Table of Contents
** Minutes
The financial impact of inventory balancing
How strategic inventory balancing benefits your customers
6 best practices for effective inventory balancing
How ShipBob optimises your inventory and customer experience
Inventory balancing is one of the most powerful levers ecommerce brands can pull to improve shipping speeds, reduce costs, and maximise cash flow. It may not grab headlines, but when done right, it ensures the right products are in the right place, at the right time.
Too much inventory leads to bloated storage costs and locked-up capital. Too little? Missed sales and unhappy customers. Striking the right balance is tricky (especially as your business scales) but it’s essential for operational and financial health.
In this guide, we’ll break down what inventory balancing is, why it matters, and how to do it effectively across multiple locations and channels. You’ll also see how ShipBob’s tech and fulfilment network make it easier to maintain balance and drive smarter growth.
What is inventory balancing?
Inventory balancing is a strategic approach to maintaining optimal stock levels across your supply chain. It’s the art and science of ensuring you have the right products in the right quantities at the right locations to meet customer demand without tying up excessive capital or risking stockouts.
While inventory management focuses on the overall process of ordering, storing, and selling goods, inventory balancing hones in on the delicate equilibrium between having too much and too little inventory at each stage of your supply chain. It’s not a one-time task but rather a continuous process of monitoring, analising, and adjusting stock levels in response to real-time demand signals.
Consider two contrasting scenarios:
- An electronics retailer consistently runs out of popular smartphone models at their West Coast warehouse while overflowing with excess stock in their East Coast facility. Customers in California face frustrating delays, while capital is tied up in slow-moving inventory 3,000 miles away.
- A fashion brand uses real-time sales data to predict which styles and sizes will be most popular in each region. They strategically allocate inventory across their fulfilment network, ensuring no location is overstocked or understocked. As a result, they can consistently meet demand and keep customers happy.
The second scenario illustrates the power of effective inventory balancing. By optimising stock levels and placement, businesses can improve cash flow, reduce costs, and deliver a better customer experience.
Balanced inventory enables faster shipping and market expansion
One of the most significant benefits of balanced inventory is the ability to offer faster shipping to customers. When you strategically distribute your inventory across multiple locations, you can position products closer to your customers, reducing the distance and time required for delivery.
For example, if you have fulfilment centres on both coasts and in the Southwest, you can offer 2-day ground shipping to most of the continental United States. This level of speed is increasingly important in the age of Amazon, where customers expect quick and affordable delivery.
Balanced inventory also enables you to efficiently expand into new markets without overextending your resources. By placing minimal inventory in strategic locations, you can test demand in new regions with limited risk. As sales grow, you can gradually increase stock levels to support the market.
The financial impact of inventory balancing
Inventory balancing has a profound impact on your bottom line. When your inventory is out of balance, the financial consequences can be severe.
Carrying excess inventory ties up valuable capital that could be invested elsewhere in your business. You’re paying for the cost of the products themselves and for the storage space they occupy. Every square foot of warehouse space comes at a premium, and if that space is filled with slow-moving or obsolete inventory, it’s money down the drain.
Alternatively, inventory shortages and backorders caused by insufficient inventory can be damaging to your brand’s reputation. Lack of inventory means you miss out on potential sales. The cost of acquiring a new customer is far higher than retaining an existing one, so every lost sale due to a stockout is a significant setback.
But when your inventory is balanced just right, the financial benefits are clear. You’re able to maximise sales and revenue by always having the products your customers want in stock. And perhaps most importantly, you can improve your cash flow and working capital by turning over inventory more quickly and reinvesting that capital back into your business.
Investors also take notice of well-balanced inventory. A business with a track record of maintaining optimal stock levels is seen as more valuable and less risky than one with chronic inventory imbalances. This can lead to higher valuations and easier access to funding for growth and expansion.
Ultimately, mastering the art of inventory balancing is about more than just keeping your logistics running smoothly. Proper inventory balancing creates a healthier, more profitable business from the ground up. By optimising your inventory levels and reducing costs, you can improve your margins, reinvest in your business, and set yourself up for long-term success.
How strategic inventory balancing benefits your customers
Inventory balancing isn’t just about optimising your operations and financials, it’s a critical factor in delivering an exceptional customer experience. When your inventory is well-balanced, you’re able to consistently meet customer expectations and build long-term loyalty.
One of the most significant ways inventory balancing benefits your customers is through faster shipping times. By strategically distributing your inventory across multiple fulfilment centres, you can position products closer to your customers, reducing the distance each order needs to travel. This proximity enables you to offer expedited shipping options like 2-day or even next-day delivery, which has become increasingly important in today’s competitive ecommerce landscape.
Balanced inventory also helps ensure that the products your customers want are consistently available when they want to purchase them. Stockouts can be incredibly frustrating for customers, often leading them to abandon their cart or even turn to a competitor.
In fact, 66% of consumers say they would shop with a different retailer after experiencing an out-of-stock product. By maintaining optimal stock levels across your product catalogue , you minimise the risk of losing sales and disappointing customers due to availability issues.
Beyond the immediate impact on individual orders, consistent inventory availability helps build trust and encourages repeat purchases. When customers know they can rely on your brand to have what they need when they need it, they’re more likely to become loyal, long-term shoppers. This is particularly true for essential products that customers purchase on a regular or subscription basis.
By optimising your inventory management, you’re able to provide a more seamless, reliable, and delightful end-to-end experience that keeps customers coming back for more.
How inventory balancing supports customer retention and loyalty
- Consistent product availability builds trust and encourages repeat purchases
- Faster shipping times meet customer expectations and improve satisfaction
- Reliable fulfilment reduces the risk of negative reviews and brand damage
- Well-managed inventory enables personalised recommendations and bundling
- Efficient operations allow for more competitive pricing and promotions
Investing in effective inventory balancing strategies is a critical component of customer-centric growth. By prioritizing the customer experience in your inventory management decisions, you set your brand up for long-term success and loyalty.
6 best practices for effective inventory balancing
In this section, we’ll break down the key methods ecommerce businesses can adopt to consistently maintain balanced inventory across their supply chain.
1. Leverage advanced forecasting and demand planning
By integrating machine learning algorithms into your inventory management processes, you can uncover hidden patterns and trends in your sales data, allowing you to anticipate demand fluctuations with unprecedented precision. This technology takes into account factors like seasonality, market trends, and even competitor activity to provide a comprehensive view of your future inventory needs.
Moreover, tools like ABC analysis can help you prioritize your inventory investments by identifying which products are most critical to your bottom line. By focusing your resources on these high-value items, you can ensure that you always have the right stock on hand without tying up excessive capital in slower-moving products.
2. Set and monitor critical inventory KPIs
To maintain a well-balanced inventory, you need to establish clear benchmarks and regularly monitor your performance against them. Some of the most essential metrics to track include:
- Inventory turnover rate: How quickly you sell through your stock
- Days on hand: The average time products spend in your inventory
- Service levels: The percentage of orders fulfilled on time and in full
- Carrying costs: The expenses associated with holding inventory
By setting appropriate targets for each of these KPIs based on your industry and business model, you can quickly identify when your inventory starts to drift out of balance. Regularly reviewing these metrics will allow you to spot potential issues before they spiral out of control, enabling you to take proactive steps to rebalance your stock.
To simplify the monitoring process, consider investing in inventory management software that provides customisable dashboards and reporting tools. These platforms can automatically track your KPIs and alert you when certain thresholds are breached, ensuring that you always have a finger on the pulse of your inventory health.
3. Implement real-time inventory visibility systems
In today’s fast-paced ecommerce landscape, real-time inventory visibility is no longer a luxury, it’s an absolute necessity. When you have accurate, up-to-the-minute data on your stock levels across all locations, you can make informed decisions quickly and confidently.
Warehouse management systems (WMS) and inventory management software provide this crucial visibility by integrating data from various sources into a single, centralised platform. These tools can track inventory movements in real-time, from receiving and putaway to picking, packing, and shipping.
By leveraging technologies like barcode scanning and RFID tags, you can maintain pinpoint accuracy in your inventory counts, virtually eliminating the risk of stockouts or overstocking. Plus, with automated alerts and notifications, you’ll be immediately informed of any potential issues, allowing you to take swift action to rebalance your inventory as needed.
This real-time visibility is particularly valuable during periods of high demand or unexpected fluctuations. With instant access to accurate stock data, you can make fast, informed decisions about reordering, reallocating, or even discounting products to maintain optimal balance across your supply chain.
4. Adopt a distributed fulfilment approach
Storing your inventory across multiple strategic locations is a powerful way to optimise your supply chain and keep your stock levels balanced.
To determine the optimal warehouse locations for your business, start by analising your customer distribution. Where are your orders coming from? Are there specific regions or cities that generate a higher volume of sales? By identifying these patterns, you can strategically position your inventory to minimise the distance between your products and your customers.
Working with a third-party logistics (3PL) provider that has an established network of fulfilment centres can greatly simplify this process. Rather than investing in your own warehouses or managing multiple relationships with different providers, you can leverage the 3PL’s existing infrastructure and expertise to efficiently distribute your inventory.
When considering international markets and cross-border fulfilment, it’s essential to factor in additional complexities such as customs regulations, tariffs, and local consumer preferences. Partnering with a fulfilment partner that has experience in global fulfilment can help you navigate these challenges and ensure that your inventory is balanced across borders.
By adopting a distributed fulfilment approach, you can improve your inventory balance, reduce costs, and provide a better experience for your customers.
5. Establish a regular rebalancing workflow
Maintaining balanced inventory is an ongoing process that requires regular attention and adjustment. Establishing a structured workflow for periodically reassessing and redistributing your stock can help ensure that your inventory remains optimised over time.
Start by identifying which products need rebalancing and when. This may be based on factors such as sales velocity, seasonality, or changes in demand patterns. For example, you might prioritize rebalancing your top-selling SKUs on a weekly basis, while slower-moving products may only require monthly adjustments.
Once you’ve determined which products need attention, outline a clear process for transferring stock between locations efficiently. This may involve creating pick lists, scheduling transportation, and coordinating with your warehouse teams to ensure a smooth transfer. Leveraging tools like ShipBob’s Inventory API can help automate these processes and reduce manual effort.
When rebalancing inventory, it’s also important to consider how you’ll manage any outstanding orders or backorders. Implementing partial fulfilment rules can help ensure that you’re able to ship orders as quickly as possible while still maintaining a balanced distribution of stock. For example, you might set a rule to fulfil partial orders from a single location until a minimum threshold is met, at which point the remaining items would be shipped from another warehouse.
Finally, consider creating triggers for automatic rebalancing actions based on predefined thresholds or events. For instance, you might set a rule to automatically transfer stock from one location to another when inventory levels fall below a certain point, or when a sudden spike in sales occurs in a particular region. By automating these processes, you can reduce the need for manual intervention and ensure that your inventory remains balanced even during periods of high demand or volatility.
How ShipBob optimises your inventory and customer experience
At ShipBob, we understand the critical role that inventory balancing plays in driving growth and success for ecommerce businesses. That’s why we’ve built a powerful suite of tools and services designed to help you optimise your stock levels, streamline your operations, and deliver an exceptional customer experience.
Smart distribution & rebalancing with ShipBob’s IPP
With ShipBob’s Inventory Placement Program (IPP), you can effortlessly distribute your inventory across our global network of fulfilment centres based on real-time demand and geographic order data. Our advanced algorithms analyse your sales patterns and customer distribution to recommend the optimal allocation of stock across locations, reducing the risk of stockouts or overstocking in any single facility.
But we don’t stop there. ShipBob’s IPP also features powerful internal transfer orders (ITOs) that make rebalancing between locations a breeze. With just a few clicks, you can initiate stock transfers between fulfilment centres, ensuring that your inventory remains balanced and optimised at all times. This seamless rebalancing process helps you avoid costly overstocks and stockouts while enabling faster, more cost-effective fulfilment to your customers.
“If you don’t distribute products correctly, orders are going to ship from a farther warehouse which is going to cause longer transit times and cost more money. With IPP, we can send products to one location and then ShipBob’s algorithms and technology use our historical order data to replenish inventory to each facility. That removes the responsibility from us. We can send inventory to one facility and then forget about it. We send our inventory to ShipBob once, they receive it, and they distribute it across their US network. We’re saving thousands of dollars each month by using IPP.”
– Cesar Contreras, Head of Supply Chain of Wholesome Goods
Industry-leading warehouse management system
ShipBob WMS is our proprietary warehouse management system is the backbone of our fulfilment network, providing unprecedented visibility and control over your inventory across all locations. With real-time tracking of stock levels, SKU velocity, and storage utilisation, you can make informed decisions about inventory placement and optimisation.
Our WMS also enables advanced features like batch picking and replenishment alerts, ensuring that your orders are fulfilled efficiently and accurately every time. Plus, with seamless integration to your ecommerce platforms and other systems, you can maintain a single source of truth for your inventory data, eliminating the need for manual reconciliation or data entry.
“We’re backed by ShipBob’s WMS system that has all of the details I need at my fingertips. If push comes to shove and I’m in crisis mode, I know that ShipBob’s tech will allow me to find what I need to come to a resolution.”
– Connor Stewart, Head of Operations + Impact at ARTAH
Crystal clear analytics & reporting
To make smart inventory balancing decisions, you need access to clear, actionable data. That’s why ShipBob provides a robust suite of analytics and reporting tools that give you deep insights into your inventory performance and demand patterns.
Our dashboard provides real-time visibility into key metrics like SKU velocity, inventory turnover, and demand forecasting, enabling you to make data-driven decisions about inventory placement and rebalancing. You can also access detailed reports on storage costs, fulfilment performance, and shipping spend, giving you a comprehensive view of your supply chain efficiency.
Distributed fulfilment network
With ShipBob’s expansive network of fulfilment centres across the United States, Canada, Europe, and Australia, you can strategically position your inventory closer to your customers, reducing shipping costs and improving delivery speeds. Our network enables you to offer fast, affordable shipping options like 2-Day Express, while maintaining balanced inventory levels across locations.
“Everybody expects Amazon-level shipping speeds and 2-day or next-day delivery. To provide that to our customers via ground shipping, we need to increase the number of fulfilment centres we use to reduce shipment time. Instead of partnering with a bunch of different providers that each have one or two warehouses, we can just distribute inventory across ShipBob’s dozens of US fulfilment centres.”
– Jessica Cedarleaf, VP of Operations at Tonies
Plus, with ShipBob’s cross-border fulfilment capabilities, you can easily expand into new international markets without the hassle of managing multiple 3PLs or dealing with complex customs regulations. We’ll handle the logistics of getting your products to customers around the world, while you focus on growing your business.
Ultimately, ShipBob’s comprehensive suite of inventory balancing tools and services is designed to help you optimise your supply chain, reduce costs, and deliver an unparalleled customer experience. By leveraging our advanced technology, global network, and deep expertise in eecommerce fulfilment, you can achieve a state of perpetual inventory balance that drives growth and success for your business.
Start shipping with ShipBob
Connect with our team to get started with ShipBob.
Inventory balancing FAQs
Here are some frequently asked questions related to inventory balancing for ecommerce businesses.
How often should I rebalance my inventory?
As a general rule, larger businesses with more stable demand patterns can rebalance less frequently, perhaps once per quarter or even semi-annually.
Smaller businesses or those with highly seasonal or volatile products may need to rebalance monthly or even weekly to avoid stockouts or excess carrying costs.
Certain events should trigger an immediate rebalancing regardless of your regular schedule:
- A sudden spike or drop in demand for specific products or locations
- The introduction of new products or the discontinuation of old ones
- Expansion into new markets or sales channels
- Significant changes in supplier lead times or costs
What metrics indicate my inventory is out of balance?
Several key metrics can signal that your inventory is out of balance.
- High carrying costs: If you’re spending too much on storage fees or financing for excess inventory, it’s a clear sign that you’re overstocked in certain locations.
- Frequent stockouts: Running out of products on a regular basis indicates that you don’t have enough inventory in the right places to meet customer demand.
- Slow-moving inventory: If certain products are taking much longer to sell through than others, it could mean they’re sitting in the wrong locations or that you’ve overestimated demand.
- Excessive transfers: Having to constantly shuffle inventory between locations to cover shortages is a red flag that your stock levels are imbalanced.
As a benchmark, aim for an inventory turnover rate between 2 and 4, meaning you sell through and replace your entire inventory 2 to 4 times per year. Days of inventory on hand should generally be between 30 and 90, depending on your industry and product types.
How does inventory balancing change during peak seasons?
Peak seasons like holidays or summer sales can put extra strain on your inventory balancing efforts. The key is to prepare for the anticipated surge in demand without going overboard and ending up with too much stock when the rush subsides.
Start by looking at historical sales data to forecast the expected increase in demand for each product and location and pre-position inventory in the right places before the peak season hits. This may involve temporarily increasing your stock levels or shifting products to locations closer to your customers.
Once the peak season ends, resist the temptation to immediately slash prices on leftover inventory. Instead, gradually draw down your stock levels and redistribute products to locations where they’re more likely to sell at full price.
What role does safety stock play in inventory balancing?
Calculating the right amount of safety stock is key to maintaining a balanced inventory without tying up too much capital.
The amount of safety stock you need can vary by product and location. For example, you may keep more safety stock of your best-selling items or in warehouses that are farther from your suppliers. Use historical data on sales volatility and supplier reliability to determine the appropriate level for each SKU.
Keep in mind that excess safety stock ties up working capital and can lead to higher storage costs and spoilage. Aim to strike a balance that minimises stockouts without overburdening your inventory.
How does ShipBob help with global inventory balancing?
With 60+ locations in the United States, Canada, Europe, and Australia, ShipBob allows you to store inventory close to your customers, no matter where they are.
ShipBob’s powerful software automatically routes each order to the optimal fulfilment centre based on geographic proximity and inventory availability, reducing shipping costs and speeding up delivery times.
