There are more than 4.4 million stores on Shopify globally, and the number is increasing day by day. As the number of Shopify stores grows, managing inventory becomes even more important.🛍️ Shopify business owners are under pressure to revolutionize their operational strategies. A functional & reliable inventory management system isn't just a nice-to-have anymore—it’s an undeniable game-changer in eCommerce.

Alright, but why exactly? Let's look closer together: Why inventory management is important for a Shopify store? ✍️

Why is Inventory Management Important for a Shopify Store?

Imagine running a Shopify store without knowing which products are available, what needs restocking, or what's the most popular. How would you decide about your inventory? Your decision would be based on out-of-date, unreliable, and estimation-focused data which is not sustainable for a Shopify store. 🤷‍♀️ In the sea, there are plenty of fish and a fiercely competitive environment, which is getting more challenging every day. 🐟

Here is where inventory management plays a critical role. The goal is to ensure Shopify stores have the right products in the right quantities at the right time. It creates the difference between smooth operations & satisfied customers, and chaos & missed opportunities. Moreover, advanced features get you ahead of your competitors in many ways.

Let's summarize the key points that make inventory management important for a Shopify store:

📦 Balanced Stock: With successful inventory management, you'll always have just the right amount of stock on hand. It keeps an eye on your inventory levels and automatically alerts you when it's time to reorder, ensuring you're never caught off guard and maximizing your sales potential.

📈 Sales Forecasting: it's all about using valuable & reliable data to predict demand. By analyzing past sales and market trends, you can easily find out how much inventory to keep on hand. This means you can stock up when demand is high and avoid overstocking during slow periods, keeping your inventory levels balanced.

🤝 Demand Management: According to Statista, the number of users in the eCommerce market in the United States was forecast to continuously increase between 2024 and 2028 by a total of 50.7 million users. When the demand is this high, responding to customers' expectations and meeting demand is fundamental to online sales. For example, when you are out-of-stock temporarily, you should be able to continue accepting orders or assess interest in upcoming products with backorders and preorders. These are only achievable with effective and functional inventory planning.

👛 Cost Management: When it comes to finances, we know that every penny counts. Successful inventory management helps to lower costs and increase profits by optimizing your stock levels. So you don’t spend money on excess inventory sitting on your shelves. Plus, with accurate forecasting and strategically used features just as preorder and backorder, you can get the best deals from your suppliers and maximize your return on investment. It's a win-win for your business and your bank account.

How about now? How do Shopify merchants manage their inventory currently? 🤔 Let's review together.

How Do Shopify Merchants Currently Manage Their Inventory?

Currently, 15% of all online businesses worldwide use Shopify to manage their inventory. When it comes to managing inventory, Shopify merchants can be broadly categorized into three groups: Excel users, Shopify users, and third-party app users.

Merchants Manage Their Shopify Inventory with:

• Excel: These merchants manage their inventory using Excel spreadsheets, typically manually entering and updating product information, quantities, and other relevant details. Although Excel is a widely accessible tool, it can be prone to human error, lacks real-time synchronization with other systems, and may not scale well for larger inventories or complex operations. Additionally, manual data entry and updates can be time-consuming and increase the likelihood of mistakes.

📌 For more detail, you can read Excel Limitations in Inventory Management: Why to switch from managing inventory on Excel?

• Shopify: Some merchants use Shopify inventory tracking and utilize the platform's built-in inventory management tools. These tools include inventory tracking, purchase order creation, bulk editing, and the option to add tags to products. Store owners can filter their inventory based on categories such as product type, availability, tags, and quantity. While these built-in tools are suitable for small businesses with simple inventory flows, larger companies may find limitations in Shopify's inventory management capabilities.
• Third-Party Apps: Over 80% of all Shopify merchants have used, or are currently using, third-party integrations. These integrations provide additional features and functionalities that extend Shopify's inventory tracking capabilities. Third-party apps may offer advanced reporting, forecasting, automation, synchronization with other platforms or systems, barcode scanning, multi-location inventory management, and more. Merchants may leverage these features to streamline their inventory processes and address specific needs or challenges in their business operations.

What Shopify Merchants Need When Managing Inventory?

Your inventory management process should be designed with features that provide reliable data, and the ability to move with confidence & precision, and accordingly making you earn more. 💸

• 📦 Inventory Planning: Having the right products, in the right amount, at the right time is highly significant to manage and optimize your inventory. Effective inventory planning involves activities such as determining optimal stock levels and identifying fast-selling products. This helps minimize stockouts and reduces excess inventory costs.
• 📊 Demand Forecasting: Inventory forecasting is the process of predicting future demand for your products based on historical sales data, market trends, seasonality, and other relevant factors. By accurately forecasting demand, businesses can optimize their inventory levels, reduce the risk of overstocking or stockouts, and make informed decisions regarding production, purchasing, and pricing strategies. Advanced forecasting techniques, such as statistical modeling and machine learning algorithms, are often employed to enhance accuracy and reliability.
• 📍 Multi-location Inventory Management: In today's global marketplace, many businesses operate across multiple physical or digital locations, such as warehouses, retail stores, and online platforms. Multi-location inventory management involves efficiently managing inventory across these diverse locations to meet customer demands while minimizing costs and logistical complexities. This may include real-time inventory tracking, centralized order management systems, and optimized distribution strategies to ensure seamless inventory flow and fulfillment operations.
• 💬 Supplier Management: Smooth communication with suppliers is key to keeping your inventory flowing effortlessly. Using purchase orders (POs) to connect with suppliers ensures that orders are placed efficiently and accurately. Easy access to detailed agreements specific to each supplier requires clear and transparent transactions. You can streamline your communication process and avoid delays by using tools that provide quick access to supplier details such as agreements and contact information. Effective communication helps in receiving orders on time and builds strong relationships with suppliers, contributing to a more efficient inventory management system.
• 🔄 Automatic Replenishment: Say goodbye to manual stock monitoring! Automatic replenishment takes the hassle out of inventory management by restocking your shelves whenever stock levels dip below a certain point. This keeps your inventory optimized without you having to lift a finger. No more worrying about running out of stock or tying up resources in excess inventory. It's like having your own personal inventory assistant, ensuring you're always stocked up and ready for business.
• 🔤 ABC Analysis: ABC Analysis is a method used to classify products based on their significance to the business. "A" items are high-value and contribute to a significant portion of the revenue, while "B" items have moderate importance, and "C" items are low-value with minimal impact.
• 📝 Purchase Orders: Purchase orders (POs) are documents issued by a buyer to a supplier to request the purchase of goods or services. In the context of inventory management, POs are used to replenish stock levels by ordering new inventory from suppliers. They typically include details such as the quantity, description, price, and terms of purchased products. Purchase orders are crucial in maintaining optimal inventory levels, ensuring timely deliveries, and facilitating transparent and efficient transactions between buyers and suppliers.
• 🛒 Preorders & Backorders: Preorders and backorders refer to the practice of accepting orders for products that are currently out of stock or not yet available for sale. Preorders allow customers to reserve products in advance, often before they are officially released or restocked. Backorders, on the other hand, occur when customers place orders for items that are temporarily out of stock but will be replenished at a later date. By offering preorders and backorders, businesses can capture demand early, minimize lost sales opportunities, and maintain customer satisfaction by keeping them informed about product availability and delivery timelines.
• 📈 Custom Reports: Easily accessible custom reports are essential to reach deeper insights into inventory dynamics and drive continuous improvement. These tools enable businesses to track metrics, identify trends, and make data-focused decisions. Customizable to specific requirements, reports optimize inventory management, covering turnover rates, stock movement, aging inventory, SKU performance, and ABC Analysis(Sales Performance Report). Leveraging custom reports fosters a deeper understanding, optimization, and continuous improvement in inventory management.
• 🚚 Freight Planning: Freight planning is optimizing your shipping processes. Prioritizing saving costs and making timely deliveries is possible by exploring different freight options. Additionally, you can balance speed and expenses by comparing the cost of stockouts with freight expenses. You can confidently select the most cost-effective freight option through thoughtful procurement optimization. Moreover, choosing between air or sea freight based on expected demand to boost profits is possible with freight planning.
• ⚙️ Integrations: Think of these as your inventory's best friends, connecting it seamlessly with other tools and systems like your sales platform or accounting software, making your life easier and your business smoother.

P.S. Fabrikatör, your favorite inventory planning tool 🙃, provides you integrations with many apps such as Shopify, Klaviyo, and ShipHero. Want to start a trial now? ✨

Does Shopify Have Inventory Management?

Yes, but its functionality is limited. Shopify offers handy built-in inventory management tools like tracking, creating purchase orders, and bulk editing. You can also filter inventory by various criteria and adjust counts as needed. However, for larger businesses, Shopify's inventory management has limitations, especially for planning & purchasing features.

• Limited Tracking Capability: Shopify's native inventory tracking is too basic for merchants with complex workflows, leading to manual adjustments and increased risk of errors.
• Multichannel Functionality: While Shopify does support multi-location tracking, the number of locations allowed depends on your pricing plan. Plus, it has restrictions on certain items, which means managing them separately if you sell across multiple channels.
• Limited Data & Limited Forecast: Shopify's inventory tracking holds data for only 90 days, limiting long-term analysis and hindering demand forecasting and historical performance evaluation. Accordingly, Shopify inventory reports may not be reliable for your store.
• Limited Restock Process: Expanding businesses face challenges with inventory replenishment due to Shopify's lack of functionality in recommending order quantities and generating purchase orders for multiple SKUs.
• Problems with POS: Shopify's POS function may lead to issues as it allows selling products even when inventory reaches zero, providing a false picture of reorder points.
• Limitations in Third-Party Fulfillment Integration: Shopify doesn’t let you create transfers for products using third-party fulfillment services (3PLs).

📌 Overall, Shopify supports your store's inventory tracking, transfers, and multi-location management. Yet, it lacks advanced planning and purchasing features. Specifically, it doesn't allow exporting purchase orders, syncing with other apps, forecasting, or providing a dedicated planning interface.

📌 If you're new in eCommerce, with limited product variety and low inventory, Shopify’s limited inventory management features may be enough for your store. But what about later? Especially if you have various products and aim to grow, tracking your inventory more professionally is a must. To achieve your goal, you need an inventory management solution that can fully automate with Shopify and has features specifically designed to optimize inventory for the success of your store.

Inventory Management App for Shopify

What could be the right Inventory Management Software for you? Fabrikatör! 🎉

As you've seen, plenty of features can make a difference and help you maximize your profit when managing your Shopify store's inventory. We know how important it is to keep improving and looking ahead in this process, and that's exactly what we're all about! We know what you need, it’s Fabrikatör! 🫂

With Fabrikatör, you can:

• Save time by restocking inventory on time or creating purchase orders in seconds. ⏱️
• Utilize an innovative app with a user-friendly interface. 📱
• Monitor inventory, set growth goals, and create custom reports directly from the dashboard. 📊
• Easily gain visibility over your operations. 👀
• Utilize backorder and preorder features aligned with purchasing to turn inventory and out-of-stock products into profit. 💰
• Streamline inventory planning and control by effortlessly managing purchasing, demand forecasting, freight, and order management. 🚚
• Handle your supply chain operations efficiently by integrating your Shopify store with ShipHero, Klaviyo, and many more. 🛠️

You can book a demo now for our 5/5 rated Shopify app today. ✨ Take your Shopify game to the next level! 🚀