Update: We’ve expanded this post into an in-depth white paper that explains each of the topics here in more detail. If you want more information on any of the topics below, we invite you to download the extended whitepaper.
The inventory management process seems simple. Review historical sales, project future demand, send out purchase orders to suppliers, and receive inventory into stock. This process works well if you’re managing a handful of products, but as your business scales, you need to employ better inventory management practices.
At the end of the day, the problem you are trying to solve is inventory financing: How much inventory do I need to service my customers while minimizing the quantity sitting on my shelf when it’s time to pay the supplier. In addition to the capital, there are additional costs associated with overstock inventory, such as insurance, taxes, storage space, damage, and obsolescence. By taking a smarter approach to inventory handling you will be able to grow your business and save the headaches associated with inventory sitting on your shelves.
5 Tips for your Inventory Strategy
1. Don’t Treat All Your Items the Same
The first step to better inventory management is to identify your A, B, and C items. Typical inventory breakdown show that 10-20% of items account for 80% of the sales – “A” items. The next “B” items account for 15% of the sales, with the remaining “C” items are responsible for the remainder. The goal is to maximize resources and effort on the most profitable, fastest moving items, while minimizing resources for the slow movers. “A” items are extremely important to the success of your business. Your re-order strategy should be based on avoiding stock out of these items, even if they have to be re-ordered on a daily or weekly basis. Your “B” and “C” items are less important to your business and can be handled with less stringent controls. Items in each segment should have their own strategy for stock and re-orders.
Monsoon OMS can automatically create purchase orders for items as they get low on stock and automatically e-mail them to the supplier. You can set your own re-order points or use the historical sales data to generate an inventory forecast based on remaining inventory for you. Set re-order points for your best products and never worry about running out of stock again. You don’t have to spend time checking the inventory of items again or manually create and send out purchase orders.
2. Take Suppliers into Account (Part 1)
Closely monitor your supplier performance. Do you get complete order quantity fulfillment every time, or do you consistently see shipments come in at less than 90% of what was ordered? Your system should be able to track inventory, quality, price, and delivery data points. This enables you to identify suppliers that need extra attention. You can then work with the supplier to understand where the problem is occurring, or order safety stock against the unreliability of the supply.
With Monsoon OMS you can track what was promised and received versus what you asked for in your purchase order. No more guessing why your items are out of stock when you placed a re-order or why your inventory never seems to add up. You can quickly see where in the process the inventory disappears and work with the best suppliers for your business.
3. Take Suppliers into Account (Part 2)
Many suppliers require minimum order quantities and offer price breaks at certain order sizes. This may cause larger-than-needed orders for your business, which then turns into surplus inventory. If you have a consistent track record of ordering from them, try negotiating with your suppliers about minimums or price break sizes Visit This Link. Consider an annual commitment, but ask for flexibility to order as needed.
Monsoon OMS can keep track of lots, boxes and minimum order sizes on a per supplier basis. It can then route the order to the most appropriate supplier based on the order size, cost or other parameters you set such lot size, pieces in fixed lots and have a minimum order quantity. By the way, speaking of boxes, Monsoon OMS can also keep track of your shipping supplies such as boxes to make sure you don’t run out of those either.
4. Inventory is a Company Responsibility
Perform ongoing review of inventory and product segmentation on a continuing basis (review tip #1: Don’t Treat All Your Items the Same). This shouldn’t be a one-time activity. Marketing, sales, and operations— everyone has some insight into what is happening with sales, promotions, and market changes. You need to get input from all the departments and synthesize their knowledge and plans as part of your inventory forecasting.
Monsoon OMS gives you dozens of reports about your orders, customers, suppliers and inventory. Each department can get the information they need to make decisions on what to order, re-stock, discontinue, discount, promote and merchandise.
5. Optimize the Right Places
Once you’ve gotten the new processes on track, look to optimize the entire supply process— not just your metrics. Instead of trying to figure out how to decrease your order quantity, work with the supplier to cut down their lead-time, with your carriers to figure out how you can be given more visibility into your shipments or with your warehouse to receive items into inventory quicker.
The best part of having an order management system like Monsoon OMS is that once you find a process that works for you, it can be fully automated. Purchase orders reconciled, inventory updated, RMAs matched and processed. This allows you to stop thinking about managing inventory and get back to growing your business. Imagine how much time you can save by automating some of the most mundane eCommerce tasks that you may be doing manually today.
Update: We’ve expanded this post into an in-depth white paper that explains each of the topics here in more detail. If you want more information on any of the topics above, we invite you to download the extended whitepaper.
Are you looking for Inventory Management Software?
Monsoon OMS is a full fledged multi-channel inventory management software for eCommerce merchants. With key functionality such as automatic synchronization of inventory counts and status updates across all sales channels, integrations into dozens of shopping carts and marketplaces, Monsoon OMS provides a consolidated picture of the inventory being sold on each of your online channels.
To learn how Monsoon OMS has made a huge impact many multi channel merchants, check out some of our success stories. To learn how your eCommerce business could grow with better inventory management software, please contact us.