What does your business sell? Your inventory, of course. Inventory management includes storing, accounting for, selling products, and shipping them. Without solid inventory management, your Shopify business supply chain can break and disrupt relationships between you, your customers, and your suppliers.
In this article, we look at how you can effectively manage your inventory in Shopify and what challenges you need to overcome.
What is Shopify Inventory Management?
Inventory management in Shopify is about tracking and controlling the stock of products in your online store. It includes tasks like updating stock levels, setting inventory alerts, and managing product variants.
Shopify's inventory management tools allow you to easily monitor your stock across different locations, manage suppliers, and ensure that you have the right amount of products available to meet customer demand.
The 3 Benefits of Effective Shopify Inventory Management
The global cost of problems in inventory management adds up to as much as $1.1 trillion according to supply chain analysts. Fortunately, Shopify supports a strong inventory management system to monitor inventory and manage order fulfillment.
You can make better data-driven decisions about your Shopify store's stock, ordering, and which items you're carrying by using Shopify's inventory management system. It also allows you to minimize your cost of holding inventory while letting you keep consistent levels of stock to meet customer demand.
Here are the 3 key reasons why good Shopify inventory management is important:
Improving Customer Satisfaction
When your customers purchase an item and receive it on time, they're satisfied and happy. On-time delivery (OTD) is one of the most important components of customer satisfaction and loyalty. The usual OTD standard is 95% or better.
Good inventory management helps to keep products available and also can enable faster order fulfillment. When you can use inventory management tools to minimize stockouts and backorders, customers will automatically be more satisfied. Having a great record with on-time deliveries contributes to customer retention.
Reducing Storage and Warehouse Costs and Waste
Storing products you're not selling costs money. A strong inventory management system can cut costs and reduce waste in dozens of ways. Other savings can include reduced labor costs by reducing errors in shipping, packing, and stocking.
You'll also lower the risk that you're carrying obsolete products and items and can reduce the chances of having lost or misdirected items. Inventory management systems also strengthen communications all along your supply chain, as well as with customers.
Enhancing Operational Efficiency
Having a good inventory management system prevents you from listing products in your e-commerce store as available when they're not. You can use inventory management systems and best practices to automate inventory tracking and streamline tasks like picking and packing. You can also process orders more quickly and prevent errors through automated inventory management systems.
Resolving Common Inventory Challenges in Shopify Inventory Management
No matter whether they sell vintage clothing or specialized parts for electronics buffs or auto restoration, Shopify e-commerce stores share common challenges. They include:
- Managing Stock Levels – Inventory management systems let you accurately know what stock you have available, when, and where. The system will notify you when an item is out of stock, and will also provide you with up-to-date stock levels.
- Handling Multiple Sales Channels – If you have a brick-and-mortar store and a Shopify-driven e-commerce storefront, an automated inventory management system lets you know current stock levels when purchases are made via any of your channels.
- Dealing with Stockouts and Overstocking – In an ideal world, products would never be out of stock, and there also would never be overstocking. Fortunately, inventory management systems let you know when it's time to replenish in-demand items.
- Syncing Inventory Across Locations – With multiple locations taking orders, for example, multiple digital sales channels, you need to keep track of how much is in stock. Inventory management systems can sync and coordinate across locations.
How Shopify Inventory Management Works
Inventory management is part of Shopify's existing e-commerce platform. You can set up inventory tracking, view your inventory, and check levels in the inventory area of the Shopify dashboard.
1. Set Up Your Inventory System
To set up your inventory system in Shopify, log in and go to your Shopify dashboard, and select Products, then All Products. Choose the product you want to manage. In the inventory section, choose track inventory. You will need to choose to track inventory for each product.
2. Track Inventory in Real-Time
If you're using Shopify's inventory management system, every product that you track will update records in real time. This system is effective, but you will still need to check the physical inventory to match the reports that the system is providing to you.
3. Manage Inventory Variants
Shopify allows you to create product variants for items that have multiple attributes and variations, like different shirt sizes or colors. After adding a product in Shopify, you can then add variants by scrolling to the "Variants" section on the product page.
After selecting the product page, you'll see a checkbox that says "This product has variants." You can create up to three different options, for example, size, material, and color.
4. Generate Inventory Reports
Shopify offers different plans with different reporting options, including the basic level, as well as Advanced Shopify and Shopify Plus. In each level, your administrative dashboard will show you options for reports you can run. Some of them include inventory value, quantity, sell-through rate, and history.
Best Practices for Shopify Inventory Management
To properly set up your inventory management process, you will need to assign each product or item a unique SKU (stock keeping unit) number and use Shopify's built-in inventory tracking system. This will support the following best practices and others:
- Run Regular Stock Audits – Regular stock audits will help you reconcile Shopify's reports with stock levels and create good demand forecasting.
- Implement Reorder Points – Reorder points occur when your stock hits a minimum acceptable level. You can set these levels for each SKU in the Shopify inventory management system.
- Use Inventory Forecasting – Looking at history reports can help you to forecast inventory seasonally, from month to month, or quarter to quarter. Shopify's system will let you do this and optimize your inventory count, process, ordering, and supply chain.
- Organize Your Inventory Efficiently – You or your warehouse may use different methods like "last in, first out" (LIFO) or "first in, first out" (FIFO) to improve efficiency. Barcodes and RFID tags also help to optimize and make inventory well-organized.
Features to Look for in Inventory Tools
When choosing inventory tools for your Shopify store, focus on features that will streamline your operations and adapt to your business needs.
Support for Various File Formats – Look for tools that support a wide range of file formats, including CSV, XML, and Google Sheets. This flexibility allows for easy data import and export, making it simpler to sync inventory across different systems and collaborate with suppliers or team members.
Automated Inventory Updates – Manual inventory management can be time-consuming and prone to errors. Choose tools that offer automated inventory updates, ensuring that stock levels are always accurate across all sales channels.
Real-Time Inventory Tracking – Real-time tracking is crucial for maintaining visibility into your inventory at all times. With this feature, you can monitor stock levels as they change, allowing you to respond quickly to fluctuations in demand or supply chain issues.
Advanced Forecasting and Reordering – Some tools offer advanced forecasting capabilities, analyzing past sales data and trends to predict future demand. This helps you make informed decisions about when and how much to reorder.
In-Depth Analytics and Reporting – Robust analytics can provide insights into sales performance, turnover rates, and profit margins. Look for tools that offer comprehensive reporting features, including sales history and inventory turnover reports. These insights enable you to identify best-sellers, slow-moving items, and areas for improvement.
Automation for Reorders – Automating the reorder process can save time and reduce the risk of human error. Some tools allow you to set reorder points and automatically generate purchase orders when stock levels fall below a certain threshold, ensuring that you always have the right products in stock.
Tools and Apps for Optimizing Shopify Inventory
Optimizing your Shopify store inventory is crucial for maintaining a smooth operation and meeting customer demand. Fortunately, Shopify offers a range of tools and apps designed to streamline this process.
- Stocky by Shopify. An excellent tool for managing inventory, Stocky offers features like automatic re-order suggestions based on sales trends, making it easier to avoid stockouts or overstocking. It also simplifies purchase order creation and provides detailed inventory reports.
- Extensiv Order Management (ex-Sukubana). More than just inventory management, Extensiv Order Management integrates with multiple sales channels and warehouses. It centralizes inventory control, allowing you to manage stock across various platforms efficiently, which is particularly useful for multi-channel sellers.
- syncX. If you work with multiple suppliers, syncX can be of great assistance. It updates your inventory automatically by syncing with supplier feeds, reducing the risk of human error and saving you time on manual updates.
- Thrive by Shopventory. Thrive offers advanced inventory management, including bundled products and kits. It also provides in-depth analytics, allowing you to make data-driven decisions about inventory allocation and purchasing.
- QuickBooks Commerce. Ideal for small to medium businesses, QuickBooks Commerce provides inventory management alongside accounting features. It helps you maintain optimal stock levels while integrating seamlessly with your financial records.
Amasty can integrate any programs or applications you need to keep your store running.
Troubleshooting Common Shopify Inventory Issues
Shopify provides a great system for managing your inventory, but sometimes issues arise. Let’s look at the most common ones.
Problems with Variant Inventory Management
Managing inventory for products with multiple variants (e.g., sizes, colors) can be challenging. Common issues include incorrect variant quantities or mismatched SKUs.
Solution: Ensure each variant is correctly set up in Shopify with accurate inventory tracking. Use tools that provide clear visibility into variant-specific stock levels.
Errors in Purchase Order Creation
Mistakes in creating purchase orders can lead to inventory shortages or excess stock.
Solution: Check for errors in your purchase order settings and workflows. Tools like Stocky or Inventory Planner can help by automating purchase order generation based on sales data, reducing manual errors.
Delayed Inventory Updates
Delays in inventory updates can lead to stock discrepancies and lost sales.
Solution: If you experience slow updates, review your app settings and integration configurations to ensure real-time synchronization. If the issue persists, contact support for the tools you’re using to investigate any underlying problems.
Import/Export Data Issues
Errors during data import or export (such as CSV files) can disrupt inventory management.
Solution: Ensure that your data files are formatted correctly according to Shopify’s specifications. If errors occur, use Shopify’s built-in import tools or seek assistance to resolve data formatting issues.
Inventory Misalignment Due to Returns
Handling returns can sometimes cause inventory misalignment if not properly managed.
Solution: Make sure that returns are accurately processed and stock levels are updated accordingly. Regularly review your return management process to address any discrepancies.
Frequently asked questions
Yes, you can check it out with a free trial and it's integrated into the platform and available at different levels, including Shopify Plus inventory management.
Shopify's built-in inventory management tool lets you track, view, and manage your stock, but Shopify won't physically keep your inventory for you.
To track inventory on Shopify, use its built-in management tool that helps you view, update, and control stock levels efficiently.
Shopify is a SaaS e-commerce platform. On its own, no, it doesn't have inventory, but it does have a dropship option through Shopify Collective.
