Inventory management is a key factor for all ecommerce businesses. Put simply, it's the only way to guarantee customer happiness while keeping up with spending. Yet, despite this, 43% of small businesses don’t track their inventory. This is an issue that, left unchecked, can bring serious long-term issues to businesses.
Luckily, there is a simple answer for sensible inventory management: data analytics. With the right insights, you can maintain effective inventory levels, keep customers happy, and sustain long-term growth. Let’s explore how.
Understanding the Basics of Data Analytics in Inventory Management
Before we discuss the specifics of inventory management, let’s give a broad overview of data analytics. Data, in its raw form, isn’t useful. Data analytics tools unpack information to deliver actionable insights.
Modern ecommerce businesses are no strangers to data analytics. Whether through monitoring websites, customer support, or social media analytics, data plays a major role. It helps us track progress towards goals, and spot areas where improvement is needed. Inventory management analytics is a natural extension of this.
Inventory analytics software helps organizations by providing a variety of data insights. From helping to order the optimum amount of stock to predicting seasonal changes, it has become an invaluable tool.
As the world of online business becomes more fast-paced and on-demand, inventory management becomes harder. That’s why, if your company hasn’t already, now is the time to invest in inventory analytics.
Key Benefits of Data Analytics for Inventory Management
Inventory data analytics is set to become more and more important. Let’s look at how this technology helps to maximize your inventory and unlock ecommerce potential.
A smoother sales process
Ultimately, businesses should create a smooth and seamless ordering process. That’s why successful organizations use multiple data points to get the most out of data analytics and ensure their online sales process runs smoothly.
The use of accounts receivable automation software will provide visibility on quotes and sales orders, so you have the insights you need to manage your inventory efficiently. Alternatively, purchase order software will give you real-time insights into order status, helping you to enhance customer service.
All this results in happier customers. There are fewer delays in getting the products shoppers need, and they can enjoy an ordering process built around their needs.
Create happier and more loyal customers
Ecommerce inventory management can have a big impact on customer happiness and boost trust. To help illustrate this, let's Imagine two scenarios.
In scenario A, a customer arrives at your online store and places an order. They’re told that their item will arrive in two days. Unfortunately, after the customer makes their order, you have a shortage of a key part needed to manufacture their product. This means that their item takes much longer to arrive than the estimated delivery date. In scenario B, the customer places their order and it arrives on time as expected.
Customers expect scenario B. Data analytics makes it much easier to meet this expectation. By constantly having appropriate stock, you can deliver consistent on-time deliveries. This keeps shoppers happy and helps to cultivate more loyalty. This means more referrals, positive reviews, and increased long-term revenue.
Keep on top of stock levels
There’s always risk involved in ordering stock. Order too much, and you risk using storage space on items you struggle to shift. Order too little and you might sell out, disappointing customers. The challenge is finding a happy medium between these two points.
Luckily, inventory management analytics can provide you with the insights that you need. Software can look at data and predict optimal levels of stock. This way, you can make sure that on-demand products are always available. There’s also a reduced danger of being hampered with surplus stock.
Modern solutions are also often equipped with AI-powered predictive analytics capabilities. This technology looks at current and past market patterns to predict future trends. For example, analytics might predict a spike in sales for a certain product on Black Friday. Thanks to this, businesses can better prepare their inventory. Instead of being caught out by a trend, you can be among the first to capitalize on it.
Identify cost savings
Businesses are constantly looking for new ways to cut costs and save money. But spotting money-saving areas isn't always easy. Luckily, data analytics can help simplify this process, spotting opportunities that you otherwise might have missed.
For example, an analytics tool can analyze supply chain performance. To do so, it will look at key areas of supplier performance, such as lead times and transportation costs. It can then suggest areas where savings can be made and enhance ecommerce efficiency. For example, this might involve optimizing transportation routes.
Tools and Technologies for Implementing Data Analytics
Implementing data analytics involves various tools and technologies. Let’s explore some of the top examples.
- Manufacturing software - If you also manufacture your products, then you'll want to use manufacturing software that gives you control over the entire process, from planning production to streamlining supply chain operations and inventory management.
- Business intelligence (BI) tools - BI tools enable easy access to a business’s various data streams. These tools manipulate data by collecting, analyzing, sorting, filtering, and providing reports. A BI solution can help you visualize your inventory data and make more thorough evaluations.
- Internet of Things (IoT) systems - The IoT means that sensors and other devices can collect real-time inventory data. For example, you can monitor the temperature of different storage and make sure that items are being kept in optimal conditions.
Challenges and Considerations
Implementing data analytics brings many benefits, but the process also presents some hurdles. Preparation is the easiest way to guarantee a smooth transition. Below, we’ve listed some of the key areas you should prepare for.
Data accuracy and cleanliness
To provide accurate insights, data needs to be high quality. This means no duplicate, incomplete, or inaccurate data. Low-quality data can bring many issues, including:
- Missing opportunities to maximize your inventory or cut costs.
- Taking incorrect actions based on misleading information.
- Storing incorrect details of customers.
Using an inventory management system is the simplest way to maintain high-quality data. These tools are designed to provide complete visibility over your inventory. Systems will combine a variety of methods, such as barcoding and point-of-sales systems to provide up-to-date and accurate information.
Alongside this, there are several safeguards to maintain the integrity of your data. Be sure to carry out regular checks of your stock records. Weed out any inaccuracies or mistakes before they become too damaging.
Lastly, don’t overlook the usefulness of manual stock checking. A physical count can make sure that your inventory records are accurate.
Integration issues with existing systems
Integrating your digital analytics software with existing systems may pose some problems. This is especially true if you are currently operating on older, legacy systems. To get maximum data insights, you must make sure that a solution links with critical systems. For instance, you’ll want access to data stored within your CRM tool.
The easiest way to guarantee a smooth integration is by researching before choosing your analytics solution. Make a list of existing needs and goals, and consider your future plans. Consider the integrations that are essential for meeting these objectives.
Next, think about the integration capabilities of different solutions. Does a platform integrate with the systems that you need? Without native integration, you may have to overcome various hurdles to make sure your systems connect.
Finally, consider the level of customer service offered by a provider. If you run into any issues during integration, it's useful to have access to expert help. A platform that offers around-the-clock customer support is always a bonus.
Skill gaps and training needs
Although switching to an analytics-based approach brings huge benefits, it can be a challenge for some of your existing staff. This will be especially true for seasoned employees who are used to following certain procedures. It’s the job of leadership to reduce these concerns.
Make sure you prepare staff well in advance of implementation. Be sure to highlight the advantages of an analytics-based approach. Put these benefits in the context of employees' work lives. Explain how new systems will make their jobs easier.
For those unfamiliar, the use of data analytics tools can be a learning curve. A comprehensive inventory management and demand forecasting course can help to show employees the ropes. Alongside training, provide easy access to informational resources on your LMS. Make sure that staff can access this on the go and learn in the environment that suits them.
Final thoughts
Data is set to become even more of an essential commodity for businesses as time goes on. It will continue to transform every aspect of business, with inventory management being no exception. To get ahead of the curve, it's best to adapt now.
Many small and medium businesses have yet to implement inventory analytics. By implementing now, you can provide a smoother and more reliable experience than your competitors. Customers will view you as a safe choice for future ecommerce purchases.
Of course, when making the switch, be careful not to overlook the challenges we’ve discussed here. Always prepare your team ahead of time by offering training and appropriate resources. Do thorough research to find a solution that integrates smoothly with your existing systems.
With the right planning and care, data analytics can transform your ecommerce business. So, why not step into the future?
