The Keys to Lower Inventory Costs

Managing inventory is one of the most crucial tasks of an ecommerce business. Poorly managed, stock costs can escalate, and gains erode. In this post, I will review five strategies of high-performing, multichannel vendors that greatly lower inventory costs while streamlining operations.

Alright, see our merchandise:

1. Magento 2 pos extension
2. Pos for woocommerce
3. Pos for shopify
4. Pos for bigcommerce
5. MSI management

The Keys to Lower Inventory Costs

Construct an accurate sales forecast. Do not purchase inventory until you understand what you will need, if you want it, and how much. Creating a good sales prediction requires understanding:

• Revenue history by item and weekly.
• Sales volatility to your category.
• Upcoming promotions.
• Aggressive action.
• External variables that influence your market.

Importantly, understand the 80/20 rule. For many retailers, 80 percent of sales come from approximately 20 percent of goods.

Shorten your supply chain. Try buying from producers and providers that are near your warehouse. The turnaround time for replenishment is faster, which makes it easier to respond to changes in your sales forecast.

Purchasing from overseas manufacturers might not be optimal. The savings in manufacturing could be offset by long-term stock finance fees, shipping fees, tariffs, and warehousing. And you might need to carry way too much inventory, which ends up tying up money.

Try buying from manufacturers and providers that are near your warehouse.

Here's an illustration. I once owned a business that offered razors to customers. We considered buying the razors from an overseas manufacturer at about a 25-percent cost savings. On the surface it seemed like a terrific deal. But when we crunched the numbers, the savings wasn't that attractive. We had a four-week manufacturing cycle in the time of the purchase. Then, to keep the costs low, we sent over water to arrive on the West Coast of the U.S.. This added another 28 days. We then had another six days for the freight to be published and for the goods to be trucked from the West Coast to the East.

When all of these costs and time were factored in, the savings was closer to 5%. But the elongated turnaround time from order to receiving the merchandise did not provide us the flexibility we needed. In summary, we opted to pay a higher product price for the flexibility of weekly deliveries.

Audit the warehouse frequently. No matter how accurate you believe your stock systems are, there are always disagreements, in my experience. Human intervention creates mistakes, like the delivery count, choosing errors, stock in the incorrect warehouse slots, incorrect inventory in the choosing slots, shrinkage from damages, and shrinkage from theft. So, physically audit the stock in your warehouse, such as packaging and advertising materials. If you are using a third-party logistics firm, audit its thing counts, too.

Here is another example. A Fortune 100 customer, a merchant, uses very sophisticated inventory management systems. The business sells its products in several channels with numerous warehouses in North America.

Throughout the 2018 holiday season, the company delivered stock from a warehouse to a fulfillment center. However, the system said the stock never came, forcing the company to scramble for more product. The deficit over two weeks created out-of-stocks that cost the company about $42,000 in lost sales. No one knew where the missing stock was.

Ultimately, at the end of January, the warehouse supervisor was auditing stock and discovered the item was there, but it had been put in the wrong slot. The mistake went undiscovered for around 45 days. The mistake caused a chain reaction because warehouse employees counted the lost inventory for the item that was supposed to be in that slot, which then caused shortages for that product.

Related posts:

https://www.connectpos.com/how-to-start-furniture-business/

https://www.connectpos.com/buyer-persona-what-is-it-how-can-it-be-built/

https://www.connectpos.com/top-payment-gateways-for-pos/

https://www.connectpos.com/top-4-thailand-payment-gateways/

https://www.connectpos.com/how-is-connectpos-different-from-other-magento-pos-systems/

https://www.connectpos.com/how-is-connectpos-different-from-other-bigcommerce-pos-systems/

The deficit over two weeks created out-of-stocks that cost the company about $42,000 in lost sales.

Centralize inventory coverage. Multichannel inventory management is the practice of accounting for stock stored in several locations or used for a number of sales channels, like marketplaces, branded sites, and wholesale outlets. Nevertheless, it's crucial that inventory coverage for these stations or locations is concentrated. Prevent, say, a list report for Amazon, another one for eBay, and another one for your site. That sort of installation is prone to mistakes. The end result is warehouses with the incorrect product and continuing out-of-stocks.

Automate. My long experience in selling in a number of stations has taught me that automation is vital, especially for over 20 products. It is almost impossible to manage a company on spreadsheets. Enterprise resource planning tools can deliver all of your business processes collectively -- inventory, order management, accounting, human resources, customer relationships. ERP software integrates all these functions into a single system to streamline processes and data across the whole organization. Everyone can see it -- workers and supply chain partners.

With good automation, you will never have to worry about a customer placing an order and not being able to fill it. Sales information is automatically shared with providers, for restocking. Similarly, product information is syndicated from the ERP to all of your channels.

The fantastic thing is that the price of automation tools is decreasing. It's among the easiest things to implement, even for smaller businesses. It lets you run your company with fewer people.