BIG IDEA
Amazon selling is more than just listing and sending products to customers. A lot of things that are equally crucial, if not more, happen behind the scenes.
For instance, there's inventory management (IM), which is the process of managing your stocks to ensure you can fulfill all orders. Shopify explained what IM is and how important it is to your business success.
📉 IM is for inefficiency minimization
You can't decide on the optimal quantity, storage location, and timing for replenishing inventory overnight. They're something you learn over time by trial and error.
IM's main goal is to minimize costs while maintaining sufficient stock levels. It helps you avoid:
- spoilage (for perishables);
- dead stock and inefficient cash flow;
- high storage costs;
- and, most importantly, canceled orders.
🔵 Types of IM
There's no absolute 'best' IM practice. It varies from business to business, so it's important to know the different IM types to match your needs.
- Retail IM is about efficiently handling the stocks you sell to customers. The goal is to have enough inventory to cover demand and avoid those pesky logistics costs incurred by slow-moving or non-moving items.
- Multi-location IM is more complex. From the name itself, it requires managing inventory at different storage locations to ensure stock availability. If you have multiple warehouses or sales channels, you must maintain accurate and centralized inventory records to avoid delivery and decision-making conflicts.
🔑 Inventory control is the key
Again, it's not something you can learn in a jiffy. But it won't hurt to start early with some proven and tested inventory control techniques:
- Use Six Sigma. More like a principle than a method, Six Sigma is widely used to reduce excess inventory. Edwin Garro, founder of PXS School of Excellence, recommends the use of DMAIC, a five-step problem-solving process based on this principle.
- Define the problem you intend to tackle.
- Measure your current inventory level.
- Analyze the underlying reasons for any existing issues and develop your strategy to eliminate them.
- Execute your IM plan by conducting pilot tests to assess its effectiveness in resolving the issue.
- Control the new process.
- Set par levels. This simply means setting the minimum quantity of products in your inventory. This helps you determine your reorder quantity and schedule.
- Follow the first in, first out (FIFO) principle. In this method, the oldest stocks are sold first. By using FIFO, you can reduce the risk of spoilage, work around expiration dates, and improve your inventory rotation.
- Make contingency plans. Whether you like it or not, you will face problems in your business. The best way to beat them—expect the worst and strategize how to solve it. This would prepare you even for the most unexpected challenges.
👌 Mastery is the best policy
It's not easy finding the best IM strategy for your business. But with experience and diligence, it's not impossible to master the control of your inventory and supply chain processes.
To power up your inventory game for Prime Day and other upcoming sales events, read on for some IM reminders and tips we’ve compiled for you.
HOT TOPIC
Top 4 common inventory problems and how to solve them
Whether you’re a small retailer or a large-scale manufacturer, managing inventory can be challenging. But as we said, the key is anticipating the problems to build an effective, targeted plan.
Kapture shared some of the most common challenges businesses face regarding inventory management, as well as the solutions to overcome them.
🛍️ Outdated products
It’s one of the most common inventory issues, especially for those who sell seasonal items. Every unsold product on your shelf can lead to significant losses. Not to mention the space they occupy, which you could have used for new units.
Solution: Use an IM platform. This would help you monitor and clear old stocks. Another way is to run discount deals on them to trigger sales. Hello, Prime Day! 👋
🚰 Overstocking
This is another common problem that’s usually caused by overestimated demand. If you keep adding new stock without disposing of the older ones, it will eventually cut your profit margins.
Solution: Revamp your forecasting method. You can recalculate your spreadsheet formula, but we don’t recommend this one for accuracy reasons. Instead, we’d go for the use of demand planning and forecasting software.
📈 Data inaccuracy
In most cases, this issue exists in manual processes. They’re dated and prone to mistakes and inaccuracies. One wrong record can lead to a domino effect that may hurt your efficiency and profitability.
Solution: Automate. Embrace technology. Use modern inventory tracking tools, such as barcodes and QR codes). If you don’t have the resources, you can always try free IM systems.
🥊 Tighter competition
As the competition becomes fiercer, demand levels increase. This forces businesses to expand their logistics network beyond what they can manage. Their resources are stretched out, causing some inefficiencies in managing stocks.
Solution: Prioritize productivity. A key rule in business is to fix the internals first. You can use productivity tools to optimize your processes and prep your business for competition.
🧐 But, there’s a bigger problem …
Some sellers can forecast demands but fail to adjust their inventory in time. This shows a lack of awareness and understanding of the importance of proactive IM.
So if you want to effectively face the challenges above, you must prepare ahead of time. Know your priorities and use all resources you can get to store your goods in the right place at the right time.
ACTIONABLE ADVICE
Optimize your inventory management process with these 4 tools
While being proactive can keep you on top of inventory challenges, it’s not enough to optimize your inventory operations in the long run. You’d need powerful IM tools in your arsenal.
We’re not talking about old-fashioned spreadsheets. SellerAp listed some of the most advanced IM software and tools you can use instead.
🧰 4 tools for inventory optimization
But first, a disclaimer: these tools can effectively streamline supply chain workflows. Still, you must check their compatibility with your business model to make sure they’ll work their magic. 🪄
1. SellerApp
Its profit dashboard is a gold mine of inventory data. Aside from giving you an overview of your stock levels, it allows you to sort them by status and fulfillment method to manage them more efficiently. 📊
SellerApp also shows your sourcing or manufacturing costs to let you know if it’s time to find new suppliers.
2. Extensiv Order Manager
Formerly known as Skubana, this software is the new best friend of multi-channel sellers. 🤝
It allows data integration from multiple e-commerce platforms (including Amazon, Walmart, and Shopify) for easier inventory overview. Plus, it has automation tools that smoothen out fulfillment workflows.
3. SoStocked
If you like tools you can customize to your needs and preferences, this one’s perfect for you!
SoStocked allows you to adjust dashboards according to your KPIs. It also has a forecasting feature that considers seasonality and sales history to guide your stocking strategy.
4. Linnworks
Like Order Manager, Linnworks has integration features for those selling on multiple platforms. It supports centralized IM through its automation features, including real-time analytics and stock forecasting.
What’s more, it has a warehouse management solution that can fulfill orders for you. 📦
🧾 There are honorable mentions we weren’t able to include in the list, so we’re leaving their exploration to you. But the important thing is you’re free to choose the one that best suits your business needs.
If you already have a go-to IM tool, feel free to share it with us by replying to this email!
