What Is Inventory Management and How Can It Be Improved in Times of Crisis?

When you run an e-commerce business or an online store, you know that one of the first things you need to focus on is inventory management -- that is, managing all the materials (goods, products, etc.) that you sell.

We all know that inventory refers to a certain quantity of goods intended for sale and stored in a warehouse or storage space until the moment of sale.

What Is Inventory Management?

Inventory management refers to the process of:

• Tracking products in stock
• Planning replenishment
• Optimizing inventory levels
• Minimizing storage costs

Challenges in Times of Crisis

1. Demand Uncertainty

• Unpredictable fluctuations
• Sudden changes in consumer behavior
• Forecasting difficulties

2. Supply Chain Issues

• Delays from suppliers
• Increased transportation costs
• Raw material shortages

3. Cash Flow Pressure

• Capital tied up in inventory
• Increased operational costs
• Need for liquidity

Improvement Strategies

1. Diversify Your Suppliers

• Do not depend on a single source
• Identify local alternatives
• Build relationships with backup suppliers

2. Implement Tracking Systems

• Real-time inventory
• Alerts for critical levels
• End-to-end visibility

3. Adopt the ABC Method

• A - High-value products (20% of products, 80% of revenue)
• B - Medium-value products
• C - Low-value products
• Focus on managing category A

4. Optimize Safety Stock

• Calculate based on demand variability
• Adjust for lead time
• Review periodically

5. Use Data-Driven Forecasting

• Analyze sales history
• Monitor market trends
• Adjust for seasonality

KPIs to Monitor

• Inventory Turnover - how many times inventory rotates
• Days of Inventory - days of available stock
• Stockout Rate - the rate of out-of-stock occurrences
• Carrying Cost - the cost of maintaining inventory

Conclusion

Efficient inventory management is critical in times of crisis. Invest in systems and processes for resilience.