Using an automated inventory management system is fundamental to the success of any ecommerce business. Behind every standout, marketing campaign is a tightly-run inventory management operation that keeps items from going out of stock and maximizes the time and cost of fulfillment.

Like a humble sous chef in a kitchen or an offensive lineman on the football field, fulfillment tends to be overlooked — unless something goes wrong. As it’s the backbone of ecommerce, the way you handle your inventory deserves a lot of thought and planning. When it’s done right, good order fulfillment bleeds into other operations of your business, including marketing. Here are five reasons why smart inventory management leads to improved marketing and sales ROI.

Kitting gives you more sales opportunities

Kitting is when you pre-pack and sell multiple items together, usually as a matter of convenience for your customers. It’s more convenient for you because it boosts your average sales amount!

For example, perhaps you sell organizational packing cubes for frequent travelers. They come in four different sizes, starting at $10 for the smallest cube and up to $30 for the largest one. IN addition to offering single cubes for purchase, you can bundle one of each size and sell them together in a “value pack.” Many customers will be thrilled to get what feels like a deal by buying in bulk from you, and you’ll benefit by selling more inventory at a winning margin.

Balanced inventory keeps storage costs low and customers happy

There’s a Goldilocks rule for maximizing inventory management in your warehouse: Anticipate stock to find a balance between too little inventory and too much inventory.

If you have too many SKUs sitting on the shelf, not only are you spending more in storage costs, eventually, you’ll have to put on a clearance sale to move that excess stock. Clearance sales are a double whammy in that they reduce your profitability (as opposed to selling items at a higher price) and from a marketing perspective, they condition your customers to buy only when they see items on sale.

On the other hand, if you have too little inventory, you run the risk of turning away potential customers because of the dreaded “out of stock” message appearing when they try to add an item to their shopping cart. Nothing kills a relationship with customers faster than losing them to a competitor who has a much-needed product in stock when your store doesn’t!

Use past purchasing data to create a positive feedback loop of streamlined inventory

Track sales history and demand data to anticipate what stock needs to expand and what inventory should be liquidated to save carrying costs. When you look holistically at your sales data and consider how trends may affect your upcoming week, month, or quarter, you can improve upon previous performance.

Take the time to review your best-performing products and look for correlations such as holidays, seasons, trending and viral movements on social media, and other factors. There’s all sorts of AI plugins and customer relationship management (CRM) tools that are designed to help you anticipate these effects on demand; find them and use them!

Be smart about where you store inventory

At first glance, it may not seem like a big deal where your inventory is kept, but location is everything. On a macro scale, it’s critical that your inventory be located as close as possible to as many customers as possible. This is the simplest and cheapest way to ensure fast shipping times to customers (and cheaper costs as well).

For this reason, Amazon has fulfillment warehouses in just about every state, as well as near every major city in the USA.

But where you place inventory within the warehouse is important, too. Locate your most popular inventory closest to picking and packing area of your warehouse to minimize the time that goods spend out of inventory but not yet packed onto the delivery truck.

If you have outsourced fulfillment to a 3rd party logistics company, they will hopefully distribute your inventory across different sections of their warehouse rather than cluster it all in the same area — this makes it easier for pickers to optimize their routes and spend less time in transit between shelves and packing stations. As with all vendors you may work with, you have a right to inspect their facilities and see for yourself how your product is being stored and where it is located.

Make the returns process as painless as possible

Finally, you have to prepare for the inevitable scenario where a customer returns an item.

Since this usually means the customer is unhappy about your product in some way, you’re already in a tricky situation. The last thing that you want to do is botch the process by faulty inventory management and cause undue stress; you might go from a merely 3 star to a 1 star review if you don’t correctly record a return and the customer feels as if they’ve been had. It can’t hurt to offer a coupon on a future purchase or maybe a free trial of a new product when you do process someone’s return.

With a little creativity and kindness, you may be able to turn a negative experience into a positive one.