How to Maintain Healthy Multichannel Inventory Management

Oct 03, 2012 3:10 AM  By

Inventory management in a multi-channel environment is a difficult challenge for small and mid-sized merchants with limited resources, but if they don’t get a handle on it, this can directly affect customer service and brand reputation.

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Let’s look at this all-too familiar scene: You realize two separate buyers have purchased the same item – one through your own ecommerce store, the other through Amazon, eBay or even over the phone– but you don’t have enough items available in your inventory.

So, what should merchants do to avoid this scenario? First, it’s important to understand why the same item was sold twice.

As more merchants are listing products in multiple marketplaces like eBay or Amazon to reach potential buyers, they aren’t always integrating the management of inventory between these channels, and it becomes difficult to track inventory on a real-time basis. In addition, manual data entry errors can easily occur.

Furthermore, inventory shortages can result in backorders and cancellations. Excess inventory can be equally problematic as it leads to cash flow issues. Multichannel merchants need visibility into their inventory management in order to find a happy medium between too much and too little inventory.

Once you’ve been able to determine the “why,” multichannel merchants should ask themselves these five key questions in order to diagnose the health of their inventory management system:

1. Are you able to track what is “available for sale” versus what is on hand? For example, items that have been returned or are available for sale via various channels have to be carefully tracked.

2. Can you effectively allocate inventory by channel?

3. Can you determine and monitor the minimum amount of inventory to keep?

4. Can you identify and track items used in assembled packages, such as gift baskets, and track them properly?

5. Do you have visibility into excess and obsolete stock, and do you have a targeted action plan in place to sell off or reduce this inventory?

If you can answer “yes” to all of these questions, then you are on your way toward effective inventory management, which can ensure customer satisfaction and directly impact your bottom line by reducing cash investments, maintaining healthy cash flows and maximizing sales.

If not, it may be time to revisit your inventory management strategy.

First, ask for outside help from your suppliers and hire a dedicated inventory control specialist. Make sure you are carefully monitoring inventory levels to determine supply and demand and establish a system to forecast and track inventory across channels.

Also, utilize inventory management software that is tightly integrated with your order processing system, can manage multiple inventory channels and locations and that will alert you when inventory levels get too low or too high.

Fred Lizza is the chief executive officer at Dydacomp, a provider of business technology platforms for small and mid-sized ecommerce and multichannel merchants.