Inventory management for E-Commerce

Posted in Operations & IT Articles, Total Reads: 2722 , Published on 11 September 2013

If you have ever worked in retail or worked in any business that uses or sells products, then you know the importance of maintaining inventory. Inventory is the product that a company sells. If your e-commerce system has no method of tracking inventory, it can be very difficult to run day-to-day operations. Systems that let you take e-commerce real-time inventories are crucial to running a successful e-commerce business. Systems like Warehouse management, Supplier Drop Ship let you know, at a glance, what you have or what you don’t have available for your customers. This also lets you know when the numbers on any particular item are getting low. You then know when it is time to order more products. An e-commerce real-time inventory system also tells you when you have excess of any specific product. Knowing that, you can mark down an item to move your inventory faster. And as most people know, the faster you can turn over your products the higher your profit will be.

image courtesy: renjith krishnan,

E-Commerce in India 

India has an internet user base of about 150 million as of Feb 2013 according to International telecommunication Unit. India now has 3rd largest Internet population in the world after China (at 575m) and the US (at 275m) Though penetration of e-commerce is low compared to  these and other markets but it is growing at a much faster rate with a large number of new entrants. The industry consensus is that growth is at a flexion point.

COD(Cash on Delivery) mode of payment is quite unique to India in terms of its cash economy. As per latest stats more than 75% online e-commerce transactions have been COD based.

Market Size & Growth

The e-commerce market in India is expected to grow by 33 per cent to reach Rs 62,967 crores by the end of 2013 predicted a report released by the Internet and Mobile Association of India (IAMAI) and IMRB International. The ecommerce market was valued at Rs 47,349 cr in December 2012. As per the findings, Online Travel (booking rail, air, bus tickets, hotel accommodations, tour packages) comprised a majority 71 percent of the whole Digital-Commerce pie in 2012.  While e-tailing, which includes purchases of various consumer products/services constituted 16 percent of the overall share.

India alone has close to 10000000 online shoppers. This number is growing consistently.

Growth of e-commerce over years

Top Categories in E-Commerce

  1. Electronics Goods like Laptops, Mobiles, Tablets, Cameras etc
  2. Apparel : Men’s wear, Women’s wear, footwear, denim etc

Inventory is the largest investment in the asset column of any business’s balance sheet, therefore it is very crucial to run inventory management most effectively for the business.

Now Main question arises about “How to manage the Inventory system?”

We can reduce lots of hassles of inventory management by opting to have the Supplier Drop Ship or Deliver Goods Directly where the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer to the customer. However, many websites still prefer to have complete control by either stocking inventory completely or using a hybrid model of both.

Benefits of stocking inventory in house:

  • Company is directly in charge of  its own shipping department, meaning  they can set shipping prices and resolve issues, such damaged shipments, directly without making the customer wait for the manufacturer’s response.
  • Warehouse can exactly track which products are in stock or out of stock and old inventory.
  • Merchandisers can come up with special promotions on non moving goods according to data of old and non-moving stock.

If a company chooses to stock inventory, its profit from the items should be substantial enough to justify the holding costs. Incurred while carrying the inventory of goods, holding costs directly relate to the facilities and equipment required for storage.

To further improve inventory management efficiency and minimize associated costs, consider:

  • Technology – A strong inventory management backend that includes bar codes, proper Stock keeping management allows a company to streamline its supply chain. A streamlined process leads to accurate planning as well as improved forecasting and product turnover, which leads to increased profits and better customer service.
  • Using an Inventory management system will makes it easier to integrate products with the better promotions.
  • Measuring inventory turns – with the adequate software and proper techniques, company can achieve more frequent inventory turns, which results in profits.
  • Managing vendors – Timely ordering can be happen only when a company has robust Inventory accessing mechanism which will result strong relation with Vendors and regular buying helps in negotiating terms and conditions, favourable to business.
  • Eliminating Extra/Obsolete inventory – It is very important to wipe out extra or obsolete inventory time on time otherwise this will incurred costs such as Manufacturing, Holding, & Maintenance. So it becomes crucial to work with merchandising and marketing team to design promotions and discounts to liquidate dead inventory.
  • Reducing inventory items – maintain just enough items to meet customer demand and limit.

The Warehousing space that a business requires depends on the type and size of merchandise and most importantly, the turnover rate of a product. Low turnover rate will deplete the profits. To maximize storage capacity and profits, a retailer should organize inventory into different sets, from the top-sellers to rarely sold items.

The ability to accurately and effortlessly manage your inventory is paramount to providing inimitable services to customers, efficiently utilizing resources, and maximizing profits.

The article has been authored by Lalit Choudhary, SIBM Bangalore.






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