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3 tips to help ease your inventory management woes

3 min read


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Inventory management is a thorny problem for many entrepreneurs. Stocking too much inventory is a waste of resources, while holding too little will lead to missed sales opportunities.

And then there’s the matter of actually filling orders. Companies need a plan to get their products to consumers in a timely fashion, while maintaining the top-notch service their customers expect.

So what’s an entrepreneur to do? Read on for tips from successful e-commerce startups that have overcome their share of inventory challenges.

Tip #1: Define your distribution channels

When Daniel and Stephanie Rensing were seeking to expand their small business, The Smart Baker, which sells baking accessories such as monogrammed aprons and decorative cupcake towers, they figured they’d sell their products to anyone who wanted them.

But online wholesalers flooded the Internet with The Smart Baker’s products, diluting the brand, driving down prices and putting pressure on forecasting. As a result, the company shifted its strategy to focus on selling directly to consumers, as well as to retailers and distributors that bring added value to the supply chain.

The takeaway: Rather than opening your business and products to everyone, be clear about who you’re targeting and how you’re going to fulfill those orders. Going too broad too quickly can put pressure on your inventory.

Tip #2: Don’t be afraid of adding inventory

While it’s wise to be cautious about stockpiling too much inventory, it might be worse if you can’t get your products to your customers in a timely manner because you don’t have enough.

“Being able to forecast demand so you have the right inventory available will make your life much easier and your cash flow much better, since you can turn over that inventory,” Rensing said.

Finding the right cadence for ordering inventory can help you adjust to shifts in demand. Paul Goodman and Griffin Thall, the co-founders of Pura Vida, which sells bracelets made in Costa Rica, order products from their crew of 80 artisans weekly. They have found that this pace is frequent enough to stay on top of sales growth without getting too far ahead of demand.

“You have to trust in your brand, and trust in your customers, that you are going to be able to sell [your inventory],” Goodman says.

The takeaway: A solid forecasting system can help you determine how much inventory you will need. You may want to experiment with different ordering schedules to figure out what works best for your customers and your company.

Tip #3: Consider outsourcing to maintain service levels

At first, Goodman and Thall attempted to manage shipping and customer service themselves, but they have since found they can run their business better by outsourcing those functions to specialists.

Pura Vida now uses a third-party logistics firm for shipping and a professional customer-service provider. That allows the founding partners to focus on growth, product development and managing the team in Costa Rica while knowing that their customers’ orders are being handled professionally.

“You have to remember that the customer is always right, no matter how many other issues you are facing, and no matter how busy you are,” says Goodman.

Another advantage of outsourcing: Third-party providers are able to scale operations up and down quickly if demand spikes or sudden service issues arise.

The takeaway: Don’t try to do everything on your own. Leverage outside experts to help you stay on top of the day-to-day tasks of running your business. Outsourcing can be a valuable strategy for maintaining strong service levels as your business grows.