Lack of Balance: the Perils of (and Fixes for) Unbalanced eCommerce Inventory Levels

In our latest post in the blog series on key challenges in eCommerce, we look at the issue of unbalanced inventory levels, their impact and how you can mitigate them.

Managing inventory effectively is crucial to ensure smooth operations and customer satisfaction. However, maintaining good inventory levels can be a significant challenge. This challenge increases markedly if you sell a multitude of products at differing speeds across different regions, marketplaces and webstores. Unbalanced inventory – having too much stock, too little, or none at all – can create a host of problems that negatively impact your business. Here are six areas of concern, each with a recommended remedy.

1. Stockouts and lost sales

One of the most immediate challenges of unbalanced inventory levels is stockouts, where customers see you’ve no stock or can’t see your listing at all. Stockouts mean lost sales and disappointed customers, who may in turn switch their loyalty to competitors. Repeated stockouts exacerbate the situation, obviously.

Implementing real-time inventory tracking and automated replenishment systems ensures that stock levels, re-order quantities and lead times are consistently monitored and adjusted. Forecasting tools (like Volo Vision) can also help predict demand and prevent stockouts by aligning inventory levels and anticipated sales, creating timely purchase orders for new products.

2. Excess inventory and holding costs

On the other ‘bad’ side of the balance, having too much stock ties up your hard-earned or hard-borrowed capital and increases holding costs, sometimes with a third party. Storage costs, insurance, and the risk of obsolescence or damage add to the financial burden. Getting rid of excess inventory to free up cash is generally through markdowns, bundles and discounts, which clearly erodes your margins.

It might be the flip side of the problem, but you mitigate it in exactly the same way, to make sure you’re always ordering the right levels of inventory to match product popularity and re-order lead times.

3. Cash flow issues

Unbalanced eCommerce inventory directly affects your cash flow, as we’ve discussed. Funds that you might have wanted for marketing or buying other product lines are sitting on your warehouse floor, or somebody else’s warehouse floor.  Conversely, not having the inventory that people want to buy, whether you know it or not, means lost revenue and missed opportunities for growth.

This is where your investment in a good analytics and reporting tool pays dividends. Systems like Volo Vision constantly analyse sales and flag the areas of opportunity or concern, in some cases automatically triggering time-sensitive re-order quantities which you can sign off or allow to proceed without your intervention.

4. Troublesome order fulfilment operations

Issues with unbalanced eCommerce inventory levels have a knock-on effect when it comes to order management and shipping, making them more complicated. Delays, back orders, and increased labour costs in communications and manual processes become the order of the day, which can end up frustrating your customers.

Order management systems, which streamline different types of order across multiple channels and via multiple carriers, give you inventory visibility and more effective fulfilment, especially when integrated into an end-to-end system, over which sits your analytics package. As with many processes saddled with manual intervention, automation can help ensure that orders are processed accurately and efficiently, driving up your ‘customer sat’.

5. Poor demand forecasting

Unbalanced inventory levels often result from inaccurate, seat-of-the-pants or non-existent demand forecasting. Misjudging the ebbs and flows of customer demand can lead to either overstocking or understocking, both of which have negative repercussions. Seasonal fluctuations, market trends and old-fashioned bad luck can all impact demand, making a mockery of your forecasting efforts.

Having a good business intelligence system to give you accurate and up-to-date data on your inventory levels doesn’t just improve your cash flow situation. It also makes your relationships with your suppliers better and can even give you better negotiating power as a well-organised and digitally savvy business that they can trust.

6. The customer experience

The ultimate casualty of unbalanced eCommerce inventory levels is the customer experience. Too little or no stock can make them go elsewhere, and too much stock means stale product offerings and the risk that you’re not seen to be in sync with customer needs.

The happy medium ground of inventory levels – a balance of availability and variety – comes from analysing regularly what your customer purchases are telling you. Do this by channel, but also by region, since trends and tastes will undoubtedly be within the different audiences.

Missing out on lost orders, or having cash tied up in stock that’s not selling, can mean the difference between success and failure. A scientific approach to your inventory levels can maximise your cash flow and allow you to make the most of the selling opportunities you’re pursuing.

Contact us to discuss how you can remedy your unbalanced inventory levels.