Effective e-commerce inventory management with RPA

Damian Andruszkiewicz

E-commerce sales are growing rapidly worldwide and with increasing demand, it becomes more challenging for e-commerce companies to keep track of the amount, location, and pricing of products available for their customers. When we add to the picture different business models involving the use of company own warehouses, third-party logistics fulfillment center (3PL), or dropshipping products that are housed in a separate business, proper Inventory Management is essential. In this article, we will show examples of how can Robotic Process Automation (RPA) be used to streamline inventory management in e-commerce.

What is Robotic Process Automation and how it can be used for inventory management in e-commerce?

RPA use cases in e-commerce inventory management example

Robotic Process Automation (RPA), is the name given to software that can perform tasks at the user interface level. Robots can do anything that employees do, and free them from tedious, mundane, and time-consuming tasks. Because RPA is great for repetitive tasks that have to follow a specific set of rules, there are multiple areas of business where these robots thrive.

According to Office Worker Survey, conducted by UiPath, 67% of global office workers feel crushed by doing repetitive tasks. They would like to automate many of them, including data input or creating datasets, and RPA robots are the perfect solution for those mundane tasks.

When it comes to inventory management in e-commerce, it is crucial to work on actual data, as it directly affects sales and customer satisfaction.

According to research conducted by 2Flow Outsourced Logistics Solutions problem of Out-Of-Stock (OOS) items in e-commerce can cause 1/3 of customers loss in 1st occurrence:

  • 1st OOS occurrence: 31% of customers make no purchase or switch stores, while 69% buy a substitute product,
  • 2nd OOS occurrence: 50% of customers make no purchase or switch stores, while 50% buy a substitute product,
  • 3rd OOS occurrence: 70% of customers make no purchase or switch stores, while 30% buy a substitute product.

By implementing RPA software, e-commerce companies can help not only with accurate inventory level tracing but also in demand and supply forecasting, as well as by streamlining communication, related to inventory management, between all departments and suppliers.

Use cases of RPA software in e-commerce inventory management

With proper process discovery, mapping, and thoughtful implementation of RPA software, it can be really valuable to any e-commerce company. The uses of RPA robots are not limited only to monitoring inventory, generating notifications, or transferring data between systems. It can be also supported by AI and Machine Learning capabilities, to track patterns and help to avoid problems with an inventory shortage.

Some specific use cases of Robotic Process Automation (RPA) software in e-commerce inventory management include:

  • tracking and dealing with deadstock,
  • avoiding or limiting the risk of stockouts,
  • reducing lead times,
  • increasing visibility in the supply chain,
  • dealing with inventory discrepancies.

How to track and deal with deadstock in e-commerce with RPA?

RPA in e-commerce to deal with deadstock

Deadstock, known also as a dead inventory is a name given to items that have not been sold and are unlike to sell. Those products, if not properly tracked and pushed out of inventory, can pile up and take up space in the warehouse. Deadstock is a common problem for e-commerce companies selling seasonal items, as well as in the case of clothing - items that are in unpopular sizes, styles, colors, or are out of fashion can turn easily into a deadstock.

A good example of RPA use for streamlining e-commerce (as well as retail) operations is Walmart. This multinational company deployed over 500 bots not only to automate tasks such as answering employee questions or retrieving useful information from audit documents but uses RPA software also to track the inventory flow, to identify slow-moving items and deadstock.

RPA software can help companies to limit deadstock by:

  • demand forecasting, helping to order items that are likely to be sold,
  • tracking inventory flow to determine which items are not selling and can become a deadstock,
  • alerting employees when borderlines are crossed so they can intervene and deal with deadstock.

In case of repetitive cases, when a company has a problem with the same item frequently, RPA can be used to push out products, when more processes are automated. For example, it can be used for discounting such items or bundling them, when robots are involved not only in inventory management but also in the sales process or customer service. Then robots can trigger certain actions when specific conditions are met, and help to get rid of deadstock automatically.

How to track and reduce the risk of stockouts in e-commerce?

Reducing risk of stock-outs with RPA in e-commerce example

A stockout or out-of-stock (OOS) can happen in e-commerce and retail alike, but for online shops, it can have more consequences. In the case of retail shops, it will for sure irritate customers, but especially when this location is convenient for them they will most likely return to the shop. When purchasing online we do not have such a guarantee, on contrary, as proven by

According to a “Digital Shopping Behaviour” survey conducted by Statista.com, “*43% of online shoppers named in-stock availability of desired items and fast and reliable delivery as the two most important attributes when shopping online*”.

Out-of-stock (OOS) average level of 8-10% can cause serious losses in sales and customer satisfaction, drastically reducing the chance that customers will return to the online shops. To reduce OOS levels e-commerce companies can implement RPA software, to create appropriate measurement and response systems.

Specific use cases of RPA for out-of-stock (OOS) reduction may include:

  • gathering and working with accurate data - frequently re-ordering wrong products or quantities is a result of having wrong data about items in stock. RPA can be used to streamline data transfer between inventory systems, external sources, points of sales, and audits results, allowing to deal with problems such as shipment variances, misplaced products, returns, and stolen goods,
  • system integration - RPA allows easy and fast data exchange between various tools, including legacy systems. When programming integration of your inventory system with an e-commerce platform is too expensive, using robots can be a perfect solution,
  • automatic notifications or re-orders - RPA can not only collect data and calculate inventory levels, but it may alert employees when it is necessary to order products, or with proper implementation, do it automatically, within determined parameters,
  • finding OOS patterns - with use or RPA we can proceed with multiple inventory audits, to find periods when they usually experience stockouts and eliminate them,
  • demand forecasting - with the use of RPA companies can compile historical sales data, and other components such as promotions, seasonality, economic state, etc. to have insights on how certain products will be selling and order them to stock appropriately.

With the right data companies can crate re-order points and use RPA software to proceed with ordering the right merchandise when necessary.

How RPA can reduce lead times in e-commerce?

How to reduce lead times  in e-commerce with RPA software example

There is a certain amount of time between ordering a restock of the item, and when the order arrives in the warehouse. This period is called “lead time”, and depending on the complexity of the supply chain can be a major factor impacting business effectiveness. We already know the consequences of lacking inventory to sell, but how can e-commerce companies use RPA to reduce the lead time?

From a logistic point of view, it would be perfect to rely only on local suppliers and be able to integrate inventory management systems with supplier software, to assure that order processing will be fast and without errors. Unfortunately, such cases are rare and most e-commerce companies that work with dozens or hundreds of suppliers have to deal with processes that are far from perfect and try to streamline them as they can.

For that, RPA software is a perfect solution - as it basically does not require any programming to be implemented, it can work with all types of software that the company is using.

Depending on the c-commerce specifics, some use cases may include:

  • automating data entry to speed up inventory management processes and reduce errors,
  • determining and tracking minimal stock levels with RPA, that will allow proceeding with orders before shortage will occur and allow to avoid it,
  • setting up automatic re-stocking orders to reduce the time that employees need to proceed with orders when they are informed about the stock shortage,
  • streamlining communication between e-commerce companies and suppliers, by automating e-mails and using RPA combined with AI to understand messages and act accordingly, reducing the need for human intervention,
  • speeding up payments or document verification and acceptance when it is necessary to proceed with order fulfillment.

RPA robots can work 27/7/365 and with properly mapped processes and good implementation, especially when not only e-commerce but also supplier is using RPA, most order steps can be automated.

It is easy to imagine a situation in which even entire process, from the first RPA alert about low stock level, through placing a new order, accepting it on the other end, and to fulfillment can be done without a need of human interaction.

How automation can increase visibility in the supply chain?

RPA increasing  supply chain visibility in e-commerce example

High supply chain visibility (SCV) in e-commerce allows companies to avoid inventory shortages and bottlenecks, display accurate information about availability, and track products through to delivery. For most companies it will be important to improve this visibility, for now, it does not look good.

According to a study conducted by logistics operator GEODIS and Accenture Interactive, only:

  • 16% of the companies questioned are able to get real-time key performance indicators for their supply chain,
  • 40% of European brands say that their analytical capabilities are too rudimentary, generating data in a fragmented way, often manually and without clear governance.

Supply chain visibility is important not only in the aspect of cooperation with suppliers, but also to assure that customers are well informed as well about their purchase status. In more general terms, the ability to quickly process and fulfill orders is directly related to customer experience, through order validation, shipping, or return processes. To read more about that aspect see our article on “Use cases of RPA improving e-commerce customer service”.

The most frequently mentioned challenges in supply chain visibility are the result of:

  • lack of supply chain elements integration,
  • inefficient organizing, processing, and managing data,
  • lack of access to useful insights technological limitations,
  • no synergy between automated systems and manual operations,
  • inconsistent data flow between company and supply chain partners.

Robotic Process Automation (RPA) software can be used to automate processes in all of those areas, resulting in faster, easier and precise communication between companies. With the ability to obtain data in real-time and use them not only internally, but also to communicate with customers, e-commerce platform operators gain a competitive advantage.

On a more detailed level, many companies use RPA to:

  • generate of Bill of Lading (BoL),
  • coordinate data flow for shipping manifests, statuses, invoices, and remittances,
  • create Electronic Proof of Delivery (EPD) for partners and clients.

How RPA can be used to deal with inventory discrepancies?

RPA for inventory discrepancies in e-commerce example

Each company that has a warehouse deals with the problem of inventory discrepancy, when actual inventory stock is different from the quantity recorded in an inventory system. When not monitored or undetected, such discrepancies result in overstocking and loss in sales.

The most common causes of inventory discrepancies, that can be eliminated with the use of RPA include:

  • incorrect data recorded during receiving/inbound stock,
  • inadequate recording of damaged and returned stocks,
  • human error during stocktake process,
  • use of the incorrect unit of measurement,
  • forgetting to update the inventory system.

One of the biggest factors affecting inventory discrepancies is return rate and the company's ability to properly deal with returns. From the customer's point of view, it is important to be able to send back items and receive refund, but e-commerce deals not only with processing this transaction but also have to have an effective process in place to be able to quickly sell the same product again if it is undamaged.

According to research by Shopify.com:

  • return rates for e-commerce businesses range from 20% to 50% depending on how expensive the items are and when they are sold,
  • 41% of shoppers buy variations of a product from an e-commerce business with the intent of returning.

Without a proper way to effectively track, register and resale returned items inventory discrepancies are one of the most frequent problems for e-commerce businesses.

Inventory management in dropshipping e-commerce model

For many companies, the biggest advantage of dropshipping is the lack of need to stock and send the items themselves. But lack of a warehouse does not mean that inventory management can be ignored by e-commerce platforms. On the contrary, it can be even more challenging to gather all the information about product availability accurately, to ensure that costumes will be able to buy items that can actually be shipped to them, and the company would not have to proceed with refunds shortly after a sale.

In the case of dropshipping, inventory management typically means a process of syncing suppliers' inventory data with e-commerce platforms, via a product data feed.

Multiple companies do this manually, using data received in multiple formats (for example XML, CSV, TXT, or EDI), capturing the necessary product information and adding them to the e-commerce platform in a unified way, in a way that allows customers to see all products from various suppliers in the same, standardized way, characteristic to the online store.

RPA software can support employees through:

  • allowing to update inventory data in real-time,
  • capturing a product data feed with any product identifier (typically SKU, MPN, or UPC), quantities and cost,
  • making use of additional product information such as titles, descriptions, categories, UPCs, images and adding them automatically to the platform.

How we can support RPA implementation in your e-commerce business?

RPA consulting and implementation services GGS IT Consulting

With our experience from working on complex projects, as RPA consultants we are able to guide your company through the entire process of RPA implementation, from creating a strategy, discovering processes, designing optimal configuration, testing, up to full-scale use, and effectiveness monitoring.

GSS IT Consulting experts can support your company in starting digital transformation with RPA through:

  • defining strategy,
  • analyzing, understanding, and documenting business processes,
  • setting up operating models,
  • identifying technical infrastructure requirements to deploy automation solutions,
  • educating employees and helping to create an “RPA-friendly” environment, where each team member looks for more automation opportunities to support company transformation,
  • creating and documenting test scenarios and procedures to ensure optimal configuration,
  • training our clients on building, operating, and maintaining automation solutions,
  • helping to solve issues that arise in day-to-day operations with RPA software,
  • further support of the implementation of any type of automation technologies by the company,
  • helping to plan and set up Centers of Excellence or Process Mining Hubs, to boost up automation efforts.

If you are wondering how to improve customer service quality in your e-commerce business with RPA, get in touch with one of our consultants. You can book a free 30 minutes consultation with us and we will help you identify your needs and pick the right technology to match your challenges.

By providing both basic and in-depth information on digital transformation we are helping our clients at every stage of their journey, ensuring that our robotic process automation consulting services are complete.

You can read more about RPA software and its applications for e-commerce companies on our blog:

How to use RPA in e-commerce to gain a competitive advantage?

Use cases of RPA improving e-commerce customer service

What is robotic process automation (RPA)?