In online business, particularly on e-commerce platforms such as Shopee, Tiki, Lazada, etc., effective inventory management is a crucial factor determining the success or failure of any business. Having too much inventory leads to wasted capital, while too little inventory results in stock shortages and missed sales opportunities.
So, how do you manage your inventory effectively? Join Ecomax to learn about three key steps to optimize your inventory management, thereby enhancing your business performance!
1. Forecast Demand - Understand Customer Needs
"Know thyself, know thy enemy. A hundred battles, a hundred victories." In business, to sell products, you first need to understand the market demand and the needs of your target customers.
To accurately forecast demand, consider the following factors:
- Sales history of the product: This is a valuable data source that helps you track the number of products sold over a certain period, thereby predicting future consumption trends.
- Market trends and e-commerce platform trends: By catching on to the current "trends," you can make timely and appropriate stocking decisions to meet consumer demand.
- Seasonal factors: Consumer demand often fluctuates throughout the year. For example, sunscreen sells well in summer, while warm clothing is in demand in winter.
- Campaign days and promotional events: During special occasions such as holidays, e-commerce platforms often run attractive promotions, drawing a large number of shoppers.
Specific example:
You want to forecast the demand for a type of lipstick in March. Consider the lipstick's sales history over the past three months, current makeup trends (nude lipstick, glossy lipstick, etc.) and festive occasions in March (International Women's Day on March 8).
Pro tip:
To optimize inventory management, prioritize stocking according to the following order:
- Hot, best-selling products: These products generate the main revenue for the business and should be prioritized for stocking.
- Steadily selling products: Stock a moderate quantity to maintain a stable inventory.
- Slow-selling products: Limit the quantity to avoid excessive inventory.
Additionally, the product's shelf life is also an important factor to consider.
2. Estimate Required Stock - Determine The Optimal Quantity
Once you have demand forecasts, the next step is to estimate the required stock for each product. The simple formula is:
Required stock quantity = (Average daily sales) x (Stock days) - (Current inventory)
Specific example:
You are selling men's shirts and want enough inventory for seven days. Knowing that:
- On average, you sell 30 shirts per day.
- Currently, you have 75 shirts in stock.
Applying the formula:
Required stock quantity = (30 x 7) - 75 = 135 shirts
However, consider the following factors:
- Supplier promotions: If the supplier offers attractive promotions for bulk orders, you might consider ordering more than the estimated need.
- Working capital: Ensure you have enough capital to order stock and maintain business operations.
- Storage space: Limited warehouse space is also a factor you need to calculate to avoid overloading.
- Market demand: Market demand can fluctuate, so adjust your stock quantities flexibly.
Note:
Maintain higher stock days for best-selling products and conversely, limit stock days for slow-selling products to optimize costs.
3. Budget Planning - Efficiently Control Your Budget
Effective cost management is the key to sustainable business growth.
- Determine working capital: Ensure you have enough capital to order the estimated stock while maintaining business operations.
- Prepare for unexpected costs: There are always unforeseen expenses in business. Be prepared to avoid being "caught off guard."
Thorough budget planning helps you:
- Ensure a reasonable stocking plan: Avoid excessive stocking, which leads to wasted capital.
- Control costs: Help you track cash flow closely, allowing for appropriate adjustments to business activities.
Ecomax - Optimal Solutions for E-commerce Businesses
Are you facing difficulties in inventory management? Don’t worry, Ecomax is here to support you! With a team of experienced professionals, Ecomax provides effective multi-channel sales management solutions to help you optimize your business operations across all aspects. Contact us today for a free consultation.