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A Shopify inventory management guide for 2022.

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Inventory Management
The Shopify logo shown on the left and the Shopify website is being used by a person on a mobile phone.

Consumers cite convenient delivery as a must-have. And 58% of customers have dropped ecommerce sites completely that are inconvenient to use or offer a subpar delivery experience.

That’s according to Linnworks research study about the effortless economy. The truth is these trends of a seamless and convenient shopping experience were already gaining momentum prior to the pandemic. However, the pandemic just accelerated it.

It turns out the key to thriving as a retail or ecommerce business lies in adapting to a Total Commerce approach, where you can manage sales and inventory across all of the channels you sell on an integrated platform.  

As you scale up, order volume grows, and you are on multiple channels, it becomes difficult to manage it all via Shopify’s native functionality.  
In this post, we’ll dive into the ins and outs of managing inventory for Shopify businesses, including when it might be time to switch to dedicated inventory management software

Why is it important to manage inventory on Shopify?

The pandemic accelerated online shopping to the point that the entire supply chain has been affected. 

In the US alone, more than 600,000 logistics industry jobs are projected to open up over the next decade. Demand continues to grow, and with unstable supply chains, there has never been a stronger need for efficient inventory management

Effective inventory management is crucial if you plan on running a successful ecommerce business. Poor inventory management means losing out on sales by not having the right products in stock or in the wrong location. Mismanaging your stock can also result in wasted money through overhead costs by having too much product on hand.

These are just a few of the inefficiencies that can be avoided through proper inventory management. 

What are the benefits to Shopify inventory management? 

Right out of the box, Shopify helps you manage your inventory directly through their platform. For some small retailers, the capabilities of the platform are more than enough to service their inventory needs. Others will need additional inventory management software, like Linnworks, to get the job done. 

Inventory tracking

Shopify lets you set up inventory tracking for each product in your store. You can toggle this option on and off. If you have an item that doesn’t need to have inventory tracked, for example, a digital download, then you can switch tracking off. However, most retailers will find this function useful. You can also decide whether or not to allow customers to purchase items that are out of stock.

Bulk inventory updates

Shopify is fairly flexible when it comes to managing inventory updates. The bulk editor is set up similar to a spreadsheet with rows and columns of data. This allows you to change inventory quantities for multiple variants and locations at once. You can also update product properties, add fields, and remove properties within the editor.

Fast fulfillment and shipping

Shopify lets sellers ship their products faster by assigning the best carrier for the items that have sold. Faster fulfillment and shipping almost always result in a happier customer. You can also connect your carrier account to your Shopify platform for calculated shipping and tracking.

Inventory forecasting

Forecasting demand is a pivotal part of ecommerce. Using insights and reports can help you track your sales amounts and order trends. Taking advantage of these insights can give you a better picture of how much inventory you’ll need to stock in the future.

Note: You’ll need a Basic Shopify Plan or higher to run certain inventory reports through the platform. Reports available will vary based on your plan’s features. For example, some plans allow you to track the quantity and percentage of inventory sold per day or view a month-end inventory snapshot. Reporting through Shopify also allows you to run an ABC analysis by product or view the product sell-through rate.

In our experience, the default reports in Shopify are fine when you are selling mainly on your website. However, as you scale, the reports become less helpful. And, it might be time to switch to dedicated inventory management software so you can get a holistic view. 

What are the features you should look for in Shopify inventory management software? 

Fortunately, no one expects you to handle complex inventory management on your own. Inventory management software has made it possible to ditch the old paper or Excel spreadsheets in favor of a more comprehensive and accurate solution. 

As you grow and add more channels to the mix, you’ll find that you can’t rely on Shopify’s inventory management alone. Unfortunately, by itself, the platform will not connect your inventory across multiple channels. This is where inventory management software that connects with Shopify comes in. 

Whichever software option you choose to use for your store, you’ll want to do your research and look for certain features, like the ones below, that can have a positive impact on your business.

Streamlined order management and shipping fulfillment 

Imagine having the right stock levels, in the right place, and at the right time whenever your customer makes a purchase. Utilizing inventory management software puts you a step closer to that reality. However, the nature of retail and the global economy will always put you at the mercy of supply chain disruptions and other factors out of your control.

For instance, one study revealed that supply chain disruptions caused by the pandemic were so extreme that they resulted in retailers shifting their priorities of supply chain management. From the 12 months leading up to COVID-19 to 2022, retailers went from focusing on cost efficiency and on-time delivery to prioritizing agility and speed. Agility with customization, scalability, and product launch speed saw the largest jump in prioritization, with 17% of executives ranking it as one of their top priorities in the supply chain before COVID-19 to a whopping 63% ranking since COVID-19.

This example goes to show that supply chain disruptions and external factors can have a major effect on the supply chain and fulfillment priorities. However, accurate inventory management helps you be as prepared as possible for external chances by optimizing your fulfillment process.

This also means you can avoid stock-outs, and the overselling that result from inaccurate stock level details can cost you customers. No one wants to email a customer issuing them a refund and apologizing because the item they bought was already out of stock when they made the purchase. This doesn’t just lose you the immediate sale but can cause frustration and the loss of a repeat customer. 

Multichannel software capabilities

If you sell on any platforms outside of Shopify, then you’ll benefit from using inventory management software that can track inventory across all sales channels alongside your Shopify store. 

If you aren’t implementing a multichannel strategy now, it’s time to reconsider. In 2020, multichannel retailers generated more than $350 billion in the United States, and this number is only expected to grow to an estimated $575 billion by 2023.

Multichannel ecommerce is a great way to diversify and grow your profits. Even if you aren’t currently utilizing a multichannel strategy, tracking your inventory with a multichannel inventory management software is setting your business up for success in the long term.

Purchase order process automation

Purchase order management capabilities are a valuable feature to have with inventory management software. Purchase order automation allows you to set up a purchase order approval process.

Essentially, if your stock dips below a certain amount or meets specific criteria set up by you, an automated purchase request would be sent to a designated team member for review and approval. Once approved, the purchase order is automatically created through the software. This eliminates the tedious process of tracking inventory to manually process a purchase order.

Inventory replenishment automation

Software that includes automated inventory management allows retailers to forecast projected sales and inventory levels. This means you can carry out inventory stock replenishment as needed. Having this level of control over your inventory replenishments allows you to avoid over or understocking your inventory.

Reporting and insight capabilities

In addition to forecasting, many inventory management software options, like Linnworks, include robust reporting and insights accessible through a single dashboard. 

For example, you can see trend lines on data that are compared to your previous years. This allows you to do inventory forecasting, so you can plan on how much inventory to keep on hand while also monitoring the financial health of your company.

Total Commerce overview

One of the top benefits of Linnworks inventory management software solution is the ability to see all of your commerce operations in a single platform. With as many apps and software options entrepreneurs use to run their businesses, it helps to keep as much information in one location as possible. Linnworks is a Total Commerce solution that integrates with Shopify for automated inventory management across all of your sales channels.

A high level of visibility gives you an accurate picture so you can track your inventory in real-time at any time. This will effectively streamline the entire inventory and ecommerce process. 

A Total Commerce platform can also reduce overall costs and expenses. This is because you’ll be keeping the optimal level of inventory on hand at all times with the use of sales forecasting and insights, so you aren’t wasting money on overhead, products that aren’t selling, or inefficient rushed shipping to get smaller quantities of product on hand to fulfill an order for an item out of stock or at the wrong location. Knowing which products are available will help eliminate wasted marketing funds, so you aren’t spending the budget on products that you don’t have to sell. 

A Shopify inventory management case study 

So, what does this look like at scale? 

Let’s take the example of the growing business, Gym + Coffee.

As Gym + Coffee added more locations and order volume increased significantly, managing their inventory in Shopify became cumbersome. They turned to Linnworks so that they could sync all of their inventory channels automatically and set up automated order routing based on warehouse location. This means they can sync order management, shipping and returns in one integrated system. 

Relying on Shopify’s platform to manage inventory works fine when you are small or only selling on a couple of sales channels. But as your business grows or if you are already in high-growth, you need to utilize an automated multichannel inventory management platform.

Find out about Linnworks Shopify integration

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