The world of E-commerce has revolutionised how we engage with brands, with most of us now reaching to global giants such as Amazon for our everyday items.

While this point of sale change has made significant strides in the last few years, it’s introduced several supply chain management factors that online businesses need to consider outside simply shipping orders to customers.

Tracking inventory is a significant part of managing a successful E-commerce business, helping businesses understand how much inventory they have at all times, allowing them to meet customer demand and saving money by reducing excess inventory.

But what is inventory tracking, and how can it support production planning, stock control and improving customer satisfaction? We’ve created this definitive guide to inventory management systems to help you understand the actual value of tracking inventory levels.

In this article, we define inventory tracking and explain its purpose, including the importance of inventory control, how they operate with the help of management software, the key benefits and challenges and the key methods that small businesses should adopt.

What is inventory tracking?

Before we get into the specifics of inventory management, we must first define what inventory tracking is. Inventory tracking is a method of tracking and managing inventory or stock levels for an E-commerce business.

The primary purpose of inventory tracking processes is to ensure a consistent adequate stock level to meet customer demand. This is integral to consider, especially as customer demand can fluctuate depending on times of the year, holidays and societal influences such as pandemics, natural disasters and supply chain issues.

Secondly, tracking inventory serves as a critical financial management device. This is because inventory tracking allows businesses to understand which products need restocking and consistently buying and which products to reduce supply.

Therefore, inventory tracking solutions prevent businesses from having surplus inventory, leading to better warehouse management and money management.

Inventory tracking is highly beneficial to small businesses that rely on streamlined inventory management, warehousing and fulfilment to grow and meet critical business development targets.

What is the importance of inventory tracking?

As we’ve mentioned, inventory fluctuates with the supply chain and customer demand, so having accurate inventory data is critical to a well-functioning business.

 While it may be challenging to keep on top of, primarily if your business operates in multiple locations, it’s still worth investing your time to research inventory management solutions.

Here’s a guide to the importance of tracking inventory items:

Better customer relationship management

Customers who receive their orders are more likely to return to your business for future goods. This is fundamental to your business development and ensures you build a loyal customer base.

A significant portion of fulfilling orders is ensuring you have enough stock to meet customer needs. So, inventory tracking is central to successful customer relationship management.

Accurate reporting

Reporting is an essential process within any business, especially when reporting on stock cost values. A comprehensive inventory management solution is an excellent way to increase the accuracy of your reporting, ensuring that you can assess each item’s value and measure it against profit.

This will help you balance your books and create accurate profit and loss reports. From this, you’ll be able to make critical business management decisions more confidently.

Increased storage space

Effective inventory management doesn’t just benefit your business on an operational level; it’s also beneficial for increasing your storage spaces. Suppose you’re a large business with access to several multiple warehouse locations.

In that case, this might not be a significant issue, but small businesses that operate out of home or in small offices need as much space as possible. Tracking inventory ensures you don’t have additional stock when you don’t need it, thus relieving space for stock in high customer demand.

Better inventory forecasting and problem detection

Continually monitoring stock levels allows you to identify fluctuations in consumer demand much earlier. This allows you to accommodate changes and meet consumer demand without the risk of overselling or running out of stock.

Monitoring stock fluctuations also allows you to identify problems much earlier. This prevents identifying problems during auditing and stock take, potentially costing you significant amounts of money.

How do inventory tracking systems work?

So, how does an inventory tracking system work? This depends on your chosen method, which we will discuss in due course.

However, inventory tracking systems analyse how much stock leaves a business by online purchases, measuring this up against the amount of stock left on warehouse shelves.

This gives managers a real-time view of their inventory turnover, allowing them to see which items they can retire and which items they should continue ordering from suppliers.

For automated systems and inventory tracking software, systems may do this automatically and place orders with suppliers via electronic data interchange.

Benefits of inventory tracking

Here are some of the critical benefits of inventory tracking:

Optimise business spending

No one likes to lose money on dead stock. This happens for various reasons, but one of the main reasons is that businesses overorder from suppliers and vendors and fail to sell these to customers.

With inventory tracking, you can effectively forecast customer demand, assessing which items are likely to sell. This allows you to reallocate assets and spend money where it matters.

Automated solutions avoid human error.

Employing automated inventory tracking solutions over physical inventory tracking minimises human error and enhances inventory accuracy. Using barcodes and barcode scanners, QR codes, or mobile devices helps systems calculate inventory levels. This reduces the chance of miscalculation, missed stock or errors in reporting tracking data.

This means warehouse managers can streamline inventory management, organise their warehouses to a better standard and improve supply chain efficiency. eCommerce Shipping’s dashboard allows you to check stock levels and provides access to statistics on your inventory, allowing you to improve reporting and shift slow-moving stock.

Challenges of inventory tracking

As with anything, there are a few key challenges that businesses may have to navigate to manage inventory effectively. Here are three critical challenges of inventory tracking:


While using an inventory tracking solution can lead to increased efficiency and fulfilment of all sales orders, but using an inventory management system can be time-consuming. This is because it can be complex, especially if there are multiple sales channels to track and multiple warehouses to navigate.

Multichannel retailers may struggle to maintain efficient operations while trying to track inventory. However, this is where automated inventory management software can save you time.

Large inventory problems

Although needing to order larger inventory is typically a positive development sign, it can make tracking inventory and managing inventory turnover much harder.

This might mean you have trouble managing different variations of the same product according to price, colour or size depending on the type of goods you sell.

Inventory tracking methods

One of the best things about inventory tracking is that businesses have a lot of freedom over the methods they choose to track inventory. Here’s a guide to some of the ways you track inventory:


Excel is a super helpful tool and can be used for inventory management for smaller businesses dealing with low inventory and low order frequency.

You can note down order details against supply from vendors and suppliers with a spreadsheet. However, this doesn’t provide real-time data, which may lead to more reporting errors.

Manual inventory tracking

If you’re a small business that isn’t prepared to commit financially to inventory management software, then you have the option to track inventory manually.

 You can manually write down the order details for each shipment, but this may be time-consuming and unsuitable for large amounts of inventory, especially if you have a high customer demand. Therefore, manually tracking inventory might not be the best option.


There’s always the option to outsource your inventory tracking method to third-party logistics companies. This can be useful if you’re just starting in E-commerce and need the benefit of industry expertise to introduce yourself to inventory management.

Software solution

One of the best ways to track inventory, optimise reporting and assess product performance is to deploy an inventory management software solution. We recommend eCommerce Shipping’s dashboard with state-of-the-art tools and resources to help your e-commerce business scale.

Software solutions are a great way to understand which products to push and market to shift slow-moving stock. We also conduct effective quality control and provide access to our fast-growing logistics network with multiple warehouse locations to ensure fast delivery.

Final thoughts

Inventory tracking and using inventory tracking software can significantly impact your E-commerce business, helping to meet consumer demand and facilitate good customer relationships. Therefore, focusing on revolutionising your asset tracking is central to your development.

If you need to kick start your order management and asset tracking, eCommerce Shipping can help you! We think our dashboard is the best business tool you can use to improve logistics, order management and quality control.

Contact us today to learn more about how we can help you!

Frequently asked questions

What is inventory tracking?

Inventory tracking is a system that measures your stock levels against your demand. This helps you understand which products are in demand and which products you can potentially retire.

There are several ways to track inventory quantities, such as using inventory tracking software, manual inventory tracking and outsourcing.

How can you improve inventory tracking?

Here are some ways to improve your inventory management and tracking:

  • Conduct frequent inventory audits
  • Limit inventory shrinkage
  • Optimise your demand forecasting
  • Note down all product information.

What are the main benefits of inventory tracking?

The main benefits of inventory tracking include:

  • Improved customer relationships
  • Saves money on dead stock
  • Improves SKU (stock keeping unit) rationalisation. This helps you identify which stock to retire due to lack of orders or high-profit loss.

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