The bread and butter of inventory management is tracking
product quantities. That’s because failure to get an
accurate count leads to serious issues — incorrect amounts
can either lead to an overstock, too much product on hand,
or a stockout, too little product on hand to meet demand.
Tracking is a matter of adding and subtracting, but make no
mistake, it can get tedious. There are a few common ways to
monitor product counts that scale with how much inventory
and how many sales channels you’re working with.
The most basic, spreadsheets offer a centralized place to keep
tabs — literal tabs in many cases — on inventory. Once stock
arrives, add your product quantities to the sheet. Once an order
is made, subtract from that product’s quantity. It’s that
simple, and tracking can be made easier by implementing Excel
While they work fine, they can get time-consuming to manage,
especially if you’re selling on multiple channels, working with
a variety of products, or dealing with orders that contain
Most online sales channels, from eBay to Shopify, will offer
some form of inventory tracking. You can add the products and
their quantities to the channel, and it will automatically
adjust the count for every order made on the channel. All you
need to do is input updated product counts when you restock.
Of course, some of the same issues with spreadsheets flare up
when tracking via channels. If you’re running a multichannel
business, juggling inventory counts throughout various channels
can be overwhelming. Not only will it involve manually updating
quantities inside each at the end of every day, it’s
decentralized, which leaves greater room for error.
At a certain point — particularly when order volumes or product
quantities get too high and when channels are numerous —
inventory management software will come into play.
Inventory management software tools provide a centralized,
automated option for tracking and updating inventory quantities.
That means no arithmetic-ridden spreadsheets, little to no
manual updates, and less risk of human error.
The gist is straightforward, each of your channels — whether
it’s sales or supply-side — connects with the software, making
it a hub that users can log into to get a look at all matters
And inventory management systems can also morph into order
One of the primary benefits of inventory management software is
its compatibility with various fulfillment models. Whether
you’re running your operation in-house or having third parties
store and ship product for you, inventory management systems
assist in keeping inventory organized and aligned across every
As for how they work, let’s start with the first part of dealing
with inventory: purchasing inventory through purchase orders.
An e-retailer’s products are imported into the inventory
management system, and suppliers are then added and assigned
to their respective products. If on-hand inventory already
exists, the count is imported or manually entered as well.
Through the inventory management system, the e-retailer
creates and sends a purchase order to their suppliers when
it’s time to purchase product that requests a certain
Depending on the fulfillment model, the supplier will ship
the product requested to either the e-retailer’s HQ (when
fulfilling in-house) or a third-party logistics provider’s
warehouse (when outsourcing fulfillment).
As inventory trickles in, product quantities are noted in
the purchase order, and the count for each product is
Now for the channel side of things.
So long as the inventory management software supports them,
a merchant first integrates each of their sales channels
with the system.
If they’re working with a third-party logistics provider
(3PL) — a service that stores and ships product — the
merchant will need to integrate that channel as well.
Once an order is made on a sales channel, the inventory
management app will make note and import the order.
The merchant then fulfills the order, and the inventory
management tool tweaks the product count accordingly,
relaying the new amount back to every integrated sales
If a 3PL is used, the inventory management tool will take
that imported order and route it directly to the integrated
3PL. Once fulfilled, order specifics like the tracking
number are then routed back to the inventory management tool
which then relays them to the sales channel where the order
Integrating with suppliers is where things get a little
trickier. Some e-retailers want a clear look at how much
inventory their suppliers have on-hand, especially those that
dropship or fulfill just-in-time. They’re heavily-reliant on
their suppliers and prefer the peace-of-mind that comes with
But an inventory management solution typically only creates
integrations with channels that are popular with its target
customers like the sales channels Shopify and Amazon or
third-party logistics providers like Fulfillment By Amazon and
Plenty of suppliers are out there that sellers tap for products,
and they’re more than likely not supported by the inventory
management system. That’s where APIs — Application Program
Interfaces — come in. An API acts as a blueprint that maps out
how a software developer can assemble an integration with some
An inventory management provider typically constructs an API
that third-party developers use to build custom integrations. In
this supplier situation, an e-retailer that wants their
inventory tool and supplier to be directly connected will have
to pay for it in one of three ways.
Just like we’ve been saying, it’s perfectly possible to find a
third-party developer to do the dirty work for you. You can
place a freelance job opportunity on hiring websites like Upwork
and Fiverr, or use independent development agencies.
Suppliers might be willing to build an integration with the
inventory management tool for a cost, especially if you’re
working with a large order volume. Ask, and they most likely
will offer a quote.
Inventory management provider
Obviously, whatever service you’re using to manage inventory is
interested in getting your business, so they’ll do what they can
to get an integration built.
Some inventory management providers are willing to build that
custom supplier integration for a payment. They will either
charge a recurring fee for every feed they build between the app
and your supplier, or they will require a lump sum up-front to
construct it. Others will curate developer directories, creating
listings for third-party developers and agencies that show off
their work, their websites, and their pricing.
Long story short, nearly every part of your business revolves
around inventory, and inventory management tools bring each of
those parts together in a single, unified place.