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E-commerce inventory management is critical for a business’s success, especially for companies that are growing quickly. Understanding the common challenges in inventory management and their solutions is essential. It is key for improving cash flow and reducing expenses, especially if it is a small business.

An e-commerce company’s approach to inventory management needs to account for its method of storing inventory. For example, a business can store inventory in its own warehouse or multiple warehouses at different locations. A company can also dropship products directly from the supplier to the customer.

Here are seven of the most common challenges in inventory management and how to help solve them.

1. Incorrectly Located Products

The most likely cause of incorrectly located products is a lack of any management software to track products in the warehouse. As a result, staff members spend an excessive amount of time locating a specific product during the order fulfillment process. 

Without proper inventory management in place, it can be very difficult to locate this product among the thousands that an e-commerce business typically stocks. It also increases the risk of selecting the wrong product, slowing your supply chain, and hurting your customer service.

One solution is to label each product with a quick response (QR) code or radio-frequency identification (RFID) tag. This approach helps employees quickly identify the desired product from its inventory via a handheld scanner. A light on the scanner will then indicate when workers have located the correct product, allowing them to pass this information to the sales team.

QR and RFID solutions save a great deal of time, shortening the sales cycle and improving customer satisfaction. Oftentimes an e-commerce platform can help with tags and codes to make it easier on an e-commerce business.

2. Obsolete Material

Virtually any e-commerce business experiences losses due to product obsolescence. This generally happens when a product becomes obsolete before it can be sold. Often this is typically because a newer product is developed and the demand wanes.

Those doing inventory management often abandon their control of these products over time, making them difficult to locate and sell. However, products that a business considers obsolete may have value for a customer who doesn’t need the features of a new model.

In this scenario, a company may not even be aware that it has the product in inventory storage. The customer will end up buying a newer product or nothing at all, allowing the older product to remain unsold.

A platform that helps with the inventory management process is highly useful for locating obsolete stock in inventory, allowing it to be sold or otherwise used.

3. Lack of Centralized Control

The storage of products in multiple geographically separate locations is a complicating factor in inventory management. Each location may keep its own data on its stock. This makes it more difficult to ship the order from the correct location, often resulting in shipping delays and supply chain issues. The lack of centralized control is one of the most persistent challenges in inventory management today, especially for enterprises with multiple warehouses.

A centralized hub, or e-commerce platform with a single inventory dashboard can greatly reduce the time and cost of maintaining multiple inventory locations. Placing inventory data in one place provides an e-commerce business with better inventory control. 

That allows it to quickly and effectively track the stock entering and leaving its warehouses. A lot of times this can be solved by utilizing a 3PL with technology to centralize data.

4. Limited Visibility

A poor inventory management system means that clerks must track products across multiple records, which tends to be tedious, time-consuming, and prone to error. These problems generally result in poor visibility over their inventory level.

Fortunately, even e-commerce startups can benefit from a 3PL provider that incorporates basic bookkeeping principles. Implementing such a system may involve updating various inventory management components, including hardware, software, and processes. A warehouse modernization effort like this can improve data capture and provide the analytics needed to solve challenges in today’s supply chain.

5. Inefficient Process

A manual paper-based inventory management system generally becomes more inefficient as inventory grows. Such a system may work fine when an e-commerce business is just getting started. But an e-commerce business will eventually need a digitized inventory management system once they start getting sale after sale.

A tech-focused system for managing inventory helps a warehouse staff manage track and manage stock more efficiently. It should provide a cloud-based approach that allows workers to track shipments in real-time with GPS. The use of smart devices will also pave the way for robotics to play a greater role in inventory management.

6. Overstock

Overstock occurs when a business buys additional stock before selling the stock that’s already in its inventory. This condition is largely due to poor stock control and management, often as a result of manual processes. In this situation, existing materials are unaccounted for, causing the company to buy materials there isn’t demand for. This ultimately brings profits down.

A stock auditing system allows inventory managers to review their existing stock, so they only order the additional stock they need. A business owner can also avoid overstock by keeping lead times in mind when placing orders for products that are in high customer demand. For example, a business with the right solution should have technology that uses data to avoid issues like overstock.

7. Waste and Defects

Waste and defects are often the results of poorly trained operators following non-standard procedures. These costs can be very high when workers routinely waste products, and it can also impact customer satisfaction.

Rigorous management processes allow an e-commerce business to seamlessly manage inventory while minimizing waste and defects. They also streamline procedures, helping to simplify the workflow of inventory staff.


Inventory management challenges include many separate problems to overcome for e-commerce businesses trying to grow. Fortunately, there are comprehensive e-commerce platform solutions available that can solve all these problems with a single package.

E-commerce businesses should always look for ways to improve their profits, which includes making processes as efficient as possible. Performing tasks by hand is usually a clear indication that a company can improve its inventory management processes, saving time and money.

If you’re struggling with your e-commerce inventory management and want to look into Tradefull as a solution, contact us today.