Since the coronavirus pandemic emerged, it’s literally been a different world. How else would you explain the incredible 14,928% increase in online searches for toilet paper or a 1,009% increase in searches for bidets? As consumers purchased more products than ever online, it’s raised the stakes for retailers – especially those that are late to the party.
If you’re a veteran eCommerce seller, you already know how important inventory management is to your operation. If you’re fairly new, you may just be finding out. Either way, the current state of eCommerce is bringing to the forefront strategies that should have been implemented a long time ago.
What is Inventory Management?
Inventory Management is the process of ordering, storing, and using a company’s inventory. This includes any raw products, components, or items as they make their way into the warehouse and go back out the door to fulfill customer orders.
If you’re a small business with only a handful of products, it may be easy to manage. For operations that have dozens or hundreds (or thousands) of SKUs being sold on multiple sales platforms, it can get complex fast.
Why is Inventory Management Important?
Managing a supply chain can be a tricky business. If you fail to order enough products or raw materials or fail to order them in time, it can lead to stock-outs and leave customers frustrated. If you order too much, or too soon, you could be stuck with excess inventory that might not sell. Also, you’ll be tying up cash that could be invested in other parts of your business and paying holding costs while it sits in your warehouse.
Inventory Management Software (IMS) can help manage the process and create efficiencies. It can manage your supply chain, keep accurate counts across multiple sales platforms and marketplaces, and create warehouse efficiencies that literally save you time and money.
Labor is one of the biggest – if not the biggest expense in running a warehouse. A study in 2008 estimated labor made up 65% of most warehouse facilities’ operating budgets. Even with advances in automation and better processes, that number hasn’t changed much over the years. When you’re looking to control costs, one of the first places you have to look is at your labor force. If you can find ways to make them more productive and streamline your operations, your profit margins will increase.
Inventory Management software solutions can help you manage your warehouse efficiently by tracking the entire process as goods move through your warehouse. Using barcodes and scanners, an IMS can efficiently track:
- When goods are received
- When you break down cartons or pallets into units
- When you create kits or bundles out of multiple SKUs
- When items are stored in bins or shelves
- When orders are picked
- When orders are verified
- When orders move to a packing station
- When orders need to be returned to inventory, such as canceled orders or returns
Not only will an IMS track the process, but it can also create efficiencies, such as creating efficient pick routes to reduce steps.
Best Practices for Inventory Management
COVID-19 has caused most of us to re-evaluate the way we operate. For some, cash flow has tightened which means a closer look at productivity and workforce as business has slowed. For others, it’s meant moving as quickly as possible to fulfill orders based on demand. In either scenario, however, implementing best practices can make your operations more efficient and optimize your profitability.
Regardless of your situation right now, you need to adopt four inventory management habits to help sustain your business through these uncertain times and into the future. An IMS can help future-proof your business.
4 Inventory Management Habits to Adopt
Here are four inventory management habits that companies are focused on right now during these uncertain times and how SkuVault can help now and into the future.
1. Accurate Inventory
If you don’t have accurate inventory data (counts, locations, etc.) right now, there’s no reason to believe you will have them later.
Many retailers quickly ramped up their eCommerce offerings and may have expanded new purchase options, such as curbside pickup, delivery, or BOPIS (buy online, pick up in store). This increases the complexity of managing their inventory significantly. A good example of this is the high levels of demand many business owners are experiencing right now. As they hustle to meet demand, more incorrect shipments are going out.
When retailers have inaccurate inventory counts, it means customers can order products that you are unable to deliver, which is bad news on a lot of fronts:
- The customer becomes frustrated and doesn’t trust your brand.
- They may decide not to do business with your company anymore.
- They may leave bad reviews that can cost you future customers.
- And finally, they might go right to your competitor to buy the item you are unable to deliver.
It can get worse. As bad reviews pile up, orders go undelivered, or you fail to accurately fulfill orders, online marketplaces may penalize you or delist your product listings.
Accuracy across various selling channels is harder than you might think – especially if you are doing it manually or using spreadsheets. However, SkuVault allows users to allocate inventory for each method efficiently to avoid stockouts. Features like barcode scanning and quality control support these efforts for maximum accuracy.
2. Demand Planning
Demand planning is the process of forecasting or predicting demand for products. Although no one predicted this crisis, you can get ahead of it and the changing consumer trends with demand planning.
Utilizing SkuVault reports, such as the Replenishment Report, can help you stay ahead of the curve and avoid stockouts. Accurate inventory data feeds into these reports and syncs with your online sales to make demand planning more reliable. As sales volume increases, SkuVault’s IMS can flag you that it’s time to re-order before your regular renewal dates. When certain items start flying off the shelves, it can help you determine the amount of safety stock you need before your supplier can replace your inventory.
For many retailers, COVID-19 made peak season look like a minor blip. Just ask the folks selling masks or sanitizer. While there was no way to anticipate this kind of demand, a rapid increase in certain SKUs would be obvious more quickly with an IMS. Retailers that saw this instant demand were better able to re-order more quickly before the supply chain got completely disrupted.
3. Self-fulfillment
For a period, Amazon shut off FBA orders for non-essential orders. They made the move to prioritize the shipping of medical supplies and household staples, but it crippled retailers that relied on Fulfillment by Amazon to handle their inventory. It caused a seismic shockwave across FBA sellers and third-party merchants. Even if customers ordered their goods, they were unable to ship orders.
Amazon lifted the restriction a month later but it served as a wake-up call to eCommerce retailers. FBA is still slow a month after Amazon lifted its restriction. Many are still struggling to meet demand and revenue projections despite increased demand.
It was a reminder that when you rely on someone else to handle your inventory, you’re subject to their rules. An algorithmic change by a marketplace can cost your money. Although Amazon’s intentions were good – to get medical supplies and essential items out to people as quickly as possible – it reminded retailers how fragile that relationship can be.
Many rushed to find other ways to fulfill orders outside of Amazon.
To become a Merchant Fulfillment Network (MFN) seller quickly, there are two options: choose an inventory and warehouse management system, such as SkuVault, to help accommodate high order volume or use a third-party logistics provider (3PL).
If you decide to move off of FBA, even temporarily, SkuVault can make the transition easy
Not only does SkuVault give you complete inventory visibility into the activity, quantity, and locations of inventory across warehouse facilities, it can also help mitigate the confusion an unexpected influx in orders can cause.
If you don’t have the time or resources to quickly make the switch to self-fulfillment, utilizing a 3PL is another option to manage the fulfillment for you. SkuVault has created the SkuVault Network to combat the increase in urgent staffing issues and logistics challenges caused by COVID-19. The SkuVault Network will connect buyers and sellers to vendors, suppliers, 3PLs, and partners through a handpicked process. If you need to enlist a 3PL immediately, the SkuVault Network is here to connect you with one that will fit your business needs successfully.
Either way, SkuVault allows you to implement a self-fulfilled model to avoid total dependence on Amazon FBA.
4. Fast Sync Time
During peak demand season, fast sync times for your inventory is crucial.
Syncing inventory quantities across channel listings quickly has always been important, but when things change rapidly, you need to watch your inventory levels closely. SkuVault’s sync times are every 5 minutes. Some inventory management system’s only do a daily sync, and some are delayed by up to 48 hours. When things are moving fast, you can’t afford to wait two days to get accurate inventory counts.
SkuVault can also handle high volume orders, which most retailers are experiencing, and sync them to all your channels every 5 minutes. When big orders come in, you need to know right away to adjust your reorders and your online inventory. You simply can’t afford the lag time.
Common Questions
Q: My supply chain is unable to fulfill my orders. What can I do so this doesn’t happen again?
When the coronavirus surfaced in China, it impacted many eCommerce sellers that relied on products from Asia. It also hurt manufacturers that relied on raw materials and parts from China. As companies were unable to get the goods they wanted, prices rose and it clogged up the entire supply chain for many producers.
The companies that fared the best with the disruption had mapped their supply networks prior to the pandemic. With better visibility into their supply chain, they had a better understanding of which suppliers, sites, materials, and products were at risk. They were able to move more quickly to secure their supply chain or find alternate suppliers.
SkuVault provides transparency into your supply chain. While we can’t guarantee there won’t be disruptions in the future, we can help you recognize problems earlier and take action faster.
Q: Why does it make sense to invest in an IMS now when I’m having to watch my expenses carefully?
While many companies have cut back on expenses, they are continuing to invest in technology that will make them more efficient. Better methods for tracking and managing your inventory and warehouse practices have been proven to save money over time. It can reduce your labor costs and speed up your order delivery.
Besides more efficiency, SkuVault also provides an assortment of reports to make better data-driven decisions:
- Just In Time (JIT)
- Drop Shipping
- Re-Ordering
- Out-of-Stock
- Weeks-on-Hand
- Turn Rate
- Purchasing
- Forecasting
- Purchase Orders
- User Accountability
- Assembly and Print-to-Order
- Order/Receiving Discrepancy
- Supplier Reporting
- Efficiency
- Class/Brand
- Zone Management
- Statuses
- Transaction History
- Exporting
These reports can help you take the guesswork out of operations and sales and yield a better ROI.
Q: Can improving my inventory accuracy really save me money?
Managing your inventory accuracy will improve your margins. Here’s a real-world example: If you can reduce your overstocks and stock-outs, you can lower your overall inventory costs by as much as 10%.
When you store inventory that isn’t selling, it ties up capital that could be used for something else. Inventory pileup means you’ve got goods that are collecting dust and taking up space on your shelf that could be used for more valuable inventory elsewhere.
Besides tying up cash in overstock, there are other dangers from inventory pileup. When you’ve got an abundance of products to store, you need more storage space to hold it. Warehouse space can be expensive. There may be additional holding costs, such as financing or manpower to move products in warehouses.
When you’re out-of-stock, you’re out of luck. Until you can get replacement items from your supplier, you’re losing sales every day.
SkuVault helps you better manage your inventory to forecast demand for more accuracy and can even automate your reorders. One important feature of SkuVault is the Replenishment Report. This allows you to generate a detailed report of inventory levels. It uses three different report types (reorder, replenish, and assembly) and allows for a deep dive into sales forecasting, reorder points, and minimum/maximum order quantities. The best part is that it brings all these things together whether you are selling online or offline. Your sales history is funneled into a single report.
How SkuVault Can Help Now and in the Future
When things are going well, it can be easy to put off worrying about inefficiencies or areas that should be improved. When there’s a crisis or times get tough, these small worries can quickly magnify into significant stumbling blocks.
If you’ve been putting off fixing some of these issues, it’s time to take care of them once and for all. Adopting these best practices for inventory management can help right now and will pay dividends long after the coronavirus pandemic starts to fade. Whether we return to business as usual in the future or adjust to a new normal, it will help prepare you for future disruptions and make your operations work more efficiently.
Things continue to evolve with COVID-19. More than ever, eCommerce inventory management software is playing a significant role in how well companies are dealing with the new selling environment. While you can’t control what others like Amazon choose to do or how consumer habits change, using SkuVault as your eCommerce inventory management system can help you adapt more quickly to changing environments.
SkuVault connects channels, organizes warehouses, and manages inventory efficiently with powerful integrations and simple workflows. This lets you sell faster, pick faster, and ship faster.
Whether you need to shift your fulfillment models, reprioritize your suppliers and supply chains, or manage your inventory more efficiently, SkuVault provides a robust inventory management software and warehouse management system to help your business grow. Contact us today for a demo.
