Keeping Track of Inventory: Best Practices and Tips

Keeping Track of Inventory: Best Practices and Tips

Keeping track of inventory

Just as your business grows and changes, so does your inventory. 

Keeping track of what you have, where it is, and how much you have is necessary to run and grow a successful eCommerce business. 

Fortunately, there are several best practices and tips to help make the task easier. In this post, we will discuss some of the most important ways to keep track of your inventory. 

By following these best practices, you can ensure that inventory issues don’t stop your eCommerce business from growing.

15 Ways to keep track of your inventory

Managing your inventory is one of the most critical tasks for an eCommerce business. Here are 15 best practices to keep your inventory on track.

Start with your own data

While it can be challenging and cost-prohibitive for smaller organizations to leverage and utilize large amounts of data, your business will benefit significantly if you take special care to collect and understand a key data set – your own.

You’ll want to collect as much information as you can about your own customers’ preferences and behavior in order to gain insights and fully understand what they want and how they will respond to your business’s products, offers, and more.

Your own customers and their behaviors are the keys to scaling your business. Learn all you can from them.

Some examples of using your own data include the number of products sold, the time of year they are sold, regional product trends, how long it takes to source products, and how long it takes you to ship products. These stats can be collated in something as simple as a spreadsheet for you to analyze.

Maximize inventory turnover

eCommerce businesses live and die by their inventory turnover rate. A high inventory turnover rate means that your eCommerce business is selling through its inventory quickly and efficiently. 

On the other hand, a low inventory turnover rate can tie up working capital, increase storage costs, and lead to obsolescence. To maximize your inventory turnover:

  • Keep a close eye on your sales data. Knowing which products are selling quickly and which ones are languishing on the shelves will help you make strategic decisions about inventory levels.
  • Offer promotions and discounts. Encouraging customers to buy more products at once with promotions and discounts can help you clear out slow-moving items.
  • Use just-in-time inventory management. Just-in-time inventory management is all about aligning your stock levels with customer demand. This can help you avoid the costs of carrying excess inventory.
  • Review your product mix regularly. As your eCommerce business grows, you should review your product mix on a regular basis to make sure that you’re offering the right combination of products to your customers.

Following these best practices can help ensure that your eCommerce business has a healthy inventory turnover rate.

Learn (and Use) Your ABCs

Not all inventory is created equal.

In order for your eCommerce business to maximize its inventory turnover, you need to know which products to prioritize.

The ABC inventory management strategy groups your inventory into three categories based on how valuable they are to your company.

If this seems familiar, it’s because it is a variation of the old 80/20 rule, which states you get 80% of your results from 20% of your efforts.

Group your inventory into the following categories and consider which of your products bring in the most significant revenue.

  • Category A: High-value inventory (70%) and small in number (10%)
  • Category B: Moderate value inventory (20%) and moderate in number (20%)
  • Category C: Low-value inventory (10%) and large in number (70%)

As you categorize your inventory, make sure that you are aligning value with your company’s overall goals, such as profitability, increasing market share, or brand awareness.

Forecast Demand

Demand volatility has been at an all-time high over the last few years, and inventory optimization is difficult to get right. 

That said, automated demand forecasting is available for businesses of any size thanks to intelligent inventory management systems with the help of artificial intelligence (AI), which can provide more accurate data than ever before.

This is especially beneficial for businesses that are looking to manage their inventory more effectively and avoid stock-outs or overstock situations. Implementing an AI-based demand forecasting solution can help companies to improve their overall accuracy by up to 80%, meaning that they can make better decisions regarding what inventory to order, how much to order, and when to order it.

In addition to improving accuracy, AI-based demand forecasting solutions can also provide businesses with real-time insights into customer demand patterns. You can utilize this information to make more informed decisions about pricing, promotions, and product mix. By understanding what customers want and when they want it, your business can be better equipped to meet customer demand.

Automate Everything You Can

Automating your inventory and supply chain as much as possible can free up your team while increasing productivity and accuracy. 

In essence, it means utilizing technology in order centrally manage a complex web of working parts without any need for manual labor.

The benefits of automating your workflow are many and varied but can be boiled down to a few key points:

  • Increased Productivity: By automating repetitive tasks, you free up your employees to focus on more critical tasks that require human intervention.
  • Decreased Costs: Automating your workflow can help you to reduce operational costs by eliminating the need for manual labor.
  •  Increased Accuracy: Automating your workflow can help to improve accuracy and consistency by ensuring that tasks are carried out correctly each and every time – including purchasing and order processes.
  •  Improved Customer Satisfaction: By automating your workflow, you can improve customer satisfaction levels by ensuring that tasks are completed in a timely and efficient manner.
  • Customized Experience: You can customize the storefront experience for your B2C and B2B customers.
  • Increased Efficiency: Automating your workflow can help to make your business more efficient by streamlining processes across multiple sales channels and warehouses.
  • Improved Compliance: Automating your workflow can help to ensure compliance with internal and external regulations.
  • Enhanced Security: Automating your workflow can help to improve security by ensuring that only authorized personnel have access to sensitive data and systems.
  • Automatically track your revenue goals to keep your eCommerce business growing.
  • Improved Scalability: Automating your workflow can help you to scale your business up or down as required. For example, you can apply bulk actions for typical, unique, and high-order volumes.
  •  Easier System Administration: Automating your workflow can help to make your inventory and supply chain easier to manage and monitor.

When it comes to automating your inventory and supply chain, there are several different options available to you. The type of automation you choose for your business will depend on your specific needs and challenges.

Check out our recent post on eCommerce marketing automation to help get you started.

Track by Batch and Expiry Date

eCommerce businesses need to keep track of their inventory in order to maintain efficient operations. 

One way to do this is by tracking inventory by batch and expiry date. Your business can use this information to plan for future needs and avoid situations where products expire before they can be sold. 

Additionally, tracking inventory by batch and expiry date can help your eCommerce business to identify trends and reduce waste. For example, if a particular batch of products is selling well, you can order more of that product in the future. 

Conversely, if a particular batch of products is consistently expiring before it can be sold, your business can adjust its ordering process to avoid waste. 

Either way, the ability to track your inventory by batch and expiry date is an essential part of running your eCommerce business.

Follow FIFO or LIFO

First in, first out (FIFO) means the first items in your inventory are also the first ones to be sent to customers. In other words., your oldest items go first. 

Last in, first out (LIFO) is the exact opposite. That means the newest items are shipped first.

If your inventory is perishable items, then FIFO is your best strategy. Otherwise, you’ll end up with spoiled inventory you can’t sell.

If your inventory is non-perishable, LIFO is generally the default. This is because you won’t need to rearrange or rotate your inventory in the warehouse. 

Finally, you will most likely need a mixed approach if you sell both perishable and non-perishable goods or both non-seasonal and seasonal products.

Keep Your Pipeline Flowing

To ensure you never have a product shortage, it’s essential to keep your pipeline inventory flowing. Your pipeline refers to physical items like raw materials or finished goods that are being moved through your company’s supply chain.

Pipeline management involves understanding what physical goods or services are currently in transit and where they are in the process. This can help businesses avoid issues such as stock-outs or production bottlenecks. It can also help with forecasting, providing visibility into what orders are likely to be delivered and when.

Decouple Inventory for Additional Safety

Decoupling inventory, also known as decoupling stock or safety stock — refers to products, components, or inventory that are set aside in case of a production stoppage or a supply chain issue. 

Decoupled inventory provides your eCommerce business with a safety net to continue fulfilling customer orders in case of a production delay or stoppage.

It is crucial to keep both your pipeline inventory and your decoupled inventory in mind to find a balance between cost and risk which will set your business up for effective inventory management as well as sustained growth.

See how much additional product you need with our safety stock formula.

Kit and Bundle to Increase AOV

Inventory kitting, sometimes referred to as product bundling, groups multiple products together for sale as a single unit, often offering a discount.

For example, if your eCommerce business sells cosmetics, you might create a product bundle that includes all red lipsticks from a variety of different manufacturers. Or, you might create a “sensitive skin” makeup bundle that consists of a grouping of hypoallergenic products.

When a customer purchases a kitted or bundled item, your inventory system should link each individual product to that sale automatically.

Bundling can benefit eCommerce businesses by:

  • Increasing average order values (AOV)
  • Keeping holding and shipping costs down
  • Offering customers convenience and flexibility
  • Tracking and maintaining stock levels more effectively
  • Preventing deadstock by selling old or unwanted inventory

Know What Type Of Inventory Management Fits Your Business

As an eCommerce business owner, you have to ask: how do I know what type of inventory management fits my business, continuous review systems or periodic review? 

The primary difference between the two types of inventory management is the frequency with which you review and restock your inventory. 

In a continuous review system, you review your inventory levels on a regular basis and restock them as needed. This allows you to keep a closer eye on your inventory levels, but it can also be more expensive and time-consuming. 

In a periodic review system, you review your inventory levels less frequently, typically on a monthly or yearly basis. This can save you time and money, but it can also lead to stock-outs if your inventory levels drop unexpectedly. 

So, which type of inventory management is right for you? The answer may depend on the size and complexity of your eCommerce business.

If you have a large or complex business, then a continuous review system may be the better option. A periodic review system may be sufficient if you have a small or simple business. Ultimately, the decision comes down to what works best for your eCommerce business.

Implement Cycle Counting & Make Your Cycles Count

In order to successfully manage your inventory, you will need to implement cycle counting.

Before you start, you’ll want to consider the following:

  • Counting frequency: How many counts can your staff manage each year? How does cycle counting impact your manufacturing, receiving, and delivery?
  • Counting strategy: Consider whether you will categorize inventory by location, product category, SKU, or value.
  • Counting chief: It is crucial to have a trusted stakeholder or employee to take point on your cycle counting system for both consistency and accountability. 

Implement Quality Control

Quality control is another important aspect of inventory management. Your eCommerce business should prioritize quality control to ensure that your customers are satisfied with their purchases and that your company is running efficiently so it continues to grow. 

There are a few ways to prioritize your eCommerce business inventory quality control. 

  1. You can create a quality control plan that outlines the steps you will take to ensure the quality of your products. This plan should be designed to meet the specific needs of your business and should be reviewed on a regular basis. 
  2. You can create a dedicated quality control team that is responsible for inspecting products and identifying any defects. This team should be trained in quality control procedures and should be empowered to do their jobs effectively.
  3. You can implement quality control measures throughout your entire operation. Make every employee responsible for quality control.

By taking these steps, you can ensure that your eCommerce business always puts quality first.


A failure to execute inventory best practices for your eCommerce business can result in customer loss, inventory cuts, and, eventually, employee cutbacks. 

Prioritizing inventory control will help you to reduce inefficiencies in your business and give your business a solid foundation for growth.

Use a Warehouse Management System (WMS)

As your business expands, it can be more and more challenging to keep track of your inventory levels. This is where a Warehouse Management System (WMS) such as SkuVault can be highly beneficial. 

A WMS can help you to track your inventory levels in real time, so you can always be sure that you have enough products on hand to meet customer demand.

In addition, a WMS can also help you to optimize your warehouse space, which can save you money on storage costs. 

Overall, using a WMS is essential to growing and running a successful eCommerce business. 

Frequently asked questions about keeping track of inventory

Below you’ll find some of the most common questions we receive about inventory tracking systems.

What is an Inventory Tracking System?

An inventory tracking system is a powerful tool for eCommerce businesses. By tracking inventory levels, companies can ensure they have the products they need to meet customer demand. 

In addition, inventory tracking can help businesses avoid stock-outs and lost sales. 

This also allows businesses to optimize their warehouse space and save on storage costs. 

There are a variety of different inventory tracking systems available, and the right system for your business depends on your specific needs. 

However, all effective stock tracking systems share one fundamental goal: to help businesses keep track of their inventory levels and ensure that they always have the products they need to meet customer demand.

What are the Benefits of Tracking Inventory?

eCommerce businesses have a lot to keep track of. 

In addition to product data and customer information, you also need to keep tabs on your inventory. While this may seem like a tedious task, tracking inventory can provide many benefits, including:

  • Preventing stock-outs
  • Optimizing your capital tied up in inventory
  • Meeting customer demand
  • Knowing which products to retire and when to expand your range

Ultimately, tracking inventory is essential to running a successful eCommerce business.

What are Inventory Tracking Challenges

Any eCommerce business owner knows that one of the most important aspects of running a successful operation is keeping track of inventory. After all, how can you know what to sell or reorder if you can’t see what you have in stock? However, inventory management can be a real challenge, especially as your business grows. Here are just a few of the potential difficulties you may face:

  • Too much data: As your business expands, you’ll have more and more products to keep track of. This can quickly become overwhelming, making it difficult to spot errors or discrepancies.
  • Your inventory doesn’t sit still. Inventory levels can change rapidly, and it can be hard to keep up with the latest numbers. This can lead to frustration when trying to track down a particular item.
  • Lack of standardization: If your team members are manually inputting inventory data, it’s likely that there will be some variation in the way that information is entered. This can make it difficult to compare apples to apples when trying to get an accurate picture of your stock levels.

Despite these challenges, it’s essential to have a system in place for tracking your inventory. Otherwise, you run the risk of making costly errors that could hurt your bottom line. 

By taking the time to implement a solid system and train your team members on how to use it properly, you can overcome these challenges and keep your eCommerce business running like a well-oiled machine.

What are Inventory Tracking Methods?

Inventory tracking helps you know what you have in stock, what needs to be ordered, and how much you can sell. There are a few different methods you can use to track your inventory: 

  • Inventory tracking software: Inventory tracking software, such as SkuVault, can be a standalone program or something that integrates with your eCommerce platform. It will help you keep track of what you have in stock when it needs to be reordered, and how much you have sold. 
  • Third-party logistics (3PL): A 3PL is a company that will store and ship your products for you. They will keep track of your inventory and let you know when you need to reorder. 
  • Mobile apps: There are a number of apps that allow you to scan barcodes and keep track of what you have in stock. This can be a convenient way to track your inventory if you don’t want to use a dedicated program or third-party service. 
  • Pen and paper/Spreadsheet: This is the most basic method, but it can still be effective if done correctly. You will need to keep track of what you have in stock, what needs to be ordered, and how much you have sold. This method becomes more challenging as you add more products to your inventory.

Whichever method you choose, tracking your inventory is essential for running a successful eCommerce business.

How do I Choose the Right Inventory Tracking Method for my Business?

eCommerce businesses come in all shapes and sizes, which is why it’s crucial to find an inventory tracking method that fits your specific needs. 

There are a few factors to consider when choosing an inventory tracking method, such as the size of your business, the frequency of orders, and the type of products you sell.

 If you have a small eCommerce business with a few orders per week, you can probably get away with using a spreadsheet to track your inventory. 

On the other hand, if you have a large eCommerce business with multiple orders per day, you’ll need a more sophisticated system that can handle the volume. 

You should also consider the type of products you sell. If you sell physical goods, you’ll need to track stock levels and location. If you sell digital goods, you’ll need to track file downloads and license keys. 

By taking these factors into account, you can choose an inventory tracking method that’s right for your eCommerce business.

Final Thoughts

Tracking inventory is an essential component of any eCommerce business. 

By using the best practices and tips we’ve outlined in this blog post, you can help ensure that your inventory is always accurately accounted for, reducing your carrying costs and overhead while ensuring your company’s customers can always get the products they want when they want them.

Implementing a WMS can make the entire process simpler and more efficient for your team. 

If you have any questions about how to track your inventory or would like to learn more about SkuVault’s WMS, we’re always happy to help.

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