How to Organize Your Merchandise Inventory for Your E-Commerce Business

How to Organize Your Merchandise Inventory for Your E-Commerce Business

The speed at which your merchandise fulfillment processes are successfully aiding your business in cashing your merchandise inventory is a mark of your business’ financial status. To increase the generation of revenue via your eCommerce fulfillment company, you need to keep a constant check on your inventory and carefully devise strategies. Besides providing end-to-end ecommerce fulfillment solutions, ShipBots offers expert’s assistance with inventory management too.

Read on to find out what merchandise inventory is and how collaborating with ShipBots can make it easier for you to monitor and manage it effectively.

What is Merchandise Inventory?

The value of goods that your business possesses, be it raw materials or finished products, is known as merchandise inventory. It is the inventory that the business expects to cash soon. Inventory is the essence of a 3PL fulfillment company, and its total financial value is always accounted for, at the end of a fiscal year. It includes all goods that are under the possession of a company, be it the inventory in the warehouse storage, in transit, in raw material form in warehouse or ready to be sold.

Why Is Merchandise Inventory Management Important for Inventory Accounting?

Monitory and managing merchandise inventory is crucial for a business as the inventory is the most important asset of an eCommerce company. By having a thorough understanding of important metrics regarding inventory reporting, businesses can better manage their merchandise inventory. By carefully forecasting customer demand and prioritizing inventory management, businesses can lessen the possibility of stockouts or excess inventory that may result in higher carrying costs or renting warehouse space.

How is Merchandise Inventory Valuation and Accounting Carried Out?

Inventory valuation can be carried out in different ways depending on which one suits the requirements of your business, however, for the right inventory management, consistence in this choice is essential for precise tracking and valuation. Inventory tracking can be done as follows:

  • First In, First Out (FIFO): shipping products to customers from the batch that was manufactured by you first
  • Last In, First Out (LIFO): saving products from the last batch that was manufactured by you, after all the other batches have ended
  • Specific identification: finding the history from purchase to sale of an inventory item
  • Weighted average of inventory: working out the cost of goods in your inventory

Once you’ve chosen a method that suits your business and supply chain requirements, you will need to stay persistent in using it for accuracy in your inventory tracking.

Which System is Better for Merchandise Inventory Accounting?

Essentially, there are two systems for merchandise inventory accounting, namely Perpetual Inventory System that keeps a continuous check on inventory levels and value and Periodic Inventory System that monitors and updates inventory records after periodic intervals. Let’s take a look at the factors that might make one a better choice over the other for your fulfillment company.

Perpetual Inventory System

  • updates the records of warehouse logistics in real time and offers a real-time view of other inventory metrics such as turnover rate, etc.
  • enables the automated tracking of SKUs
  • allows accurate accounting of in-stock inventory
  • utilized for managing higher inventory stocks for businesses

Periodic Inventory System

  • updates the records at the end of each period
  • does not include regular updates of every sale and purchase
  • performs manual tracking of SKUs
  • more prone to inaccurate inventory recordings, due to human error
  • utilized by businesses with low inventory stocks

How Do I Calculate the Value of Merchandise Inventory?

To calculate the monetary value of your merchandise inventory, you need to multiply the quantity of unsold inventory in your possession with the cost of each unit of inventory. Once found, the value of merchandise inventory must be added to the balance sheet.

Merchandise inventory value = Cost of each unit x quantity of unsold inventory amount

For calculating the costs of goods sold or COGS, you need to subtract the previously calculated merchandise inventory value from the sum of the inventory you had at the beginning and the inventory purchased after.

COGS = (Inventory at the beginning + newly purchased inventory value) – Merchandise inventory value

How Can ShipBots Make Merchandise Inventory Management Easier?

ShipBots specializes in facilitating businesses with assistance in eCommerce and merchandise fulfillment, from maximizing their dock-to-stock efficiency by optimizing the supply chain, keeping track of inventory via tech-fueled tools, and assisting businesses with splitting inventory across 3PL fulfillment centers, if needed.

Optimizing Inventory

ShipBots can help your growing business by cutting down on inventory carrying costs through accurate demand forecasting, strategic inventory and warehouse location, and splitting inventory costs across multiple fulfillment warehouses.

Real-Time Inventory Tracking

ShipBots enables you to keep tabs on your inventory stock levels in real-time, so you can avoid large inventory carrying costs or stockouts.

Free Analysis and Reporting

Shipbots’ software lets you be on the top of your business analytics by knowing the precise history of your stock levels, checking which channels are getting the most sales, and which items are not generating enough revenue. ShipBots can facilitate your business with choosing the right pick and pack method and strategically choose a warehouse fulfillment location that suits your business needs.

To learn more about ShipBots and to collaborate with us, you can request a quote and we’ll get back to you as soon as possible.

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