How to Define the Ideal Inventory for Your E-commerce

How to Define the Ideal Inventory for Your E-commerce

Have you ever lost a sale because the product was out of stock? Or worse: had thousands of dollars tied up in products that don't sell?

Inventory management is one of the biggest challenges for e-commerce sellers. Too much stock means tied-up capital. Too little means lost sales and unhappy customers.

In this article, we'll explain the three fundamental concepts every seller needs to understand: Suggested Stock, Safety Stock, and Reorder Point.

What is Suggested Stock?

Suggested Stock represents the ideal quantity of products you should keep in inventory to meet expected demand for a specific period.

Think of it this way: if you sell an average of 50 units per month of a product, keeping only 30 in stock means you'll lose sales. Keeping 500 means unnecessarily tied-up capital.

What is Safety Stock?

Safety Stock is your emergency reserve. It's the minimum quantity you should always have on hand to cover unexpected situations like:

• Supplier delivery delays
• Unexpected demand spikes
• Unplanned promotions that increase sales
• Logistics problems

Without safety stock, any variation in the supply chain can result in stockouts and lost sales.

What is Reorder Point?

The Reorder Point is the inventory level that triggers the alert: "Time to place a new order with the supplier!"

When your stock reaches this level, you have enough time to receive new products before completely running out. This considers the time your supplier takes to deliver (lead time).

Why Use the Last 30 Days as a Basis?

You might be wondering: why not use 6 months or 1 year of data to calculate inventory?

The answer is simple: the market changes fast.

Using too long a period can include:

• Seasonalities that don't apply to the current moment
• Products that have lost or gained popularity
• Trends that have already passed
• Changes in consumer behavior

The last 30 days represent the most recent and relevant demand for your inventory decisions.

Complete Practical Example

Let's apply all of this to a real product:

Interpretation: Keep 81 units in stock. When you reach 27 units, place a new order. Never let it fall below 17 units.

The Costs of Poor Inventory Management

Managing inventory poorly has real costs that many sellers underestimate:

Stockout Costs (Insufficient Inventory)

• Directly lost sales
• Customers who buy from competitors and don't return
• Drop in marketplace ranking
• Negative reviews due to unavailability

Excess Costs (Too Much Inventory)

• Tied-up capital that could be earning returns
• Storage costs
• Risk of product obsolescence
• Need for promotions to liquidate

Automating Inventory Management

Manually calculating inventory for dozens or hundreds of products is impractical. That's why WetrackWise automatically analyzes your sales data and suggests inventory levels for your top products.

In the Suggested Inventory section of the dashboard, you'll find your top 3 best-selling products from the last 30 days with all calculations already done, allowing you to make quick, data-driven decisions.

Conclusion

Good inventory management is the balance between having enough product to never lose sales and not having money tied up unnecessarily.

The three indicators we covered - Suggested Stock, Safety Stock, and Reorder Point - are essential tools to achieve this balance.

Start applying these concepts to your best-selling products and see how your operation becomes more efficient and profitable.