Ineffective inventory management costs eCommerce companies a staggering $1.75 trillion in lost revenue per year, according to a report by IHL. That alone should be enough to explain why eCommerce businesses need to keep track of their inventory in order to run smoothly.

Effective inventory management is an often overseen but crucial part of any eCommerce company in today’s hyper-competitive marketplace. The inventory management process needs to be precise, efficient, and cost-effective; if you don’t have all of these things in place, you run the danger of not being able to meet client demand and losing money due to inefficient fulfillment. Luckily, all this can be prevented with good apparel eCommerce software. 

In this post, we’re discussing the importance of effective eCommerce software and explaining how ApparelMagic can help take your eCommerce business to the next level. 

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What is eCommerce Inventory Management?

The act of tracking the amount, location, and pricing of stock available from your eCommerce business is known as eCommerce inventory management. The eCommerce component takes into account the requirements of online retailers that might need to track stock levels across different online sales channels.

Because eCommerce stores sell finished goods, their inventory is one of their most valuable assets, and any loss in inventory equals a loss of money. The money of an eCommerce company is invested in these commodities until they are sold – the more efficient the product sales process is, the healthier the bottom line will be.

Inventory management is about making it easy to keep track and analyze the products that come and go from your warehouse. It allows you to know where a product is stored, how long it’s been in storage, as well as its worth, and a range of other inventory data. This will aid in the streamlining of warehousing operations and the making of more informed financial decisions.

Why Is Inventory Management Software for eCommerce Important

Inventory management software provides visibility into inventory levels and whereabouts from the time the stock enters your warehouse until it reaches your client. Products that are understocked, overstocked, or out of stock can be seen more clearly allowing you to estimate inventory purchases better and prepare for any shortages.

Your clients will have a smoother shopping experience if you use trustworthy eCommerce inventory management software. Inventory counts are always precise since the system automates inventory procedures and updates numbers across all of your sales channels. As a result, online counts are accurate, and customers have a better probability of obtaining the goods they’re interested in. 

Benefits of Using ApparelMagic Inventory Software For Your eCommerce

ApparelMagic is an integrated inventory solution tailored for wholesalers and retailers in the fashion industry. eCommerce, wholesale, and retail clothes shops can all benefit from ApparelMagic’s inventory management, multi-channel sales, and accounting features.

Here’s are several ways in which ApparelMagic can help your eCommerce business:

Improved accuracy

According to statistics, inventory accuracy is only 63 percent for most retail enterprises. Tracking inventory in real-time makes inventory management much easier and ensures that you have the right amount of goods on hand to fulfill orders. Proper inventory tracking enables you to avoid overstocking and save time and money by reducing the amount of manual labor required to keep it in stock.

Improved business planning

Having effective eCommerce inventory management software will assist you in gaining the insights you need to grow your company or streamline operations. Using centralized data and tools like barcode scanning, you can simply transfer data and keep track of what’s going on in your eCommerce company. With quick access to such valuable insights, you will be able to create better outreach and marketing tactics for increasing your sales and boosting profitability.

Better management for omni or multi-channel eCommerce

Managing a multi or omnichannel e-store can be quite difficult, especially if your operations haven’t been automated. For instance, you might mistakenly sell the same thing on two sales channels when you only had one product in stock. With multi-channel eCommerce inventory management software like ApparelMagic, your software would recognize that only one product is in stock, announce it on all of your sales channels, and alert the consumer who came second that they had missed the product.  

Improved customer service

Delivering a positive purchasing experience to your clients is critical in today’s competitive eCommerce environment. Happy customers will not only increase the likelihood of repeat purchases, but they will also help you boost conversions through word-of-mouth advertising and positive reviews. With ApparelMagic, you can fulfill customer orders quickly and accurately and ensure high levels of customer satisfaction. 

Saving time

ApparelMagic uses artificial intelligence and machine learning to automate your inventory management process, optimizing the pick-pack process and saving time in inventory forecasting. By automating these operations, your staff will have more time to focus on priority responsibilities and develop corporate growth strategies.

Reduced costs 

Improving the efficiency of your inventory management reduces the likelihood of errors and, as a result, you’ll need fewer resources to correct such errors. Furthermore, well-organized inventory management prevents overstocking and saves money on storage costs. ApparelMagic will also alert warehouse managers to restock items in a timely manner in order to avoid stockouts. In short, effective inventory management reduces the need for huge amounts of working capital, increases cash flow, and allows you to allocate the money to fund payroll, product development, and other business activities.

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Integrating ApparelMagic With eCommerce Tools

To achieve better visibility and control, you can connect ApparelMagic inventory management software with your eCommerce sales channels. Some of the most significant ones include:

Amazon. By integrating ApparelMagic with Amazon via CartRover, you’ll have access to projections and reports that will help you keep track of your suppliers, goods, and customers so that you can make better business decisions. All your sales orders are seamlessly updated, allowing you to fulfill orders quickly and efficiently.

BigCommerce. You can connect ApparelMagic and BigCommerce via CartRover as well. It can be set up to download orders, sync inventory, and upload shipment tracking info automatically back to ApparelMagic.

Shopify. With this direct integration, orders are automatically retrieved and styles, pictures, and inventory availability are automatically synced to Shopify. By integrating ApparelMagic with Shopify, you’ll be able to sync photos from Shopify, sell via Shopify’s POS integration, and manage several Shopify stores separately. 

ApparelMagic also integrates  with other sales channels and eCommerce platforms via CartRover, such as WooCommerce, Magento, eBay, Etsy, etc., with a simple integration setup, quality support, and live training to help your staff. 

B2B eCommerce ApparelMagic

When you use ApparelMagic’s full-service software to handle your B2B eCommerce, you can cut out the middleman and communicate directly with your retailers. You can allow retail businesses to do their own shopping by browsing and filtering products and adding colors, sizes, and styles to their cart.

It comes with all of the inventory management features that any apparel company would require, right out of the box. Using a simple page builder and templates, you can create a B2B eCommerce store within minutes. Build a slick, attractive web presence with images, videos, and copy. You can set up preorders on your website, or just enable customers to order based on inventory. You can also use ApparelMagic Pay to accept and process credit card payments without the need for integrations. B2B eCommerce is fully built into ApparelMagic, so your incoming orders are visible to the entire team right away. 

The Bottom Line

Your company’s most valuable asset is inventory. Establishing best practices for inventory management can be a huge asset in running your eCommerce business more efficiently.

Having a strong inventory management strategy will help you acquire a better understanding of what you have in your warehouse and where it is, improve warehouse organization, and make better purchasing decisions. 

It’s critical to make decisions that will allow your company to scale and grow. ApparelMagic is the best all-in-one software solution that will save you time and money, and improve customer service, contributing to increased revenues and ensuring smooth business growth. 

Any company that sells physical inventories requires a place to store those inventories, be it a warehouse or a store. Retail inventory management is essential for determining when more of a certain product is required, fulfilling orders in a timely and efficient manner, and preventing loss of items. It has a direct impact on profitability, and no company can grow successfully without an effective inventory management system in place.

There are numerous inventory management techniques available and the best one for you will be determined by the type of your business and the products you sell.

This post is for business owners who need to figure out how to manage their inventory levels effectively. Whether you’re establishing a new inventory management system or looking to improve an existing one, we’re offering some of the most common inventory control methods that you might find useful.

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The Goal of Inventory Management

Successful inventory management is critical to a company’s success. Excess inventory is reduced and you have enough products in stock on hand to fulfill client demand when you manage your company’s inventory well. The following are some of the most important inventory management goals:

Having enough supply. One of the goals of inventory management is to shape demand in accordance with current supply. Supply tracking ensures that goods are available to meet customer demands and ensure high customer satisfaction levels. 

Eliminating extra inventory. Inventory management will help with inventory optimization and keep dead stock off the shelves. Goods that don’t sell deplete the company’s resources by occupying space in your warehouse or store. Sales promotions (such as flash sales or bundling of products) can be utilized to push underperforming inventory stock. Another option to get rid of obsolete inventory is to return unsold stock or sell the items at a discount to another company. 

Know when to scale or shrink production. If you’re a manufacturer, you know how important it is to scale back output to meet customer demands and cut production, especially at the end of the season. One of the goals of inventory management is to let you know exactly how many items are in your inventory at any given time, so you know when to decrease or increase your output. 

Minimizing inventory costs. If you don’t sell the items in your inventory, your assets could easily turn into liabilities, especially if you’re working with perishable products. As a result, ensuring that inventory doesn’t lose capital is one of the smart goals examples for retail inventory management. When you manage stock levels correctly, you avoid buying expenses, carrying costs, and storage costs.

Optimizing sales. As part of your inventory management strategy, you should keep track of and assess company sales on a regular basis. You need to know which products don’t sell and tend to sit for a long period of time, which ones are higher-value items and best-sellers, as well as which items sell well at different seasons of the year. This information will help you keep track of how many goods you need and when you should order them in order to increase sales. 

Most Effective Inventory Management Techniques

There are many types of inventory management strategies, so it can be challenging to choose the right one for your company. The more quickly your company expands, the more challenging stock management gets. That is why laying a solid foundation from the beginning is so important. Here are some inventory management best practices and techniques to take into consideration when choosing the best type of inventory management for your business:

• ABC Analysis. This strategy works by determining the most and least popular items. Inventory value, cost significance, and annual consumption units are used in ABC analysis.
• Batch Tracking is a quality control method that allows users to group and monitor comparable commodities in order to track defective inventory items back to their originating batch or manage inventory expiration.
• Bulk Shipment. This technique is based on the idea that buying and shipping items in bulk is nearly always less expensive. Bulk shipment is among the most used inventory management methods and can be used for goods that are in high demand. The disadvantage of bulk shipment is that holding large amounts of inventory can increase warehousing costs.
• Consignment Inventory. This method of inventory management includes a wholesaler that places goods in the retailer’s hands but retains ownership of the stock until it’s sold. Then the retailer is able to purchase the spent stock.
• Dropshipping is a technique that completely removes the expense of inventory storage. You can pass customer orders and shipment information directly to your wholesaler or manufacturer, who will subsequently ship the items.
• Cross-docking is a method similar to dropshipping, where you transfer items immediately from one transport truck to another without any warehousing.
• Demand Forecasting is based on historical sales data. In essence, it’s a way to forecast demand and estimate future sales of inventory, i.e. what products a business expects consumers will buy in the future.
• Economic Order Quantity is a formula that calculates how much stock a company should buy based on a number of parameters such as demand rate, the total cost of production, etc. The economic order quantity (EOQ) formula selects the greatest number of items to minimize holding, buying, and other expenditures.
• The LIFO and FIFO methods are ways of calculating the price of items. In order to keep inventory fresh and maintain cash flow, the FIFO method (first-in, first-out) assumes that older goods are sold first to avoid spoils. LIFO (last-in, first-out), on the other hand, assumes that newer items are sold first, which in turn lowers the taxes.
• Just-in-time inventory management (JIT) is a method of receiving goods only when it is needed, rather than ordering too much and risking being left with dead inventory.
• Lean Manufacturing is a collection of management techniques that may be applied to any type of business. Its purpose is to increase efficiency by removing waste and non-value-adding activities from day-to-day business operations.
• Reorder Point Formula. Many executives and business owners often turn to standard inventory management formulas to keep things running smoothly and stay organized. One such formula is the Reorder Point Formula which determines the minimum inventory quantities that a company should hold before restocking. To account for wait time, a reorder point is frequently higher than a safety stock level. Other examples of inventory management formulas include Cost of Goods Sold Formula, Average Inventory, Sell-Through Rate, etc. Besides inventory management formulas there are also inventory management ratios, such as the Inventory Turnover Ratio.
• Safety Stock refers to ordering additional inventory and putting it aside in case the organization doesn’t have enough to refill. This helps avoid stockouts, which are frequently caused by inaccurate forecasting or unexpected changes in consumer demand.
• Six Sigma is a technique that gives businesses the tools they need to improve their performance (raise profits) and reduce surplus inventory.
• Lean Six Sigma combines Six Sigma with the lean method to optimize stock flow and further reduce surplus inventory.
• Perpetual Inventory Management entails physical counts of inventory as soon as it arrives in order to provide real-time data. It’s the most basic inventory accounting method, and it can be manually recorded in an Excel spreadsheet or on paper.

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How ERP Can Improve Inventory Management

One of the wisest decisions a business owner can make is to use an ERP (enterprise resource planning) system for cloud inventory management. Not only will you avoid the problems of using a spreadsheet, as well as all the possibilities for human error that come with it, but you’ll also save time on manually updating inventory.

Your company’s inventory will be automatically integrated with all processes and operations, from planning to production and accounting if you use an ERP system. You’ll be able to run your entire business from a single platform, making your company more streamlined, organized, and efficient. 

Although no two ERP systems are the same, the inventory management module in a typical ERP solution will have the following functionalities:

• Stock management and tracking
• Stock transfers and storage management
• Multi-channel order fulfillment
• Sales and order management
• Integrations with shipping, accounting, eCommerce, and other tools
• Payment gateway functionality
• Intelligence analytics and reports (including year-end inventory reporting)

ERP inventory management solutions are designed to eliminate manual labor by streamlining and automating the inventory management process and operations. Furthermore, ERP systems enable you to collect higher-quality data, which provides you with insights into your organization that can be used to track performance and plan for growth.

ApparelMagic for Inventory Management

ApparelMagic is an inventory management software that acts as a central hub for your clothing company. It includes multi-location inventory management, warehouse management, multi-channel sales, purchasing and manufacturing, multi-currency accounting, customer service and support, as well as a wide range of powerful integrations to help you make smart inventory decisions and ensure you have complete control over your entire inventory at all times. 

This software provides a wide range of benefits, including accurate tracking, inventory count, and real-time data, and helps avoid issues like stock-outs, overstocking, and phantom inventory. It also enables you to get complete visibility of your inventory. With ApparelMagic, you can organize your warehouse and get better information that will help you provide a better customer experience and help keep your customers happy. 

ApparelMagic is powered by a combination of ERP with customer relationship management (CRM) and product lifecycle management (PLM) features. With software tailored to clothing and accessories, this solution lets fashion companies manufacture and deliver orders quickly, efficiently, and with minimum waste. 

The Bottom Line

The benefits of inventory management can’t be overstated. Proper inventory management is critical if you want to be competitive and provide your consumers with the experience they desire, regardless of whether you are an online business, a brick-and-mortar store, or you’re using multiple sales channels. 

If you don’t have a solid approach to inventory management, keep a close eye on your inventory turnover and levels of inventory, or you fail to count goods on a regular basis, you’re setting yourself up for inventory problems and challenges. Poor inventory management can have a long-lasting negative impact on your business.

Using specialized inventory management software is the best option for inventory management and smart inventory investment. Deciding when you might require one is an important stage in your company’s growth, so be sure you pick an inventory management software that masters the fundamentals of inventory management and functions as a catalyst for your expansion, such as ApparelMagic.

It’s not easy to create a smart eCommerce supply chain management strategy because it involves many components including transferring finished products from a manufacturer to a third party or a seller, tracking inventory, warehouse management, delivery, dealing with returns, etc. If one of the supply chain’s stages deviates from the plan, the entire supply chain will suffer.

The efficiency with which you manage your supply chain is a key determinant of your future success, regardless of whether your company is B2C or B2B eCommerce. As your sales and business model evolve, there are opportunities to optimize your supply chain once you have a good eCommerce logistics plan in place. 

In this post, we’re explaining how you can simplify your eCommerce management so that you may improve supply chain operations, lower logistics expenses, and keep your customers happy.

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What is an eCommerce Supply Chain? 

A supply chain is a series of logistics activities that includes raw material production, completed goods manufacture, inventory management, storage, order fulfillment, and delivery. The aim is to provide a high-quality product and a positive experience for your customers, and each supply chain stage is critical to building and running a reliable business.

What Is eCommerce Supply Chain Management?

Supply chain management in eCommerce includes controlling the flow of resources, information, and capital among the stages and entities in the eCommerce supply chain, starting from the provision of raw materials to the delivery of finished products to the customer. 

Suppliers, vendors, manufacturers, warehouses, transportation and logistic companies, fulfillment and distribution centers, and the final consumers are all part of the supply chain. Each of these entities is in charge of a certain link in the supply chain and has a role in whether or not you meet your customers’ expectations.

How eCommerce Supply Chain Management Works

To increase efficiency and speed at every stage of the supply chain, supply chain management systems have progressed from manual and traditional supply chain management (SCM) systems to advanced systems that use AI and ERP software solutions.

The eCommerce supply chain management is comprised of 5 stages:

• Planning. During the planning step, you gather information about your supply chain in order to determine how much inventory you’ll need to meet market and customer demands.
• Sourcing. During this stage, you look for suppliers, vendors, and manufacturers who can supply the inventory you need.
• Making. This stage entails transforming raw materials into finished products, as well as preparing those products for distribution to consumers. 
• Logistics, also referred to as delivering, encompasses all types of transportation of goods along the supply chain to the final consumers.
• Reverse logistics, also known as returns processing, entails processing returned products from buyers and returning expired or damaged goods from your warehouse to your supplier.

Every stage of the supply chain management system plays a role in the chain’s overall efficiency. An improvement or malfunction in one stage will have repercussions throughout the entire chain.

5 Supply Chain Strategies for eCommerce Businesses 

eCommerce companies should always be searching for ways to optimize and improve fulfillment and logistics systems. Here are a few strategies that retail and wholesale eCommerce businesses can employ to improve efficiency and boost online sales. 

Use Inventory Management Software

If it’s not controlled in real-time as orders are placed and shipped out, inventory management can become a serious issue. By using effective inventory management software or ERP (Enterprise Resource Planning) inventory system in combination with inventory management strategies, you’ll be able to avoid stockouts, optimize freight shipments, and accelerate product deliveries to your customers. In addition, you can gain access to useful data to aid in your decision-making on how to optimize your supply chain.

Review Your Sourcing Partners and Strategies

Great quality, low prices, and fast lead times are all attributes of an ideal sourcing partner. However, finding a sourcing partner that provides all this isn’t easy, so most eCommerce companies will have to select which characteristic is most important to their customers and provides them with the most competitive advantage. Is your plan to produce high-quality goods? The most cost-effective goods? Or maybe your goal is to get your goods to market as quickly as possible? Giving answers to these questions might also assist you in figuring out whether you should be sourcing domestically or internationally. 

Improve External and Internal Communication

As your eCommerce business expands, you’ll need to hire more people and partner up with more vendors. Maintaining open and transparent communication is crucial in order to ensure that everyone is on the same page, but also to reduce errors, confusion, and downtime. Effective communication leads to increased efficiency, faster service, and a decreased number of returns. 

Streamline Warehouse Operations

From tracking inventory movement to managing warehouse workers, you’ll want to take steps to streamline your warehouse operations by cutting carrying costs, improving inventory storage, and optimizing the fulfillment process. Having an effective warehouse management system in place can assist in the management of inventory storage and levels, as well as the improvement of productivity and the effective fulfillment of orders. It can also contribute to increased accuracy, thus saving you time and reducing the likelihood of human errors without the requirement for ongoing warehouse audits.

Reduce Costs and Shipping Times 

The fact that Amazon can now deliver to over 70% of the population of the United States in a single day inevitably puts smaller eCommerce companies under pressure to improve their shipping times. But is it possible to increase delivery speed without affecting costs? 

Collaborating with a 3PL provider (third-party logistics) is one option to achieve this. Most 3PLs have partnerships with carriers and receive special rates because of the volume they carry. Furthermore, if a third-party logistics provider has more than one fulfillment center, they can ship from the one nearest to your customer, allowing you to get your product to them much faster and for less money. 

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What Are the Benefits of eCommerce Supply Chain Management? 

Optimizing your eCommerce supply chain can help improve internal operations but also have a significant impact on the customer experience. Here are some of the most important benefits of streamlining your supply chain:

Accurate Inventory Management

In the eCommerce supply chain, inventory management is crucial. By optimizing inventory levels, you can improve stock control, simplify inventory evaluation, avoid dead stock and stockouts, and estimate future demand. 

Some of the options for addressing common eCommerce inventory concerns include conducting regular inventory audits, setting reorder points based on previous order data and future estimates, and using inventory management software.

Cost-Effective Delivery Rates

Another way to optimize your eCommerce supply chain is by coming up with strategies to cut delivery costs. Checking into carrier shipping discounts based on order volume, using the appropriate packaging for products depending on their dimensions and weight, and spreading inventory across geographic areas once it is cost-effective are just a few examples.

The form of transportation you choose can also have a significant impact on shipping costs. Expedited air delivery is quick, but it is also expensive. Freight shipping, on the other hand, uses more affordable transportation methods. LTL freight, for instance, allows you to combine your cargo with that of other carriers traveling in the same direction and only pay for your piece of the trailer rather than the entire trailer. 

Faster Shipping Times

Shipping is one of the most important stages in the supply chain. If you get it right, it can help reduce cart abandonment and provide a significant competitive advantage. You need to identify and address any delays in the supply chain, especially in shipping. Shipping times are influenced by two key factors: 1) the locations of your manufacturers, warehouses, and end customers and 2) the transportation mode. 

Improved Customer Experience

A well-organized eCommerce supply chain means that you can provide the finest possible customer service for each order. By identifying strategies to optimize your supply chain, you can lower shipping costs, shorten shipping times, and decrease the likelihood of human errors. As your supply chain becomes more robust, you can devote more resources to enhance communication with customers by allowing them to track purchases in real-time and delivering updates from the moment their order is processed to the time it is delivered.

The Bottom Line 

By discovering ways to streamline your eCommerce supply chain, you’ll be able to remove issues, increase productivity, and create a more effective team. By shortening delivery times, delivering better shipping costs, and preventing stockouts, a simplified supply chain will eventually provide an improved customer experience.

Determining the worth of unsold stock is a common task for retail businesses. The retail method of inventory (retail inventory method or RIM) is one way to simplify this procedure. This method can help you estimate how much your inventory is worth at the end of a specified period. When combined with physical inventory counting, this strategy will show you how to manage inventory in retail stores. 

The retail method of inventory is explained in this article, along with steps to calculate it, tips on when to implement it, and more.  

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What is the Retail Inventory Method?

A retailer or retail inventory manager will use the retail method of inventory to evaluate the final inventory balances. The retail method of inventory is an approach that assesses the value of a store’s stock over a specified reporting period. Calculating the ending inventory balance of a store requires using the cost of products, sales, and retail prices. The value of your stock that’s still available for sale at the end of the reporting period is referred to as ending inventory. Because the method isn’t completely precise, it should be supplemented with a physical inventory counting on a regular basis. 

Follow these steps to calculate the cost of ending inventory using the retail method of inventory technique.

1. Calculate the cost-to-retail ratio (cost of merchandise / retail price of the merchandise) x 100
2. Calculate the cost of stock available for sale (cost of beginning inventory + cost of purchases)
3. Calculate the cost of sales during the specified period (sales during the specified period x  cost-to-retail percentage).
4. Calculate ending inventory (cost of merchandise available for sale – sales during the specified period).

Retail Method Advantages And Disadvantages

The simplicity of the retail method of inventory is its key advantage. It’s a simple formula that can help you figure out how much inventory you have. This can then be used to guide your purchase and budgetary decisions.

Another advantage of RIM is that it offers a more streamlined process. Physical checks and counts of inventory can be costly and time-consuming, but this method allows you to do them less regularly because you have an estimate of your stock and its value. There is also no need for a physical inventory when using RIM. Multi-location companies can easily estimate the value of their stock without physically inspecting what they have on hand.

You can also use RIM to create inventory value reports. The retail method of inventory is permissible under Generally Accepted Accounting Principles (GAAP), so you can use it for the purposes of tax reporting. Inventory value reports can also help you figure out how much your company is worth.

However, it should be noted that RIM is merely an estimate, and it isn’t always an exact depiction of how much stock you actually have. Furthermore, for merchants with inconsistent cost-to-retail ratios, the retail method of inventory doesn’t work well.

Who Should Use RIM

There are many types of businesses and business owners that can benefit from using RIM to calculate their ending inventory, including the following:

• Retailers who store inventory in warehouses. The cost of products held in warehouses is relatively steady, unlike retail outlets, where the cost-to-retail ratio is more unpredictable (due to sales/price cuts), hence the formula for the RIM approach will produce more accurate results.
• Retailers with multiple locations who need a picture of their inventory will benefit from this method. Coordinating stock calculations and counts across multiple locations can be tough. RIM could be an excellent way to go if you need to rapidly estimate how much stock you have.
• Wholesalers who sell similar things in huge quantities. If you sell significant amounts of inventory to other stores and all of your items have the same or similar markups, the retail method of inventory is an excellent approach to cut down on physical inventory counts.
• Retailers who don’t hold many sales. If you run a retail business with few to no sales promotions, RIM is an excellent choice because you don’t have to worry about discrepancies caused by irregular markups.
• Retailers who keep their markups consistent. As mentioned before, the retail method of inventory is best for companies that offer products with a consistent cost-to-retail ratio. RIM is a suitable calculation to do if you’re a specialty store that buys products at similar prices and applies the same markup to most or all of your products. However, if you have a wide range of different products with widely disparate markups, you’re unlikely to gain anything from this strategy.

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When to Implement RIM

When you implement this method will depend on your accounting, purchasing, and other schedules. One of the situations when this method is beneficial is when you need a rough estimate of the value of your stock. It’s vital to keep in mind that the retail method of inventory only provides estimates, not concrete data. These figures provided by RIM are only estimates because certain items at a retail store or warehouse are likely to have been broken, misplaced, or even shoplifted at some point, which will not be properly accounted for by this method.

In addition, this method should only be used in instances where there is a known relationship between the price at which inventory is purchased and the price at which it is sold to consumers. For instance, if a shoe brand consistently marks up every pair of shoes at 100% of the wholesale price, the retail inventory method can be applied correctly.

On the other hand, using RIM is not recommended if your markups are variable. For instance, if you run sales on specific products, your cost-to-retail ratio will be inconsistent, and the formula won’t provide you with an accurate picture of your stock.

Retail Inventory Method Additional Tips

If you’re planning to employ RIM, keep in mind that it should be used as a part of a bigger inventory management strategy. The approach will be most effective if you combine it with tools like a robust retail management system and barcode scanning software for easy inventory reconciliation.

In addition, you should ensure that you always have the right data. The retail method of inventory approach necessitates the gathering of certain data, such as your beginning inventory, cost-to-retail ratio, and sales, so you must have the most accurate numbers in order to make sure that the calculation is correct. 

Finally, physical inventory counts should not be abandoned. The retail inventory technique is essentially an estimate of your ending inventory value, as we’ve already stated. As a result, you should make physical inventory counting a priority. A complete count of inventory will almost certainly necessitate closing your store or counting items outside of business hours. If this isn’t possible, consider using cycle counting, a strategy in which specific, defined inventory portions are counted on a rotating schedule.

The Bottom Line

Keeping track of inventory is a crucial part of running a successful apparel business. It enables retailers to better analyze sales, manage inventory costs, decide whether to order more inventory, and lets them know how much of their goods makes it into the hands of customers rather than being damaged or stolen. 

Although the retail method of inventory saves time and money, it is not without flaws. It works best when used as part of a bigger inventory management plan, in combination with other approaches such as robust inventory management software like ApparelMagic, performing physical inventory counts, and regularly reviewing your stock and sales performance.

ApparelMagic allows you to automate all of your inventory management operations. With detailed data and features like real-time metrics, and sales processing, the software allows you to keep track of what is selling and what isn’t, enabling you to foresee trends, make smart purchasing decisions, and keep your shelves filled with goods that are in demand. 

The process of sourcing, storing, and selling a company’s inventory is called inventory management. The term refers to your tracking system for each stage of the product life cycle, including the management, warehousing, and processing of both raw materials and finished products.

The purpose of inventory management is to ensure that the right products are in the right place at the right time. To achieve this, you need inventory visibility, which includes knowing how many items to order, when to order them, and where to store them.

So, what happens if your company doesn’t have an effective inventory management system in place? What if you’re unable to find the right balance between having too much inventory in stock or not enough?

In this post, we’re discussing the importance of inventory management, explaining how it works, and breaking down its most important benefits for your business. 

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Why Is Inventory Management Important 

Inventory is one of the most important assets a company can have. In inventory-intensive industries, such as food manufacturing and retail, an organization’s inputs and completed products form the foundation of its operation. If there is insufficient inventory where and when it is needed, customers can become dissatisfied. On the other hand, excess inventory comes with its own set of risks, such as the cost of storing and insuring it, as well as the chance of damage, theft, and spoilage.

Because of this, inventory management is crucial for businesses of all sizes. Understanding when to restock, how much to manufacture or buy, how much to pay—but also when and at what price to sell—can all be difficult decisions. 

By using an efficient inventory management system, companies can fulfill orders accurately and on time. They can easily track, oversee, and manage inventory and avoid issues like understocking, overstocking, obsolete item stocking, excessive return volumes, and loss of customers. 

Inventory management also helps you achieve a balance between supply and demand by aiding in better planning. Consider a situation where there is a high demand for a product but there isn’t enough inventory to meet that demand. Accurate inventory management will help you make sure you have just enough stock available to meet current customer demand. 

A strong inventory management strategy results in an organized warehouse which, in turn, leads to more efficient fulfillment plans. Finally, inventory management is crucial if you want to avoid financial bottlenecks. It helps prevent needless tying up of capital in surplus inventory while also improving the company’s liquidity position. With an inventory tracking system in place, business managers can make better-informed decisions about the merchandise in their warehouse.

What Are the Benefits of Inventory Management 

Some of the most important benefits of inventory management include:

Increased accuracy and efficiency

Surprisingly, inventory is accurate only 63% of the time for many retail companies. When you consider how harmful an incorrect order may be, this number is quite low.

One of the most important advantages of inventory management is that it decreases the amount of inventory that businesses must keep in stock while at the same time enhancing order accuracy.

Saves money

Having an insight into your inventory means that you will always know how much you have in stock and where it is located, so you can make the most of it. It also means you can keep less inventory in your warehouse or store because orders can be completed from any location on the planet. This results in decreased inventory costs and a lower number of items that remain unsold before they become outdated. 

Better data visibility and planning

When examining the advantages of having an inventory management system, it is crucial not to overlook the usefulness of business intelligence. An inventory management system allows you to keep a centralized record of every item, providing a single source for item location, supplier information, specifications, and the total quantity of items currently in stock. This enables you to fine-tune your marketing processes and make informed business decisions.

Reduced labor costs

Businesses are constantly seeking ways to save time and money, and inventory management is one of the most effective methods to do so. Many of the best inventory management systems have functions like barcode scanning that help eliminate time-consuming tasks such as manually entering product numbers. By automating more tasks and freeing up resources, your employees will be able to focus on more critical work and help you grow your business faster.

Satisfied customers

Providing customers with the products they want in a timely manner is a crucial aspect of building and maintaining customer loyalty. Customer satisfaction leads to positive testimonials and repeat business. Moreover, by rapidly and precisely fulfilling customers’ orders, you’ll establish yourself as a trustworthy name in the marketplace. 

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How Inventory Management Works 

Inventory management helps companies determine how much stock they have and where that stock is located. It allows you to track products from the point of purchase to the point of sale, allowing you to know when there is a shortage of a certain product and making sure that there is always enough inventory to fulfill orders.

Small businesses usually track their inventory manually and use spreadsheet formulas to determine ROP (reorder points) and amounts. Bigger companies rely on ERP (enterprise resource planning) software, whereas the largest corporations typically choose highly customized SaaS programs for this purpose. 

The three methodologies used to account for inventory are weighted-average costing, last-in-first-out (LIFO), and first-in-first-out (FIFO). In most cases, an inventory account is divided into four categories:

• Raw materials – the different materials that an organization buys for its manufacturing process. Before the company can turn these materials into finished products that can be sold, they must undergo extensive processing.
• Goods in process – refers to raw materials that are in the process of being turned into a completed product.
• Finished products — goods that have reached the end of the manufacturing process but have yet to be sold or sent out to the consumers. 
• Merchandise — is a term used to describe the completed products that a company purchases from a supplier with an aim to resale to customers. 

Various inventory management methods can be used depending on the type of product or business. Materials requirement planning (MRP), just-in-time manufacturing (JIT), days sales of inventory (DSI), and economic order quantity (EOQ) are a few of those methods. 

How To Properly Manage Your Inventory 

Here are some inventory management strategies that many businesses use:

Audit your stock

Even if you already use sophisticated inventory management software, you should still count your inventory on a regular basis. Companies utilize different techniques, such as a year-end physical inventory that counts every item and regular spot-checking, which is especially useful for products that have stocking issues or move quickly.

Identify low-turn stock

If you have inventory that hasn’t sold in the last year, it is probably time to stop stocking those products. You might also think about other ways to push that item out, such as promotions or special price offers because surplus inventory wastes both money and space.

Track all product information

Keep track of tall the product details for each item in your inventory. Countries of origin, suppliers, barcode data, lot numbers, and SKUs should all be included. It’s also wise to keep track of the cost of each item over time so that you are aware of things like seasonality and scarcity that could affect the price.

Improve your forecasting

Accurate forecasting is critical. Market trends, historical sales data, forecast growth, as well as the overall economy, promotions, marketing activities, and so on should all be factored into your projected sales calculations. The best inventory management software can help you automate inventory forecasting, also known as demand planning, and aid you in making an informed projection about how much inventory will be needed over a long period of time. 

The Bottom Line 

Inventory management is crucial to an organization’s success because it makes certain that there is always the adequate amount of goods on deck, without a surplus or a lack of items, decreasing stockout and erroneous records opportunities.

The advantages of these systems are undeniable, and more and more businesses will begin to implement them over time, replacing ineffective spreadsheets that need to be updated manually. 

Using inventory management software eliminates inventory management errors, resulting in a business that is more efficient, more profitable, and well-equipped to meet every customer’s needs. 

If your company stores the goods it sells in a warehouse, warehouse inventory management is an important aspect of your supply chain management. It is crucial for keeping track of the products your company has in stock and making sure that your inventory levels are kept at ideal levels.

Understanding how to create and implement a warehouse management strategy is critical to staying on top of your goods, reducing loss, and satisfying customers by rapidly fulfilling orders.

In this post, learn more about the importance and benefits of warehouse inventory management, how to implement it, and more. 

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What is Warehouse Inventory Management?

Warehouse inventory management is a process that includes receiving, storing, tracking, and auditing stock in a warehouse. For instance, for the clothing industry, this would mean tracking the movement and location of clothes, shoes, accessories, jewelry, and related items within the warehouse.

In other words, warehouse inventory management is all about managing incoming and outgoing goods, as well as knowing where individual items are located in the warehouse.

Warehouse management also entails warehouse staff management, optimization of storage space and costs, and replenishment of inventory when predetermined minimum quantities are reached. All of this has a direct influence on fulfillment, delivery, and customer satisfaction.

Why is Warehouse Inventory Management Important 

Here are several important reasons why businesses should prioritize warehouse inventory management: 

1. Reduced Costs

Storage, fulfillment, and labor expenses can all be reduced with proper warehouse inventory management. Investing in a cloud based inventory management solution, automating activities to eliminate human error, and organizing inventory to speed up the picking and packing process are just a few of the ways to optimize your supply chain and boost your profits. 

2. Increased Productivity

When inventory in your warehouse is properly recorded and maintained and manual tasks are automated, your employees will have more time to focus on more important duties like logistics and growth. Assisting your warehouse employees in becoming more productive will not only save you money but also ensure that orders are shipped at a faster rate and with increased accuracy.

3. Improved Accuracy

Speaking of accuracy, if your warehouse is not well-organized and managed, the fulfillment process will suffer complications and delays. The majority of order troubles arise from chaotic inventory, poor picking and packaging operations, and not enough stock control. You can dramatically enhance order accuracy and speed up order fulfillment by implementing warehouse management best practices and technologies.

4. Faster Shipping 

The way you manage your warehouse inventory also has an impact on shipping efficiency. An automated shipping process allows you to boost shipping times, increase your output, handle a bigger volume of orders with ease, decrease shipping costs, and ensure higher order accuracy rate. 

5. Increased Customer Satisfaction

Finally, a successful warehouse is one that fulfills customer orders timely and accurately. By investing in warehouse inventory management, you’ll enhance customer satisfaction by reducing shipping times, lowering shipping costs, and increasing order accuracy. Moreover, if a customer wants to exchange or return a product or there’s a problem with an order, a good warehouse system and inventory management will help you manage returns and refill items more rapidly.

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Best Methods and Practices for Warehouse Inventory Management 

Having the above-listed benefits of warehouse inventory management, here are some methods and best practices that will help you implement such a system and make sure it runs smoothly.

1. Inventory Tracking

Inventory management software will automatically update each item’s status or location within the warehouse, thus smoothing out the operations. It will also let you know how many goods are ready for shipment, as well as when you should order more products based on projected volume.

Retail inventory management software includes features like traceability, which allows you to track items by serial number or lot, integrated barcoding, activity-tracking dashboard, expiration tracking, etc. These features will not only boost efficiency but also help prevent losses by making sure that nothing has been moved without permission.

2. Receiving

The process of restocking inventory in a warehouse is referred to as receiving. Inventory management and fulfillment can be made easier, more cost-effective, and more efficient with an efficient warehouse receiving procedure. Once inventory is stowed, retailers can track it in real-time, estimate inventory needs, set reorder points, and much more from a single dashboard.

3. Picking and Packing

Picking and packing refers to the process of taking your customers’ purchases and packing them into a shipping box. Your warehouse operations will run faster and more accurately if you have an efficient picking and packaging process in place. There will be fewer mispicks, decreased number of returns, and more satisfied consumers who get what they want when they want it. An effectively-managed picking and packing process will also save you time and money, as research has shown that processing orders takes about 70% of labor time!

4. Shipping

Getting parcels out for delivery with UPS, USPS, and FedEx, as well as putting bulky items or larger cargo into pallets to be delivered by LTL freight, are examples of warehouse management for shipping. By optimizing the shipping process, software for warehouse management eliminates the need for warehouse workers to “double-check” product availability prior to each shipment, allowing your company to improve accuracy, boost speed, and deliver high-quality service while keeping warehouse shipping costs low. 

5. Reporting

A warehouse inventory management system should provide inventory and operational reports to help you determine the health of your warehouse and inventory management processes, but also find areas to improve efficiency and speed up delivery. This could include order fulfillment accuracy, number of orders fulfilled per hour to measure staff efficiency, number of orders delivered on time, etc. Reporting will also provide you with inventory forecasts and help you to better understand staffing requirements and labor management.

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What Is the Difference Between Inventory and Warehouse Management? 

Warehouse management and inventory management are two aspects of stock management. 

Inventory management includes forecasting, ordering, receiving, and allocating goods. It provides information to calculate profit margins and sales trends, determines reorder points based on demand, shows the inventory record, and stores inventory availability status. Raw materials, components, and finished goods are all part of the inventory. 

Warehouse management, on the other hand, is concerned with products stored in storage facilities and warehouses, as opposed to those used in the manufacturing process or kept in storefronts. It’s part of a broader inventory management system that tracks goods from point of acquisition to point of sale.

Warehouse management and inventory management are similar in that they both aid in the efficient movement of inventory from the supplier to the end-user. Each one entails stock storage, shipping, and reordering. In addition, both inventory management and warehouse management improve accuracy and productivity by using software, barcode tools, and RFID (radio frequency identification), and they both enable insight into all stock, whether for one warehouse or the entire firm.

The Bottom Line

From receiving and storing merchandise to completing and shipping orders, inventory and warehousing management have an impact on your entire supply chain. Inadequate warehouse inventory management can result in increased logistics expenses, disgruntled warehouse employees, more picking and packing errors, longer shipment times, and dissatisfied consumers.

By choosing to employ a warehouse management system, you increase your productivity in the warehouse and improve logistics. The precise activity records aid warehouse staff by making sure they know exactly what the next step in the process is. Because every product in the warehouse is tracked in real-time, inventory control is straightforward, and customers can rest assured that their orders will be fulfilled timely and accurately. 

There are a lot of moving parts when it comes to managing the flow of goods and services needed to make your business function. How well—or how poorly—you manage those moving parts can make or break your brand in today’s competitive landscape.

While effective supply chain management is crucial for any business, this is particularly true for those of us in the apparel industry. Between fast-changing fashion trends and a limitless variety of products, apparel and fashion retailers often have more complex supply chains than other industries. That’s why it’s important to understand each facet of it in order to manage it properly. 

Using the right apparel inventory management software can help you optimize and take control of your supply chain, control costs and manage vendors and deadlines in one place.

Stages of the Apparel Supply Chain

1. Design – Before a piece of clothing is ever created, all aspects of it must be designed and planned for, from the silhouette to material to embellishments.
2. Textile Production – Raw and synthetic materials must first be spun, woven, blended, or dyed before they can be turned into the clothing on shelves in stores. This stage of the process also produces the highest emissions and pollutants due to the water and chemicals needed.
3. Apparel Production – Clothing production is taking the fabric from step two and cutting, piecing, and sewing it into the product designed in step one.
4. Distribution – Every company is different, but from step three a garment will either be sent directly to retail or shipped to a distribution warehouse, often shared by multiple major retailers. The movement of a garment within a distribution warehouse is digitally tracked every step of the way to maintain accurate supply records.
5. Purchase – Finally, the end user purchases the garment from a retail or wholesale channel.

Apparel Supply Chain Variants

How your supply chain is configured is ultimately a function of market demand and inventory considerations. There are essentially three variants:

Push Supply Chains

In a push supply chain model, analysts project demand for your item and push them to retailers based on their predictions. Cold weather apparel begins appearing in stores as warm weather ends and suppliers have been preparing for this increased demand long before it was present.

Pull Supply Chains

A pull strategy is one that waits for demand to be present before creating the product, which decreases the cost of holding inventory that may not sell. The risk in this strategy is not being prepared when demand ramps up and not meeting consumer needs.

Push/Pull Supply Chains

A compromise between these two is also available. A producer may choose to keep finished products at a distribution center waiting for consumer demand, or a manufacturer may choose to keep a large store of raw materials waiting for the demand for future production.

Challenges of the Apparel Supply Chain

There are several key challenges facing effective apparel supply chain management. Often, many of these difficulties are relevant only to fashion retailers and are not present in the supply chain for other industries and businesses. 

• A looming trade war has made sourcing executives wary about future demand, which is compounded by the increase in production and sourcing costs from tariffs imposed on Chinese products.
• Human rights and labor abuses in overseas manufacturing is leading to calls for increased transparency in production
• Demand forecasting in the apparel industry is difficult and can make effective supply chain management difficult, too.
• Although software is a game-changer in today’s business environment, inventory management poses challenges to supply chain management in the apparel industry.

The Future Development of the Apparel Supply Chain

It’s difficult to say exactly what the future holds for the apparel supply chain. Fashion retailers need to figure out new strategies for apparel inventory management, as well as supply chain management. 

Retailers will likely continue to look for ways to address those common challenges, incorporate more helpful technology into the process, and address larger issues in the fashion industry, such as sustainability. Meanwhile, consumers are increasingly looking for guilt-free, cruelty-free products. Meeting this demand will be crucial. 

As always, it’s important to look for ways to improve the apparel supply chain and make it more efficient, not only for your business, but for the industry as a whole.