Do eCommerce Sites manage Stock?
If you are considering an eCommerce business, one of the most obvious questions can be, how is stock managed in eCommerce? Is it managed on the website itself or do they need to manage it separately? So I decided to write this helpful article explaining the ins and outs of managing stock on an eCommerce website.
Do eCommerce sites manage stock? E-Commerce websites manage stock by maintaining the available quantities for each product and its variations. Once you input the available quantities of each of the product units, the website pretty much handles it automatically. That is, it deducts the numbers sold, re-adds the numbers returned, and warns you when the stock reaches below the safety stock level, etc.
It is important to understand exactly how the stock is managed in different types of eCommerce websites. You must understand various nuances associated with inventory management in eCommerce, so read on further so that you do not miss anything important.
How do you manage stock inventory in eCommerce?
E-Commerce websites have an inbuilt stock management system at the back end. You need to input the number of units available for a particular product. This process is usually manual, i.e., every time you receive supplies, you need to manually update the new number of units available to you for each product or each SKU (Stock Keeping Units).
For example, on WooCommerce websites, you can input the available quantity in the section Products > Inventory in the WordPress backend. Here you can select the SKU and input the stock quantity for each SKU.
For simple products, i.e., a product that has only one variation, stock management is pretty straightforward. You just need to input the stock quantity and the website will take it from there, that is it will automatically deduct the numbers every time an order is processed. You also have the option to input the ‘Low Stock Threshold’, which is the safety stock for your product. For example, if you set the Low Stock Threshold for Product A as 5, the website will notify you every time the available quantity goes below 5, and you can place an order with your suppliers.
There is also an option to decide on backorders. Backorders are basically orders for products that are temporarily out of stock. For example, for Product B, if the stock quantity is 20, your backorder settings will decide whether your customers can place orders for quantities of more than 20.
The recommended and most commonly used setting is ‘Do Not Allow’ backorders. This setting will not allow your customers to order more than 20 items (which are in stock currently) for Product B. Alternatively, you can allow your customers to order more than the stock quantity, but notify them that the items are available on backorder. Thus your customers will be able to order more than the available quantity of 20 for Product B, say 25 units. You can choose this option if your suppliers can quickly fulfill the excess quantities on your request.
There is a third option to allow backorders without even notifying the customers. This is advisable only if your suppliers are very prompt with fulfilling the excess quantities, or you have in-house production which can be ramped up quickly when required. But in this case, your customers order some items which are not in stock, and the customer is not even notified when they will be available. Generally, this option is not advisable since it can negatively impact the customer experience.
Do eCommerce sites manage stocks for different variations of a product?
Many products on an eCommerce website can have more than one variation. For example, a particular T-shirt can have multiple sizes (S, M, L, XL, etc) and multiple colors (red, white, blue, black, etc). On WooCommerce websites these are called variable products. The different variations of a variable product fall under the same SKU but have different IDs.
The stock management for a variable product is slightly more complicated than for a simple product since each variation can have different quantities available. And it is important to track the available quantities of each of the variations separately in order to run your business smoothly.
It is also quite possible that your supplier fulfills different quantities of each of these variations. For example, you may receive 20 units of L size in white color, while 25 units of L size in black color, and so on. Now, if you update the available quantity for this product under the Product section, all variations will get updated by the same number, which is not very practical and may not be correct.
For tracking the stock of a variable product in WooCommerce, you can use an extension called WooCommerce Stock Management. This is a very powerful plugin that allows you to input and track the available quantities of each variation of a variable product separately.
Do Shopify Websites Manage Stock?
Shopify, being an end-to-end, done-for-you eCommerce platform, allows you to keep track of your inventory at the back end, like any other eCommerce website. You need to go to the Shopify backend and under all products, you can select the particular product for which you want to input the stock.
Under the Inventory section, you have the option to select the SKU and input the quantity available. There is an option to ‘Track Quantity’ which should be checked in order for your site to track the quantities. There is another option called ‘Continue selling when out of stock’, which if checked, will enable backorders on your website. In other words, even if all your inventory is sold out, it will not show on your website as ‘sold out’ and your customers can continue ordering. As mentioned earlier, you should enable this setting only if you can get the fulfillment super-fast once you are out of stock.
When a product is sold on your website, it will deduct the quantity automatically from your stock in real time and update the new available quantity. In case a particular item is returned after the order is placed, you can handle that from the refund page under orders. You can select the particular order that is being returned, and select the quantity being returned. There is a check box that says ‘Restock Item’, you should make sure that is checked and then click on the Refund button. This will add the quantity of the product back to stock.
What are the 4 types of inventory management?
As an eCommerce business owner, there are numerous ways in which you can manage your inventory. You can choose your method based on the size of your business, the nature of your product, and the nature of your suppliers. There are 4 types of inventory management methods used most commonly.
Just-in-Time inventory: In this strategy, you order your products from your suppliers just as you receive orders from your customers. This is an effective way to keep the inventory cost to a minimum. This is most suitable when you can predict the pattern of demand, for example, if you are selling seasonal products.
This is also suitable for new smaller businesses, which receive orders once in a while, so they do not need to stock any inventory and can get the fulfillment as and when they receive the orders. This is not suitable when the buyer trends are unpredictable, since you will not have enough inventory to fulfill a sudden surge in demand.
Dropshipping: This is another powerful method of inventory management for new eCommerce businesses that do not have extra cash for inventory storage. Here, you only need to administer your eCommerce site and manage your orders. Once the order is received you can get it dispatched directly from the manufacturer or third-party supplier. This method getting very popular these days with more people being bitten by the entrepreneurial bug and new people entering the eCommerce market every day.
The obvious flaw in the method is, you do not have any control over the quality of the products or the customer experience. If your supplier is not doing their job right, your business and reputation will suffer.
First in, First Out: A popular inventory management technique used when your products are seasonal (for example- fast-moving fashion) or perishable (for example- grocery). In First in, first out, the stock arrived in your warehouse first is used for fulfilling the customers first.
This method is not suitable if the prices of your products fluctuate a lot since it will impact the profit margins.
ABC Analysis: This is a valuable method when the variety of products sold by you is huge, and it is difficult to keep everything organized. In this method, you divide your stock into 3 categories- High in value and low in quantity, Medium in value and medium quantity, and Low in value and high in quantity.
Having clearly defined categories in your products enables you to handle fulfillment and the storage differently for each category.
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