Inventory Management on Shopify - Streamline Your Stocking

Bahroze Ali

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November 25, 2024

How To Manage Inventory On Shopify: A Complete Guide To Streamline Your Stock

Inventory is the quantity of products that are available for sale. Managing inventory is the process of organizing stock in online stores. Inventory management is a powerful tool to help in tracking, updating, and controlling inventory. It allows online stores to stock adjustments and inventory tracking.

Inventory tracking helps to avoid selling products that are out of stock. It prevents stockouts or overstocking and ensures accurate stock levels. Shopify allows you to set up inventory tracking, view inventory, and adjust inventory levels on the Inventory Page.

In this blog, we'll introduce, the importance, and various techniques of inventory management.

Introduction To Inventory Management:

Managing inventory is the process of ordering, storing, and tracking inventory. It is a built-in feature in Shopify that allows online stores to track, organize, and optimize their stock. It helps to track the right products with the right quantity. It ensures businesses can meet customer demands and prevents stockouts or overstocking.

Today mostly digital or cloud-hosted systems help in managing inventory. They work on all devices and for all users to ensure everyone interacting in the supply chain is on the same page.

The inventory programs track and organize all features involved in managing inventories. There are three key types of inventory systems which are manual, perpetual, and periodic:

• Manual Inventory System: It allows to track, update, and manage stock levels without automation. This is ideal for small online stores with a limited number of products.
• Perpetual Inventory System: It tracks the inventory levels in real time. As the product is sold, returned, or restocked, the inventory updates automatically.
• Periodic Inventory System: It updates inventory in specific intervals of time. A periodic system requires physical inventory counts at specific periods.

Inventory Management Features:

Inventory management has the following various features in Shopify:

• Inventory Tracking: Inventory tracking allows online stores to track product inventory automatically. It tracks stock in real-time and views availability in all multiple locations.
• Stock Adjustments: It helps in stock adjustments and updates the stock levels manually.
• Product and Variant Management: Managing inventory allows to add, organize, and edit products, including variants. It manages the inventory levels for all product variants.
• Low Stock Alerts: Low stock alerts send notifications when stock levels reach the set threshold. It prevents the products from going out of stock.
• Multi-Location Inventory: Most businesses have multiple warehouses or stores. The inventory management system manages inventory across various warehouses. It helps to assign stock to specific locations.
• Reporting and Analytics: Reporting and Analytics provides detailed stock reports. It helps businesses to decide about stock levels by tracking the demand of customers.
• App and Integrations: Integration of third-party apps offers advanced features like automated restocking, forecasting, and analytics.

How to Set Up Inventory Management in Shopify:

Enable Inventory Tracking:

• To enable inventory tracking, go to Shopify Admin > Products.
• Select the product you want to manage. Scroll to the Inventory section.
• Check the box for Track Quantity and enter the stock in the Quantity field.

Stock Setting Configuration:

• If you want pre-orders then enable the Continue Selling When Out Of Stock option. Otherwise unchecked this option to prevent pre-orders.
• Use Shopify apps like Stocky for inventory tracking to track stock levels and set alerts on low stock.

Setting Locations for Inventory:

• Assign inventory to location, go to Settings > Locations. Add locations where inventory is stored.
• For accurate tracking, assign inventory quantities to each location.

Organize Products and Variants:

• To organize multiple variants, go to the Variants section of the product
• Set individual stock for each variant.
• Under the Inventory section, assign quantities to each variant.

Update Inventory Levels:

• To manually update stock, go to Shopify admin and click Products > Inventory.
• Select products and update quantities directly.
• The other way to update inventory is to use Bulk Editor or import Inventory CSV Files. These are the fastest ways to update inventory.

Inventory Reports:

Shopify offers built-in reports for analyzing inventory performance.

• Login to the Shopify Admin account. Go to Analytics > Reports.
• Various reports like Inventory Levels, Sell-through Rates, and ABC Analysis to track stock levels and manage inventories.

Shopify offers different App integrations like Stocky, TradeGecko, and ShipBob to enhance inventory features.

Importance of Inventory Management:

Effective management of inventory is important for online store success. It helps to optimize business performance and enhance operations and customer satisfaction. Whether you are running a small business or company, managing inventory is essential for several reasons:

Streamlines Order Fulfillment:

It allows efficient order fulfillment by ensuring valid stock levels at each location. Advanced methods such as inventory distribution can help keep inventory in place across many fulfillment centers. It ensures that products are near customer locations. This speeds up deliveries and reduces both sides' shipping costs.

Reduce Costs:

management of inventory helps minimize costs by preventing overstock. Warehouses offer variable costs depending on the product dimensions and storage you need. When you store too many products and face difficulty in selling those products, then it will increase your storage cost. Managing the inventories helps you to identify slow-moving items. It allows businesses to make decisions about running ads and promotions.

Optimize Stock Levels:

It ensures an accurate stock level and prevents stockouts and overselling. It tracks product availability in real time. It auto-updates stock in the Shopify store when any item is sold out. This enhances customer satisfaction and reduces the cancellation rate.

Improve Cash Flow:

Inventory directly affects sales and expenses in your business. Managing inventory helps you decide how much you need to spend on your business. This leads to improved cash flow management.

Support Automation and Growth:

It allows the integration of apps to automate repetitive tasks. Automation helps to reduce human error, save time, and ensure smooth operations. Features like app integrations and multi-location tracking allow seamless business growth.

Techniques of Managing Inventory:

Shopify offers various techniques to improve and manage inventory and cash flow:

Demand Forecasting:

Inventory management relies on accurately predicting demand. It predicts future sales based on historical data, trends, and market values. Demand forecasting allows businesses to plan stock levels and avoid overselling and stockout.

LIFO vs FIFO:

Last-in-first-out (LIFO) managing inventory means that new stock will be sold first, then old. If the business needs more new inventory and the prices of those inventory increase. Then the cost of inventory will also be higher, which reduces profits and thus lowers taxable income.

On the other end, First-in-first-out (FIFO) managing inventory means the oldest stock sells out first. FIFO prevents the products from becoming outdated or expiring.

ABC Analysis:

ABC analysis uses the ABC report to categorize the value of stock based on the revenue percentage.

• A = % of stock that represents 80% of revenue.
• B = % of the stock that represents 15% of revenue.
• C = % of stock that represents 5% of revenue.

The category stock A represents the most revenue-generated products. You'll ensure that you have these products on hand to avoid missing future sales. While the category stock C is about low-moving and less revenue products. It is best to discount these products to release cash and shelf space.

Perpetual Inventory System:

Regular inventory updates are important, especially for large-scale businesses. A perpetual inventory system tracks the stock in real time using apps and tools. It provides all-sized businesses with accurate and up-to-date inventory counts.

Barcodes:

Today most online stores use a barcode scanning system to track the product's stock level. This technique involves scanning barcodes that identify each product. Scanning information is sent back to the inventory management system to track each item. The barcode inventory system automates the monitoring of products at all times until they're sold. It provides real-time and exact insights into inventory. This helps to make decisions and ensure customer satisfaction.

Safety Stock Alerts:

Safety stock prevents products from being out of stock. Safety stock alert requires the least amount of product for all time. When your inventory dips below the set value it alerts you to order the stock and update inventory level.

Safety stock or par level helps you to avoid unexpected damage or delays in restocking. The par level can be varied by-products and customer demands. It also depends upon the time required to order the new stock.

Just-In-Time (JIT) Inventory:

Just-in-time (JIT) inventory is about ordering the stock only when needed. It keeps the only inventory that meets demands and replenishes just before items run out. JIT requires careful planning but it works great for brand growth. It helps in scheduled launches and new product releases.

Batch Tracking:

It tracks the inventory based on the production or purchase date. Batch tracking helps to track the products close to the expiration date.

Inventory Management System:

Shopify inventory management system allows businesses to track, organize, and optimize stocks. All-sized businesses want to eliminate human error while managing inventory processes. They use various software and apps to manage inventory.

Managing Inventory With Software:

Inventory management software is an application that offers a centralized database for storing business inventory information. The software comes as a standalone program or a built-in e-commerce platform. Various software like Shopify, Oracle NetSuite, and Sumtracker are popular for managing inventory. They automate the task of managing inventory. The software allows to track the stock and orders from sale to delivery.

Managing Inventory With Apps:

Managing inventory with apps to track the live status of inventory. These apps are suitable for online stores that access information through smartphones or tablets. It offers inventory quantity, location tracking, and stock-level alerts. If you have a Shopify store, the following inventory management apps are best for you:

• Stocky: This powerful app provides detailed inventory tracking in real-time.
• ShipHero: It helps in demand forecasting, purchasing automation, and more.
• Skubana or Cin7: It is ideal for complex inventory needs across many channels.
• Thrive by Shopventory: It connects multiple Shopify accounts. Help in automating purchasing orders.

Managing Inventory With Shopify:

Shopify already has a built-in inventory management system. Shopify allows store owners to view, track, and manage inventory. You can adjust inventory levels in the Inventory section of your Shopify admin.

Shopify offers various reports of inventory management like:

• ABC analysis by product
• Product sell-through rate
• Average inventory sold per day
• Days of inventory remaining
• Percent of inventory sold.
• Month-end inventory value

The following steps help you to find inventory reports in Shopify:

• Login to the Shopify admin account.
• On the left-hand menu click Analytics > Reports.
• Click Categories.
• Click on Inventory to filter the reports. This will only show the inventory reports.

Future of Inventory Management:

With the evolution of technology, e-commerce also evolves. Shopify offers more advanced solutions for managing inventory due to growing technologies. It allows automation, integration, and improved data analysis.

Artificial Intelligence:

Artificial Intelligence (AI) is continuously improving and provides advanced solutions for managing inventory. Smart AI systems empower businesses to automate inventory decisions and respond quickly to customer demands.

Internet of Things (IoT):

It provides real-time location data and reduces the time to find inventory. The IoT provides accurate information about stock quantity and its location. This data helps businesses to make smart decisions.

Predictive Analytics:

Predictive analytics use smart algorithms to provide accurate information to enhance inventory management. It combines advanced data like automation and machine learning to offer exact forecasting. This technology continuously improves with time and provides accurate insights. It predicts the analytics on your provided data. The more you give data, the more this technology understands your business and provides exact solutions.

It predicts future sales and offers safety stock alerts to prevent unexpected damage. It reduces costs, analyzes sales patterns, and gives businesses a greater opportunity for profit and growth.