Nothing's more frustrating for a customer shopping in your store than when they see that the product they want to buy is out of stock. The chances of customers seeing an out-of-stock message increased by 235% in 2022, rising from one in 200 to one in 59. In 2021, 7.4% of retail sales—valued at $82 billion—were lost due to out-of-stock items. By investing in inventory management, you can reduce these losses, improve your bottom line, and protect one of your biggest investments.
The good news is that Shopify offers a built-in inventory management system to help you keep track of inventory across multiple warehouse locations, streamline the procurement process, keep inventory quantities accurate, and easily move inventory across your supply chain. Read on to learn how you can optimize your inventory investment and streamline inventory related processes with Shopify.
Table of Contents:
Keep tabs on your inventory with real-time tracking
No matter your size or stage, it’s a good idea to establish an efficient way of tracking inventory as soon as possible to help you:
- Reduce the risk of errors and inefficiencies down the road
- Scale more easily when your business starts to grow
- Rely on established processes rather than having to overhaul them later
- Make informed purchasing decisions and avoid stockouts and/or overselling
Shopify automatically tracks inventory levels across up to 1,000 different locations and warehouses. But before you can view or adjust inventory levels for a product, you need to set up inventory tracking for your products.
To track inventory for a product or variant in Shopify, go to the Products page in your admin, select the product and variant, if applicable, and enable “Track quantity” in the Inventory section. You can add inventory quantities from that page as well.
Once tracking is set up, you can leverage your Inventory page to view stock levels across all locations. Having an accurate view of inventory across locations is essential for you to guarantee timely fulfillment of customer orders, reduce shipment turnaround times, and minimize stockouts, oversells, and markdowns.
Navigate to Products > Inventory to see a detailed view of your stock levels, showing you whether an item is on hand and available for sale, committed to an order, unavailable, or part of an incoming shipment. You can also customize your experience to work more efficiently by creating inventory views for your workflows. These are created with saved filters, column choices, column order, and sort order, and are displayed at the top of your inventory page.
💡 If you don’t want to see a specific inventory state (such as on hand, committed, etc.) you can choose to hide it from your inventory page.
Streamline procurement with purchase orders
Purchase orders (POs) are useful for managing inventory procurement from suppliers. They can help you track incoming inventory, monitor your spending, and make better purchasing decisions.
Shopify’s built-in purchase orders tool can help you streamline this process and improve efficiency.
To create a purchase order in Shopify, go to Products > Purchase orders, select a supplier and destination, and add the desired products and variants in the “Add products” section. You can include the quantity, supplier's SKU, individual product cost, and any tax percentages for each product. When inventory is in-transit via a purchase order, it is displayed as part of the incoming quantity at the destination location on the Inventory page.
Once the inventory arrives from your supplier, use the purchase order to receive everything that made it to the location. You can head to Products > Purchase orders, select the order, accept or reject items, and click “Save”. Once the inventory is received at the destination location, it becomes part of the on hand and available quantities.
Seamless inventory audits with bulk editing and adjustments
Inventory counts (also known as stocktakes or stock counts) help you keep accurate inventory levels, identify tracking errors or discrepancies, notice and manage slow-moving inventory, and comply with accounting or tax requirements since inventory is considered an asset on your balance sheet. Depending on your industry it is generally recommended to count stock at least once a quarter.
With Shopify you can perform these counts or make ad-hoc inventory quantity adjustments easily. You can do so in the following ways:
- Update individual variants in the Inventory page
- Use the bulk editor to update multiple variants at once
- Export the inventory CSV file and import once quantities are updated in the file
- Use the inventory scanner with the Shopify mobile app to scan a barcode and update its quantity
- If you have or are building a custom app, you can leverage our Inventory management APIs to adjust inventory quantities
You can also adjust your inventory so it’s unavailable to sell. This is useful if you want to set aside safety stock or if you have damaged items you can’t sell anymore. Keeping safety stock can be a useful practice to ensure you always have buffer inventory to meet unexpected increases in demand or supply chain disruptions. Navigate to your Inventory page to add unavailable stock, or move available inventory to unavailable, by updating the relevant column.
💡 To keep a more detailed record when adjusting your quantities, click the adjustment icon next to your on hand or available values to select a reason for the quantity adjustment, like “Damaged”, “Theft or loss”, and more.
Stay on top of inventory movements with transfers
If you have multiple physical stores, warehouses, or different locations where you hold inventory, you should account for inventory movements across them. Transferring inventory across stores and storage locations helps you optimize storage capacity, enabling faster inventory handling during high workload periods.
Creating and receiving transfers in Shopify is simple. To create a stock transfer in Shopify, go to Products > Transfers in your admin. Click “Create transfer” and select the origin and destination locations. Add products and variants, enter quantities, and optional shipment details. Finally, save your transfer as a draft. Note that inventory in-transit via transfer is displayed as incoming quantity at the destination location on the Inventory page.
Once the inventory arrives, use the transfer to receive everything that made it to the location. To receive inventory in Shopify, go to Products > Transfers, select the transfer, accept or reject items, and click “Accept and save.” Accepted items increase the available and on hand quantities for your items.
Make better decisions with inventory reports
Inventory reports are essential for monitoring the most significant and costly asset of your business. Shopify’s inventory reports are valuable for keeping track of your inventory levels, identifying trends in sales performance, and making informed decisions about restocking and inventory management.
There’s a variety of inventory reports you can start leveraging today:
Month-end inventory snapshot and value: These reports show the quantity of each product variant you had in stock at the end of each month. They are useful for identifying slow-moving products and for making informed decisions about restocking.
Average inventory sold per day: This report shows the average number of items of inventory sold per day by product variant, so you can identify sales trends and forecast future demand.
Percent of inventory sold: This report shows the percentage of each variant's inventory sold from the total starting quantity during the selected period. You can learn how much of your inventory is being sold and how quickly it's moving.
Product sell-through rate: This report shows what percentage of your total inventory you’ve sold during the selected time period. Sell-through rate is valuable for understanding how well your products are selling and for identifying trends in sales performance.
Days of inventory remaining: This report gives you an overall sense of how long your tracked inventory is estimated to last, based on your average sales rates for each variant and the amount of inventory you have left. This report lets you know how long your current inventory levels will last and for forecasting future demand. It's also a great tool to help you identify slow-moving products so you can make better merchandising and reordering decisions.
ABC analysis by product: This report gives each product variant a grade based on the percentage of your revenue that each variant contributed to over the past 28 days. It helps you understand which products are contributing the most to your revenue, and for identifying trends in sales performance and popular products.
💡 The ABC analysis by product and Days of inventory remaining reports are available on the Shopify plan or higher.
Ensure optimal inventory levels and meet customer demand with Shopify’s solutions
Shopify's inventory management solutions can help you optimize your inventory management processes from the start. By leveraging these capabilities, you can improve your operational efficiency, maintain accurate inventory records, avoid stockouts, and make more informed decisions about your procurement and inventory planning activities.