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What is Multichannel Inventory Management?

Time to read: 4 minutes

Whether your eCommerce company is small or large, it’s paramount to manage your inventory properly. Unfortunately, it does happen as it accounts for $2 trillion worth of losses worldwide. Overstocks, out-of-stocks, and preventable return issues are some of the leading inventory management issues. The stumbling blocks are doubly present, especially for companies that incorporate multichannel inventory management in their operations. 

Today, multichannel inventory management is almost a requirement for online retailers to remain competitive in a saturated market. Selling merchandise on multiple channels can become complicated without proper preparation and research. Learn more about multichannel inventory management, including common challenges within the process and the best practices to implement. 

What is Multichannel Inventory Management?

Today’s consumers are demanding and decisive, even more so for online shoppers. They are more discerning about their purchases as they can quickly go online and read reviews. This shift in consumer behavior encourages retailers to be present in multiple sales channels. 

Multichannel inventory management is the process of tracking and monitoring the ins and outs of inventory across various sales streams. This process includes keeping track of retailer orders, wholesale sales, and marketplace profits. 

Common Multichannel Inventory Management Problems

Offering merchandise across multiple sales platforms is strategic but challenging. Being present in various marketplaces provides retailers more avenues to reach their target market and possibly more sales. That said, the challenge lies in keeping track of inventory as it goes in and out of various streams. Below are common inventory management problems:

  • Overstocking

One of the most significant responsibilities of retailers lies in achieving the balance between overstocking and understocking. When it comes to multichannel inventory management, overstocking is a common problem because most online stores worry about running out of inventory to meet the demands. On the other hand, having too much stock on hand can be costly.  It can tie up capital on slow-moving merchandise, increasing the expense on storage and insurance rates.

  • Misuse of Available Space

Managing a multi-channel sales operation requires knowing the audience and stocking products that customers want. Failing to realize the in-demand items and stocking the warehouse with the wrong inventory can profoundly impact a retailer’s profit margins. Not only is there wasted warehouse space, but storage misuse can prevent an online store from stocking products that consumers want. An efficient multichannel inventory management system controls the accumulation of stagnant inventory and minimizes or prevents profit loss.

  • Overselling

On the other end of the problematic spectrum, a multichannel sales presence runs the risk of a retailer overselling products no longer in stock. Because visibility is difficult across multiple platforms, companies often take payments on items that are not readily on hand. It’s a serious concern especially considering how order fulfillment time and speed affect customer loyalty and satisfaction. Overselling can impact a retailer’s reputation and possibly decrease profit margins.

  • Failure to Expand Order Fulfillment Capacity

When a retailer expands its business to multiple sales channels, it is crucial to improve the order fulfillment capacity and expansion. More avenues to reach the customer means more potential to drive sales and profits. Unfortunately, not all companies realize the need to improve on the order fulfillment process.

As we mentioned earlier, being on various sales platforms may mean stocking inventory in different locations. Distributed inventory or splitting wholesale orders to different warehouses may lead to higher shipping costs. Moreover, monitoring stocks stored in multiple locations can pose problems in inventory visibility.

  • Delayed Shipping Times

The difficulty in locating an item across multiple warehouses can significantly affect each package’s order fulfillment duration. This problem may also lead to delayed shipping times. At present, 46% of online shoppers abandon their carts if deliveries take too long.  Getting new customers is always a good thing, but it might lead to order fulfillment and shipping problems if the company is not prepared.

  • Subpar Customer Experience 

Aside from shipping times, an inefficient multichannel inventory management system can affect customer experience. Without a solid management flow, retailers will find it challenging to connect with their customers and solve issues during the purchase process. Most consumers give online retailers only one shot to impress them with their service and products. After all, there are plenty of other merchants online. 

Multichannel Inventory Management Best Practices

A multichannel sales presence allows retailers to reach more consumers and increase profits. This profit avenue, however, is not without its challenges. Selling products across multiple platforms requires planning and diligence. Below are a few key factors that allow retailers to be present in various streams with ease: 

  • Centralize Inventory Management

Centralizing the inventory management system improves inventory visibility across multiple sales channels. Knowing what is in storage precisely prevents a retailer from overstocking and overselling. Visibility is at the heart of managing a multichannel presence.

  • Invest in Demand Forecasting

One of the cornerstones of effective multichannel inventory management is demand forecasting. Data doesn’t lie. Knowing exactly when to order a surplus to meet demand means that a retailer doesn’t miss out on the surge of orders. Investing in demand forecasting can increase profits. 

  • Choose the Right Investment Management Software

Choosing the right eCommerce inventory management software can make or break a retailer’s transition to a multichannel sales expansion. When it comes to inventory software, there is no one-size-fits-all. Besides checking the credibility of a third-party provider, it is crucial to consider the eCommerce operation’s intricacies before deciding. The products, location of the customer, sales platform presence, suppliers, fulfillment model, and expansion plans are factors companies need to consider before settling with the right eCommerce partner. 

Key Takeaways 

Multichannel inventory management is challenging. The risks of overstocking, overselling, and affecting customer satisfaction are ever-present. However, expanding to multiple sales platforms is the logical next step for eCommerce operations to reach customers.

Aligning yourself with a credible partner can help your business scale and grow with ease. We at ZhenHub developed several technology-based logistics solutions that can support your company’s growth. Sign up today or request a quote to learn more about how we can help you scale your eCommerce business. 

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