Multichannel Inventory Management: Strategies & Best Practices

Multichannel inventory management is your centralized system for monitoring and updating stock levels across multiple sales platforms, such as online stores, marketplaces like Amazon, and brick-and-mortar shops. Its goal is to provide real-time, unified inventory data that helps you optimize sales, reduce costs, and enhance the customer experience.

In this guide, we’ll go through the process of multichannel inventory management—including helpful strategies, tips, software choices, and best practices—giving you the tools for all of your sales channels to succeed.

What Is Multichannel Inventory Management?

Multichannel inventory management is the practice of ordering, tracking, and controlling your stock in sync across various sales channels—including ecommerce platforms and physical retail locations. The objective is to maintain accurate, real-time inventory data that is consistent across all channels.

This approach is vital for small business owners in retail and ecommerce because it directly affects customer satisfaction and your business’s operational efficiency. Proper multichannel inventory management ensures customers can find the products they’re looking for, regardless of how they choose to shop, and it keeps your operation from running into snags caused by stock discrepancies.

How Does Multichannel Inventory Management Work?

Managing inventory across multiple sales channels—whether split between ecommerce platforms and physical stores, or within a multichannel online strategy—typically involves the following steps:

1. Inventory stock is ordered and received
2. Goods are checked into the inventory system, sorted, and stored
3. Customers place orders or shop in-store
4. Order fulfillment or checkout is completed
5. Inventory levels are updated in the system
6. Low stock levels trigger reorders or signal the need for replenishment

The process starts when you order products in bulk from your suppliers. Once received, these goods are checked into your inventory system before being sorted and stored in your warehouse, backroom, or retail shelves.

At this point, inventory syncing becomes critical. Your inventory management system will automatically update stock levels across all your sales platforms—ecommerce sites, marketplace listings, and physical stores.

Then, you may get an order from one of your customers online, which calls for order fulfillment and shipping. Or, if they’re shopping in-store, they’ll proceed to checkout and purchase the item using your point-of-sale (POS) system. In either case, this triggers a real-time update in your inventory management system, which automatically adjusts stock levels across all sales channels. This ensures all platforms have access to the most up-to-date info, maintaining consistency and preventing overselling.

Lastly, your system continually monitors stock levels. When inventory falls below a predefined threshold, it triggers either automated reorders or sends alerts for manual replenishment, keeping your sales running smoothly.

Multichannel Inventory Management Best Practices

Mastering multichannel inventory management is more than just keeping track of stock— it influences customer satisfaction, operational efficiency, and your bottom line. Take a look at these proven strategies to make the most of your inventory efforts.

Choose Carefully Between Perpetual vs Periodic Systems

While many small, single-channel retail stores are able to rely on periodic inventory management for simplicity, multichannel businesses generally benefit from a perpetual inventory management system.

Periodic inventory management refers to a system (often a manual one) that updates inventory levels at specific intervals—usually requiring a physical count, which involves labor-intensive tallying and verification. If a multichannel retailer uses this method, it risks stock discrepancies across channels and potential overselling, as well as additional steps to ensure consistency.

On the other hand, perpetual inventory management systems continually track stock levels (often after each sale) to provide real-time updates. They’re capable of syncing this data across multiple selling platforms, making them the better choice for effective multichannel inventory management.

Strategically Plan & Forecast Inventory Needs

Inventory planning is the practice of preparing for future stock requirements, and it plays a vital role in multichannel inventory management. Here’s a streamlined guide to the key factors involved:

• Historical Sales Data: Gather comprehensive reports of past sales and specific SKU (Stock Keeping Unit) performance to understand trends and customer behavior, then use this to guide inventory purchasing decisions.
• Forecasting: Use past and current data (along with seasonal trends both from your own store and the industry as a whole) to predict future sales and stock inventory accordingly.
• Competitive Analysis: Examine competitors’ pricing, promotions, and trends to inform your own strategy.
• Evergreen Inventory Management: Manage long-term, consistently selling items with monthly sales forecasts and bulk order projections.
• Lead Time: Account for the time between ordering a product and it being ready for sale. Knowing this helps avoid stockouts or overstocking.
• Pipeline Inventory: Track goods that are in transit or in production but not yet ready for sale. Manage this effectively to ensure product availability.

Get Your Staff Involved

Multichannel inventory management is a collaborative effort that requires the entire team’s engagement. From the sales staff to the fulfillment crew, everyone plays a role in maintaining an effective inventory system. Here’s are some best practices to get everyone on board:

Document Your Processes

Start by clearly documenting every inventory-related process. This should include guidelines for receiving products, fulfilling orders, resolving discrepancies, managing sales channels, and addressing stockouts. Having these procedures in writing helps create a standardized approach that everyone can follow.

Train & Develop Team Skills

Don’t assume that written documentation is enough. Consider running in-person training sessions or webinars to walk your team through these processes. A central knowledge base can be incredibly useful, but nothing replaces hands-on training. Cover all the aspects of multichannel inventory management, from the usage of your specific software to the basics like printing shipping labels.

Establish Communication Channels

Create a straightforward way for team members to report issues or inconsistencies they run into. This could be a digital ticketing system, a shared email inbox, or a dedicated Slack channel. For very small teams, it could even be a designated manager who is always available to talk to. Quick reporting and resolution of problems can prevent minor hiccups from becoming significant challenges that can lead to lost sales or unhappy customers.

Optimize Your Warehouse or Stockroom

Another key aspect of multichannel inventory management is effectively managing and planning your warehouse, stockroom, or other inventory storage area. Properly managed warehouses result in faster shipping times, fewer errors, and ultimately, happier customers. Get these key elements dialed in to ensure efficient inventory control:

• Stock Organization: Well-organized stock allows for easier order fulfillment, a more efficient workflow, and far fewer errors. You can use a combination of shelving units, pallets, and bins to make the most of your space, along with labeled SKUs, UPCs (Universal Product Codes), or QR codes.
• Pick and Pack Process: For multichannel ecommerce inventory management, efficient order fulfillment relies on quick picking and packing. Develop a streamlined approach for picking items from the shelves and packing them for shipment, and consider implementing batch or zone picking.
• Inventory Logging: Maintain a real-time inventory logging system that integrates with your overall inventory management software, or choose a comprehensive solution. This will help in keeping track of what is available and what needs to be reordered.
• Technology integration: Use technologies like barcode scanners and point-of-sale systems to enhance efficiency and accuracy. These tools can readily connect with your inventory management software, making real-time tracking more accessible.
• Scalability: As your business grows, your inventory management needs will evolve as well. Consider third-party order fulfillment services or robust inventory management software that can handle increased volume and complexity.

Benefits of Multichannel Inventory Management

Effective multichannel inventory management can be a game-changer for small retail stores. Here are some of the ways it can benefit your business:

• Streamlined Operations: Simplifies order fulfillment processes and minimizes manual errors, saving time and resources.
• Real-time Visibility: Automatically syncs inventory across all platforms, reducing stock discrepancies and lost sales.
• Improved Customer Service: Enhances delivery options and guides customers to in-stock items, boosting overall satisfaction.
• Competitive Edge: Keeps you ahead of the competition by offering a wider product selection and faster delivery options.
• Valuable Insights: Provides data for making informed business decisions, from inventory optimization to product selection.
• Cost Savings: Reduces money lost to canceled sales, and excess labor. Plus, some inventory software can even help minimize shipping costs.
• Business Growth: Facilitates expansion to new sales channels and customer segments.

Multichannel Inventory Management Challenges

Just as multichannel inventory management can be a big advantage for retailers, it’s essential to understand the hurdles that come with it. Here are some of the challenges you might encounter:

• Increased Investment: While good multichannel inventory management can ultimately save costs, the initial setup and ongoing maintenance of integrated systems demands an investment of both time and resources.
• Ordering Across Channels: Processing and fulfilling ecommerce orders across various channels is harder than just one, as prompt delivery and order accuracy becomes more complex as sales channels expand.
• Data Integration: Integrating diverse software and inventory systems for seamless operation can be complex. Compatibility issues and data transfer errors may be tough to work around.
• Demand Forecasting: Achieving accurate demand forecasting and striking the right balance in stock levels to meet fluctuating demand becomes more intricate with multiple sales channels.
• Customer Expectations: Meeting the growing customer expectation of a seamless shopping experience across all channels can be challenging. Consistency in product availability and customer service becomes a greater task.
• Scaling Complexity: As your business expands and introduces more sales channels, the difficulties of multichannel inventory management often intensify.

Choosing the Best Inventory Management System

While some retailers choose to use spreadsheets and manual labor to manage inventory across multiple channels, the right software can make all the difference. You’ll want a system that not only gives you a complete picture of your stock across all channels, but also keeps you updated in real-time with efficient syncing. Plus, having strong reporting features can help you make data-driven decisions that streamline your operations. Here’s what to look for:

Best Features in Inventory Management Software

• Multichannel Views: Ensure the software gives you a comprehensive overview of your inventory, whether it’s in a warehouse, a backroom, or an online storefront.
• Real-Time Updates: Look for a system that offers immediate updates on stock levels and sales. Some systems sync every few minutes, while others offer near-instantaneous updates.
• Integrations: A strong system should be able to seamlessly integrate with third-party online platforms, marketplaces like Amazon or Etsy, and POS systems to centralize your multichannel ecommerce management operations.
• Vendor Management: Choose software with strong vendor management capabilities, including order tracking, supplier evaluations, and automated reorder reminders or triggers. A centralized system will help improve pricing negotiations and streamline stock replenishment.
• Reporting & Analytics: Opt for software that provides in-depth reports, such as sales by product or channel, inventory valuation, cost of goods sold, and low-stock/out-of-stock products.
• Cloud-Based Access: Having cloud-based access allows you and your team to manage inventory from anywhere, ensuring that you’re always in the loop.
• Warehouse Management Capabilities: Especially when it comes to multichannel ecommerce inventory management, it’s helpful to have features to streamline organization and the pick and pack process, like bin and zone management.

7 Best Multichannel Inventory Management Software

Frequently Asked Questions (FAQs)

Here are some questions we typically get about multichannel inventory management.

What are some common inventory management solutions?

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How do you manage inventory across multiple locations?

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Why is multichannel inventory helpful?

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Bottom Line

Mastering multichannel inventory management is no easy feat. Multichannel ecommerce inventory management involves juggling multiple online sales platforms, each with its own set of requirements—but controlling stock between physical locations and online stores has the added complexity of coordinating real-world inventory with digital sales channels.

That being said, the right strategies, software, and best practices can help you use multichannel inventory management to maximize profits while ensuring a seamless shopping experience for your customers.