• xianchaologistics

Importance of Inventory Management - Boost Customer Satisfaction and Save Costs with These Practices

Updated: Jul 6

Being a dropshipper means you do not have direct access to warehouses and inventory. However, that does not mean that there is nothing you can do about it to safeguard your business. As dropshipping is a form of retail models, stock plays an important role in the success of the business, and adopting good inventory management (also called stock control) practices helps you to maximise your potential.


Let’s first discuss the benefits of inventory management.


1. Improved customer satisfaction



In many cases, slow delivery in dropshipping industry is attributed to understocking, and stock control helps you to avoid it as much as possible. As a result of lower stock-out rate and faster fulfillment process, customers are happy and more likely to shop with you again in the future. Moreover, by consistently keeping your promise with the customers and meeting their expectations, you will build yourself a strong reputation in the marketplace.


2. Enhanced efficiency and productivity


Having an effective system to manage your stock helps to reduce uncertainty and promote clarity. In particular, it helps the involved parties such as suppliers and agents understand their tasks and responsibilities. This would allow them to have a good picture of the current inventory status and focus on their assigned tasks to deliver you the best experience and outcome. Furthermore, utilising a good inventory management system significantly reduces time used for manual processes such as stock count.


3. Time-saving and cost-effectiveness


In addition to understocking, inventory management also helps you steer away from overstocking. This saves you time and costs associated with labor and warehousing (e.g. storage, stock count, maintenance, and transportation within the warehouses), and other hidden costs such as loss of profit due to the goods being obsolete or damaged.


4. Better performance management and use of business analytics



As stock control encourages you to keep a good record of your goods inflows and outflows, you would be able to better monitor your sales and performance, especially when you have stores across different channels. Moreover, the data can also be used for business analytics and intelligence, which assists you in the decision making process. In particular, some questions that it could help you answer include:

  • Where do your goods go? Who do they serve?

  • What are some hot selling products for you to sell to maximise your profits?

  • What items are underperforming? What should you do about it?

  • What products are repeatedly purchased by customers?


5. Higher accuracy


Dropshipping industry is way more complicated than it seems to many people, especially the fulfillment process. There are numerous ways that things could go wrong. For example, customers are informed that the items they purchase are out of stock, when they, in fact, are not. Most of the time, this happens because of poor inventory management. Not only does this cause you to lose revenues, but it also harms your reputation. Another issue that could arise in the process is storage of returned items. Good practices of stock control would place the products in the right locations in order for them to be resold (or not, for spoiled items).


What are some good practices for inventory management?


1. Perform market research and forecasting



In order to better control your inventory and avoid stocking the unnecessary, you first must have a good understanding about consumer preferences and your stores. Some important factors that you should pay attention to include:

  • Seasonal sales and fluctuations

  • Performance of certain products within your stores and the market at large

  • Past and current sales and statistics (e.g. quantities, growth rate)


2. Frequently update stock levels and their particulars


By dedicating initial efforts to maintain an accurate record of your stock, you will save many resources in the long run. This includes recording types and quantities of incoming and outgoing parcels as well as their expiry dates (if applicable). Furthermore, you should also determine the minimum and maximum stock levels as well as how much and how often they should be restocked within a time period. For example, the stock levels of Christmas-related items should be generally higher than average during the last quarter of the year.


3. Utilise a system that helps you manage returns and exchanges


You can either find a system on the Internet or create one yourself. It would help you better handle your stock as well as identify the problems with your sales. For example, the system might include the items being returned/exchanged, dates, their categories, and reasons for the returns/exchanges. This would help to find solutions for similar issues if they arise in the future or prevent them from occurring in the first place. Also, it enables you to manage your overall stock level.


4. Keep track of supplier performance



This is especially important when you work with multiple suppliers. Some metrics that you should closely monitor include:

  • Delivery time

  • Compliance of terms and conditions on contracts/agreements (e.g. quality, frequency of supplies shipments)

  • Pricing variances

  • Customer support


5. Work with dropshipping agents that utilise inventory management software


With more automation in the management process, accuracy is enhanced and time is saved. For instance, at Xianchao Logistics, we use Dianxiaomi to manage our inventory. Additionally, working with a trusted dropshipping agent also takes your burden off many of the tasks above such as keeping track of supplier performance as they are also in charge of liaising and negotiating with factories.


With over 30 years of logistics experience, Xianchao Logistics began to branch out to serve the dropshipping industry in 2015. With our experience in logistics fulfilment and close relationships with suppliers, our company has risen to help different dropshippers grow their businesses over these years. We believe that our company’s success and growth will only come with helping our clients grow. Do you have a dropshipping business to grow? Discuss with us and let’s get started ASAP!


#GrowWithXianchao #UseXianchaoWisely

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