The last thing an online business wants to be spending time on when growing its business is messing with tedious spreadsheets and stock checks. That’s why it’s important for such a business to get the right inventory management software that helps in organizing and tracking inventory properly, forecasting demand, and more.
Dedicated inventory management systems are designed to track stock through the entire supply chain or the portion of a business it operates in. This includes everything right from production and ordering to warehousing, shipping, fulfillment, and stock movements in between.
But not all inventory management systems are created equal. That’s why it’s extremely important for an online business to choose the right solution that meets its specific requirements.
A good inventory management software helps a business track inventory in such a way that it does not run out of stock or knows when to order or make more of a product. Enter Shopify!
Does Shopify Have Inventory Management System?
Shopify’s inventory management system tracks and maintains inventory levels to help online businesses avoid stockouts and potential lost sales. Accurate inventory on a business’ Shopify store also helps customers when they are trying to place an order.
In this article, we are going to discuss how Shopify inventory management software can help an online business in tracking and maintaining inventory. We will also discuss how an online seller can track inventory on Shopify.
What is Shopify Inventory Management?
Shopify Inventory Management software allows online sellers to track inventory and avoid stockouts or know when to re-order inventory. It enables them to set up inventory tracking, view inventory, and make adjustments to their inventory levels.
In addition to this, the Inventory Management software allows online sellers to view the history of adjustments made to the inventory of products and variants that Shopify keeps a track of.
In case the online sellers wish to analyze the changes made to inventory levels, they can do so by viewing Shopify’s Inventory Reports.
To start tracking inventory, it is important for the seller to add or update information about products such as their price, variants, and availability from the Products page in their Shopify admin.
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Note that store inventory represents the number of each product variant that the seller has available to sell. Also, the manner in which an online seller lays out products and the fulfillment process impacts the inventory levels.
Why is Inventory Management Important on Shopify?
It is important for sellers to manage their inventory effectively. Effective inventory management ensures that the seller has sufficient stock of products to meet the requirements of his customers.
Poor inventory management can result in sellers losing out on potential sale opportunities or spending money on stocking too much inventory.
Shopify’s inventory management solution is a great way for a seller to manage inventory effectively and overcome challenges.
Whether you’re a small business or company using enterprise resource planning (ERP), inventory management helps your business do a number of important things:
1. Avoid Spoilage
There’s a very real chance that selling a product with an expiry date will go bad if an online seller is not able to sell it in time. Managing inventory effectively helps an online business avoid unnecessary spoilage.
2. Avoid Dead Stock
Deadstock is stock that can no longer be sold. The underlying reason for not being able to sell such stock is seasonal change or stock going out of style, or otherwise becoming irrelevant. Thus, an online business can overcome this mistake by adopting a diligent strategy.
3. Save on Storage Costs
Warehousing is a variable cost. It depends on the number of products stored in the warehouse. An online seller’s storage costs are likely to go up when it stores too much product at once or end up with a product that’s difficult to sell. Avoiding this can save an online seller a lot of money.
4. Improve Cash Flow
Effective inventory management is not only cost-efficient. But it also helps an online seller in improving cash flows. Note that an online seller has to pay in cash for the inventory he keeps as stock in the warehouse. Further, he is going to sell that inventory in the near future for cash. But till the time the inventory remains in the warehouse and is not sold, it is certainly not cash for the online seller.
That’s why it’s important for the online seller to consider inventory into cash flow management. Inventory directly affects the sales and expenses of an online business. As a result, both the sales and expenses determine how much cash-in-hand an online business has. In short, better inventory management leads to better cash flow management.
This means a strong inventory system can help an online business determine how much product it has in real-time. Furthermore, such a business can forecast when it will run out of stock based on sales. This will help the online business to replace the stock as early as possible. Also, proper inventory management will allow the business to plan ahead for buying more inventory by ensuring it has enough cash set aside.
5. Optimize Fulfillment
Good inventory management helps improve order fulfillment for an online business. It can use tactics like inventory distribution, which is using fulfillment centers closer to its customers. If a customer orders a product online, the order is shipped and sent faster—saving the online business a lot of time and shipping costs, and keeping them happy.
How To Track Inventory On Shopify?
It is important for an online seller to have a record of accurate inventory. Maintaining accurate inventory is important for both sellers and buyers. A seller needs accurate inventory to avoid stockouts or know when to reorder the same. Whereas, accurate inventory helps customers when placing an order on the seller’s Shopify store.
To track inventory, the online seller first needs to set up inventory tracking for a product. Once this is done, he can view or adjust inventory levels for such a product.
Note that an online seller can view the history of inventory for the product for up to the most recent 90 days.
To track inventory, the merchant or the seller needs to follow the steps below:
- Go to ‘Products’ From Shopify admin
- Click the name of the product to be tracked
- In case the product has variants, then click the variant to be tracked
- Check ‘Track Quantity’ in the inventory section
- check ‘Continue selling when out of stock’ to allow customers to purchase the item when it’s out of stock
- Enter the quantity information for each location in the ‘Quantity’ section
- Click Save.
Important Features Of Shopify Inventory Management Software
The following are the important features that sellers can look out for with Shopify inventory management software.
I. Export or Import Inventory Data
A seller can export an inventory CSV file from his Shopify account and use it as a template to update the inventory quantities.
In case the seller has a single location, he can export an inventory CSV file that contains inventory quantities at that location. Once the CSV file is exported to get a template, the seller needs to update the inventory quantities in the file. He can then import the updated CSV file to update Shopify with the inventory quantities for each product.
In case the seller manages inventory across locations, he can specify that he wants to export the data for all of his locations. Click here to know the procedure to create a CSV template.
II. Selling Out-Of-Stock Products
Note that a product runs out of stock in Shopify when the inventory level is at zero or below. Accordingly, Shopify will not allow customers to purchase that product by default unless the online seller adds more inventory and adjusts the inventory levels.
But a seller can change these default settings. He can allow customers to buy out-of-stock items from the Inventory section of a product. Note that an online seller may want to allow customers to buy out of stock items for he:
- Has products available for preorder
- Has stock coming soon and wants to continue selling before it arrives
- Wants to sell first and then order supplies later
- Is not tracking the actual inventory quantity in Shopify
A seller can even hide out-of-stock products from his customers. He can do this using the automated collections feature. This feature makes use of selection conditions to automatically include matching products. An online seller can add up to 60 selection conditions. Further, he can even specify whether products need to meet all conditions or any condition to be included in the collection.
The seller can set these conditions manually on the Collections page of his Shopify admin. He can even use an inventory management app to do this on his behalf. A seller can even choose specific products for a collection and create a manual collection.
III. Adjust Inventory Levels
An online seller can make adjustments to his inventory manually depending upon his business needs. For instance, a host of factors may compel an online seller to make more or less inventory available through his Shopify store. These factors may include product popularity, sales, or seasonal factors.
It is important for a seller to maintain accurate inventory levels on his Shopify store as it would help customers while placing an order on the store.
To track and adjust inventory levels, a seller can follow the steps below:
a. View Product Inventory
A seller can view his product inventory on the ‘Products’ page. This page displays a combined inventory count for all of the variants of each product. To see the inventory counts for the product variants, a seller needs to access the ‘Inventory’ page in his Shopify admin. He can search variants, filter or sort by different criteria, or change the sort order on the Inventory page. The seller can even add tags to products for managing inventory.
b. Adjust Inventory
An online seller can change or adjust the available inventory quantity on the Inventory Page in his Shopify store. In case he wants to modify inventory for products with variants, he can do so on the product details page of each of the variants.
An online seller can even use the bulk editor to change multiple products and their variants at once from his Shopify admin. He can also use the bulk editor to edit collections, customers, inventory, and online store blog posts and pages.
The following video will help you to modify inventory levels using the bulk editor.
IV. Inventory Transfers
An online seller can use transfers to record, track, and receive incoming inventory from suppliers or between his store locations set up. Transfers can help an online to manage its inventory in various ways. It can help him to:
- Record incoming inventory after submitting and confirming the purchase order (PO) with the supplier
- Track inventory as gets moved between various locations
- Indicate whether he has received full or partial inventory thus allowing him to process inventory at his own pace
- Automatically update product inventory once the items are received in a transfer
- See the number of incoming items and their expected arrival date right in the product’s details
A seller can perform the following tasks using the inventory transfers feature for managing inventory:
a. Create Inventory Transfers
Note that when Shopify tracks a product’s inventory, it updates the quantity available at a location automatically once the seller receives transfer constraining the product.
Thus, a seller can create an inventory transfer in Shopify to track and receive the incoming inventory. The seller can receive the incoming inventory either from suppliers or from other store locations in case he has stores at multiple locations. Accordingly, he can create inventory transfers for such incoming inventory.
However, the seller cannot create transfers for products that are managed via App and custom fulfillment locations, unless they allow multi-managed inventory. The apps and custom fulfillment locations may include dropshipping apps, third-party logistics services, and custom fulfillment services.
In addition to this, a seller can even deactivate a location that has any pending transfers. In case he chooses to do so, he needs to choose a different location for those transfers so that the transfer can proceed. In case the seller chooses the same destination as the origin, then the transfer is canceled and the inventory is restocked at the selected destination.
b. Receive Inventory Transfers
A seller can use the inventory transfer feature in Shopify to ensure the receipt of inventory whenever it arrives. Receiving inventory means that the item has arrived, the seller has evaluated that item and has decided to accept or reject it.
When the seller accepts an item in his transfer, the available quantity is added on his Inventory page in Shopify admin. In case the seller receives extra inventory from the origin location, then he can specify a greater number of items than he expected in the Accept column.
But when the seller rejects an item in the inventory transfer, it is not adjusted in the inventory quantity. Note that a seller must turn on inventory tracking for products and variants before managing inventory transfers.
Also, a seller needs to ensure that the product quantities in the inventory transfer are accurate before receiving any transfer. This is because once the seller receives and saves a transfer, he cannot delete or edit the transfer. In case there is an error, the seller may either have to undo the received quantities or manually adjust inventory.
V. Calculate Inventory
As mentioned earlier, a seller can enable Shopify to track inventory. But before doing so, the seller needs to ensure that he understands how items are counted and tracked when he receives them from the supplier.
Note that the number of incoming items varies based on the products that the seller receives. This is regardless of whether the seller marks such items as Accepted or Rejected.
A seller can find the number of incoming items for a product on the product’s details page in the Inventory section of his Shopify admin. He can even find such details in the Variants section for product variants.
Let’s consider an example to understand how a seller can calculate the inventory. Say, a seller has a transfer with 20 items. That is, he ordered 20 items from a supplier. He received 17 of them, marked 14 as Accepted and 3 as Rejected. Accordingly, there will be 3 incoming items for that product. This is because though the seller indicated that 3 of the items received were rejected, he still received 17 of the items that he ordered.
VI. Undo a Transfer
There can be a scenario when a seller creates a transfer or receive items by mistake. In such a case, he can either of the following three actions:
- Delete the transfer
- Adjust the quantities received in the transfer, or
- Manually adjust the inventory of the product to account for the mistake
In case the seller has not received any inventory for such a transfer, he can open the transfer on the Transfers page. There, he can make any changes that he wants on the transfer.
If he has already received any inventory for a transfer, including Partially received transfers, then he cannot delete or adjust the quantities in a transfer.
Finally, if the seller’s origin location is another active store location and he needs to change the inventory quantity, then he can manually adjust the inventory.
VII. Undertake ABC Analysis
Typically, a business generates the majority of its profits from only a few of the products that it sells to the customers. The remaining products are hardly ever sold. As a result, stocking the products sold seldom may lead to unnecessary costs like warehousing, maintenance, or advertising costs.
This can tie up cash that the seller could have otherwise utilized for carrying out other store operations.
Also, there can be a scenario where a business has certain products that have few sales. However, such products become top sellers or receive no sales or are sold once in a while.
This is based on a concept called the 80/20 rule or the Pareto principle. According to this principle, most of a system’s output comes from a small amount of the input.
In inventory management, ABC analysis is one of the important inventory management techniques that work on this principle. This inventory management method places the products of a seller into three simple categories. These categories help the seller to understand the areas he should focus on.
For instance, a seller can access the ‘ABC analysis by product’ report in his Shopify admin if he has a store on the Shopify plan or higher. However, he can download a reporting app with ABC analysis from the Shopify App Store in case his store is on the Basic Shopify or Shopify Lite plan.
Note that the ABC analysis method of inventory management divides your products into the following grades:
These are the top-selling products, that account for around 80% of the seller’s revenue. Since the A-grade products are the most important products for a seller, these should be given the most attention. These are the products that account for most of the seller’s revenue.
Thus, a shortage of inventory for these products can hurt the sales of the seller dramatically. So, a seller can adopt the following set of strategies in order to manage the inventory levels of Product A.
- The seller can put better controls and protection on A-grade inventory to avoid damages and theft.
- He can always have A-grade inventory on hand. In fact, he must keep a backup stock of such products and reorder them well in advance to avoid running out of inventory.
- Also, the seller can make A-grade products more visibile in his marketing content and campaigns.
On the contrary, the C-grade products can cause the seller to incur unnecessary costs if he maintains an inventory level of such items more than what is needed.
These products account for 15% of the seller’s revenue. Products in this category do sometimes move into the A level or the C level. Products with a B grade represent a moderate percentage of the seller’s revenue.
These products often fluctuate between A grades and C grades. These products are generally not as valuable as A-grade products. However, the seller must pay attention to the products that occasionally change to an A grade and which change to a C grade.
The seller can consider using the following strategies for managing product B-Grade items:
- Sellers must always have B-grade inventory on hand. They should reorder these products so that new stock arrives shortly before it runs out of stock.
- They should promote B-grade products as bundles or add-ons to A-grade products.
- Sellers must use A-grade strategies for items that occasionally change to having an A grade.
- They must use C-grade strategies for products that occasionally change to having a C grade.
These products account for 5% of the seller’s revenue. Products with a C grade represent a small percentage of the seller’s revenue. They are often considered a part of “dead” or “slow-moving” inventory.
However, such products do generate some sales for the seller. But the sale of such items can lead to a poor customer experience. Thus, it is wise on the part of the seller to sell off the stock and remove the product from the catalog.
A seller can consider the following strategies to manage inventory for such products:
- The seller can sell C-grade inventory at a discount and remove the product from his catalog after it sells out.
- He can give C-grade inventory away for free with other purchases to boost sales.
- The seller can give C-grade inventory away as charity.
- He can place less orders for C-grade inventory to reduce warehouse costs.
- The seller can stop ordering C-grade inventory, unless it serves another purpose for his business.
VIII. Organisation of Inventory
A seller can update various product-related details in his Shopify admin account. The types of details updated have a great impact on the way the products get displayed to customers. Updating product-related details help sellers organize products and help customers find the product.
For instance, a seller can specify details like product type, SKU formats, tag formats, checkout links, vendor details, and collections. These details will help sellers and customers in speeding up the process.
The sellers can use filters like those of vendors to search for products by the vendor. This can help them to speed up ordering inventory.
Likewise, the sellers can use the collections field to add the product directly to a manual collection. The sellers can even go for automated collections in which the product automatically is included in a collection when it matches the collection conditions.
Similarly, tags are searchable keywords that a seller can associate with his product. Tags can help customers find a seller’s product through his online store search. Besides this, sellers can even use tags to create automated collections.
IX. Inventory Reports
A seller can access inventory reports in case he has a store on the Basic Shopify plan or higher. He can use inventory reports to view a month-end snapshot of inventory and track the quantity and percentage of inventory sold per day. Note that it can take 12-72 hours before inventory changes appear in reports.
For instance, the Month-end inventory report showcases the quantity of each product variant the seller had in stock at the end of each month. A seller can see a negative ending inventory quantity number in the Month-end inventory report. This may happen because either the seller did not enable inventory tracking or he enabled inventory tracking but oversold a variant.
Likewise, the Average inventory sold per day report showcases the average number of items of inventory sold per day by product variant.
Then, a seller can also view the percent of the inventory sold report. This report showcases the percentage of each variant’s inventory that is sold from the total starting quantity during the selected period. Product variants only appear in the report if they have been sold at least once before or during the selected period.
Similarly, a seller can also analyze the product sell-through report. This report indicates the percentage of the seller’s total inventory that he has sold during the selected time period. The sell-through rate is calculated as: Total quantity of items sold divided by the (total quantity of items sold + total quantity of items still in inventory).
Another important report that a seller can generate in his Shopify admin is the days of inventory remaining report. The purpose of this report is to give an overall sense of how long the seller’s tracked inventory is estimated to last. Such a calculation is done based on the seller’s average sales rates for each variant, and the amount of inventory that the seller has left. Days of inventory remaining is calculated as: Total quantity of items still in inventory (ending quantity) divided by the average quantity of items sold per day.
The above features indicate how inventory management on Shopify can be beneficial to the sellers. So, let’s understand how a seller can benefit from having Shopify Inventory Management Software?
What are the Benefits of Shopify Inventory Management?
The following are the benefits that a seller can gain when using Shopify Inventory Management:
1. Operational Efficiency
Shopify Inventory Management helps a seller to save time that gets wasted in maintaining stock spreadsheets. It organizes the inventory and displays it in the form of a customized dashboard. Such a dashboard gives the seller an uncluttered view of orders from all of his sales channels all in one place.
Thus, it helps the sellers in minimizing the cost of holding inventory. It lets the seller know when it’s time to replenish inventory or buy more stock. As a result, the seller is able to maintain optimal inventory levels at all times and hence minimize costs.
Additionally, the seller is able to control inventory with the help of a centralized inventory management system. Centralizing inventory is a great way to track and manage product inventory stored in multiple locations. It helps the sellers keep track of what’s on hand, what’s moving out, and what’s coming in. In simple words, centralizing inventory brings operational efficiency.
In addition to this, it can help a seller simplify processes when he adopts a multichannel approach. It reduces the risk of fulfilling an order twice or selling something in-store that’s already been purchased online.
2. Cost Savings
Shopify Inventory Management also helps a seller in minimizing the cost of holding inventory. The inventory reports generated in the seller’s Shopify admin give a complete view of the inventory of each of the products and its variants.
The seller is able to distinguish between best-selling and worst-selling products. As a result, he considers restocking the inventory of the products that generate the most sales for his business. Whereas, he considers removing or reducing the stock of products that do not generate sales at all or sell once in a while.
This will help the seller to stop incurring unnecessary costs like warehousing, maintenance, or advertising costs.
In addition to this, an accurate account of inventory also helps the seller to avoid costs associated with over-stocking or running out of stock. A seller can even save on spoilage and shrinkage costs. The inventory reports in Shopify inventory management allow the seller to save on costs as he gets access to accurate inventory data from time to time.
3. Undertake Strategic Decisions
Shopify Inventory Management solution helps the sellers in undertaking key strategic decisions. The inventory management system helps the seller in distinguishing between the products that generate the majority of sales and the products that are laggards.
As a result, the sellers can discontinue the restocking or purchase of inventory of the products that do not generate sales at all or sell once in a while. Instead of tying up cash in such items, the sellers can plan to introduce new products or expand the sales of the given products themselves.
In addition to this, sellers having inventory stored at multiple locations get accurate data regarding inventory. Such data can help them in fulfilling orders for customers efficiently. In case there are any glitches, the sellers can resolve the same and make the flow in their supply chain seamless.
4. Speedy Order Fulfillment
The sellers using the Shopify Inventory Management solution get regular alerts on the inventory levels. This means the sellers are aware well in advance whether there is a need to replenish inventory or not. That is, even before they estimate that a particular product is about to run out of stock.
The Fulfillment, shipping, and delivery times report the time that it takes for orders to move through the entire fulfillment process, from order receipt until delivery to your customer.
Plus, the seller can set up multiple locations in his Shopify store. This way he can track inventory and fulfill orders at his locations. With multiple locations, the seller has better visibility into his inventory across your business.
How? A seller can assign online orders and in-person sales to different locations. This ensures that the inventory quantities are always accurate. If some of the inventory is out of stock at one location, but it’s in stock at another location, then Shopify will split the order so that it can be fulfilled from multiple locations.
Besides the above benefits, there are a host of other benefits that a seller can get through the Shopify Inventory Management solution.
Best Shopify Inventory Management Apps & Integrations
Inventory management apps help sellers track inventory and fulfill orders. Though Shopify has in-built inventory management features, it is a good option for those who are just starting out.
The sellers looking for scaling or expanding their business must look for other inventory management solutions offering exhaustive features. It is important for sellers to have the right inventory management solution that helps them manage multi-channel sales, make accurate projections, prepare for seasonal changes, and stock inventory from time to time.
The following are a few of the inventory management apps and integrations that sellers can consider purchasing for managing inventory.
To know more about applications, you can check out the Fulfillment Inventory Management page on Shopify’s app store.