Understanding Shopify and Inventory Management
Shopify is an e-commerce platform that allows businesses to create and manage their own online stores. While it does have some inventory management capabilities, there are limitations to what Shopify can handle.
Key Takeaways From This Article
- Effective inventory management is crucial for Shopify businesses as it helps maintain optimal stock levels and streamline operations.
- There are limitations to Shopify's built - in inventory management capabilities, including limited tracking capability, lack of multichannel functionality, restricted data and insights, and problems with the restocking process.
- To overcome these limitations, investing in a robust inventory management system that provides real-time updating and comprehensive analytics can help businesses optimize their operations and drive better results on Shopify.
- Inventory management is necessary for maintaining inventory control, providing exceptional customer service, ensuring quality assurance, optimizing inventory levels, reducing risks and costs, and keeping customers happy.
What is Shopify?
Shopify is a tool on the internet that helps you sell things...but I'm guessing you're already familiar with Shopify IF you're reading this post! People all over the world use Shopify to run their online shops. It's easy because it's in the cloud so you pay each month but don't need any software installed on your computer.
You can list different items for sale and show how many of each item you have. If you want more than one person to see what they bought, Shopify will let everyone see that info for up to 90 days past.
Can Shopify Handle Inventory?
Yes, Shopify can handle inventory. It has built-in features for this task. You can add, take away, or change products in your stock natively within Shopify. This is great if you are a new business or have a relatively limited number of SKUs/ items you sell.
But as your sales grow, you may need more help with keeping track of all the things in your shop. So even though Shopify is good at managing inventory, you might need more advanced tools if your businesses get bigger and busier.
5 Limitations of Shopify Inventory Management
Shopify Inventory Management has several limitations, including limited tracking capability, lack of multichannel functionality, restricted data and insights, and problems with the restock process.
1. Limited tracking capability
Shopify's tracking feature has limits. It only keeps data from the last 90 days. This is not enough time to get a good look at your sales trends. Also, it does not update stock levels in real-time across all online and offline stores.
You may sell out of an item but still show it as available on your site. As a result, you might lose trust with customers if they order something you don't have in stock.
2. No multichannel functionality
Shopify has a big problem. It does not work well with multiple sales channels at once. This is called "no multichannel functionality." Your Shopify store cannot talk to your other selling platforms or systems like Amazon or Etsy.
So, when you sell something in one place, the others do not know about it. You have to tell them yourself by changing the stock levels. This takes a lot of time and can lead to mistakes.
It gets even worse if you use third-party fulfillment services for some items because Shopify just can't handle transfers for these products! For fast-growing businesses who want to keep all data in one place, this is a real pain point.
3. Limited data = limited insights
Limited data in Shopify inventory management can restrict the amount of information you have about your business. Without comprehensive data, it becomes challenging to gain insights into various aspects such as stock levels, customer demand, and sales trends.
This lack of insights can hinder decision-making and make it difficult to identify opportunities for growth and improvement. By investing in a robust inventory management system that provides real-time updating and comprehensive analytics, you can overcome this limitation and gain valuable insights that will help you optimize your operations and drive better results for your Shopify business.
4. Limited restock process
Shopify's inventory management system also has limitations when it comes to the restocking process. Restocking is the act of replenishing inventory levels after a product has been sold.
With Shopify, there are constraints on how this process can be managed efficiently. This limitation can lead to delays in restocking products, which may result in stockouts and dissatisfied customers.
Efficient restocking is crucial for maintaining a healthy supply chain and meeting customer demand promptly. It is important for businesses to consider these limitations when managing their inventory on Shopify and explore other tools or strategies that can help streamline the restock process effectively.
5. Problems with POS
Shopify's Point-of-Sale (POS) system can experience some problems when it comes to inventory management. For example, there may be limitations in tracking capabilities, making it difficult for businesses to keep an accurate record of their stock levels.
Additionally, the POS system might not have multichannel functionality, which means that businesses using multiple sales channels may face challenges in managing inventory across all platforms.
Another issue is limited data and insights available through the POS system, which hampers decision-making processes. Lastly, restocking inventory might also pose difficulties within the Shopify POS system.
The Need for Inventory Management Outside of Shopify
Inventory management is necessary for Shopify businesses to maintain inventory control, provide exceptional customer service, ensure quality assurance, and optimize inventory levels.
Importance of inventory control
Inventory control is crucial for any business, especially those using Shopify. By effectively managing inventory, businesses can ensure that they have the right products available when customers need them.
This leads to improved customer service and satisfaction. Additionally, proper inventory control helps businesses optimize their inventory levels, preventing overstocking or understocking issues.
This not only reduces costs but also increases profitability. Furthermore, having accurate data on inventory allows businesses to make informed decisions about purchasing and restocking, leading to more efficient operations and better overall financial performance.
Customer service
Good customer service is essential for any business, including Shopify retailers. When it comes to inventory management, providing excellent customer service is crucial. By having proper control over your inventory, you can meet customer needs effectively and avoid unfulfilled orders.
This helps in building trust with customers and ensuring their satisfaction. With optimized inventory levels and accurate tracking, you can prevent stockouts or delays in fulfilling customer orders, ultimately improving the overall customer experience.
Having efficient inventory management processes in place contributes to happy customers, increased sales, and higher profits.
Quality assurance
Quality assurance is a crucial aspect of inventory management. It involves ensuring that the products you have in stock meet the highest standards of quality before they are shipped to customers.
By implementing effective quality control measures, you can minimize the risk of selling faulty or defective items, which can lead to customer dissatisfaction and returns. Quality assurance also helps maintain your reputation as a reliable and trustworthy business.
By regularly inspecting your inventory, conducting product testing, and addressing any issues promptly, you can ensure that your customers receive high-quality products every time they make a purchase from your Shopify store.
Optimized inventory levels
Optimizing inventory levels is crucial for the success of your Shopify business. By carefully managing your inventory, you can determine sales, profits, and keep your customers satisfied.
With optimized inventory levels, you can avoid stockouts and unfulfilled orders, ensuring that you always have enough products on hand to meet customer demand. This not only improves customer service but also helps in maintaining quality assurance by reducing the risk of deadstock or spoilage.
By implementing effective inventory management strategies, you can strike the right balance between overstocking and understocking, reduce costs, and improve overall efficiency in your business operations.
7 Core Benefits of Using 3rd Party Inventory Management Systems with Shopify
Using an inventory management system can streamline processes, sell on multiple channels, keep data in one place, reduce risks and costs, and keep customers happy. Read on to discover how it can transform your Shopify business.
1. Streamline processes
Implementing an inventory management system can help streamline your business processes. By automating tasks such as stock tracking, order fulfillment, and reporting, you can save time and reduce errors.
With real-time updates on inventory levels and sales data, you'll have a clear view of what products are selling well and which ones need restocking. This allows for better decision-making and improves overall efficiency in managing your Shopify business.
2. Sell on more channels
Selling on more channels is an important strategy for Shopify businesses. By expanding your reach beyond just your website, you can tap into new customer bases and increase sales opportunities.
With the right inventory management system in place, you can easily manage and synchronize inventory across multiple channels like online marketplaces or brick-and-mortar stores. This means that no matter where a customer makes a purchase, the product availability will be accurate and up-to-date.
Selling on more channels also allows you to diversify your revenue streams and reduce dependency on a single platform. It's a great way to expand your business and maximize your potential for growth.
3. Keep data in one place
Using an inventory management system allows you to keep all your data in one place. This means that you can easily track and manage your inventory levels, sales, and customer information without having to switch between different systems or spreadsheets.
Having all your data in one place also makes it easier to generate reports and analyze trends, helping you make informed decisions about your business. With the right inventory management system, you can have a centralized view of your entire operation, which saves time and prevents errors caused by manual data entry.
4. Reduce risks
Implementing effective inventory management practices can help reduce the risks associated with inventory management. By having proper control over your inventory, you can avoid stockouts and ensure that you always have products available for customers, reducing the risk of lost sales opportunities and negative customer experiences.
Additionally, efficient inventory management can mitigate the risks of overstocking, which can lead to increased costs and product deterioration. With accurate tracking and forecasting, you can optimize your inventory levels, minimizing financial risks and maximizing profitability.
By using an advanced inventory management system, you can streamline processes, reduce errors, and improve overall efficiency in managing your Shopify business's inventory.
5. Reduce costs
Implementing an inventory management system can help businesses reduce costs. By efficiently managing inventory levels, businesses can avoid overstocking and understocking, which can lead to wasted resources and missed sales opportunities.
With accurate data and insights provided by the system, businesses can also make informed purchasing decisions, negotiate better deals with suppliers, and optimize their supply chain processes.
This not only reduces inventory carrying costs but also minimizes the risk of stockouts or deadstock. By streamlining workflows and automating manual tasks through the system, businesses can improve operational efficiency, save time and labor costs.
6. Keep customers happy
Proper inventory management is crucial to keeping customers happy. When you have the right products in stock and can fulfill their orders quickly and accurately, it helps build trust and loyalty.
Customers don't like waiting for their items or receiving the wrong ones. By effectively managing your inventory, you can ensure that you always have what they need when they need it.
This prevents stockouts and unfulfilled orders, leading to increased customer satisfaction and repeat business. It also helps protect your reputation by avoiding negative reviews or complaints about poor service.
7. Advanced Demand Forecasting
Some 3rd party inventory management products like Yosoku not only automate your inventory management, they also optimize your stock levels, forecast demand using AI, and help you automate the re-purchasing of new stock.
Three Main Types of Inventory Management Systems
There are three main types of inventory management systems: perpetual, periodic, and manual.
1. Perpetual inventory management systems
Perpetual inventory management systems are a type of inventory management system that provides accurate and real-time information about your inventory. With this system, you can track your inventory by scanning barcodes when products are sold or received.
This helps you keep track of how much stock you have at any given time, so you can avoid running out of popular items and reduce the chances for errors in your inventory records. In fact, studies show that an effective IMS with RFID tags can reduce out-of-stocks by up to 80.3% and increase inventory accuracy to 99.9%.
So if you want to stay on top of your inventory levels and make sure you always have the right products available for your customers, a perpetual inventory management system is a great investment for your business.
2. Periodic inventory management systems
Periodic inventory management systems involve physically counting the inventory at the beginning and end of a specific period, like a month or a year. These systems are used to calculate the cost of goods sold, which is the cost of all the items that have been sold during that period.
Unlike other inventory management systems, periodic systems do not give real-time information about how much inventory is left. Instead, businesses rely on these physical counts to figure out how much they have and what it's worth.
Small businesses or those with lower turnover rates often use this type of system.
3. Manual inventory management system
A manual inventory management system involves tracking and recording inventory levels by hand. This means physically counting and keeping records of the stock you have on hand. However, this method can be prone to human error and is generally less efficient compared to automated systems.
With manual inventory management, you may need to regularly conduct physical counts of your inventory to ensure accuracy. This can be time-consuming and may lead to discrepancies in stock levels if not done frequently enough.
Must-have features of Inventory Management Systems in 2023
Inventory Management Systems must have real-time updating, assist in multichannel sales, provide demand forecasting, and include POS functionality.
1. Real-time updating
Real-time updating is an essential feature for inventory management systems in Shopify businesses. It allows you to have accurate and up-to-date information about your inventory at all times.
With real-time updating, you can track your stock levels as they change in real-time, preventing stockouts and unfulfilled orders. This helps increase efficiency and profitability for retailers.
By having immediate access to the most current information, you can make better decisions regarding purchasing, restocking, and fulfilling customer orders.
Using technologies like RFID tags or barcode software enables real-time updating by providing instant visibility into your inventory status. RFID tags use radio frequency to search for and identify inventory items, while barcode software allows for precise record-keeping and faster control of your inventory.
These tools help reduce errors and improve overall inventory accuracy. With real-time updating in place, you can avoid overstocking or understocking issues that may affect customer satisfaction or cash flow.
Properly managing your inventory with real-time updating is crucial for ecommerce businesses as it boosts operational efficiency by preventing decreased employee productivity and poor time management.
With accurate data on hand at all times, you can streamline processes, make informed decisions based on comprehensive analytics, and ensure that your customers receive their orders promptly without any complications.
2. Assists in multichannel sales
Having an inventory management system that assists in multichannel sales is crucial for Shopify businesses. This means that the system can help you sell your products not only on your Shopify store but also on other channels like Amazon, eBay, and social media platforms.
By expanding your reach to multiple channels, you can increase your sales opportunities and customer base. With an inventory management system that supports multichannel sales, you'll be able to manage all of your orders, inventory levels, and fulfillment processes from one central platform.
This streamlines operations and ensures accurate stock updates across different channels, reducing the risk of overselling or underselling items. Additionally, comprehensive reporting and analytics provided by these systems allow you to gain insights into how each channel is performing so that you can make data-driven decisions to optimize your sales strategy.
3. Demand forecasting
Demand forecasting is a crucial aspect of inventory management systems for Shopify businesses. By accurately predicting customer demand, retailers can optimize their inventory levels and avoid stockouts or excess inventory.
This helps reduce missed sales opportunities and lower warehouse costs. With the help of advanced analytics and historical data, demand forecasting allows businesses to make informed decisions about when to order new products, how much to order, and which channels to prioritize.
It also helps in managing seasonal fluctuations in demand and improving overall supply chain efficiency. By implementing effective demand forecasting practices, Shopify businesses can ensure they have the right products available at the right time, keeping customers happy and maximizing sales potential.
4. POS
POS (Point of Sale) is an important aspect of inventory management for Shopify businesses. It helps merchants track and manage sales right at the point of purchase, whether online or in-store.
With a POS system integrated into their business, Shopify store owners can easily process transactions, keep track of inventory levels in real-time, and generate comprehensive reports on sales and stock data.
This allows for better decision-making when it comes to restocking products, managing customer orders, and optimizing inventory levels to meet demand. By utilizing a POS system, Shopify merchants can efficiently streamline their operations and provide a seamless purchasing experience for their customers.
5. Artificial Intelligence
Incorporating Artificial Intelligence (AI) capabilities into inventory management systems is becoming increasingly important for Shopify businesses in 2023. AI can provide advanced insights and automation that enhance inventory management processes.
AI algorithms can analyze historical sales data, market trends, and external factors to offer more accurate demand forecasting. This can help businesses optimize inventory levels, reduce excess stock, and prevent stockouts, ultimately leading to improved customer satisfaction and cost savings.
Furthermore, AI-powered algorithms can dynamically adjust pricing and promotions based on real-time market conditions and competitor pricing, maximizing revenue and profit margins.
AI can also assist in identifying patterns of product demand, seasonality, and customer preferences, allowing businesses to tailor their inventory strategies more effectively. By utilizing machine learning, inventory management systems can continuously improve their accuracy and efficiency over time.
Overall, integrating AI capabilities into inventory management systems empowers Shopify businesses with data-driven decision-making, operational efficiency, and the ability to adapt to changing market dynamics.
How to Choose the Right Inventory Management System
When choosing the right inventory management system for your Shopify business, consider factors such as your business's requirements, pricing, integrations with other systems, usability, and customization options.
Your business’s requirements
To choose the right inventory management system for your business, consider factors such as the size of your business, its capacity to handle inventory, and the type of products you sell.
You should also think about pricing, integration with other systems you use, usability of the software, and customization options. Implementing an inventory management system that meets these requirements will help streamline processes and reduce costs while keeping your customers happy.
Pricing
Choosing the right inventory management system for your Shopify business also involves considering pricing. Different systems may have varying pricing structures, such as monthly subscription fees or transaction-based costs.
It's important to evaluate how the pricing aligns with your budget and expected return on investment. Keep in mind that while cost is an important factor, it shouldn't be the sole determinant for selecting an inventory management system.
Consider all aspects of the system, including features, integrations, and usability to ensure you're getting value for your money.
Integrations with other systems
Integrating your inventory management system with other systems is crucial for efficient operations in your Shopify business. By integrating with ecommerce platforms and in-store POS, you can optimize inventory levels, streamline order fulfillment, and improve overall inventory control.
These integrations help reduce missed sales, detect issues early on, lower costs, and enhance supply chain management operations. It's important to consider the availability of integrations for future business needs, as they will play a significant role in ensuring smooth communication and seamless retail operations.
Usability
Choosing an inventory management system for your Shopify business is not just about its capabilities; usability plays a crucial role as well. It's important to find a system that is easy for your team to learn and use effectively.
This ensures that everyone can quickly adapt to the system, saving time and minimizing errors. Customization is also essential, as it allows the system to seamlessly sync with your business's setup and meet specific needs.
By prioritizing usability, you can streamline your inventory management processes and maximize the benefits of using an inventory management system.
Customization
Customization is an essential aspect of choosing the right inventory management system for your Shopify business. Every business has its unique setup and requirements, so it's crucial to find a system that can be tailored to meet your specific needs.
By customizing the system, you can ensure that it seamlessly syncs with your existing processes and provides the necessary tools and features to optimize inventory control. This way, you can have greater control over stock levels, streamline workflows, and improve overall efficiency in managing your inventory.
Customization allows you to adapt the system according to your business's size, industry, and growth goals, making it a key factor in successfully implementing an effective inventory management solution.
Top Inventory Management Systems for Shopify in 2023
Here are some of the leading inventory management systems recommended for Shopify:
1. Yosoku
Yosoku is a state of the art back-office automation platform for ecommerce sellers powered by advanced artificial intelligence capabilities. It was originally designed specifically for mid stage Shopify businesses but is a great tool for any Shopify seller doing over $100K/yr in annual sales. Yosoku integrates with your entire tech stack and automates every aspect of your inventory tracking, reporting, and management lifecycle.
Yosoku goes above and beyond basic inventory management features by including things like automatic KPI tracking, cashflow forecasting, automatic PO and replenishment support and so much more.
Yosoku is priced competitively for early to mid-stage sellers and is the easiest and fastest to setup and use.
2. Brightpearl
Brightpearl is a retail operations platform that offers inventory management specifically designed for Shopify businesses. With seamless integration, Brightpearl allows you to sync your inventory effortlessly with your Shopify store.
It offers advanced automation features, making it easier to manage and track your inventory in real-time. Brightpearl also provides built-in CRM (Customer Relationship Management) and accounting capabilities, ensuring all aspects of your business are centralized and streamlined.
By using Brightpearl, you can have better control over your inventory, improve efficiency in managing orders and shipments, and enhance overall customer satisfaction.
3. Skubana
Skubana is a software program that helps retailers manage their inventory. It is designed to increase efficiency and profitability by preventing stockouts and unfulfilled orders. Skubana offers features like demand forecasting, low stock alerts, and supplier management.
It integrates with Shopify, providing real-time updates on inventory, orders, and fulfillment. With Skubana's help, businesses can reduce out-of-stocks by up to 80.3% and improve inventory accuracy to 99.9% using RFID tags.
4. Skuvault
SkuVault is a top-rated inventory management system for Shopify. It is a software designed specifically to handle physical products and efficiently manage inventory control. SkuVault helps businesses keep track of their stock levels, streamline processes, reduce costs, and ensure customer satisfaction.
With its comprehensive reporting and analytics capabilities, SkuVault provides valuable insights into inventory performance and helps businesses make informed decisions. It also integrates seamlessly with other systems, making it an excellent choice for businesses looking to optimize their inventory management process.
5. Ecomdash
Ecomdash is one of the top inventory management systems for Shopify. It helps businesses increase efficiency and profitability by meeting customer needs and avoiding stockouts and unfulfilled orders.
With Ecomdash, manual data entry and spreadsheets are eliminated, providing efficient inventory control. It can be easily integrated with Shopify through the Brightpearl Shopify app.
Ecomdash is a solution that helps optimize inventory levels and overcome inventory management challenges, making it an essential tool for businesses using Shopify as their ecommerce platform.
Conclusion
Inventory management is not just important for your Shopify business, it's essential. It helps you avoid stockouts, meet customer demands, and optimize profits. By implementing the right inventory management system and best practices, you can streamline processes, reduce costs, and keep customers happy. Don't underestimate the power of inventory control - it can make or break your business success on Shopify.
FAQs
1. What is inventory management in a Shopify business?
Inventory management in a Shopify business controls the product inventory. It helps to track products, manage vendor relationships, control stock discrepancies and handle the demand-supply balance.
2. Why do we need an Inventory Management System (IMS) for retail businesses?
An IMS is needed to manage online and offline sales, run warehouse operations and replenish stocks based on customer needs. This can boost sales and profits.
3. How does technology help in inventory control methods?
Technology like Inventory Control Software or Radio Frequency Identification Tags (RFID) make it easy to track goods sold and left over in your stockroom. This ensures accurate daily average usage data, which helps with planning future orders.
4.What challenges come with manual inventory management systems?
Manual systems can lead to errors like incorrect purchase orders or missed restocking points causing items to be out of stock frequently affecting overall profits.
5.How does using software applications such as ShipHero or Yosoku aid merchants' growth?
Using tools like these allow high-growth merchants to align multichannel sales better while automating processes such as order assignment, volume forecasting ensuring smooth business requirements fulfillment.
6.What role does Shopify Plus play assisting scalable inventory management platform?
Shopify Plus provides comprehensive analytics reporting along with features for shared base inventory across listings making it easier during seasonal demand fluctuations maintaining equilibrium avoiding shipping delays.