How to Fix Common Inventory Management Challenges

Understanding your ecommerce customers needs’ and making wise decisions on how to manage your inventory to meet them is a growing challenge in today’s competitive marketplace. Here are some of the most common problems and challenges in inventory management, and how you can improve your ecommerce fulfillment to overcome them. You can also outsource the entire inventory management process to a third-party logistics provider. A 3PL can provide valuable tools and data that will allow you to successfully manage your inventory in the most efficient and cost effective manner possible.

Common Inventory Management Challenges

Increased Customer Expectations

The expectations and demands of customers are constantly changing and now they are looking to distributors to be more flexible with their orders. Additionally, you have to compete against other businesses who are also trying to keep up to the unique needs of customers. Your company has the responsibility of learning and understanding customer needs, and assuring their demands and expectations are met.

Lack of Inventory Insight

Being unaware of inventory levels can negatively impact your supply chain. Companies should make sure they have full visibility of their inventory at all times, to know when stock needs to be replenished. It is also important to understand what is in stock, what is going to be ordered, the size and quantity of the order, and what items need to be replenished. This can be a time consuming task, but it is essential to ensuring profitable business operations.

Inefficient Processes

Even with the availability of technology, many companies still have outdated inventory management systems and manual processes for inventory control. By upgrading your operations and implementing new technology and software, you will become more efficient in managing your inventory. Newer technology tools can help automate inventory management, eliminating simple manual errors (that can have a bigger ripple effect).

Managing People and Space

You should take full advantage of your warehouse space, and this requires precise management of your employees and your fulfillment center. By mismanaging either of these key areas, you can end up with issues like inadequate storage space, and improperly sorted and stored materials. If people are not trained properly and your space is not optimized for efficiency, this can greatly increase the chance for errors.

Inventory Management Techniques to Help Solve Your Problems

Accurately Track Inventory

It is essential to know where items are at any time in the supply chain. A good third-party logistics (3PL) company can provide you with the tools you require to manage your supply chain and inventory more effectively. It is also important for you to be able to warn customers of any deliveries that may be arriving late. Giving customers a notification beforehand shows that you care—you will be seen as a proactive business that has the customer in mind. It’s much better to manage the situation ahead of time, instead of waiting for a complaint.

“eFactory is one of the most complete warehouse management solutions I’ve been given by a 3PL partner. It gives me full, real-time visibility of my own inventory and allows me to pull any data I could want for my offline analytics needs.”

Johnny Shi Essential

Conduct a Regular Inventory Audit

Auditing your physical inventory can be time consuming, but it is an important aspect of inventory management. It involves counting actual warehouse inventory on hand (also called cycle counting) and making sure that it matches up with what you have listed in your inventory management software. If you work with a 3PL, they should perform inventory counts on a regular basis (using a barcode scanner to track SKUs) and compare it to the information against their inventory management system. This can help to cut down on human error. There should be clear rules in your 3PL partner agreement (also know as a Service Level Agreement – SLA) that states the frequency the inventory is checked and the allowable discrepancy.

Some use a technique called spot checking. This means choosing a specific product and counting the units on hand and comparing it to what your inventory records show. Instead of counting the number of all of your products, you can assume if you randomly select a spot to check, and it matches perfectly to your inventory records, that the rest of the inventory follows. However if you spot check and find non matching information, it might be best to do a full inventory audit.

Centralize and Backup Essential Data

Before your decision-makers can build out a forecast, you should gather and analyze any historical data you have and make it centralized. This is a huge challenge for many companies as this information can be found in disparate systems. Getting all your data in one place is essential to your success, and without proper updates your information can become inaccurate. Integrating and centralizing your systems in real-time will help your teams access up-to-date information to make the best decisions for your business. Losing valuable inventory data can set you and your team back. To prevent this from happening you should frequently backup your inventory data to the cloud in the case of hardware failure.


The best ecommerce businesses will build transparency into their fulfillment operations to make sure employees and customers know what is happening to orders and when it is happening. Even with the most up-to-date inventory management strategy, issues with orders can still occur. If your customer is aware of delays, they can change their expectations and feel confident that their item will still arrive. Communication and transparency is essential to your success. This includes notifying the customer the moment an item they are waiting for comes back in stock.

Distributed Inventory

Having warehouses in multiple locations can help you provide more affordable and faster shipping to customers, and helps you make region-popular items more accessible. If you have warehouses located strategically around the country, you will have an easier time reaching customers in their shipping zone, saving you money and delivering in a more timely fashion.

“By moving our inventory to Louisville, we got a much higher proportion of our freight to a lower cost option. We were able to see significant cost savings because of Louisville’s excellent location.”

Cristian Gormsen CEO at Eargo

Invest in Inventory Management Software

Another alternative to hiring more employees is to choose a software that can take over some of the manual processes you run. Some software can help you build a more automated inventory flow and increase your efficiency. One option is an inventory management system (IMS) that collects data from sales and inventory counts. As your warehouse staff scan each item into the system, the IMS will update your stock levels. An inventory management system like eFactory will allow you to run inventory reports, even schedule them to come to your inbox at the same time every day.

Outsource to a 3PL

If your company has a successful product, and you are rapidly growing your inventory to meet customer needs, you know the feeling of overflowing inventory, whether it’s in your home garage, office, storage space, or elsewhere. It’s an excellent problem to have, but strategizing solutions can be a huge hassle. When you choose to outsource to an order fulfillment company, the 3PL can store all of your inventory for you without you having to take deliveries, handle the products, organize and sort everything. This leaves more space that might be needed for business operations. It can also be a cost-effective method to help boost your bottom line. The 3PL will help you manage the flow of inventory from manufacturer to their fulfillment centers; they will alert you when the inventory levels get below a certain threshold and order more inventory to be sent to their fulfillment centers which will decrease your fulfillment costs. They can handle all of your purchase orders, dropshipping, ensure that you have safety stock.

Ensure You Never Run Out of Product

One of the most critical parts of inventory management is calculating the right amount of product units (SKUs) needed in stock at any given time. If your stock level dips too low, you run the risk of running out of products which can lead to missed sales, backordering, and customer service issues. On the flip side if you have too much inventory, it can result in having products that can no longer be sold due to decreased demand or being outdated. This is also known as “dead stock”. Proper order management, combined with analytics can also help with your warehouse management operations.

Reorder points are the minimum quantity, established by you, of each of your products that need to be on hand to prevent having a stockout. If your inventory dips below that quantity, it means that you need to order more products.

It can require some work on the front end to calculate the reorder point formula, but having it will help you avoid running out of inventory which can cause numerous after-effect problems for your business.

Establish and Maintain Good Relationships With Your Suppliers

The first step in setting up your business is finding the right manufacturer that can help build your products in the most cost-effective and efficient manner in order to grow your small business. After you have chosen your manufacturer it is important to establish a positive relationship with them so that they can help with your inventory management, as opposed to getting in the way of it.

Communicate with them frequently to let them know of potential increases in sales, promotions, or other factors that could cause a spike in your need for additional inventory. This will help ensure that they can keep up with your customer demand, and that you have all of the products in your inventory that you’ll need. With well-established communication, should you run low on products, they are more likely to go out of their way to help you restock.

Utilize Automation

If you haven’t added this to your supply chain, now is the time. You should consider investing in a quality automated inventory system to remove tedious manual processes and boost efficiency in your inventory management processes. There are a few options for you to consider, including an enterprise resource planning solution (ERP) or warehouse management system (WMS). These systems provide visibility of your inventory at every stage as it moves along the supply chain. With barcode technology, you can gain real-time data about every item in your warehouse, to make informed decisions about what you have in stock, when you need to restock, and when to stop ordering an obsolete item.

Bottom Line

Keeping track of inventory in real-time can be challenging, but these inventory management problems and solutions don’t have to overwhelm you. Getting proactive to avoid these challenges by outsourcing to a 3PL professional will lead you to more success and growth in your business. Taking the time to change and improve your warehouse and inventory management processes will make your supply chain run smoother and will lead to greater efficiency and profitability for your business.

There are many benefits to working with a third-party logistics provider (3PL), such as helping with your inventory management challenges. If you are seeking logistics support we’d love to hear from you. You can read DCL’s list of services to learn more, or check out the many companies we work with to ensure great logistics support. Send us a note to connect about how we can help your company grow.