices for which products have been paid for.
    – Which orders are still awaiting payment?
    – Which orders incur excessive charges based on estimated costs?
    – Which orders have past-due payments?


‍The efficiency with which orders are processed can make or break an online retailer. In today’s extremely competitive eCommerce industry where customers’ expectations continue to climb, having a solid strategy in place is essential.


ALSO READ: Top Challenges of eCommerce Packaging


Choose a fulfillment strategy that works for your company by first identifying its specific needs. In addition, you can improve your chances of success by forming a partnership with a company that specializes in eCommerce inventory management system.


About XPDEL:

XPDEL helps eCommerce brands accelerate their growth, empowering them with multi-channel fulfillment, whether shipping directly to consumers, delivering to businesses, or selling through retail stores. We are founded and operated by veterans with experience from Amazon, FedEx, UPS, JDA, Walmart, Target, and other leading companies in eCommerce and Retail. Guided by these experts, we provide customer experiences that help you grow your business.