Effective inventory management is a crucial aspect of e-commerce that can significantly impact the brand's reputation and customer loyalty. To ensure smooth order fulfillment, maintaining optimal inventory levels and timely restocking of fast-selling products are essential.

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Especially, when you're selling on marketplaces, it's crucial to follow a schedule to prevent any potential shortage or stock-outs that can lead to a loss of sale or penalty by the marketplace.

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In this blog, we will learn what is inventory replenishment, why inventory replenishment is important for ecommerce brands, and how to improve the replenishment process.

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What is inventory replenishment?

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Inventory replenishment is the process of restocking inventory in the warehouse or fulfilment centre to maintain sufficient inventory levels. This process involves sourcing inventory from suppliers or manufacturers. In the event of unexpected spikes in demand, it also involves relocating inventory from reserve storage to storage shelves (primary storage).

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34% of ecommerce brands are unable to ship orders on time due to items being out of stock.

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Why inventory replenishment is crucial for ecommerce brands?

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1. Prevents unwanted events like stockouts

In the event of untimely inventory replenishment, a stockout, or when products are out of stock during purchase, may occur. This can result in a significant inconvenience for your customers and a loss of sales for your business. Additionally, while your products are out of stock, your customers may turn to your competitors. To avoid such scenarios, it is crucial to maintain precise inventory levels in your fulfilment warehouse and ensure prompt inventory replenishment.

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2. Avoids high holding costs due to overstocking

Replenishing inventory too soon or without considering factors such as shifts in customer demand or seasonality can result in slow-moving inventory. This can eventually increase your inventory-holding expenses. Furthermore, if slow-moving inventory remains in storage for an extended period, it may become unsellable, especially products with expiration dates, such as food, beverages and cosmetics. Thus, aside from not having adequate inventory, overstocking can also affect your bottom line by driving up storage expenses. However, with an effective inventory replenishment process, you can prevent overstocking.

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3. Minimises the chances of split shipments

‍Split shipments occur when a single online order containing multiple products is shipped in separate shipments to the same customer. One of the reasons for this is when a customer orders multiple products from your online store, but one of them is out of stock at the closest fulfilment centre.

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4. Eliminates additional costs

Split shipments and overstocking can become serious problems which can increase shipping costs, packaging costs as well as holding costs. However, with timely inventory replenishment, you can save on all these unnecessary costs.

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How to ensure optimum inventory replenishment?

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1. Forecast customer demand

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By analysing historical sales data, ecommerce brands can forecast future demand and plan how much inventory they need to stock and when they need inventory replenishment. However, while forecasting demand accurately is next to impossible but by studying your historic trends and patterns can help you to a great extent.

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2. Use a robust inventory management system (IMS)

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A robust inventory management system (IMS) can be a valuable tool for automating critical processes such as inventory replenishment and providing real-time inventory level visibility across multiple sales channels and locations. Advanced reporting features allow access to historical data such as sales trends, average sales per day, sales by product, and sell-through rate to make informed decisions about when to restock inventory.

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To your surprise, Eshopbox's inventory management system does it all— real-time inventory level visibility across locations and advanced reporting.

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3. Set reorder points

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Standard inventory levels refer to the amount of stock that a brand should have on hand to meet customer demand while minimising overstocking. These levels are determined based on historical sales data, lead times, and other factors that impact product availability.

Reorder points, on the other hand, represent the minimum quantity of inventory that a brand should have on hand to avoid stockouts. When inventory levels fall below the reorder point, it triggers to replenish inventory levels. Once you have all the data you need at your disposal, you can establish standard inventory levels and reorder points.

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Eshopbox's IMS enables ecommerce brands to fetch relevant historic data to establish standard inventory levels and reorder points.

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4. Use AI-powered inventory allocation

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There are situations when some of the items gets stockout from the customer's nearest fulfilment centre. As a result, the complete order has to be shipped as split shipments. To avoid such scenarios, you can partner up with a 3PL provider like Eshopbox to get access to AI-powered inventory allocation without investing heavily in advance technology.

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For example, Eshopbox’s actionable dashboard predicts your ideal inventory allocation based on consumer demand and historical data. It is done based on the following parameters without any manual effort.

• Where are your customers located?
• Which products are ordered by which zones?
• Which products are frequently bought together?
• What are the buying habits and trends of your customers?

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Eshopbox then plans your ideal inventory distribution and will help you ensure that you have optimum inventory levels and particular SKUs at specific fulfilment centres.

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5. Leverage proactive replenishment reminders

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The latest technology makes inventory replenishment very easy. For instance, Eshopbox sends proactive replenishment reminders when you’re running low on inventory to ensure uninterrupted order fulfilment. This ensures you don't have to worry about depleting stock as automation takes care of it.

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6. Collaborate with your manufacturers or suppliers

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By working closely with suppliers, a brand can establish reliable lead times, negotiate better pricing, and ensure timely delivery of inventory to stay ahead of replenishment problems.

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7. Perform regular inventory audits

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To track your inventory more efficiently, you should conduct regular inventory audits. It will enable you to know if there's any difference between the actual inventory in the fulfilment centre and the recorded inventory levels in your system. This way, you can maintain sufficient stock in the fulfilment centre and know when to restock inventory.

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8. Keep safety stock

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Safety stock refers to the additional inventory that a brand keeps on hand to protect against unexpected fluctuations in demand or supply chain disruptions. It serves as a buffer against stockouts, which can result in lost sales or reduced customer satisfaction. So, it's ideal to have a safety stock in your fulfilment centre at all times.

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Wrapping up

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Inventory replenishment is a crucial but often overlooked aspect of the order fulfilment process. It demands significant attention if you want to improve customer experience and thrive in your business. While it may seem challenging to optimise inventory levels, you can simplify the process by adopting the right approach, partnering with the right experts like Eshopbox, and leveraging the right technology. By doing so, you can seize every chance to impress your customers and establish a robust reputation for your brand.