Inventory is such an important part of dropshipping, but it’s far from simple. As a dropshipper, you’ve got to make sure your stock is accurate, for starters. You also have to make sure that information is passing between you, your suppliers, and your website correctly—it’s a delicate dance of data where you’ll pay dearly for any problems.
On one hand, you don’t want to hold onto too much inventory because it ties up your cash. But on the other hand, running out of inventory means you can’t reliably serve your customers, which can really hurt your business in the long run.
When it comes to inventory, you’ve got to hit the sweet spot. Inventory management makes it possible to balance your need for cash with your available inventory. Know why inventory management is so important to you as a dropshipper and follow our 4 methods to better manage your inventory.
Inventory management refers to how a dropshipper track their inventory. It helps you know important things like:
As your business grows, you’ll probably get an inventory management tool to keep you sane. These systems sync with your supplier’s inventory data, feeding information into your store and updating everything accordingly.
Inventory management is basically a spreadsheet that pushes product information through the supplier’s system and to your website. Your supplier might ask for a data format like XML, CSV, or TXT. Your supplier warehouses the products and accepts orders via email, API, or their dealer portal.
So, why does your operation need inventory management? As you grow, dropshippers rely on inventory management because:
At the end of the day, the real purpose of inventory management is to help you know what you have and what you need. This way, you order the right amount of product from your suppliers, fulfill customer orders, and keep enough cash in the bank to run your business.
Not sure how to make that happen? Follow our 4 best practices to get your inventory into ship shape.
While you’re ultimately partnering with a supplier for a transactional relationship, try to forge a personal connection with them. As a dropshipper, it’s always a good idea to be on speaking terms with your supplier. A friendly relationship can help you negotiate better terms with your supplier, like lower minimums or credit terms, so don’t overlook the value of being personable.
You should also try to sync up with your supplier. You have to work with your supplier’s format, so make sure their layout works for your business. When you ask them for their product data feed, you need to make sure they’re sending information like:
How often does your supplier update this data? Do they update it via email, or automatically via FTP?
You should also match your update frequency with your suppliers. For example, if they update daily, you need to update daily. If they’re updating hourly, you still need to keep up with them!
The last thing you want to do is run out of inventory. You can practice better dropship inventory management by setting inventory minimums with your suppliers.
This sets up an automatic rule where, when the supplier’s inventory falls below a certain threshold, you mark the item as out of stock on your own website.
There’s no right answer here; depending on your supplier and the products you’re selling, you’ll need to handle this differently. For example, if you’re selling on a platform like Amazon, you’ll want to set a higher minimum because Amazon heavily penalizes out of stocks.
If there’s one thing we learned from COVID-19, it’s that your business has to be agile—the unexpected will always happen. Remember when toilet paper was out of stock for a few months? A sudden increase in product demand like that means you won’t have the cash on hand to fund products.
Nobody can predict the future, but spend some time every week to think ahead. What’s going to be popular next week, next month, and next year? Look at market trends, your growth rates, national economic performance, and marketing costs to stay on top of trends.
If that sounds like too much to manage alone, Spark Shipping can help. We help dropshippers automatically source products from multiple suppliers—this way, you always buy from the supplier with the in-stock inventory you need at the best price.
Inventory management is nearly impossible to do manually. Fortunately, a lot of inventory management can be automated, so you can avoid human error whenever possible.
You have a few options for automating your dropship inventory management:
Inventory is an unwieldy part of dropshipping. That’s why you should always have a strategy behind your dropship inventory management. These 4 tips will help you get one step ahead of other dropshippers. The good news is that it’s a prime opportunity for automation. When you automate dropship inventory management, you avoid mistakes, run a tighter ship, and have the time to focus on growing your business.
Ready to get ahead of the pack? Try Spark Shipping to automate your inventory management with nearly any vendor for a sleeker, better operation.