E-Commerce Inventory Management

Stock is cash on a shelf. You will set par levels and review the costliest items first, seeing stock as tied-up cash that deserves regular attention.

• Too little loses sales; too much ties up cash and spoils.
• Costs: purchase, storage, loss, capital.
• Goal: enough, not extra.
• Know your lead time.
• Set a written par level for every item, for example 20 units of a fast seller and 4 of a slow one, so anyone on shift can see at a glance what counts as low.
• Review the five costliest items weekly and the rest monthly, because a few lines usually hold most of the money tied up in stock.
• Write down your top five sellers and their lead times.
• Mark shelves with item codes and picture labels.

Activity. List holding costs for three items.

Standard to meet. State the costs with currency.

Common mistake. Ignoring holding cost.

Check yourself. What do you hold too much of?

Every item needs one name, one code and one place. You will give each item one code and each shelf one label, so every product has a single name and a findable place.

• Unique code, name, size, unit, supplier, cost.
• Locations: shelf, row, bin labels.
• One item, one home.
• Keep the list in one spreadsheet.
• Give every item one unique code and one description, such as BOLT-M8-50 for a box of fifty, so the same product is never counted under two names.
• Record each shelf, bin and bay with a short label like A-02-3 and mark it physically, so a new team member can find any item in under a minute.
• Count one shelf each day instead of everything at once.
• Record each stock difference and its cause.

Activity. Create the item list of 20 products.

Standard to meet. Remove duplicates and fill all fields.

Common mistake. Two codes for one item.

Check yourself. Any duplicates?

Counts keep records honest. You will run daily cycle counts of one aisle and trace the cause of each difference, keeping records trustworthy without a shutdown.

• Count by shelf, one person counts, one checks.
• Compare with the record.
• Investigate differences before adjusting.
• Accuracy = correct lines / all lines.
• Run a cycle count on one aisle each day instead of a full yearly shutdown, comparing the shelf to the record and noting every difference above two units.
• Investigate each difference by checking the last three receipts and issues before changing the number, and write the cause beside the correction.
• Plan extra stock before big sales dates.
• Check supplier delivery times quarterly.

Activity. Complete a full count and record accuracy.

Standard to meet. Calculate accuracy and write the causes.

Common mistake. Adjusting the record without finding the cause.

Check yourself. What caused your count gap?

Look at the past to plan the near future. You will forecast next month from twelve months of sales, adjust for known events, and measure the miss so the method improves.

• Average weekly sales over 4 to 8 weeks.
• Adjust for known events.
• Do not trust a single week.
• Round to pack sizes.
• Use the last twelve months of sales by month, then adjust for known events such as a seasonal peak, to estimate next month rather than copying last month alone.
• Compare forecast with actual each month and calculate the gap as a percentage; if you miss by more than 20 percent twice, change the method.
• Keep damaged goods apart and logged.
• Photograph shelf layouts before changes.

Activity. Forecast demand for 10 items.

Standard to meet. Forecast explained.

Common mistake. Using one week to forecast.

Check yourself. How many weeks do you average?

Order when stock reaches the reorder point. You will calculate a reorder point from usage, lead time and safety stock, and write the rule where staff can follow it.

• Reorder point = daily use x lead time + safety stock.
• Safety stock covers surprises.
• Order quantity: pack size, price breaks, space.
• Review monthly.
• Calculate reorder point as daily usage times supplier lead time plus a safety margin; for example 6 a day times 5 days plus 12 spare gives a trigger of 42.
• Write the rule on the shelf label or in the sheet, with the order quantity and the supplier, so the reorder does not depend on one person's memory.
• Set a maximum stock level for each item.
• Review prices if stock is slow.

Activity. Set reorder points for 20 items.

Standard to meet. Apply the formula correctly.

Common mistake. Ignoring supplier delays.

Check yourself. What is your lead time range?

Good storage cuts loss. You will arrange shelves by weight and speed and apply first in, first out, cutting damage, expiry loss and picking time.

• First in, first out for dated goods.
• Heavy low, light high; label clearly.
• Protect from damp, heat, pests.
• Keep damaged and returned stock apart.
• Store heavy and fast-moving goods between knee and shoulder height. Keep aisles clear and wide enough for quick, safe picking, and check your local safety rules.
• Use first in, first out by placing newer deliveries behind older ones and marking dates on cartons, so older stock leaves before it expires or fades.
• Use a simple traffic-light status for stock.
• Train new staff on counting rules.

Activity. Reorganise a shelf and photograph.

Standard to meet. Check that the layout meets the safety checks.

Common mistake. Stacking heavy items high.

Check yourself. Is your shelf safe?

Spot stock that is not selling or vanishing. You will flag items with no movement in ninety days and measure shrink by cause, deciding what to discount, return or write off.

• Turnover = cost of goods sold (what you paid for the items you sold) / average stock value.
• Slow movers: no sales in a set period, such as 60 to 90 days.
• Actions: discount, bundle, return, stop buying.
• Shrink: damage, loss, theft; track causes.
• Flag any item with no movement in 90 days and list it with its cost; decide to discount, bundle, return or write it off within a set month.
• Track shrink as a percentage of stock value each month, and compare breakage, miscount and theft causes so you fix the largest cause first.
• Keep a record of returns by reason.
• Share the monthly report with the team.

Activity. List slow movers and actions.

Standard to meet. Assign each slow mover a dated action.

Common mistake. Letting slow movers sit.

Check yourself. Which item is slowest?

Show owners the picture. You will build a one-page monthly stock report and pick one improvement with a target, so owners see the picture and trends.

• One page: accuracy, stock-outs, turnover, cash tied up.
• Three improvements.
• Share with the peer circle.
• Plan 90 days.
• Build a one-page monthly report with stock value, turnover, stock-outs and shrink, and keep the same layout each month so trends are easy to see.
• Choose one improvement per month, such as fixing the top five stock-outs, state a target number and check the result at the next review.
• Test your reorder rule on last month's data.
• Update the plan after each stock-out.

Activity. Write the health report.

Standard to meet. Report uses four measures.

Common mistake. Reporting without actions.

Check yourself. What is your top action?

A best seller runs out for 5 days.

Question: Cause and fix?

Model answer: Reorder point too low; recompute with real lead time and raise safety stock.

Boxes unsold for 6 months.

Question: Options?

Model answer: Bundle, discount, return to supplier or write off; stop reordering.

On the slide: L1 Basic · Basics of stock

Notes: Count items on a shelf and explain why stock records differ from the shelf. Notes: count ten items at home and compare with a list. Standard: differences explained.

On the slide: L2 Awareness · Awareness

Notes: Describe stock-keeping units, reorder points and safety stock. Notes: work out one reorder point from daily sales and lead time. Standard: correct arithmetic with units.

On the slide: L3 Foundation · Foundation

Notes: Set up a stock sheet for 20 products with counts, locations and reorder levels. Notes: spreadsheet only. Standard: no product without a count date and a level.

On the slide: L4 Practitioner · Practitioner

Notes: Run counts for two weeks, record sales and receipts, and flag low stock. Notes: practice data. Standard: record matches a count within 2%, or the gap is explained.

On the slide: L5 Specialist · Specialist

Notes: Set up and run stock control for 20 products for four weeks, with counts, reorder rules and a health report. Notes: report shows stock-outs, dead stock and shrinkage. Standard: stock-outs and shrinkage reported with causes and one fix.

On the slide: L6 Advanced · Advanced

Notes: Control stock across channels and warehouses with regular partial counts (cycle counts), supplier lead-time tracking and write-off rules. Notes: add an ABC ranking. Standard: cycle counts on schedule and write-offs approved and recorded.

On the slide: L7 Super expert · Super expert

Notes: Set the stock-count, reorder and shrinkage method and teach the stock controllers who use it. Notes: run a cycle-count audit on a set schedule and review variances and write-offs.