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When to restock inventory: Popular methods and processes

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Kelli Trapnell

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December 19, 2023

Learn how to optimize your inventory management to increase profits and meet customer demand for your ecommerce business.

When you run an ecommerce business, smart inventory management is crucial to running a successful online store.

If your inventory levels of particular products are too high, you’ll likely need to liquidate products at low prices, reducing your profit margins. If they’re too low, you’ll run into stockouts, and miss out on customer orders that you otherwise could have filled.

In order to make sure that your inventory levels are in line with customer demand, it’s important to put strategies in place to help you determine when to restock. Here are some tips that can help.

Optimize your inventory accuracy

First of all, you won’t be able to know when to restock or not if you don’t even know your current inventory levels.

This is the case for many brick-and-mortar businesses, which take part in manual inventory tracking on a periodic basis—often, once a week or even once a month. The business has no visibility into day-to-day inventory levels, and this means that if certain products are out of stock, they will not be replenished until after the inventory tracking date. As a result, the business is likely to lose out on sales, and customers may decide to shop elsewhere.

Ecommerce businesses typically use software to support their inventory management. However, if they are selling products through multiple sales channels, and the ecommerce tools are not well integrated, you may still lack important real-time data around your inventory turnover, and fail to meet demand.

“Inventory accuracy” refers to the difference between your recorded and your actual inventory, and it’s a problem for many businesses: Auburn University’s RFID Lab found that the average inventory accuracy for businesses ranged from 65 to 75 percent.

To ensure that you can meet customer demand and avoid both oversupply and stockouts, it’s important to use inventory management software to help you improve your inventory accuracy.

Automating your inventory management

In order to maintain optimal inventory levels, it’s important to follow your entire supply chain — and that includes the post-purchase side (product returns).

The right inventory management solution should include:

  • Real-time data tracking
    Your inventory management software should integrate with all of your sales channels, including third-party sales channels such as Amazon and Ebay, updating in real-time each time a product is sold. It should also integrate with your returns management solution, so that you know when a product is on its way back to your warehouse for inspection and resale. By getting an accurate read on your inventory levels at all times, you’ll be able to set alerts to replenish supply once stock levels are low, helping you avoid stockouts.

  • Intelligent inventory allocation
    As your business grows, it will be important to maintain enough stock to supply customer demand across multiple warehouses, so that customers in different regions will all have access to fast shipping. As such, you’ll need to track inventory levels in each regional hub: If stock levels are low in one area and high in another, you can transport some of your excess stock to balance it out. The right inventory management software can automatically monitor stock levels across warehouses and authorize relocation based on demand.

  • Data-driven stock replenishment
    Your inventory management solution should provide demand forecasts, using analysis of historic customer demand to determine which types of products to stock at which times of the year, and how many you’re likely to sell in a given period of time. A data-driven approach will help you avoid both overstocking and stockouts, helping you ensure consistent stock levels for your customers. It should also respond to real-time stock levels — i.e., if a particular product went viral on TikTok and is selling fast — to alert you on when it’s time to reorder, even if it doesn’t fit past shopping patterns.

  • Real-time tracking across your supply chain
    Your inventory management tool should also integrate with your supply chain, so that you’ll be aware of when your manufacturer or carrier is running behind on a scheduled shipment. The system should make it easy for you to view historic trends in your order restocking, so that you’ll have a better sense of how accurate your suppliers are when you place orders with them, and can be confident in how quickly the products will be in your warehouse or on your store’s shelves. You’ll also be able to use this data to communicate with customers about stockouts or order delays, helping you improve customer satisfaction.

Why inventory management is so important

Accurate inventory management makes it easier for you to predict customer demand—and to easily respond to changes in demand.

If you’re seeing overstock on a particular product category, you can use that inventory data to determine which SKUs to discount in a special promotion, or to bundle with other items (“kitting”). You might also decide to sell some of your overstock to a third-party liquidation service to help you clear out old stock.

When you don’t have enough stock, you’ll be able to top-off your inventory levels quickly, with automated replenishment based on certain inventory levels. By using both historic data and real-time data to help you optimize your inventory restocking, you’ll be able to keep the right inventory allocation to ensure that you’re meeting customer demand without overstocking and risking “dead stock” (inventory that is no longer sellable because it’s expired or out-of-season).

By automating your inventory management process, you won’t need to risk falling victim to human error, and accidentally ordering 1,000 of a product when you only needed 100. You can pre-set restocking levels based on past trends and real-time data, ensuring that you maintain the right allocation to help you keep your store’s profit margins high.

You’ll also have better visibility into your inventory turnover ratio, so that you can manage your customer expectations wisely. If certain items are running low in stock, you’ll be able to let customers know “only 10 in stock—order soon”, so they don’t miss out on the item. Or, when stockouts occur, you can let customers know the product’s expected delivery date, so that they can decide whether they want to reserve the product on backorder.

Tying in the post-purchase experience

As we mentioned earlier, it’s also important that your inventory management solution integrates data from the post-purchase process. Anywhere up to 30 percent of ecommerce sales may end in a product return—so it’s crucial to understand whether those product returns are going back into inventory and can be resold, or not.

Using a returns automation solution like Loop can help. Loop develops a customized returns workflow based on the item type and condition: For instance, if the item is a cosmetics product that’s been opened, the customer can receive a refund for the unwanted product, but will not be required to send it back, as it cannot be resold. On the other hand, if the product is a curling iron that’s still in its original packaging, your return solution can automatically route the product return back to one of your warehouses for resale—and it can even select the warehouse location based on current stock levels.

By integrating your returns data with your inventory data, you’ll always have a holistic view of which products are coming back as returns, so that you can better predict your future inventory levels.

Loop also makes it easier to help you avoid overstock by encouraging ecommerce exchanges over refunds. When using Loop, shoppers can get instant access to store credit so that they can swap the product out for either a variant on the original item, or even choose any item in your store and pay the difference in price. This can help your brand improve customer satisfaction while helping you retain more revenue from the original sale.

By automating your inventory management throughout the supply chain, you’ll be able to build a data-driven inventory restocking process that helps you optimize for high profitability, efficiency, and customer satisfaction.

Want to find out how Loop can help? Get in touch for a demo.

Retain more revenue with Loop today

With Loop, your brand can offer everything from refunds to direct exchanges to shopper incentives and more. Even better? These exchanges build your business.