Excelling in multichannel inventory management is no longer optional—it’s essential for modern retailers with 73% of consumers preferring to shop from more than one channel.
Struggling to keep your inventory aligned across multiple sales channels? Download our ebook to take control of your multichannel inventory management.
However, expanding into multiple channels brings its own set of challenges. Ensuring that the right products are available exactly where and when your customers need them—and avoiding dead stock that ties up capital—requires precision and strategy.
This complexity grows for businesses managing online platforms and physical locations, including stores or pop-up shops in various regions. Juggling inventory across these different outlets can quickly become overwhelming without the right systems.
In this post, we’ll break down what effective multichannel inventory management looks like, explore its benefits and challenges, and provide practical steps to streamline the process for your business.
What is Multichannel Inventory Management?
Multichannel inventory management is the process of tracking, controlling, and optimizing inventory across multiple sales channels—such as eCommerce platforms, marketplaces, retail stores, and wholesale partners.
Effective multichannel inventory management prioritizes real-time visibility into stock levels, streamlines order fulfillment, and prevents issues like stockouts or overstocking. By integrating inventory data from all channels into a single system, businesses can efficiently allocate products, meet customer demand, and improve supply chain agility.
Efficient multichannel inventory management reduces operational costs and enhances the customer experience by ensuring products are available where and when they’re needed.
Challenges of Multichannel Inventory Management
Optimized multichannel inventory management is essential for maintaining a seamless supply chain, but executing it well is no small task. This section will discuss six challenges of multichannel inventory management.
1. Supply Chain Data Fragmentation
Managing inventory across various sales channels and warehouse locations can lead to fragmented supply chain data. When brands rely on manual data collection or disconnected systems, critical information becomes scattered across platforms. This fragmentation hinders real-time inventory tracking and decision-making, increasing the risk of stock discrepancies across channels and costly operational inefficiencies.
2. Stockouts
Poor multichannel inventory management can result in stockouts across one or multiple sales channels. Inconsistent stock visibility leads to mismanaged inventory levels, disrupting operations with inconsistent product availability, reduced product quality, and ultimately a poor customer experience. Inconsistent product availability not only leads to lost sales but can also erode customer trust and loyalty.
3. Overstocking
Without accurate, real-time inventory tracking, businesses may overstock products on certain channels while others run low. For example, overestimating demand on a marketplace platform could lead to excess stock that becomes dead inventory, tying up capital and reducing profit margins. Similarly, seasonal products that fail to sell due to poor inventory allocation result in costly markdowns or waste. This is especially detrimental when other channels are simultaneously stocked out, leading to a dual impact of lost sales and obsolete inventory.
4. Complex Warehouse Management
Fulfilling orders across multiple sales channels requires goods to leave warehouses at varying times and volumes, making warehouse operations harder to manage. Different sales channels have different fulfillment requirements, and orders need to be prioritized accordingly. Balancing inventory distribution while maintaining order accuracy and efficient workflows becomes increasingly complex, leading to potential delays and fulfillment errors. On channels like Amazon, failing to meet fulfillment requirements can lead to the channel being shut down entirely.
5. Increased Supply Chain Costs
Selling across multiple channels often introduces higher operational costs, including storage, shipping, and platform fees. Without careful management, these added expenses can erode profit margins. Businesses must balance these costs with channel-specific profits to maintain overall profitability.
6. Lack of Uniform Omnichannel Customer Experience
Today’s customers expect a seamless experience no matter where they’re shopping. Poor multichannel inventory management can lead to inconsistent product availability, shipping delays, and disjointed customer service, damaging brand reputation and customer satisfaction. A unified inventory strategy is essential to deliver a consistent, high-quality customer experience.
Benefits of Multichannel Inventory Management
This section will discuss 7 benefits of Multichannel Inventory Management.
1. Better Forecasting Ability
Data from multichannel inventory management can be aggregated through an advanced Order Management System (OMS) to identify out-of-stock patterns and set rules and automated notifications or reorder points when inventory runs low.
These advanced insights help you identify inventory turnover rates and find your sweet spot in terms of inventory carry costs and storage costs without risking running low on inventory. Over time this data will help you identify seasonal patterns and forecast demand. Not only will you be prepared to take on busier seasons, but you can also strategize your marketing to double down on seasonal growth opportunities with confidence that your supply chain will be fully equipped to meet the demand.
2. Real-Time Inventory Level Visibility
A robust multichannel inventory management system provides real-time visibility into inventory levels across all sales platforms and storage locations. This transparency ensures that you’re accurately tracking stock as it fluctuates due to sales, restocks, or returns. Real-time insights help prevent overselling and stockouts while enabling proactive inventory replenishment and inventory allocation based on sales channel priority.
3. Seamless Supply Chain
Effective multichannel inventory management streamlines the entire supply chain by ensuring the right products are available at the right place and time. This coordination supports efficient order fulfillment and smooth distribution to partners and customers, reducing delays and minimizing disruptions across operations.
4. Better Customer Service
Optimized inventory management enables timely and accurate order processing, reducing the chances of stockouts and cancellations. Consistent product availability and on-time deliveries enhance customer satisfaction, while fewer mis-picks and returns contribute to a more positive overall shopping experience.
5. Cost Efficiency
By preventing stockouts and overstocking, multichannel inventory management minimizes costly issues such as lost sales, dead stock, and excessive storage fees. This balance leads to more efficient use of resources, ultimately improving profitability over time.
6. Business Expansion
Efficient inventory management empowers businesses to confidently scale operations across new sales channels and markets. With greater control over stock levels, companies can meet increasing demand and attract new customers without compromising service quality.
7. Brand Building
Today’s consumers shop across multiple channels, which means you need to make multiple touchpoints with potential customers before they actually convert. Delivering a consistent, high-quality customer experience across multiple channels strengthens brand reputation.
What’s the best approach to multichannel inventory management?
An extensive 1 to 2-day delivery footprint is essential to take full advantage of multiple sales channels, which means not only managing inventory across multiple channels but also across multiple warehouse locations. Each sales channel will also have different fulfillment requirements, adding even greater complexity.
For the sake of accuracy and to enable the flexibility to move quickly, manual inventory management is insufficient for a multichannel strategy. For full visibility and optimal efficiency, you must have a multichannel inventory management software that integrates directly with your warehouse management system (WMS).
How to Choose The Right Multichannel Inventory Management Software
This section will discuss 9 important features the right multichannel inventory management software should have.
1. Integration with Current Supply Chain Tools
As with many aspects of managing a multichannel selling strategy, the name of the game is integration when it comes to multichannel inventory management. Choosing a multichannel inventory management software with the technological capabilities to integrate with your current Commerce Operations Management (COM) strategy will not only simplify multichannel inventory management but will allow you to leverage your available inventory strategically and have full control of your fixed assets.
2. Deep Supply Chain Visibility
A multichannel inventory management software should have both the technological capabilities and warehouse SLAs that allow near real-time visibility into inventory levels across all sales channels and at all warehouse locations. This level of visibility will help you stay one step ahead of stockouts and oversells that often come at the cost of refunds, consumer trust, and even negative ratings and reviews.
3. Supply Chain Forecasts
Effective multichannel inventory management software (MIMS) should offer advanced forecasting capabilities that go beyond low-stock alerts. Accurate demand forecasting helps predict sales trends, identify slow-moving inventory, and prevent stock imbalances before they occur. This proactive approach minimizes stockouts and excess inventory, optimizing supply chain efficiency.
4. Reorder Points Reminders
The right MIMS should automatically calculate and notify you when inventory levels approach predefined reorder points. This feature ensures timely restocking, preventing stockouts and maintaining consistent product availability across all sales channels without inflating inventory carry costs with excess inventory.
5. Purchase Order Automation
Creating purchase orders can be repetitive and time-consuming. Top-tier inventory management software automates purchase order generation and submission, reducing manual tasks and freeing up time for strategic decision-making. Automated purchase orders help maintain inventory levels without constant oversight.
6. SKU Generation Automations
Managing product SKUs across multiple channels can be complex. The best MIMS automatically generates SKUs for new products using product identification intelligence, ensuring consistency and accuracy across platforms while reducing manual data entry errors.
7. Cost
Affordability is critical when selecting inventory management software. Choose a solution that aligns with your budget for long-term use while still providing essential features. A cost-effective system enables your business to maximize ROI without overspending.
8. Ease of Use
User-friendly software is essential for efficient adoption across your supply chain team. The right MIMS should offer an intuitive interface that is easy to navigate, even for non-technical staff, ensuring seamless implementation and daily operation. If your business has a complex tech stack, look for a MIMS with a well-documented open API so you can interact with the software the way that best suits your day-to-day operations.
9. Analytics and Reports
Comprehensive analytics and reporting tools are vital for tracking performance. A quality MIMS should provide detailed insights per sales channel and aggregated reports, including ROI analysis, to help evaluate profitability, identify trends, and support data-driven decisions.
Tips for Successful Multichannel Selling
Tip 1: Multichannel Strategy with Limited Inventory
A particular challenge for SMBs is their limited ability to invest in fixed assets like inventory. When carrying limited inventory it can be difficult to determine which channels to prioritize: should you heavily stock sales channels that you know will be fast-moving and feed secondary channels as needed? Should you expose all of your inventory to all sales channels at once?
Every channel will have a different profit margin based on the cost to acquire customers, average order value, and commission rates among other factors.
Having full visibility into your inventory levels and the ability to move them seamlessly across sales channels allows you to weigh top-line revenue against margin so you can decide which channels to feed inventory to, which to market more aggressively, and which to reconsider altogether. This tactic, known as ring-fencing, enables SMBs to wring out every ounce of profit available in their limited inventory.
Tip 2: Prioritize Tech, Integrations and Partnership
According to Google, product searches, including the term “available near me”, grew by 100% in the past year, underscoring the importance of careful oversight of inventory levels and integrations like Google’s local inventory ads. Pairing local insights with Google’s Free & Fast shipping annotation can drive your product listings to the top of the search results, and drive traffic to all of your channels.
However, a multichannel selling strategy is only as strong as the technology that supports it. Finding the right multichannel selling software that integrates with all of your marketplaces and your ecommerce platform will simplify sales operations, and finding a fulfillment partner that prioritizes technology will simplify your supply chain and make fulfillment a revenue driver for your business. The right fulfillment partner will help you make multichannel inventory management an asset and growth lever as part of your multi channel selling strategy.
In a 2020 survey, 32% of merchants indicated that poor inventory management was their biggest fulfillment challenge, while 31.2% cited incorrectly filled orders (which inevitably lead to preventable returns). This kind of mismanagement and preventable returns significantly driveup operating costs and reduce the return on investment in your multichannel strategy. However, in the same survey, 44% of merchants indicated that outsourcing fulfillment led to greater operational efficiency, and 32% found that an outsourced fulfillment partner provided speedier and more reliable fulfillment.
To learn how Ware2Go simplifies multichannel inventory management through fully integrated technology, reach out to one of our fulfillment experts.
Tip 3: Focus on High-Performing Channels First
For fast-growing businesses, it’s crucial to prioritize high-performing sales channels to maximize profitability and operational efficiency. Spreading resources too thin across every platform can dilute impact and strain inventory management. By focusing on channels that consistently drive the most sales and revenue, businesses can allocate inventory, marketing efforts, and fulfillment resources more effectively. Once these core channels are optimized, companies can gradually expand into additional platforms with a stronger foundation and clearer growth strategy.
Frequently Asked Questions
How do you manage inventory across multiple locations?
Managing inventory across multiple locations requires centralized inventory management software that provides real-time visibility into stock levels. Automation tools help synchronize inventory data, streamline transfers, prevent stockouts, and balance stock distribution for efficient order fulfillment.
What are the 3 major inventory management techniques?
The three major inventory management techniques are Just-in-Time (JIT), Economic Order Quantity (EOQ), and ABC Analysis. JIT minimizes holding costs by ordering stock as needed, EOQ optimizes order quantities to reduce costs, and ABC Analysis prioritizes inventory based on value and demand.
What is the best multichannel inventory management software?
The best multichannel inventory management software depends on business size and needs. Leading solutions include NetSuite, Cin7, and Skubana for comprehensive inventory control, automation, and real-time insights across sales channels and warehouse locations.
Partner With Ware2Go to Maximize Your Multichannel Selling
For retailers nowadays, being a multichannel business is more of a necessity than a choice. After all, most customers buy across different channels.
To ensure you make the most of every channel in your sales toolbox, actively track and manage your inventory using multichannel inventory management software. That way, you can keep stockouts, oversells, overstocking, and returns at bay and grow your business.
To gain even more from each of your sales channels, partner with a fulfillment partner like Ware2Go. A partnership like this gives you access to supply chain experts that will streamline your multichannel inventory management so you can spend less time filling purchase orders and more time expanding your business.
To learn how Ware2Go simplifies multichannel inventory management through fully-integrated technology, reach out to one of our fulfillment experts.
