Inventory Management FAQ: Common Questions Answered

Managing inventory for your Shopify store can feel overwhelming, especially when dealing with multiple sales channels, product variations, and suppliers. But with the right strategies and tools, you can avoid stockouts, overstocking, and manual errors. Here's a quick summary of key inventory management tips:

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• Enable Shopify Inventory Tracking: Track stock levels, automate updates, and monitor adjustments for up to 180 days.
• Set Reorder Points: Use the formula (Average Daily Sales × Lead Time) + Safety Stock to know when to restock.
• Calculate Safety Stock: Keep extra inventory as a buffer for unexpected demand or supplier delays.
• Use Tools Like Forstock: Automate demand forecasting, reorder suggestions, and supplier coordination with real-time data.
• Manage Multi-Location Inventory: Assign stock to specific locations and reassign as needed.
• Track Key Metrics: Monitor sales velocity, stockout frequency, and inventory profitability using Shopify reports.
• Conduct Regular Audits: Perform cycle counts to ensure stock records match physical inventory.

Efficient inventory management ensures you meet customer demand while maintaining healthy cash flow. Start small - optimize one area at a time, and leverage tools to simplify complex tasks.

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Shopify Inventory Basics

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What is Shopify inventory management and how does it work?

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Shopify's inventory management system helps you stay on top of your stock by tracking levels, monitoring availability, and automatically updating quantities when orders, returns, or manual changes occur. It also keeps a log of stock adjustments for up to 180 days, making it easier to spot trends or resolve discrepancies.

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How to enable inventory tracking for products or variants

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To start tracking inventory in Shopify, you'll need to enable the feature for each product or variant. The steps differ slightly depending on whether you're using the desktop admin or the mobile app.

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For desktop users:

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• Go to Products in your Shopify admin.
• Select the product you want to track or choose a specific variant.
• In the Inventory section, check the box labeled Track quantity.
• If you want to allow sales even when stock is depleted, enable Continue selling when out of stock. (Keep in mind, this setting doesn't apply to Shopify POS, which allows staff to sell items even when inventory hits zero but will display warnings.)
• Enter the stock quantity for each location in the Quantity section.
• Click Save.

For mobile app users:

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• Open the Shopify app and tap the store icon.
• Find and select the product or variant you want to track.
• Go to Inventory > More and enable Track Quantity. If needed, toggle on Continue selling when out of stock.
• Input the available quantity and tap Save.

Managing inventory across multiple locations

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Shopify makes it easy to manage stock across multiple locations. When inventory is assigned to a specific location through an app, it ensures accurate counts and prevents double-booking. You can also reassign products between locations as needed, giving you flexibility in managing your inventory.

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Forecasting and Reorder Planning

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How to calculate reorder points in Shopify

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Reorder points help you figure out the exact moment to place your next order, ensuring you avoid running out of stock. The formula is simple: Reorder Point = (Average Daily Sales × Lead Time in Days) + Safety Stock.

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Let’s break it down with an example. Say you sell 15 wireless earbuds per day, your supplier takes 21 days to deliver, and you keep 50 units as safety stock. The calculation would look like this: (15 × 21) + 50 = 365 units. So, once your inventory drops to 365 units, it’s time to reorder.

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Here’s what goes into the formula:

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As straightforward as this may sound, managing reorder points manually becomes tricky as your inventory grows. Sales patterns shift, especially during seasonal peaks or promotions, so you’ll need to update these calculations regularly to keep up with demand.

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Next, we’ll dive into how to determine safety stock, which acts as your buffer against unexpected changes.

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What is safety stock and how is it determined?

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Safety stock is your backup supply - an extra cushion to handle unexpected demand surges or supplier delays. It’s what keeps your customers happy when things don’t go as planned.

The amount of safety stock you need depends on a few key factors. One is your service level, which represents the percentage of time you want to avoid stockouts. For example, aiming for a 95% service level requires more safety stock than a 90% target. Another factor is demand variability - products with steady sales need less buffer stock compared to items with unpredictable demand.

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The formula for calculating safety stock is: Safety Stock = Z-score × √(Lead Time) × Standard Deviation of Demand. The Z-score reflects your service level (e.g., 1.65 for 95% or 1.28 for 90%). While this method is precise, it can feel overwhelming, so many businesses stick to simpler rules of thumb.

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Here are a few common approaches:

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• Keep 1-2 weeks of average sales as safety stock.
• Maintain 10-20% of your average inventory as a buffer.
• For seasonal items, increase safety stock to 30-40% during peak times like Black Friday or the holiday season.

You should also adjust your safety stock based on supplier reliability. If your suppliers are dependable, you can afford to keep less on hand. On the other hand, unreliable suppliers mean you’ll need a larger buffer. Additionally, prioritize safety stock for your best-selling products - those are the ones you can’t afford to run out of.

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How Forstock simplifies forecasting and reorder planning

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If manually crunching numbers sounds like a headache, automated tools like Forstock can make your life much easier. Instead of managing reorder points through spreadsheets, Forstock uses real-time data to forecast demand, taking into account sales trends, seasonality, and more.

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Forstock continuously monitors inventory levels, sales velocity, and supplier lead times to provide automated reorder suggestions. You’ll always know what to order and when, without having to do the math yourself.

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The platform also incorporates safety stock recommendations, factoring in demand variability, supplier performance, and your desired service levels. As your business grows and sales patterns shift, Forstock adjusts these recommendations automatically, ensuring your inventory stays balanced without constant manual oversight.

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With Forstock’s unified dashboard, you get a complete view of your inventory across all sales channels. You can quickly see which products are nearing their reorder points, track how reliable your suppliers are, and evaluate your forecast accuracy - all in one place. This level of visibility helps you make smarter decisions, even during your busiest times.

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The best part? Forstock integrates directly with Shopify, pulling live sales data to keep your forecasts up to date. There’s no need to overhaul your existing workflows - Forstock works in the background, optimizing your inventory management while you focus on growing your business.

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Managing Multi-Channel and Multi-Location Inventory

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Tracking inventory across online and retail storefronts

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Shopify's built-in multi-location inventory tool simplifies the process of keeping tabs on stock across different stores, warehouses, and fulfillment centers - all in real time^[1][2][3][4]. This feature ensures that you can manage inventory seamlessly across various sales channels, whether online or in physical retail locations. On top of that, Shopify makes it easy to handle specialized inventory needs, such as preorders, product bundles, and items tied to promotions.

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Managing preorders, bundles, and promotional stock

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Shopify allows you to sell products on preorder, even when inventory is at zero. This means you can gauge customer demand without triggering a "sold out" message, which keeps the sales process running smoothly. For bundles and promotional stock, Shopify offers tools to consolidate inventory tracking and analyze the combined sales performance of these grouped items. This helps you stay on top of stock levels while maximizing sales opportunities.

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Shopify Inventory Management Beginner Tutorial - Basics to know for optimizing Shopify inventory

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Optimize Your Inventory Management

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Join hundreds of Shopify brands using Forstock to prevent stockouts, reduce overstock, and streamline inventory operations with real-time analytics and AI-driven demand forecasting.

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Get Started

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Purchase Orders and Supplier Management

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Once you've fine-tuned your reorder strategies, the next big step is managing purchase orders and building solid supplier relationships.

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Creating and Managing Purchase Orders in Shopify

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Purchase orders are essential for keeping supplier relationships strong and inventory records accurate. When creating a purchase order, you’ll document key details like supplier information, product specifics, quantities, costs, and expected delivery dates. Many merchants rely on integrated tools to track received quantities, even for partial shipments. This not only keeps inventory levels accurate but also provides a detailed record to evaluate supplier performance over time.

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Setting Supplier Lead Times and Minimum Order Quantities

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Managing supplier lead times is crucial to avoid running out of stock. Lead times can vary depending on factors like production capacity, shipping methods, and location. To stay ahead, it’s smart to include a buffer in your reorder calculations to account for potential delays.

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Minimum order quantities (MOQs) are another factor to consider. While larger orders can lead to cost savings, they also tie up cash and take up more storage space. Striking the right balance between MOQs and inventory turnover is especially important for seasonal items or products with unpredictable demand patterns.

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How Forstock Simplifies Purchase Orders and Supplier Coordination

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Forstock takes the hassle out of managing purchase orders for Shopify merchants. Its automated system reduces manual data entry and provides a unified dashboard with real-time updates on order status and key details. This makes supplier coordination more efficient and ensures that all purchase order data stays consistent and up to date. With Forstock, you can make better decisions and maintain smoother relationships with your vendors.

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Inventory Reporting and Performance Metrics

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Once you've streamlined your purchase orders, the next step is tracking how your inventory is performing. Reports and metrics play a crucial role in identifying potential problems and guiding your stock management decisions.

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Key Shopify Inventory Reports for Analysis

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Shopify provides built-in reports that can offer deep insights into your inventory's performance. These tools help you categorize products based on their revenue impact, giving you a clearer picture of what drives your sales. Other reports focus on current stock levels, highlighting slow-moving products that may need attention. Some metrics even estimate how long your inventory will last under current sales trends - an invaluable tool during high-demand periods like sales events or seasonal spikes. Together, these reports form the backbone for tracking key inventory metrics.

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Important Inventory KPIs for Shopify Brands

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To effectively manage your inventory, keep an eye on key performance indicators (KPIs) such as sales velocity, stockout frequency, and inventory profitability. These metrics help you make informed decisions, whether it's adjusting reorder points or assessing how efficiently your inventory is performing. Don’t overlook the costs tied to holding inventory, like storage fees and other related expenses, as these are critical to evaluating profitability. Regularly reviewing these KPIs can also signal when it's time for an audit.

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Best Practices for Inventory Audits and Cycle Counts

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Routine inventory audits and cycle counts are essential for keeping your stock records accurate. Prioritize frequent counts for high-value or fast-moving items, while slower-moving products can be checked less often. Schedule counts during quieter business hours to minimize disruptions. Always document any adjustments to maintain a clear audit trail, which can help identify recurring issues. Random spot checks between scheduled counts can also catch discrepancies early. Finally, improving the organization of your storage areas can make the counting process faster and more accurate.

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Conclusion: Key Takeaways for Shopify Inventory Management

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Managing inventory effectively is a cornerstone of success for Shopify businesses. The strategies outlined here offer a clear path to streamline your operations and keep your stock in check. Start by enabling inventory tracking for all products and variants, and as your business grows, scale up to manage inventory across multiple locations seamlessly.

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Use historical data, lead times, and safety stock to calculate reorder points. Think of safety stock as your safety net - it cushions against unexpected spikes in demand or supplier delays. These data-driven methods ensure consistency across all your sales channels.

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Whether you're selling through your Shopify store, physical retail locations, or third-party marketplaces, accurate inventory counts are critical. They help you avoid overselling and disappointing customers, especially when dealing with complex setups like preorders, product bundles, or promotional stock.

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Take advantage of automation tools like Forstock to simplify purchase order creation and supplier coordination. By automating these tasks, you minimize human error, save time, and free up resources to focus on performance tracking. Keep tabs on key metrics like sales velocity, stockout frequency, and carrying costs using Shopify’s built-in reporting features.

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Regular inventory audits and cycle counts are essential to ensure your system aligns with your actual stock levels, preventing costly errors that could hurt your customer experience. Successful Shopify brands rely on data-driven approaches to inventory management - from tracking and forecasting to supplier automation - to support growth and maintain healthy cash flow.

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The key is to start small. Identify one area of your inventory management that needs immediate attention, and work on improving it. From there, gradually expand your efforts to optimize every aspect of your operations. By applying these methods, you'll set the stage for long-term growth and avoid the financial pitfalls that challenge many ecommerce businesses.

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FAQs

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How can I manage inventory efficiently across multiple sales channels with Shopify?

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To efficiently handle inventory across multiple sales channels using Shopify, leverage its multichannel inventory management tools. These tools keep your inventory levels synced in real-time across platforms like your online store, marketplaces, and even social media. This way, you can accurately track stock and avoid issues like overselling or running out of products.

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By automating inventory updates and simplifying order fulfillment, you’ll save time, minimize mistakes, and make it easier to grow your business. Plus, this approach helps keep your customers happy by ensuring the products they want are always in stock when they’re ready to buy.

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How can I determine the right amount of safety stock for my Shopify store?

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To figure out the right amount of safety stock for your Shopify store, focus on three key factors: average demand, demand variability, and lead time. These elements will guide you in determining how much extra inventory you need to handle unexpected demand surges or supply chain delays.

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Here’s the formula to calculate safety stock:

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Safety Stock = (Maximum Daily Usage × Maximum Lead Time) − (Average Daily Usage × Average Lead Time)

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This calculation helps you maintain enough stock to prevent shortages while keeping excess inventory costs under control. Make sure to adjust your safety stock during seasonal shifts or promotions to reflect changes in demand. Finding this balance ensures you can meet customer needs without over-investing in inventory.

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How does Forstock work with Shopify to simplify inventory management, and what are the key advantages?

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Forstock and Shopify: A Perfect Match for Inventory Management

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Forstock works hand-in-hand with Shopify to take the hassle out of inventory management. It keeps an eye on your stock levels in real-time, instantly adjusts inventory after each sale, and syncs data across your online store and physical locations. Say goodbye to manual updates and the errors that come with them - your inventory stays accurate without the extra effort.

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What makes Forstock stand out? It helps you avoid stockouts by letting you set reorder points and predict demand, streamlines restocking, and boosts overall efficiency. With Forstock, Shopify businesses can save precious time, keep their inventory running smoothly, and make customers happy by always having the right products in stock.