How To Improve Inventory Accuracy For eCommerce Businesses

Accurate inventory records are the difference between a successful business and a failing one. When discrepancies abound, you lose profits and customers. While there’s no way to avoid them completely, there are strategies to help bridge the gap. Today we’ll cover the best ways to improve inventory accuracy for your eCommerce business.

What Is Inventory Accuracy?

Inventory accuracy, usually expressed as a percentage, is how well your recorded product levels match what’s on the shelf. Ideally, these numbers would be the same, but as every growing business knows, mistakes happen. This can be administrative error, damage, theft, issues with your eCommerce inventory software, and more.

You can calculate this percentage with an inventory accuracy formula:

(counted units / recorded units) x 100 = inventory accuracy

Now let’s see it in action. Let’s say you count 225 units in your stockroom, but your electronic records show 250 available units. You would use the inventory accuracy formula to find your percentage.

(225/250) x 100 = 90%

The higher the percentage, the more accurate your inventory management system. Maintaining a 100% accuracy rate is almost impossible, but most companies try to get as close as they can. Anything over 95% is considered a good inventory accuracy rate.

Why Does Inventory Accuracy Matter?

Avoiding inventory discrepancy is important for both you and your customers.

Prevents Stocking Issues

Accurate inventory data is the best way to avoid over or understocking. Without this information, you may find yourself ordering too many products, leading to a surplus of items you can’t get off the shelves. Dead stock drains your resources and takes up valuable warehouse space.

You can also have the opposite problem—selling out of a product without realizing it. This can cause backorders and unhappy customers as you scramble to fulfill their orders in a timely manner. But with the right technology and up-to-date inventory records, you can avoid these stocking problems.

Limits Order Delays

As we mentioned above, order delays are often the consequence of poor inventory tracking. A customer may order a product that’s listed as available, only for you to discover it’s not in the warehouse. Now you can’t fulfill their order on time.

With correct inventory information, you can improve customer satisfaction while providing on-time delivery. Quick and accurate fulfillment will help you minimize losses and keep your business running smoothly.

Improves Forecasting

Without inventory statistics, you can’t accurately gauge where you’re at with your business. You need to know if you’re meeting your goals or struggling to keep up with the competition. With this data, you can reduce operational costs and plan ahead for holidays and busy seasons.

What Causes Inaccuracies?

Maintaining a high inventory accuracy can have its challenges. For eCommerce businesses, this often stems from storing products yourself. When you’re in charge of storage, fulfillment, returns processing, and inventory management, there’s more room for things to go wrong.

Coupled with an inadequate (or non-existent) inventory management system, accuracy rates will plummet. Maybe your software is not advanced enough to keep up with your growing business. Maybe it can’t track stock across multiple locations. Or maybe you rely on a manual, unorganized system that makes counting stock difficult.

Another challenge is inventory shrinkage. This is where products seem to just disappear with no explanation. This can be due to theft, misplacement, damage, or a number of other reasons. Every company has to combat shrinkage, and it’s a driving source of inventory inaccuracy.

How To Improve Inventory Accuracy

There are many ways to increase your accuracy and inventory organization. The method you adopt depends on the size of your business and your available resources.

#1. Count Your Inventory

Keeping track of your inventory at the SKU level is crucial to maintaining accurate numbers. One method is cycle counting. Cycle counting is when you count a small selection of inventory on a regular basis to ensure your product levels match your records. Over time, you will eventually check all your goods.

It’s best practice to build these into your everyday operations schedule. By breaking it into bite-sized pieces, you save time and resources. You also avoid having to shut down operations for a day to complete a full count.

On top of this, you can perform an annual audit where you count all of your products at once. For high-value items, you may wish to schedule counts for them more often. By planning time to count and match your findings with your digital records, you can tackle discrepancies as they arise. Then you can update your records with accurate inventory data.

#2. Invest In Security And Training

If you’re struggling with inaccurate inventory, you may need to upgrade your security. Consider limiting who has access to your stockroom and installing more advanced security measures. Monitor your workers and share inventory management best practices.

You can also provide employee training. Give your workers clear guidelines and checklists for handling, counting, and reporting products. On top of this, make sure you establish systems of accountability. These upgrades should limit administrative error and reduce employee theft.

#3. Optimize Your Warehouse

Another option is changing how you store your products. Improving inventory organization in your stockroom or warehouse works wonders in preventing shrinkage. This involves picking an inventory valuation method, such as FIFO or LIFO, to prioritize your goods.

No one wants to pay for products they can’t locate. Avoid stocking issues and misplacing items by optimizing your layout. Develop a system so products are easy to find, access, and identify. Keep your space clean and well-labeled to make your cycle counting that much easier. Take your inventory to the next level with a warehouse management system.

#4. Improve Returns Processing

The average return rate for an eCommerce business is 17.6%. No matter your industry, returns happen, but how you handle them is key. Tracking returned SKUs and monitoring when those items can go back in stock is no easy feat. Reverse logistics technology can help simplify the process.

Ensure that returned items aren’t just sitting around and that items marked in stock are actually available for sale. Managing your returned products efficiently also helps you maintain a strong relationship with your customers.

#5. Invest In Technology

You shouldn’t be tracking your product levels manually. Use the technology at your fingertips and upgrade your inventory management system and discover your best-selling or slow-moving items. This helps with demand forecasting and product insights so you can make informed decisions about your business.

Invest in barcode and RFID technology to increase efficiency, reduce manual entry, and limit errors. You can also use barcodes to label your storage containers. Integrate that with your eCommerce inventory software so all your inventory data is in one place.

There are dozens of eCommerce inventory softwares out there, but they all have similar functionality. They can integrate with Shopify, Amazon, and other eCommerce platforms while tracking items across multiple locations. Lean into automation to streamline the entire fulfillment process and speed up transactions.

#6. Partner With A 3PL

Knowing how to improve inventory accuracy on your own can be overwhelming. But when you partner with a 3PL, we use our professional warehouse technology and inventory management systems to help your business grow.

When you work with Jay Group, we ensure inventory accuracy rates of 99.9% while maintaining quality assurance. We will store, ship, and track your products for you. Rely on real-time data to plan ahead and know that you’re getting complete transparency in the entire fulfillment process.

Benefits Of Working With Jay Group

The first rule of eCommerce success is “be where your customers shop.” With a 3PL by your side, you can meet your customers where they’re at and know you have the inventory to back it up. But it’s more than that. When you work with us, we can help you: