From manual to Automation: The Future of Ecommerce Inventory Management

ecommerce inventory management guide

For e-commerce retailers to thrive, certain key elements are crucial, a well-designed and effective website, a strategic shipping approach, and the ability to monitor inventory counts and locations. However, many of these retailers encounter initial inventory errors that can lead to significant costs, often arising from the absence of a proper inventory management solution.

inventory management for ecommerce website serves as a comprehensive way to facilitate the growth of retailers across various levels of their operations and improve customer services. This technology helps business owners to streamline warehouse processes and make informed financial decisions.

Understanding your current inventory levels is important, as it sets the foundation for seamless operations in the overall business process.

What is Ecommerce Inventory Management?

Statistic: Retail e-commerce sales compound annual growth rate (CAGR) from 2023 to 2027, by country | Statista
Find more statistics at Statista

The foundation of any successful business lies in intelligent product management, which seamlessly connects both the operational front and backend. On the backend, it plays an important role in the supply chain, serving as a crucial intermediary connecting suppliers and customers.

One of its essential functions is maintaining accurate quantities on the front end, ensuring that customers aren’t lost due to misinformation.

E-commerce inventory management involves the accurate tracking of the location, quantity, pricing, and composition of available inventory in your business.

In the online shopping world, it means helping stores handle their products on different websites where they sell things.

Why Inventory Control is Crucial?

Maintaining control over your inventory doesn’t need to be complex, but its significance cannot be overstated.

“In the age of fast-paced ecommerce, agility is key. Inventory management software empowers you to react quickly to demand fluctuations, ensuring you have the right products in stock at the right time, leading to a 12% increase in overall sales.”

Source: McKinsey & Company, 2023

Effectively managing both overstocking and understocking challenges enables businesses to realize a substantial 10% decrease in inventory expenses.

Proficient management of stock levels provides valuable insights into:

  1. When to Re-Order: It’s essential to recognize when your inventory is decreasing. Waiting until it’s finished can lead to customer dissatisfaction. Think of it like restocking your kitchen – you don’t wait until you’re out of milk before buying more.
  1. Optimal Re-order Quantity: For instance, running an online pet store may reveal unexpected demand for squeaky carrot toys. Managing inventory enables you to order more without excess, ensuring a balanced stock of popular items.
  1. Diversifying Product Orders: Effective inventory tracking helps in predicting the success of new products. If the squeaky carrot is a hit, understanding inventory data can guide decisions on introducing related items like a squeaky tomato.
  1. Avoiding Stock out: Beyond perishables, accurate inventory control prevents goods from being thrown away in the warehouse, avoiding issues like expiration or going out of style. It’s a critical aspect of minimizing waste and optimizing sales.

The Importance of Inventory Control

Inventory management helps you see where your product is from the moment it arrives until it gets to the customer. This means you can spot if you have too much, too little, or if something’s missing. Knowing this helps plan what to buy and prevents running out of stuff.

ValuTrack reports that around 73% of warehouses are looking to introduce mobile inventory management solutions.

A good inventory system also makes customers happy. It automates things so the number of products online is always right. That way, improve customer service as they get what they expect, and you don’t lose them because of mix-ups. Keeping customers happy is crucial for your business to succeed.

Before picking an ecommerce inventory system, figure out what your business needs. Why? Because inventory management affects everything in your business.

Nearly half of small businesses (43%) still rely on manual inventory management methods, exposing them to potential errors. Utilizing software tools becomes crucial in preventing chaos and minimizing human mistakes.

The Role of E-commerce Inventory Software

statista graph of erp software revneu 2019 to 2026
source: Statista

However, the task of selecting suitable product management software is not a simple one. It requires careful consideration of your business’s nature, size, and specific challenges. Following common criteria, look for software that:

  • Enables real-time data analysis.
  • Optimizes inventory by analyzing data.
  • Addresses issues of overstocking and understocking.
  • Takes seasonality into account.
  • Makes adjustments based on the product’s lifecycle.

“ One order management system, one database, one inventory. Without these, you will never seem seamless to your customer.” 

Andy Laudato, COO of The Vitamin Shoppe

TAKEAWAY-  Streamline your business processes easily by centralizing everything in one system. Opt for a commerce solution that maintains synchronized inventory across all platforms, making operations smoother for you.

5 Strategies for E-commerce Inventory Management

Understanding that each business has distinct needs, consider various inventory tracking strategies to find the best fit for your business model. There are many strategies present to increase online sales. But we are going to focus on inventory management for now.

ABC Analysis:

Categorize your inventory into three groups based on profitability. This allows for tailored restocking strategies for each category. For instance, high-value but low-quantity items may require a different approach than moderate-value and quantity products.

Just-in-Time Inventory (JIT)

Ideal for businesses with low on-hand inventory needs. With JIT, stock orders are fulfilled as they are purchased, preventing excess stock. However, it may not suit businesses dependent on buyer trends, as unexpected demand surges can lead to stockouts.


A popular and accessible strategy, especially for new ecommerce sellers. In dropshipping, you don’t handle the product; instead, orders are fulfilled directly by the manufacturer. While it facilitates quick business growth, it relinquishes control over the customer experience.

First In, First Out (FIFO)

Favoured by retailers with goods having expiration dates, FIFO ensures the earliest received products are the first to be fulfilled. Be cautious with price fluctuations, as it can impact profits due to variations in the cost of goods.

Safety Stock

Retailers use safety stock to hold extra inventory in anticipation of unexpected demand spikes. Unlike JIT, safety stock helps manage delays and demand fluctuations, providing a buffer against incorrect forecasting or changes in consumer demand.

Each strategy has its merits, so understanding your business’s specific requirements is crucial in selecting the most effective product management approach.

Why Inventory Auditing Matters for E-commerce Business


Efficient product management can significantly streamline audit processes by minimizing their frequency, duration, and complexity.

“Manually managing inventory in an ecommerce business is like navigating a blind maze. Inventory management software provides real-time visibility, enabling you to make data-driven decisions and avoid costly overstocking or understocking by up to 30%.”

Source: Aberdeen Group, 2022

Unlike traditional retail stores, ecommerce inventory operates on a global scale, making sales more unpredictable. Therefore, it’s essential to align audit methods with technological advancements.

Utilizing real-time synchronization product management tools, as opposed to static platforms like Excel, offers several advantages.

Precise Profit Calculation

Conducting inventory audits plays a pivotal role in accurately calculating profits. The precision of inventory accounting directly influences the bottom line.

By tracking and accounting for changes in inventory value over time in relation to manufacturing and cost of goods sold, audits can mitigate inventory shrinkage and pinpoint slow-moving products that may be financially draining.

Accurate Budgeting

An accurate method of tracking inventory value is imperative for effective budgeting. Inventory audits contribute to better and more precise budgeting by providing insights into the exact inventory count, facilitating informed decisions about the next batch of inventory to be purchased, and determining the appropriate level of safety stock.

Identification of Inefficiencies

Audits serve as a valuable tool for uncovering inefficiencies within the inventory management system. These inefficiencies may include slow-selling or stagnant products, rapidly depleting SKUs causing frequent stockouts, inaccuracies in storage or inventory tracking methods, and other operational errors.

Armed with this information, businesses can enhance their financial health by discontinuing underperforming products, emphasizing successful ones, and optimizing various aspects of the supply chain.

Optimization of Inventory Holding

Holding costs encompass all expenses associated with maintaining inventory, including warehousing, labour, insurance, rent, and the value of damaged, expired, or out-of-date products.

Extended inventory holding periods and a surplus of unusable stock translate to increased expenditures. Inventory audits are instrumental in limiting these factors, helping businesses optimize their inventory holding and minimize unnecessary costs.

Overcoming Inventory Audit Challenges

Conducting inventory audits poses significant challenges, particularly as the scale of a business increases. The complexities involved in this process are numerous, presenting hurdles that demand attention.

Time-Intensive Nature

The study reveals that companies boasting efficient supply chains, with a performance level higher than average, can experience revenue growth exceeding industry norms, with 79% falling into this category. 


Performing audits on physical inventory is inherently time-consuming. Consider a scenario where a business deals with 500 different SKUs.

Verifying actual inventory levels against electronically recorded or spreadsheet-listed quantities is a meticulous task that can span days if not weeks. Even with a single SKU but a substantial quantity, engaging in manual counting becomes a laborious undertaking.

Opting for electronic inventory reports is imperative for efficiency, providing access to real-time information across various locations.

Challenges in Scaling

As a business expands, the challenge of scaling inventory solutions becomes more obvious. Strategic planning is crucial, and while full physical inventory audits are necessary, spot-checking emerges as a more manageable approach between these comprehensive assessments.

This involves selecting specific products, counting their units on hand, and comparing the numbers against the system records.

Operational discontinuance

One of the critical challenges of inventory audits is the potential disruption they can cause to operations. Pausing regular activities to conduct an audit means putting a hold on order fulfilment and the timely shipment of items to customers.

In an era where meeting customer expectations, especially in terms of swift delivery, is important, such interruptions can significantly impact the overall customer experience and perception of the brand—especially considering the high standards set by platforms like Amazon.

Enhancing Inventory Efficiency with TMD Suite

screenshot of dashboard of tmdsuite erp software for better ecommerce inventory management

Managing stock can be a complex task, but leveraging tools can greatly simplify the process. TMD, a solution catering to ecommerce businesses of various sizes, offers the option to outsource fulfillment for access to essential services, warehouses, and cutting-edge technology, helping brands stay competitive.

“Ecommerce businesses using inventory management software see a 20% reduction in order processing time and a 15% increase in customer satisfaction. Streamlined workflows and accurate fulfillment lead to happier customers and repeat business.”

Source: Capterra, 2023

For those who prefer to handle fulfilment in-house, TMD SUITE allows brands to effectively oversee and monitor their inventory.

Discover how TMD’s exclusive suite can enhance your brand’s inventory audits and management and improve customer services.

Demand Prediction

  • Demand Prediction:

While auditing inventory provides insights into current counts, TMD goes a step further by enabling businesses to utilize data for future decision-making through demand forecasting.

By analyzing historical data, this feature helps businesses make informed choices regarding inventory planning, product storage, and marketing promotions, all while meeting customer expectations. Its analytics offer comprehensive distribution metrics, including

Identification of slow-moving items,

Days of inventory until depletion based on SKU velocity,

Sales comparisons across different periods,

Seasonal sales fluctuations,

Past inventory levels and top-selling items with their percentage contribution to the overall business.

Optimized Product Storage

Efficient product management involves not only organizing SKUs within a warehouse but also determining the most strategic global locations for inventory storage.

TMD’s SUITE helps in reviewing all SKUs and seamlessly connects shipping data to enhance the overall process. For instance, It evaluates past order history to recommend the optimal distribution of inventory across its network of fulfilment centres.

This strategic placement minimizes shipping zones, transit times, and associated costs. When an order is placed, TMD’s algorithm automatically matches it with the warehouse possessing the available inventory that is closest to the customer, ensuring swift and cost-effective delivery.

Ensure Timely Reordering

Employing advanced software solutions enables you to maintain accurate control over your inventory status and strategically initiate reorders. By leveraging your store’s order history, TMD assists in projecting optimal times for replenishing inventory, eliminating the need for laborious manual reorder point calculations.

The system provides SKU-level alerts, ensuring proactive restocking to prevent stockouts.

Integrate Your E-commerce Store

the integration of your e-commerce store with a solid backend system is really helpful. Seamless integration allows for real-time data synchronization, ensuring that product listings, inventory levels, and order information are consistently updated across all platforms.

This not only eliminates the risk of overselling or stockouts but also provides a unified and cohesive experience for both the business and its customers. A well-integrated e-commerce store simplifies management tasks, reduces manual errors, and enables businesses to focus on what matters most, hence improving customer services 

    Build Your Brand

    Beyond offering quality products, building a strong brand presence is important in the competitive e-commerce landscape. Your brand is more than a logo or a product; it’s the overall experience and perception that customers associate with your business.

    Establishing a recognizable brand involves creating a compelling narrative, consistent visual identity, and fostering positive customer relationships. Utilize social media, content marketing, and personalized interactions to connect with your audience.

    A well-crafted brand strategy can lead to customer loyalty, positive reviews, and increased word-of-mouth referrals, ultimately contributing to the sustained growth of your e-commerce venture.

      Easy-to-Use Billing & Barcoding:

      Simplicity in billing and barcoding systems is crucial for smooth and error-free transactions. An easy-to-use billing system ensures accurate invoicing, reduces billing disputes, and facilitates transparent financial transactions.

      Barcoding, on the other hand, enhances inventory accuracy and speeds up order processing. Implementing user-friendly billing and barcoding solutions simplifies daily operations, minimizes manual errors, and contributes to a more efficient and streamlined e-commerce business model.

      TMD’s Suite offers enhanced visibility and organisational capabilities for businesses aiming to oversee inventory and handle order fulfilment in their internal warehouses.

      TMD’s suite, the system driving TMD’s expansive fulfilment network, proves invaluable for optimizing in-house ecommerce inventory management and fulfilment processes. Featuring real-time visibility into location-specific inventory, intelligent cycle counting mechanisms, and integrated checks and balances, TMD helps your team elevate inventory accuracy while maintaining operational efficiency.


      Effective e-commerce inventory management is more than a logistical necessity; it’s a strategic component that can significantly impact your brand’s success. By choosing the right tools and approaches, such as TMD Suite, businesses can ensure efficient operations, satisfied customers, and a strong market presence. Streamline your processes and elevate your e-commerce venture with sophisticated inventory management solutions.

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