Multichannel inventory management has emerged as a vital strategy for businesses aiming to meet customer demands. This practice involves tracking and managing inventory across multiple sales channels, including online stores, physical locations, and marketplaces, in real-time. This ensures you have the right products available wherever your customers choose to shop, creating a seamless and satisfying shopping experience.
But how exactly does multichannel inventory management work, and what are the best strategies to succeed with multichannel inventory management? Are there any tools for syncing multichannel inventory? Read on to unlock the secrets to streamlined inventory control and happy customers!
What is Multichannel Inventory Management?
To gain a better understanding of multichannel inventory management, let’s first break down its two key components:
- Multichannel: This refers to the various ways you sell your products, whether it’s through your own online store, a physical store, online marketplaces, or social media platforms.
- Inventory management: This is the process of tracking your stock levels, including purchases, sales, returns, and transfers between locations.
Thus, multichannel inventory management is the strategic practice of controlling, tracking, and optimizing a company’s stock across all its sales channels and locations. This means tracking inventory levels for products sold online, in physical stores, on marketplaces, and anywhere else you do business.
The goal of this approach is to have a single source of truth for your inventory data. This ensures you always know exactly how much of each product you have on hand, regardless of where it’s located or how it’s being sold.
Like any other concept, multichannel inventory management has its own set of benefits and limitations. Below, we will explore the advantages and disadvantages of implementing multichannel inventory management.
Opportunities/Benefits
A well-planned and seamlessly integrated multichannel inventory management system is a critical component of any thriving eCommerce strategy, bringing forth a host of advantages:
Increased sales opportunities
Companies that manage inventory across multiple channels enjoy a staggering 190% increase in revenue compared to those who solely operate on a single channel.
By implementing effective inventory management practices, businesses can optimize their product offerings across various channels. This allows them to identify top-performing products and make necessary adjustments to stock levels, ultimately maximizing sales opportunities.
Improved inventory accuracy
In fact, inventory accuracy is critical for maintaining operational efficiency and meeting customer expectations. The National Retail Federation reports that shrinkage (theft, loss, damage) costs retailers an average of 1.6% of their sales annually.
Multichannel inventory management relies on advanced inventory tracking technologies, such as RFID (Radio-Frequency Identification) and barcode scanning, which provide real-time insights into stock levels across all channels. This real-time visibility helps businesses minimize the risk of overselling or stockouts, thereby reducing inventory holding costs and optimizing working capital.
Data-driven decisions
McKinsey & Company reports that 71% of consumers expect businesses to personalize their experiences.
When analyzing multichannel inventory data, businesses can understand customer buying patterns and preferences across different channels. This allows businesses to identify trends, anticipate demand fluctuations, and optimize stocking levels accordingly. This proactive approach not only improves inventory turnover but also reduces the costs associated with excess inventory or emergency restocking.
Challenges/Difficulties
While multichannel inventory management offers significant advantages, it also comes with its own set of challenges. Here are some of the key hurdles businesses might face:
Overselling
Each year, retailers lose a staggering $634 billion due to out-of-stock items. One major contributing factor is phantom stock, where items are inaccurately listed as available in the inventory system. This can be caused by typos, inaccurate entries, or the lack of proper software.
Decentralization exacerbates the problem, as it hinders real-time synchronization of sales across channels, leading to simultaneous stockouts and potential order cancellations.
Overstock
Poor inventory planning costs retailers dearly. Overestimating demand leads to $471.9 billion in annual losses from overstock, eating into profits and limiting warehouse space for in-demand items. Sellers often overestimate anticipated sales volume, resulting in higher inventory carrying costs and limited space for more profitable items in their warehouses.
Another issue arises when sellers distribute only a portion of their inventory across different channels to prevent overselling. However, this approach can lead to premature “out of stock” notifications on one channel, resulting in missed sales opportunities.
Increased complexity and operating cost
Multichannel eCommerce inventory management inherently increases the complexity of operations and operating costs. Each channel often has its own set of rules, requirements, and customer expectations. This necessitates approaches to inventory management, order fulfillment, and customer service.
Operating costs also tend to rise with the addition of more channels. These costs include:
- Platform fees for online marketplaces
- Marketing expenses to promote products on different channels
- Additional staffing requirements to manage increased operations
- The need for advanced technology solutions to streamline processes
12 Strategies to Simplify Multichannel Inventory Management?
1. Invest in a multichannel inventory management system (MIS)
A MIS is software that centralizes inventory management across multiple sales channels. An MIS goes beyond simple stock tracking. It automates tasks, provides real-time data, and offers valuable insights to optimize your inventory management.
There are many MISs available on the market now. Popular options include Zoho Inventory, SkuNexus, Linnwork, LitCommerce, etc. Most notable is LitComemrce. If you sell products online through various platforms like Etsy, eBay, Amazon, Walmart, or even your own WooCommerce store, LitCommerce can centralize your listings, inventory, and orders.
Despite being a user-friendly multichannel inventory management tool with numerous outstanding features, LitCommerce remains very affordable. Even with a tight budget, you can still utilize LitCommerce. So, why wait? Experience this exceptional tool today!
Manage your inventory across channels easily with LitCommerce
Let multichannel inventory management software like LitCommerce work for you. Synchronize and automatically update your inventory on all channels.
Once you’ve selected a robust MIS the next step is to set it up and integrate it with your online store, marketplaces, and point-of-sale (POS) system if you have a physical store. This integration ensures that inventory levels are updated in real time across all sales channels.
2. Maintain clean and accurate product data
First, when your inventory is wrong, everything is going to be wrong too. Keeping a centralized inventory management system gives you an overview of all your channels and then ensures that all our operations run smoothly. This “Keep everything in one place” technique minimizes errors and enhances overall efficiency.
Here are some tips to better manage your inventory on various channels.
- Specify which warehouse fulfills each order to streamline workflows and enhance customer service.
- Include physical stores in your inventory management or create a virtual warehouse to track all of your items effectively.
3. Categorize your inventory in an ABC analysis
Creating a well-structured and organized product database helps in easy navigation, quick updates, and efficient tracking, which lays the foundation for streamlined multichannel inventory management.
Consider the following guidelines to have the right data structure:
- Utilize a singular, distinctive SKU for each item.
- Construct kits and bundles accurately.
- Manage variants, such as size and color, with precision.
- Comprehend the diverse units in which you may engage in buying and selling, such as pallets, crates, and cartons
4. Organize your warehouse smartly
Efficient warehouse organization is crucial for simplifying multichannel inventory management. Proper organization can streamline operations, reduce errors, and improve overall productivity.
Here’s how to optimize your warehouse layout and processes to streamline order fulfillment and minimize picking errors:
- Implement a First-In, First-Out (FIFO) system to ensure older stock is sold first. In simpler terms, FIFO is like waiting in line at a store – the first person in line (the first item added) is typically the first person served (the first item sold). This prevents product expiration or obsolescence, especially for perishable items or those with short shelf lives.
- Design efficient pick paths that minimize travel distances for pickers. Utilize software or route optimization tools to create pick lists that group items located close together, reducing unnecessary walking and maximizing picking efficiency.
- Consider implementing technology solutions to streamline picking. This could include barcode scanners for faster product identification, mobile picking carts for increased efficiency, or even pick-to-light systems that guide pickers to the correct locations.
5. Set a centralized inventory
Another way of effective multichannel inventory management is to use the First In, First Out (FIFO) method. This is a crucial practice to ensure that older inventory is sold or used before newer stock. This principle is especially relevant for perishable goods and items with a limited shelf life.
By adhering to FIFO, businesses can prevent product expiration, reduce waste, and avoid potential losses due to obsolete inventory. Implementing FIFO requires accurate date tracking and organization of inventory, ensuring that the oldest products are consistently used or sold first.
6. Provide a variety of shipping options
Offering a range of shipping options is no longer a luxury, it’s a necessity when you manage inventory across multiple channels. Customers expect flexibility and control over how they receive their purchases.
Some shipping choices you should consider in your multichannel inventory management plan include:
- Standard shipping: This is a reliable and affordable option with a moderate delivery timeframe (typically 3-7 business days). Partner with carriers like USPS, FedEx, or UPS to offer standard shipping at competitive rates.
- Expedited shipping: Cater to customers who need their purchases faster by offering expedited options like 2-day or overnight delivery. While this comes at a higher cost, it can be valuable for time-sensitive orders.
- Free shipping: Free shipping is a major incentive for online shoppers. Consider offering it for orders above a certain threshold or for specific product categories. Factor the cost of free shipping into your pricing strategy.
- Local pickup: If you have a brick-and-mortar store, offer local pickup as a convenient and cost-effective option for customers who live nearby.
- International shipping: If you plan to sell internationally, research and offer shipping options tailored to different regions. Consider factors like customs fees and estimated delivery times.
7. Create a clear out-of-stock policies
Even with the best multichannel inventory sync planning, running out of stock can happen. However, a well-defined out-of-stock policy helps manage customer expectations and minimizes frustration.
Here’s how to craft a clear and informative out-of-stock policy for your multichannel inventory management:
At first, transparency is key, you should:
- Whenever possible, display real-time inventory levels on your product pages. This allows customers to make informed decisions about their purchases.
- If a customer places an order that includes an out-of-stock item, send them a prompt email notification. Explain the situation, offer alternatives, and provide an estimated restock date.
On the other hand, you can offer alternatives for your customers. Some alternative ideas include:
- Suggest in-stock items that are similar to the out-of-stock product. This can help customers find a suitable alternative and avoid abandoning their purchase entirely.
- Give customers the option to backorder an out-of-stock item. This means they can place an order now and receive the product when it becomes available again. You need to clearly communicate any associated wait times and potential price changes.
- For highly anticipated products, consider offering pre-orders. This allows customers to secure their order in advance and receive the product as soon as it’s available.
8. Keep customers informed of order status updates
When leveraging multichannel inventory management, it is critical to proactively order status updates. This way, you can build trust, and alleviate potential anxieties for your customers.
There are several ways to deliver order status updates to your customers, including:
- Automated email notifications: This is the cornerstone of order status communication. Set up a series of automated emails triggered by specific milestones in the fulfillment process, such as:
- Order confirmation: Immediately upon order placement, send an email confirming the order details, estimated delivery timeframe, and a link to track the order online.
- Order processing: Inform the customer when their order is being processed and packed for shipment.
- Order shipped: Provide the customer with a tracking number and a link to the courier’s website to track the package’s progress.
- Order delivered: Send a final email notification confirming delivery.
- SMS text message updates: SMS offers a more immediate and personal way to reach customers. Consider sending text message updates for key milestones, like order confirmation and delivery notification, especially for customers who opt-in to receive them.
- Self-service order tracking: Implement an online order-tracking portal on your website or mobile app. This empowers customers to access real-time order status information 24/7, reducing their reliance on email updates or contacting customer service.
However, we note that informing customers through all channels can lead to inconvenience. Therefore, you should allow customers to choose their preferred method for receiving order updates.
9. Conduct regular inventory audits
Even with the best multichannel inventory management systems in place, discrepancies can occur in your inventory data. Regular inventory audits act as a vital control measure, ensuring data accuracy and preventing costly errors.
You need to start by preparation:
- Define your audit frequency: The frequency of your audits depends on several factors, such as the volume and value of your inventory, sales velocity, and risk tolerance. For businesses with high-value items or fast-moving inventory, monthly audits might be necessary. For others, quarterly audits might suffice.
- Assign roles and responsibilities: You need to clearly define who will be responsible for conducting the audit. Consider using a team approach with individuals from different departments (e.g., warehouse, purchasing) to minimize bias and ensure a thorough review.
Now, it’s time to choose an audit method. There are two main types of inventory audits:
- A full inventory count involves physically counting all your stock at once. This can be disruptive and time-consuming, so it’s typically conducted annually.
- Cycle counting involves counting a smaller portion of your inventory on a regular basis (e.g., weekly, or monthly). This allows for more frequent checks and helps identify discrepancies early on.
During auditing, you should maintain detailed records of your inventory audits, including discrepancies identified, corrective actions taken, and recommendations for improvement.
10. Analyze inventory performance metrics
Multichannel inventory management isn’t just about keeping track of stock levels. It’s about using data to make informed decisions that optimize your inventory investment and overall business performance. Some key metrics for analysis include:
- Inventory turnover rate: This metric measures how quickly your inventory is sold and replaced over a specific period.
- Average Days to Sell (ADS): This metric calculates the average number of days it takes to sell an item.
- Stock-to-sales ratio: This metric compares the value of your current inventory to your sales over a specific period.
- Sell-through rate: This metric measures the percentage of your inventory sold during a specific period.
- Order lead time: This metric measures the average time it takes for an order to be placed with a supplier and received.
When analyzing key metrics related to multichannel inventory sync, let’s try the following tips:
- Set performance benchmarks: Establish benchmark targets for key inventory metrics relevant to your industry and business model.
- Communicate insights across departments: Share inventory performance data with relevant departments, such as marketing and purchasing, to foster collaboration and optimize overall business operations.
11. Prepare for seasonal sales and promotions
Seasonal sales and promotions are a strategic way to boost sales, clear out stock, and generate excitement around your products. However, effectively managing inventory during these peak periods requires careful planning and preparation. Here’s how to optimize your multichannel inventory management for seasonal sales and promotions:
- Identify promotional products: Determine which products you’ll be featuring in your seasonal sales and promotions. Analyze your inventory data to identify slow-moving items that could benefit from discounts or bundled promotions.
- Prioritize high-demand products: Allocate sufficient stock for your best-selling products and those expected to be popular during the sales event. You need to ensure you have enough inventory to meet anticipated demand and avoid missing out on potential sales.
- Adjust safety stock levels: Temporarily increase safety stock levels for key products to act as a buffer during the sales period. This helps mitigate the risk of stockouts due to unexpected spikes in demand.
- Implement fulfillment strategies: Prioritize picking, packing, and shipping for promotional orders to ensure timely delivery and customer satisfaction during the peak season. Also, it is important to offer expedited shipping options to cater to customers who need their purchases quickly.
12. Consider dropshipping for specific products
Dropshipping can be a valuable strategy to simplify multichannel inventory management. This strategy offers some benefits such as reduced overhead costs, scalability, and flexibility.
However, Not all products are ideal for dropshipping. Here are some factors to consider when deciding which products to dropship:
- High demand: Products with consistent or high demand are good candidates.
- Non-perishable: Avoid perishable goods that require special handling.
- Lightweight and easy to ship: Focus on items that are easy to ship to minimize potential issues.
- Low return rates: Choose products with a low likelihood of returns to reduce logistical complexities.
When deploying dropshipping as a strategy to streamline eCommerce inventory management, you should:
- Carefully research potential dropshipping suppliers. Look for reliable partners who offer competitive pricing, a wide range of products relevant to your target audience, and efficient fulfillment services. Also, you can choose dropshipping suppliers that offer tools and integrations. In this way, you can easily sync product information, inventory levels, and order fulfillment processes with your online store platform.
- Establish quality control measures with your supplier, such as requesting sample products or conducting periodic reviews to ensure product quality aligns with your brand standards.
Top 5 Multichannel Inventory Management Software
Among hundreds of options on the market today, choosing the right multichannel listing and inventory management software can be a challenge. Before you decide, take these key factors into consideration:
- Sales channels: Consider how many channels you sell on (Amazon, eBay, etc.) and if the software integrates with them.
- Inventory size & complexity: If you have a large or complex inventory, you’ll need software that can handle it effectively.
- Features: Look for features like real-time inventory tracking, order fulfillment automation, and reporting tools.
- Scalability: Consider if the software can grow with your business.
- Budget: Inventory management software can range from free options to enterprise-level solutions.
We have compiled a list of the 5 best multichannel inventory management software for your consideration:
1. LitCommerce
The first and most recommended multichannel listing and inventory management solution is LitCommerce.
LitCommerce is a multichannel inventory management software that acts like your super-powered assistant. It lets you manage listings, inventory, and orders across all your sales channels from a single, unified dashboard.
With LitCommerce, you can:
- Multichannel integration: It integrates with various eCommerce platforms, online marketplaces, and even social media channels. This allows you to manage your listings and inventory across all your sales channels from a single place.
- Inventory & price sync: LitCommerce synchronizes your inventory levels and product pricing across all connected channels. This helps ensure you don’t accidentally oversell or undersell products.
- Listing management: You can create and edit product listings in bulk, saving you time and effort.
So, if you’re ready to ditch the multichannel mayhem and have more time to perfect your product descriptions (or maybe finally get some sleep!), LitCommerce might just be your secret weapon.
2. Brightpearl
Brightpearl is a specialized system designed for stores that sell online and in physical shops, catering to medium to large retailers. It streamlines operations, enhances sales, and ensures customer satisfaction through smart order management.
With Brightpearl, you can effortlessly use Magento, BigCommerce, Shopify, Amazon, and eBay alongside your physical stores—all in one place. The system’s real-time POS integration provides a clear picture of your business operations.
In addition, Brightpearl offers advanced features like FBA inventory management, real-time Amazon inventory tracking, demand planning, warehouse management, and insights into Amazon profitability. This comprehensive solution adapts to your business needs, providing flexibility and the ability to scale up with ease, ensuring your business stays competitive in the dynamic e-commerce landscape.
3. SkuNexus
At SkuNexus, we believe that inventory management is the keystone of all other business operations. If you don’t know what you have and where you have it, right now, managing inventory across various online platforms and marketplaces becomes a guessing game.
To address this, SkuNexus designs its systems to empower merchants with an array of tools providing total command, clear visibility, and complete control of their entire inventory in real time.
4. Ecomdash
Ecomdash is a handy tool that helps you manage your products, restock items, organize your warehouse supplies, handle distribution, and process orders—all in one place. Just like Brightpearl, Ecomdash is a website that works for everyone, from freelancers to big businesses.
Here are some things Ecomdash can do:
- Show you a dashboard with all your activities
- Track what you’re doing
- Manage orders that are waiting for items to be restocked
- Scan barcodes or tickets easily
- Handle different sales channels
- Keep track of your costs
- Use customizable templates
- Manage discounts
- Track deliveries
- Take care of your online store
Unlike Brightpearl, Ecomdash doesn’t work with PayPal and QuickBooks Online. But it can connect with other services like Shopify, Adobe Commerce, and WooCommerce.
5. Zoho
Zoho is a multichannel software company that offers a cloud-based inventory management system called Zoho Inventory, which is particularly well-suited for businesses selling across multiple channels. Zoho Inventory helps businesses centralize their inventory, allowing them to track stock levels, manage orders, and fulfill sales from a single platform. This eliminates the need for spreadsheets and manual data entry, reducing errors and saving time.
Zoho Inventory integrates with popular e-commerce platforms and marketplaces, ensuring that inventory levels are always up-to-date across all sales channels. This helps businesses avoid overselling and stockouts, leading to a smoother customer experience.
Multichannel Inventory Management – FAQs
Multichannel inventory management refers to the process of overseeing and controlling orders and inventory across various sales channels, such as top online marketplaces, eCommerce websites, brick-and-mortar stores, and more. The four types of inventory management are just-in-time management (JIT), materials requirement planning (MRP), economic order quantity (EOQ), and days sales of inventory (DSI). Each inventory management style has its pros and cons, therefore works for different businesses. The 5-step inventory management process typically includes: The ABC technique of inventory management, aka ABC analysis, is a method used to categorize items in inventory based on their importance and value to the business. It divides inventory into three categories: A, B, and C. The ABC analysis can be used to help make decisions about which inventory items should be given priority in terms of stock levels and reordering. Inventory and order tracking across multiple channels is critical for eCommerce businesses as it helps you ensure your inventory is on hand to meet customer demand. As a result, it also helps your business to avoid stock out or overselling and to reorder new stock on time and with the right quantity.
Choose the Multichannel Inventory Management Software that Fits Your Needs!
In conclusion, mastering multichannel inventory management is vital for modern retailers and businesses. Apply the inventory management method like First in, First out, or ABC inventory classification to your business to maximize the effectiveness of inventory management.
Although multichannel management might bring a lot of complexities, luckily, the evolution of technology helps us do the daunting task. Multichannel inventory management software like LitCommerce helps you embrace the benefits of this centralizing inventory management to thrive in the competitive eCommerce landscape. Contact us if you have any questions, and start managing inventory in one place today!
