Using Inventory Visibility to Enhance Efficiency and Profitability

Inventory management is the cornerstone of any e-commerce business. In order to optimise operations, reduce costs, and meet customer demands, it is crucial to have a clear understanding of inventory visibility. 

However, the most important part of implementing effective inventory management is to have complete visibility of the products in and out of stock. But how exactly do we achieve this? 

This blog aims to explore the concept of inventory visibility, its importance, and the challenges businesses face in achieving it. We will also discuss effective methods for monitoring inventory and the potential benefits of implementing automation solutions.

What Is Inventory Visibility?

Inventory visibility refers to the ability to track and monitor inventory levels, locations, and movements throughout the supply chain in real time. It encompasses having accurate and up-to-date information about the quantity, availability, and location of products at any given time.

In traditional retail, inventory visibility was often limited to periodic physical counts and manual record-keeping. However, with the advancement of technology and the rise of e-commerce, maintaining a clear view of inventory has become increasingly crucial for businesses to meet customer demands, better operations, and stay competitive in the market.

Comprehensive inventory visibility relies on the integration of various data sources and technologies. This includes point-of-sale (POS) systems, barcode and RFID (Radio-Frequency Identification) systems, inventory management software, and cross-channel integration. These tools enable businesses to capture and process real-time data on inventory transactions, stock levels, and stock movements.

Inventory visibility is especially critical in the context of omnichannel retailing, where businesses sell products through multiple channels, such as online marketplaces, brick-and-mortar stores, and mobile applications. A centralised inventory management system that synchronises inventory across all sales channels ensures consistent visibility and prevents discrepancies or overselling across platforms.

How Do You Monitor Inventory?

Monitoring inventory requires a combination of technology, processes, and tools. Here are some common methods used to monitor inventory:

1. Barcode and RFID Systems: Implementing barcode and RFID (Radio-Frequency Identification) systems enables businesses to track products accurately. These technologies automate data capture, providing real-time visibility into inventory levels and locations.
2. Inventory Management Software: Utilizing advanced inventory management software allows businesses to track, manage, and analyse inventory data efficiently. These systems provide insights into stock levels, demand patterns, and reorder points, facilitating more effective inventory control.
3. Point-of-Sale (POS) Integration: Integrating inventory management systems with POS systems allows for seamless tracking of sales and stock updates. This integration enables businesses to accurately monitor inventory levels and replenish stock when necessary.
4. Cross-Channel Inventory Management: With the rise of omnichannel retailing, it is essential to have a centralised inventory management system that synchronises inventory across all sales channels. This approach ensures accurate inventory visibility, prevents overselling, and enhances customer experience.

Why Is Inventory Visibility Important?

Inventory visibility offers several key benefits that contribute to the overall success of an e-commerce business:

1. Accurate Demand Planning: By having a clear understanding of inventory levels and demand patterns, businesses can improve their procurement, production, and stocking strategies. This reduces the risk of stockouts, overstocking, and lost sales, resulting in improved customer satisfaction and increased revenue.
2. Efficient Order Fulfillment: With real-time inventory visibility, businesses can fulfil orders more quickly and accurately. This minimises backorders, reduces order processing times, and enhances customer loyalty.
3. Robust Supply Chain Management: Comprehensive inventory visibility enables businesses to optimise their supply chain processes. By identifying bottlenecks and inefficiencies, they can streamline operations, reduce costs, and improve overall productivity.

The biggest inventory visibility challenges

While inventory visibility offers significant advantages, businesses often encounter challenges in achieving them. Here are some of the most common hurdles:

1. Inefficient Warehouse Setups

Poorly organised warehouses, inadequate shelving systems, and inefficient layout designs can hinder inventory visibility. Implementing effective storage solutions, such as bin locations and barcode systems, can improve visibility and facilitate efficient stock management.

2. Dependency on Manual Processes

Relying on manual data entry and manual inventory tracking processes increases the risk of errors, delays, and inaccurate information. Shifting towards automated inventory management systems minimises human errors and enhances accuracy and efficiency.

3. Lack of Knowledge about Automation

Many businesses are unaware of the benefits and capabilities of automation solutions. Investing in technologies like inventory management software, barcode systems, and RFID can significantly improve inventory visibility, streamline operations, and reduce costs.

4. Intimidating Software Costs

Some businesses may hesitate to adopt advanced inventory management software due to perceived high costs. However, the long-term benefits, including improved efficiency and profitability, outweigh the initial investment.

How to improve inventory visibility?

Effective inventory visibility is crucial for e-commerce businesses to optimise operations, reduce costs, and meet customer demands. In this article, we will explore practical strategies to improve inventory visibility. By implementing barcode scanners, streamlining inventory tracking, and utilising operations software, businesses can enhance their inventory management processes and gain a competitive edge.

1. Use barcode scanners

Barcode scanners are powerful tools for enhancing inventory visibility. They automate data capture, providing accurate and real-time information about product identification, quantity, and location. Here’s how businesses can leverage barcode scanners:

• Product Identification: Assign unique barcodes to each product SKU to streamline identification. Barcode scanners allow employees to scan barcodes, instantly updating the inventory management system and providing accurate information about available stock.
• Stock Movements: When moving products within the warehouse or during order fulfillment, barcode scanners enable quick and accurate updates to inventory records. Scanning barcodes during stock transfers ensures real-time visibility, reducing errors and improving efficiency.
• Receiving and Shipping: Barcode scanners facilitate efficient receiving and shipping processes. Scanning barcodes on incoming and outgoing products ensures accurate inventory updates, reducing discrepancies and delays.

2. Streamline inventory tracking

Streamlining inventory tracking processes is essential for improved visibility. By implementing efficient tracking methods, businesses can reduce errors, enhance stock levels, and enhance operational efficiency. Consider the following practices:

• Centralised Inventory System: Maintain a centralised inventory management system that consolidates all inventory data across multiple sales channels. This enables real-time tracking and prevents overselling or stockouts.
• Regular Stock Audits: Conduct regular physical stock audits to ensure inventory accuracy. Implement cycle counting methods that involve counting a portion of inventory regularly, rotating through different product categories. This helps identify discrepancies and correct inventory records promptly.
• Reorder Point Optimization: Set appropriate reorder points and safety stock levels based on historical sales data and demand patterns. This helps businesses replenish stock at the right time, preventing stockouts or excess inventory.
• ABC Analysis: Classify inventory items based on their value and frequency of sales. Prioritise high-value and fast-moving items for more frequent tracking and restocking, while lower-value items can be managed less frequently.

3. Implement operations software

Operations software, such as advanced inventory management systems, can significantly improve inventory visibility and streamline processes. Consider the following features and benefits:

• Real-time Data Updates: Operations software provides real-time visibility into inventory levels, stock movements, and sales. This enables businesses to make informed decisions and respond promptly to changes in demand or supply.
• Integration with Sales Channels: Choose operations software that seamlessly integrates with various sales channels, such as online marketplaces or POS systems. This integration ensures automatic updates of inventory levels, preventing overselling and stock discrepancies.
• Demand Forecasting and Planning: Many operations software solutions offer demand forecasting and planning modules. By analysing historical data and market trends, businesses can optimise inventory levels, lessen stockouts, and reduce excess inventory.
• Reporting and Analytics: Operations software provides valuable insights through customisable reports and analytics. Businesses can gain visibility into sales performance, inventory turnover, and other key metrics to identify areas for improvement.

What Are the Benefits of Improving Inventory Visibility?

Inventory visibility plays a crucial role in the success of e-commerce businesses. By improving inventory visibility, businesses can improve their operations, reduce costs, and meet customer demands more efficiently. In this article, we will explore the various benefits that come with enhancing inventory visibility. From avoiding stockouts to smarter resource allocation, these advantages highlight the importance of a well-managed and visible inventory system.

1. Avoid stockouts

One of the primary benefits of improving inventory visibility is the ability to avoid stockouts. With accurate and real-time visibility into inventory levels, businesses can track stock movements, monitor sales patterns, and predict demand more effectively. By replenishing stock in a timely manner, businesses can ensure product availability, prevent missed sales opportunities, and maintain customer satisfaction.

2. Minimize split shipments

Enhanced inventory visibility allows businesses to consolidate orders and cut down on split shipments. When businesses have a clear picture of inventory across multiple channels and locations, they can fulfil orders from the nearest available stock. By reducing the number of split shipments, businesses can save on shipping costs, streamline order fulfillment processes, and improve delivery times.

3. Prevent excess inventory and dead stock

Improved inventory visibility enables businesses to gain insights into demand patterns and make more accurate demand forecasts. With access to historical sales data, customer trends, and market analysis, businesses can optimise their inventory levels and prevent excess inventory and dead stock. By aligning stock levels with actual demand, businesses can reduce carrying costs, avoid obsolescence, and improve profitability.

4. Lower shipping costs

Inventory visibility empowers businesses to maximise their shipping processes and reduce costs. By consolidating orders, businesses can leverage economies of scale and negotiate better shipping rates. Additionally, having accurate visibility into inventory levels and locations helps businesses choose the most cost-effective shipping options and reduce unnecessary shipping expenses.

5. Smarter Allocation of Resources

With improved inventory visibility, businesses can allocate resources more effectively. By analysing data on sales trends, product performance, and inventory turnover, businesses can make informed decisions regarding production, procurement, and warehouse replenishment. This allows for smarter allocation of resources, minimising wastage and maximising operational efficiency.

6. Increased Security and Quality Control

Enhancing inventory visibility promotes better security and quality control measures. With real-time visibility into inventory movements, businesses can identify any discrepancies, such as theft, loss, or damage, and take immediate action. Additionally, businesses can implement quality control checks throughout the supply chain, ensuring that only high-quality products reach customers, thus enhancing customer satisfaction and brand awareness.

Conclusion

Improving inventory visibility offers numerous benefits to e-commerce businesses. From avoiding stockouts and reducing split shipments to preventing excess inventory and reducing shipping costs, the advantages are significant. Smarter allocation of resources and increased security and quality control further contribute to improved operational efficiency and customer satisfaction. 

By investing in technology, implementing robust inventory management systems, and utilising data-driven insights, businesses can achieve optimal inventory visibility, leading to enhanced profitability and long-term success in the competitive e-commerce landscape.

And if you wish to have access to the best logistics solutions in the industry, outsource it to a 3PL partner like Locad. We will not only help you enhance your inventory visibility with our best-in-class technology but also offer you the best warehousing, picking, packing, and delivery services. Sign up today for premium fulfillment solutions!