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2023 Comprehensive Guide to Digital Inventory in Third-Party Logistics

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Understanding and applying the concepts of digital inventory in third-party logistics (3PL) involves learning the fundamental concepts of inventory management and how it integrates with 3PL operations. Below, I will outline the key steps and best practices for effectively managing digital inventory in the context of a third-party logistics provider: Understanding the Fundamentals Digital inventory management refers to the use of software and technology to track, monitor, and control inventory in real-time. It involves using various tools such as Warehouse Management Systems (WMS), barcode scanners, RFID tags, and cloud-based platforms to streamline inventory operations. Integration of Digital Inventory with 3PL Operations Ensure that the digital inventory management system is seamlessly integrated with the broader 3PL infrastructure, including warehouse systems, transportation management, and customer order processing. Selection of the Right Digital Inventory Management System Choose a robust and scalable Warehouse Management System (WMS) that meets the specific needs of your 3PL business. Consider factors such as ease of use, real-time data updates, reporting capabilities, integration with other software, and support for mobile devices.

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Inventory Tracking and Visibility Implement real-time tracking of inventory throughout the supply chain, from receiving to shipping. Ensure that all stakeholders, including clients, have access to up-to-date inventory information through web portals or mobile apps. Demand Forecasting and Planning Utilize historical data and predictive analytics to forecast demand accurately. This will help optimize inventory levels, reducing excess stock and preventing stockouts. Inventory Optimization Implement inventory optimization techniques to strike the right balance between inventory levels and service levels. This involves setting safety stock levels, reorder points, and economic order quantities (EOQ). Barcode and RFID Technology Use barcode scanners and RFID tags for accurate and efficient inventory tracking. These technologies can speed up processes, reduce errors, and improve overall inventory accuracy.

Cycle Counting and Auditing Implement regular cycle counting to verify physical inventory levels against the digital records. Perform periodic audits to ensure data integrity and compliance with regulatory requirements. Real-Time Reporting and Analytics Leverage the power of data analytics to gain insights into inventory performance, demand patterns, and operational efficiency. Generate customizable reports for clients to keep them informed about their inventory status. Automated Alerts and Notifications Set up automated alerts and notifications for critical inventory events, such as low stock levels or order fulfillment delays. This allows for proactive decision-making and problem-solving. Continuous Improvement Regularly assess the effectiveness of your digital inventory management system and processes. Seek feedback from clients, staff, and stakeholders to identify areas for improvement and implement necessary changes. Start by developing a plan by first completing a needs assessment to determine the current gap. Once complete, look forward to what the future business will look like in three-to-five years. Then, go through the above list and chart out a plan of action, taking on the most important steps first. Keep in mind that technology and best practices in the logistics industry evolve over time, so staying informed about the latest trends and innovations is essential for continued success.

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What Is Digital Inventory in eCommerce?

In eCommerce, digital inventory refers to the representation of a seller’s products or goods in an online environment. It is a virtual catalog or database that contains information about the available products, their attributes, stock levels, and other relevant details. Digital inventory management is a crucial aspect of running a successful eCommerce business, as it enables sellers to efficiently track, manage, and sell their products online. Key components of digital inventory in eCommerce include: Each item in the digital inventory is accompanied by detailed information, such as product name, description, images, specifications, pricing, and any variations (e.g., sizes, colors). The digital inventory keeps track of the number of units available for each product. This information is updated in real-time to reflect changes in stock levels due to sales, returns, or restocking.

Stop Keeping Units (SKU’s) are unique identifiers assigned to each product variant. They help in distinguishing between related products and tracking inventory levels accurately. Products should be organized into categories and subcategories for easy navigation and a better shopping experience for customers. Product attributes are specific characteristics that aid in filtering and searching. For example, for clothing, attributes may include size, color, material, and gender. The digital inventory needs to be synchronized with various eCommerce platforms (e.g., online marketplaces, websites) and other sales channels to ensure that stock levels remain consistent across all channels.

As sales, returns, and new stock arrivals occur, the digital inventory is continuously updated to reflect the current stock status. eCommerce businesses should set safety stock levels and implement reordering rules to prevent stockouts and ensure a smooth supply chain. The digital inventory system should support backorders (accepting orders for out-of-stock items) and pre-orders (allowing customers to purchase upcoming products). Digital inventory should be intricately linked to the order management system to avoid overselling and ensure timely order fulfillment. A common mistake made by many eCommerce companies is to rely on a 3PL’s Warehouse Management System solely for tracking inventory. This is a mistake, as each business should have an Order Management System to maintain that information.

How Does Digital Inventory Work in eCommerce?

Digital inventory management has become the standard in third-party logistics (3PL), which increasingly involves serving eCommerce businesses, using technology and software to track and control the movement of products throughout the supply chain. It is a crucial aspect of efficient order fulfillment and overall supply chain management. Here is how it typically works: The 3PL provider uses a sophisticated inventory tracking system or warehouse management system (WMS). This system allows them to monitor the status and location of each product in real time. It keeps a comprehensive digital record of the inventory, including item details, quantities, and storage locations.

A 3PL’s inventory management system integrates with the eCommerce platforms of their clients (omni-channel). This integration enables seamless communication between the multiple systems, ensuring that accurate inventory levels are always reflected on the online store. When a customer places an order on the eCommerce website, the order information is automatically transmitted to the 3PL’s inventory management system through the integrated platform. The 3PL system then checks the inventory availability to confirm whether the ordered items are in stock. As the 3PL processes orders and shipments, the inventory management system updates inventory levels in real-time. This constant synchronization helps prevent overselling and ensures that customers are only able to purchase items that are in stock.

Once an order is confirmed and packed, the 3PL generates shipping labels and sends the package out for delivery. The tracking information is shared with the eCommerce platform, allowing customers to track their shipments from the online store directly. As products are shipped out, the 3PL’s inventory management system keeps track of the depleted stock. Based on predefined inventory thresholds, the system can trigger alerts for restocking or automatically reorder products from the supplier. Digital inventory management systems provide valuable insights into inventory performance. The 3PL and the eCommerce business can access reports and analytics on inventory turnover, popular products, slow-moving items, and other key performance indicators. This data helps optimize inventory levels and overall supply chain efficiency. The integration between the 3PL’s system and the eCommerce platform allows both parties to have real-time visibility into inventory levels and order status. This visibility is critical for making informed decisions, addressing issues, and providing excellent customer service. Digital inventory management in a 3PL serving eCommerce involves leveraging technology and software to ensure accurate tracking, efficient order processing, and seamless integration between the 3PL and the eCommerce business. This, in turn, improves customer satisfaction, reduces errors, and streamlines the overall supply chain process.

What’s the Difference Between Traditional and Digital Inventory Management?

Traditional inventory management and digital inventory management in a 3PL (third-party logistics) both aim to control and track inventory. However, they differ significantly in their approaches and the tools they use. Here are the key differences between the two: Method of Inventory Tracking: In traditional inventory management, inventory tracking is often done manually or using basic tools like spreadsheets. Physical counts are conducted periodically to reconcile the stock levels. This method can be time-consuming and prone to errors. Digital inventory management relies on advanced software and technology, such as warehouse management systems (WMS) and inventory tracking software. These systems provide real-time updates and accurate inventory data through automation, reducing manual work and improving accuracy. Data Accessibility: In a traditional setup, accessing inventory data may require physically being present in the warehouse or relying on manual records. This can lead to delays in obtaining real-time information and decision-making. With digital inventory management, data is accessible from anywhere at any time. Authorized personnel can access real-time inventory data through integrated systems, enabling faster decision-making and improved inventory visibility.

Order Fulfillment Efficiency: Manual inventory management can lead to inefficiencies in order fulfillment, as the process relies on human effort and is more susceptible to errors. Digital inventory management streamlines order fulfillment processes through automation. This reduces order processing times and minimizes the chances of stockouts or overselling. Integration with eCommerce Platforms: Traditional methods might lack integration with eCommerce platforms, leading to a disconnect between online sales and actual inventory levels, relying solely on the information possessed by the eCommerce business. Digital inventory management systems can seamlessly integrate with eCommerce platforms. This integration ensures that online store inventory levels are continuously updated based on real-time sales and shipments.

Inventory Accuracy and Real-time Updates: Traditional methods may suffer from inaccuracies due to manual data entry and delayed updates. Digital inventory management systems provide accurate and real-time inventory updates, leading to more precise inventory control and better decision-making. Scalability and Flexibility: Traditional methods might face challenges when dealing with a growing business or changes in demand, as they might require more manual effort to adapt. Digital systems are more scalable and flexible, capable of handling increased inventory volumes and adapting to changing business needs. Clearly, for eCommerce companies, digital inventory management offers significant advantages over traditional methods, such as improved accuracy, real-time updates, seamless integration, and greater efficiency. These benefits enable businesses to streamline their supply chain operations, enhance customer satisfaction, and adapt to the dynamic nature of eCommerce.

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Challenges With Traditional Inventory Management

Traditional inventory management in a 3PL (third-party logistics) can present several challenges that may hinder efficient operations and lead to potential issues. Some of the key challenges include: Traditional inventory management often relies on manual data entry for tracking stock levels, order processing, and inventory reconciliation. Human errors in data entry can lead to inaccuracies in inventory records, leading to discrepancies between actual stock levels and reported inventory. Traditional methods might not provide real-time updates on inventory levels. This lack of real-time visibility can result in delayed information about stockouts or inventory replenishment needs, leading to potential overselling or fulfillment delays.

With manual tracking and record-keeping, it can be challenging to have comprehensive visibility into inventory across multiple warehouses or distribution centers. This can lead to difficulties in optimizing inventory allocation and making informed decisions about stock movement. Manual order processing can be time-consuming and error prone. This may result in delays in fulfilling customer orders and impact the overall customer experience. Traditional inventory management may struggle to adapt to sudden changes in demand, especially during peak seasons or promotions. Without real-time data and efficient automation, it becomes harder to scale up or down inventory levels to meet fluctuating customer demands. Inaccurate inventory records and inefficient stock control can lead to higher carrying costs for the business. This includes costs associated with holding excess inventory, storage expenses, and potential obsolescence.

Traditional inventory management methods may not seamlessly integrate with eCommerce platforms. This lack of integration can lead to manual data transfers and increased chances of errors when updating inventory levels on the online store. Manual inventory management might not provide the necessary data and insights to implement advanced inventory optimization strategies, such as just-in-time (JIT) inventory or demand forecasting. Traditional methods may not offer robust reporting and analytics capabilities, making it challenging to extract meaningful insights from inventory data. This can hinder the ability to make data-driven decisions and identify areas for improvement. Without real-time updates and automated reorder triggers, traditional inventory management might struggle to efficiently manage the replenishment process, leading to stockouts or overstocking. Addressing these challenges often involves transitioning from traditional inventory management to digital inventory management solutions, which offer automation, real-time visibility, and advanced analytics capabilities. Implementing a modern inventory management system can significantly improve efficiency, accuracy, and overall performance leading to better financial results.

Benefits of Digital Inventory Management

Benefits of Digital Inventory in eCommerce: The most fundamental measurement of your success will start with accurate stock management. Real-time inventory updates prevent overselling and stockouts, leading to better customer satisfaction.

Having the right inventory available at the right time will lead to improved customer experience. Detailed product information, an organized catalog with high-quality images will help customers find what they need quickly. Enhance and automate processes and inventory tracking by reducing manual efforts and errors in managing stock.

Multi-Channel selling requires digital inventory to flow seamlessly across various online channels. Access to inventory data allows businesses to make informed decisions and plan for future demand. Digital inventory is the backbone of an eCommerce business, enabling sellers to showcase their products online, manage stock levels, and provide a smooth shopping experience for customers. Effective digital inventory management is crucial for ensuring the success and growth of an eCommerce enterprise.

Key Features of a Digital Inventory Management System in a 3PL Provider

The use of a Digital Inventory Management System (IMS) plays a crucial role in the success of a Third-Party Logistics (3PL) provider. It streamlines operations, enhances accuracy, and improves overall efficiency in managing inventory. Here are some key features of a Digital Inventory Management System in a 3PL provider: The system should provide real-time visibility of inventory levels across multiple locations, enabling the 3PL provider and its clients to monitor stock levels accurately at any given moment. Barcode or RFID technology should be integrated into the system to enable quick and accurate scanning of products during receiving, put-away, picking, packing, and shipping processes, reducing human errors, and improving overall efficiency. The system should have the capability to optimize warehouse layout and product slotting to reduce travel time, minimize congestion, and improve overall picking efficiency.

For products with expiration dates or specific batch/lot numbers, the system should allow for easy tracking and tracing, ensuring the proper rotation of stock and compliance with regulatory requirements. Seamless integration with the order management system allows for efficient order processing, picking, and fulfillment, ensuring accurate and timely deliveries. Integrating the IMS with the transportation management system enables better coordination between inventory levels and transportation schedules, leading to improved supply chain visibility and cost-effectiveness. Robust reporting and analytics capabilities should be included in the system to provide insights into inventory performance, order fulfillment metrics, and overall warehouse efficiency. A 3PL provider manages inventory for multiple clients across various warehouses. The IMS should support multi-client and multi-warehouse functionality, allowing for efficient management of diverse inventories.

The system should have strict access controls and data security measures to protect sensitive information and ensure that only authorized personnel can access certain functionalities. A mobile app or mobile-friendly interface for the IMS is beneficial, enabling warehouse staff to perform inventory-related tasks on handheld devices, making them more flexible and responsive. As the 3PL provider grows and oversees more clients and inventory, the IMS should be able to scale easily to accommodate increased demands and complexity. Implementing a robust Digital Inventory Management System empowers a 3PL provider to optimize its warehouse operations, provide better customer service, and maintain a competitive edge in the logistics industry.

Tips to Improve Inventory Management

Improving inventory management is crucial for any business to operate efficiently, reduce costs, and meet customer demands effectively. Successful inventory management is a continuous process that requires discipline and processes that are measured against Key Performance Indicators. Here are some tips to help you enhance your inventory management: Regularly conduct inventory audits to ensure that the actual stock levels match the recorded quantities. Identify and resolve discrepancies promptly to maintain accurate inventory records. Implement a digital inventory management system to automate and streamline inventory-related processes. Such a system provides real-time visibility, reduces manual errors, and enhances overall efficiency.

Determine optimal reorder points based on sales trends and lead times. Additionally, maintain safety stock to manage unexpected demand spikes or supply chain disruptions. Categorize your inventory items based on their value and usage. Apply the Pareto principle (80/20 rule) to focus on the high-value items that contribute most to your revenue and profit. Utilize historical sales data, market trends, and customer insights to forecast demand more accurately. A good demand forecast helps you plan your inventory levels accordingly. Cultivate strong relationships with your suppliers to ensure timely deliveries and negotiate favorable terms. A reliable supplier network can reduce lead times and improve inventory management. Arrange your warehouse in a way that minimizes travel time and maximizes efficiency during picking, packing, and stocking activities. Utilize technology like barcode scanners or RFID to speed up operations.

For products with expiration dates or shelf life, follow the first-in-first-out (FIFO) method to ensure that older stock is sold first, reducing the risk of obsolescence and waste. Provide training to your warehouse staff on proper inventory handling and management techniques. Encourage them to contribute suggestions for process improvement and efficiency. Offer seasonal promotions or discounts to clear slow-moving inventory and create space for new products. Track relevant KPIs like inventory turnover ratio, carrying costs, fill rate, and stock-out rates to evaluate the effectiveness of your inventory management strategies. Ensure that inventory levels are well-coordinated with sales and procurement functions to maintain a balanced supply chain. Stay updated with market trends, industry changes, and customer preferences. This information will help you adjust your inventory management strategy accordingly.

Wrapping Up

Digital inventory management in a 3PL serving eCommerce involves leveraging technology and software to ensure accurate tracking, efficient order processing, and seamless integration between the 3PL and the eCommerce business. Your inventory management stands at the center of marketing a product to achieving great reviews and return customers. Without managing accurate inventory levels, managing costs becomes burdensome, a drag and ultimately the downfall of your business. The earlier in the business cycle that well defined inventory management processes are executed, the more likely your business will succeed.

Why Choose Speed Commerce for Digital Inventory Management?

For over forty years, Speed Commerce has been providing results for fulfillment and distribution needs for clients requiring a solution driven relationship. Speed Commerce has experience and expertise in managing inventory across the eCommerce and retail industry. Our people have the experience of listening to your needs and providing the right solutions. Our inventory history and 100% inventory management guarantee are industry leading. At Speed Commerce, we ensure that our inventory management system can scale according to your business’s needs. Whether you are a small start-up, a growing business or a large enterprise, our solution can accommodate your requirements. Our digital inventory management solution integrates seamlessly with over eighty existing systems like ERP, order management, and e-commerce platforms. Check with our team to see how our solution aligns with your current tech stack. Speed Commerce’s robust inventory management system provides real-time visibility into your inventory levels and status, enabling you to make informed decisions and promptly responds to changes. Our client success team is considered industry leading, with a level of customer support and service that is available, offering reliable customer support that is essential for resolving issues and addressing concerns quickly for you and your customers. Our solutions are cost-effective and ensure that no matter the size of your business today or tomorrow, the benefits will always outweigh the expenses. Our data security and compliance meet the latest standards set by states like California or the European Union to ensure that your data is well protected. Before choosing any inventory management provider, it is essential to conduct thorough research, request demos, and ask for references to make an informed decision that aligns with your business objectives and requirements.

What We Do


The inbound shipping team with Speed Commerce is ready to receive, inspect, enter into inventory, and place your products on the shelves, ready for the warehouse team to pick products for your orders.

Picking & Packing

Accurate assembly of ecommerce orders can make or break your business. Our team goes the extra mile to ensure orders are assembled correctly, packed with care, accurately labeled, and sent to shipping on time.


Because of our shipping volume to and from our facilities, we have established relationships with major carriers and negotiated favorable rates. Ensuring your orders are received by the carrier as expected is our top priority.

Inventory Management

Making sure you have enough stock on hand (but not too much) takes expertise in ecommerce retail trends. We work closely with our clients and their Speed Commerce client success manager to anticipate spikes or dips in demand. Our team also manages monthly inventory reporting and takes measures to avoid shrinkage.


Need to expedite order fulfillment to meet unexpected high-demand? We're experts in cross-docking. Our team is agile and can quickly receive (and complete their inbound checklist) on the dock, then our pick-pack team will quickly assemble orders and prepare for shipment. We don't waste time putting items on the shelves; instead we get them out the door!

Returns Management

Get your reverse logistics under control. We manage the full end-to-end process of returned product, including refreshing and reviving! Reducing shrinkage and get your product back out the door generating profit with our returns management service.

Long-Term Storage

Store your inventory in our safe and secure warehouse and gain flexibility you need in your operations. We have space for your long-term storage needs. Centrally located, our warehouses are ideally situated to give you access to your inventory in a secured location. We offer transparent pricing, quick start, and flexible terms.

Managed Services

We remove the headaches in managing your ecommerce fulfillment and warehousing operation. We work with you to learn what's important to you and craft our agreements to match your expectations. You'll meet with your client account manager regularly to review our performance and make adjustments.


Your customers want their orders delivered quickly. In ecommerce, fast order fulfillment is a must! We live up to our name and ensure speed in everything we do. Same-day fulfillment gets your orders packed and shipped shortly after your customer makes their purchase.

FAQs About Digital Inventory

Here are some frequently asked questions (FAQs) about digital inventory:

Digital inventory management is the use of technology, such as software and automation, to track, monitor, and control inventory levels in real-time. It allows businesses to have better visibility and control over their inventory, leading to improved efficiency and reduced costs.

Digital inventory management offers several benefits, including improved accuracy, real-time tracking, reduced stockouts, optimized order fulfillment, better demand forecasting, streamlined workflows, and enhanced inventory control.

Digital inventory management can benefit businesses of all sizes and industries that deal with inventory, including retail, manufacturing, distribution, e-commerce, and 3PL providers.

Digital inventory management systems use technologies such as barcode scanning, RFID (Radio Frequency Identification), and cloud-based software to track inventory movements, update stock levels, and provide real-time data on inventory status.

Yes, most modern digital inventory management systems can integrate with other business systems such as Enterprise Resource Planning (ERP), Order Management Systems (OMS), and e-commerce platforms to ensure seamless data flow and process automation.

Digital inventory management systems implement various security measures to protect sensitive inventory data. These include encryption, access controls, user authentication, and secure cloud storage.

By providing real-time visibility into inventory levels and demand, businesses can avoid overstocking and stockouts, optimize order quantities, and reduce carrying costs, leading to cost savings.

Yes, digital inventory management can improve customer satisfaction by reducing order processing times, minimizing stockouts, and ensuring accurate and timely deliveries.

Yes, while modern digital inventory management systems are designed to be user-friendly, training may be necessary to ensure that employees can effectively use the system and take full advantage of its features.

Yes, many digital inventory management systems are cloud-based, allowing authorized personnel to access inventory data and manage operations from anywhere with an internet connection.

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