How Inventory Allocation Can Help Your eCommerce Business Grow

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Having an eCommerce platform is crucial to ensure business success in the current business world. The eCommerce market value has been rising year over year, and running an online store can be a lucrative venture. To build a sustainable, profitable, and scalable eCommerce business, inventory allocation becomes very important.

Poor inventory management can be a complex challenge to overcome for an eCommerce business. However, 3PL order fulfillment services can help manage and scale up your inventory and operations. Here is what you should know about how inventory allocation can help your eCommerce business grow.

What is Inventory Allocation?

Inventory allocation usually refers to strategic tracking of inventory levels across a given distribution network. Effective inventory allocation helps ensure that stock levels and storage costs are well regulated and optimized efficiently to meet customer demand.

Benefits of Inventory Allocation

The following are some of the benefits of inventory allocation to your eCommerce business:

1. Avoids Overstocking

Overstocking can be quite damaging for any eCommerce business. For small businesses, it can be fatal. When you have too much stock on hand, it becomes a waste of valuable warehousing space. Overstocking can also lead to increased carrying costs associated with warehousing, rent, insurance, and labor. When the inventory remains on the shelves for too long, losses can be accrued from the lost value of damaged, expired, or out-of-date products. To avoid overstocking, you need to exercise proper inventory allocation.  

2. Helps in Order Fulfillment

Having too little stock can be just as damaging to your eCommerce business as having too much. It's bad for your business to run out of items that customers would like to buy. It's even worse when you take orders from your customers and fail to fulfill them. About 70% of customers are less likely to buy again from an online store if an order is fulfilled 2 days late. It's usually important to make notes of a potential increase in orders to avoid overselling and running out of stock. A reliable third-party logistics (3PL) partner will offer you the best eCommerce fulfillment tools to help you allocate your inventory effectively and efficiently.

3. Deeper Understanding of Customer Behavior

With efficient inventory allocation, you ultimately learn more about your customer's purchase behavior. Inventory allocation gives you a clear picture of order distribution data that offers you insights into your customers' purchasing trends. Key customer data can help you not only to make better decisions on your inventory allocation but also helps you to understand your customers and their needs better.  

Factors to Consider when Allocating Inventory

Every eCommerce business has a unique set of needs when it comes to inventory allocation. No matter the size of your business, inventory allocation will help you to maintain supply chain efficiency. Here are some of the factors to consider when allocating inventory:

1. Inventory Demand

Demand forecasting is one of the most effective ways to allocate your stock and meet demand across your distribution centers and channels. Demand forecasting can also help you make better decisions related to other business areas, such as when to run a product promotion or hire more staff. Thus, when allocating inventory, make a clear consideration of the forecasted demand. If the demand is high, allocate more inventory and vice versa.

2. Availability of Inventory

A crucial consideration of the order fulfillment process is to ensure that products are stored at centers close to your customers' shipping destinations. Effective track of inventory availability ensures that you won't run into issues during the fulfillment process. As you expand into new markets and distribution channels, implementing technology to help you track inventory will help you save time and create a more efficient supply chain.

To avoid fulfillment problems, you may implement an inventory tracking system that connects to your online store and allows you to view all inventory products, fulfillment centers, sales channels, and your customers. Rakuten Super Logistics fulfillment platform helps eCommerce businesses track their inventory levels across their fulfillment center network in real-time.

3. Availability of Warehouse Space

It is important to consider the warehouse space available and its respective cost. Some businesses usually store inventory and fulfill customer orders from their homes until space is completely used up. In this case, it is more effective to work with a competent 3PL to store your inventory in one or multiple fulfillment centers close to your customers. Storage prices usually range from per unit or per-SKU, to a fixed fee for each shelf used, or even based on per square foot of the storage fulfillment center.  

Improve Inventory Allocation for Your eCommerce Business

To expand your business supply chain, you need to access real-time inventory tracking and data-informed decisions. Learn how Rakuten Super Logistics can improve your inventory management and fulfillment process all while lowering shipping costs and delivering fast and accurate fulfillment. Request a quote today.

Rakuten Super Logistics (RSL) is the leader in eCommerce order fulfillment services and freight brokerage. RSL offers national fulfillment services and a network of 15 US fulfillment centers located in Anaheim (CA), Atlanta (GA), Austin (TX), Chicago (IL), Denver (CO), Houston (TX), Las Vegas (NV), Miami (FL), Olean (NY), Reno (NV), Salt Lake City (UT), and Scranton (PA). Our state-of-the-art technology allows for integration with popular shopping cart platforms and online marketplaces including Amazon, Big Commerce, Channel Advisor, eBay, Magento, ShipStation, Shopify, Volusion, Walmart Marketplace, and WooCommerce.