In today’s mercurial business environment, demand, consumer behavior, and market forces can shift with the wind. 

In response to these dynamic markets, eCommerce businesses require control, visibility, and flexibility over their inventory. They must be able to track the inflow and outflow of products or materials to ensure they have the right products in the right place at the right time.  

But this process has become incredibly complex—manual-based tracking and accounting tools will no longer suffice. Instead, to handle the rising demands of the modern supply chain, businesses must rely on 3PLs and sophisticated inventory management systems (IMS).  

What is an inventory management system? 

Let’s review. 

Inventory Management Systems 

Sourcing, storing, and managing inventory in a world of complex global supply chains is practically impossible without the assistance of digital technologies, such as an IMS. 

This type of management software has changed how companies manage inventory levels and optimize their supply chain performance. It records and manages inventory levels so that a business is properly positioned to meet consumer demand regardless of factors, such as seasonality or market shocks. 

Inventory management systems utilize AI, predictive analytics, and machine learning to anticipate future trends and identify areas where the business can create advantages. As IBM notes: 

“Spreadsheets, hand-counted stock levels and manual order placement have largely been replaced by advanced inventory tracking software. An inventory management system can simplify the process of ordering, storing and using inventory by automating end-to-end production, business management, demand forecasting and accounting.” 

Failure to properly manage physical inventory can cause several serious issues that might jeopardize a retailer’s success. Common problems an IMS can prevent include: 

  • Running out of stock
  • Excess inventory
  • Misplacing inventory
  • Losing inventory 
  • Improper warehouse management 

Tasks Handled By an IMS

So, what can an inventory management system do? 

There are two primary tasks an IMS handles: 

#1 Product Distribution 

One of the most essential tasks performed by an IMS is to facilitate supply chain distribution. This includes: 

  • Receiving – An IMS helps a distribution center inspect and verify that all incoming items are properly accounted for and in working order. These systems often leverage tools such as barcode and label scanners to make it easier to track, store, and later find any piece of inventory. 
  • Storing – An IMS help optimize storage processes by providing vital information on:
    • How many items are in stock
    • Where items are located in the facilities 
    • Which goods have shelf-lives 
    • Which items need to be monitored for regulatory compliance reasons
  • Processing requests and orders – An IMS facilitates fast and accurate processing and ecommerce fulfillment processes. After an order is placed, the item must be located, picked, packed, and sent off to its destination.  

#2 Inventory Control and Demand Forecasting 

For eCommerce businesses, one of the trickiest balances involves managing inventory levels. 

Too little or excess inventory on hand could negatively impact a business’s operations. Being overstocked wastes expensive warehouse space and constricts cash flow, whereas being understocked could cause you to miss out on sales opportunities and cost efficiencies. 

An IMS focuses on two essential forecasting metrics: 

  • Economic order quantity (EOQ) – This is the ideal number of units a business should keep in its inventory to reduce order, holding, and shortage costs. 
  • Reorder point – This is the point at which a company’s inventory stocks must be refreshed to avoid running out. 

To that end, forecasting helps an eCommerce business manage order cost variance and supplier lead times. 

Benefits of an Inventory Management System 

An IMS can improve inventory accuracy and efficiently track goods sold and deliveries. 

Benefits include: 

  • Automated inventory management – IMS helps to streamline processes, making them more effective and accurate, and reduces costly human error. Furthermore, it grants real-time visibility and control over your inventory. 
  • Demand forecasting – IMS can account for factors that impact customer demand, such as holidays or marketing campaigns. They can also leverage historical and seasonal inventory data to predict future trends and patterns, adjusting inventory accordingly.  
  • Business Cost Savings – The best inventory management software facilitates the entire fulfillment process, preventing costly mistakes and freeing employees to be more efficient as they focus on value-add activities. 
  • Insights to make the right decisions – The best IMS will leverage data and analytics to drive actionable insights about business activities and operations.  
  • Happier customers – Consumers expect their goods to arrive as expected. IMS helps ensure that products reach consumers as quickly, safely, and efficiently as possible.  

Optimizing 3PL Contracts 

Although some eCommerce businesses add inventory management systems to their normal business operations, many eCommerce brands prefer to work with 3PL services that utilizes an IMS on their behalf. 

Outsourcing this task to a 3PL frees you to focus on growing the business instead of worrying about inventory management. 

But how do you know if you’re receiving the best possible deal from your 3PL? 

Enter Shipware. Our expert consultants can leverage your shipping data to renegotiate your contracts, optimize fulfillment processes, and, ultimately, reduce your parcel and LTL shipping costs. 

What can Shipware do to reduce your shipping spend? Start saving today.  



  1. IBM. What is Inventory Management and How Does It Work?