Ecommerce Inventory Mismanagement: Why It Happens (And How To Prevent It) 

Picture this: an emerging brand gets their big break when an influencer showcases their product in an organic post. The sales start rolling in. Amazing, right? It is–if the brand is prepared for the influx of order volume.  

Inventory may not always get the spotlight in conversations around ecommerce growth…but it should. It’s one of the most critical drivers of customer experience, operational efficiency, and profitability. No inventory = no sales. Yet for many brands, inventory management remains a vulnerability. 

This poses a huge problem because inventory mismanagement creates customer-facing failures that erode trust. Stockouts, back orders, overselling, and excess inventory all stem from the same root issue: lack of visibility and control. 

And the impact is real. According to IHL Group, retailers worldwide lose nearly $1.8 trillion annually due to inventory distortion — a combination of overstocks, stockouts, and preventable returns.  

For growing ecommerce brands, the stakes are clear: a poor inventory management strategy can break the bank and the business. 

But first, what is inventory mismanagement in ecommerce? 

Inventory mismanagement happens when brands lack the systems, processes, or insights to align supply with demand. It shows up in several ways across ecommerce fulfillment: 

• Running out of high-demand products 

• Over-ordering and carrying excess stock 

• Inaccurate inventory counts 

• Inventory stranded across multiple locations 

• Slow or error-prone fulfillment 

This disconnect between available inventory and customer demand often comes down to poor demand forecasting, manual processes, and limited visibility across systems and channels.  

And for brands? It can become incredibly costly, along with leaving customers with a shopping experience that’s lacking.  

Why inventory management matters to ecommerce customers 

Inventory management directly impacts the customer experience. Think of it this way: fast shipping, engaging marketing, and stellar UX design become irrelevant when the product isn’t actually available.  

Business of Fashion found that apparel brands were losing an average of 20% in monthly profit due to inaccurate stock purchasing across sizes. In other words, stockouts were seriously slowing down revenue.  

Common causes of inventory mismanagement 

• Inaccurate demand forecasting. Without a clear picture of future demand, brands fall into costly extremes: tying up cash in slow-moving inventory or losing sales when items go out-of-stock. Finding the perfect balance between not enough product and too much product while being able to adjust quickly to changes is the key to success.  

• Lack of real-time visibility. When you’re managing SKUs across multiple sales channels or warehouses, things can get messy without a unified view and technology that updates inventory availability and status in real time.  

• Manual processes & disconnected systems. Relying on spreadsheets increases the risk of human error and delays. Modern brands need dynamic, connected inventory systems to move at the pace of customer expectations. 

• Skipping inventory audits. Inventory counts that only happen sporadically leave brands vulnerable to shrinkage, mis-picks, and inaccurate data. A clear cadence of cycle counting allows brands to assess SKU value and velocity of movement.  

How brands can strengthen inventory management

Invest in demand forecasting tools

Sophisticated forecasting is powered by historical sales data, market trends, and marketing calendars. This means there are a lot of moving parts needed for brands to predict demand with greater accuracy.  

Of course, there’s no crystal ball when it comes to inventory turnover, but with the help of the previous years’ data, brands can begin to understand which seasons are most popular and which products are likely to sell out (or not). 

Demand forecasting tools can help bring all the pieces together in a streamlined fashion to anticipate customer needs. One of its greatest goals? Minimizing both overstocking and stockouts–two things that way heavy on financials.  

Pro tip: Work in tandem with marketing. When brands are informed of various marketing pushes via social, email, or influencers for particular products, they’re able to order safety stock and negate any chance of a stockout.

Prioritize real-time inventory visibility

Do you know where your inventory is? Inventory management systems allow brands and warehouse associates to keep an eye on their product at all times, no matter where it is in the warehouse.  

When inventory isn’t easily visible to your team on the ground, it’s much more likely that a shipment could be delayed or inaccurate. With real-time tracking and visibility, your associates can move more quickly to find products while reducing their order margin of error. 

This is especially critical for brands scaling into omnichannel, where inventory accuracy needs to exist across DTC, wholesale, retail, and marketplaces. 

Pro tip: Your 3PL should be able to offer you complete visibility and control of what’s happening in the warehouse, even when you’re not there. This means they should have streamlined WMS technology that includes inventory snapshots and reporting. 

Conduct frequent cycle counts & audits

Physical inventory counts can be tedious and eat up previous time, but they’re proven to be beneficial in the long run. Matching physical inventory with recorded data helps brands spot mishaps before they come to fruition. For example, a count may shine a light on the understocking of a best seller bikini right before the summer.  

From stockouts to theft to spoiled products, regular inventory audits ensure brands are noticing, understanding, and resolving inventory errors before they can negatively impact the bottom line. 

Pro tip: Work with your 3PL to ensure you’re tracking inventory management KPIs during your cycle counts, such as inventory accuracy, damage rate, and shrinkage. 

Partner with a tech-enabled 3PL

It’s never a bad idea to bring the experts in. Modern 3PLs have a robust warehouse management system and order management system that will track products through their lifecycles, deliver real-time inventory visibility, and integrate directly with major ecommerce platforms. 

Plus, the operational experience that fulfillment partners have is simply unmatched. Trained warehouse management staff can easily manage orders on your behalf, giving you the time and space to focus on growth, not stock levels. 

Pro tip: To boost the customer experience, look for a fulfillment partner who also has the expertise to take inventory management to the next level with kitting, bundling, branded packaging, sample products, surprise gifts, and more.  

How WSI manages inventory  

With people, processes, and technology in perfect sync, our goal is to always ensure that the right products get to the right products at the right time. In addition to strong account management and flexible fulfillment, WSI’s fulfillment technology enables unparalleled access to real-time inventory management through a user-friendly portal.  

“WSI’s portal has 100% been a game-changer for our level of visibility,” says Shom Gupta, former VP of Operations at Loisa. “It’s not just about tracking inventory in real-time but also having full clarity on outbound orders. I know exactly what’s happening at every step, which makes managing our operations much easier.” 

Read the full case study here.  

The bottom line? Inventory management matters  

Inventory management is no longer just an operational concern, it’s a critical component of both the customer experience and a brand’s reputation. As competition intensifies and shopper expectations rise, brands that invest in inventory management will be the ones positioned to win. Those that don’t? They’ll risk losing customers before the checkout is even complete.