Nowadays, online retail is king. You must manage your inventory and provide a frictionless customer experience. Manual inventory management may seem manageable now, but as your business grows, so does the number of orders your customers place. As the number of orders increases, you’ll have more trouble tracking your inventory. You can eliminate many small human errors by adopting an inventory management software or warehouse management system. By using an automated inventory management system, your business with be more productive and efficient, earning you more sales and a greater profit margin.
BONUS: Before you read further, download our Inventory Management Software Whitepaper to see how Logiwa uses real-time tracking to help customers get up to 100% inventory accuracy and increase shipments by 2.5x.
Minimize the Opportunity for Human Errors
Poor inventory management isn’t one big mistake. It’s an accumulation of small errors that end up negatively impacting your bottom line. Each small misstep due to human error can cost you a huge amount of money in lost sales.
You can see this when you look at what it takes to manage inventory across multiple sales channels.
Multi-channel e-commerce stores often struggle to balance inventory. Customers order on different marketplaces, but they’re pulling from the same inventory pool. You might sell out of the product and restock, but what if all of your channels aren’t updated? You end up with false “sold out” signs and lost sales. And if your sales channel doesn’t reflect your sold out status prior to restocking, you could oversell.
On a good inventory management system, you can set minimum inventory levels. On some systems, when your product inventory reaches that level, it will generate an alert. On other systems, you can even set it up to automatically reorder the product from your supplier. You can plow through your inventory manually, or automate portions of it, creating a more agile operation.
Inventory management software automatically generates your pick list, helping warehouse employees assemble the right order each time. If you’re a small business, how much can you spend handling returns resulting from inventory errors? You have to send out the same order twice at a minimum. The cost may be higher than you think.
Great Customer Service Isn’t a “Nice to Have”. It’s a “Must Have”
Your customers will be disappointed if the product they order is not available immediately, or shipped to them as soon as possible. Returns can be even trickier to handle, especially when competing against retail stores and e-commerce kings like Amazon. Inventory management software can help keep your customers informed about their orders and returns by automatically updating them every step of the way across all your sales channels.
Additionally, an inventory management system makes sure that the right items get shipped with the right order. Minimize unnecessary errors that could cause you to lose a potential customer. By shipping the right product every time, your customers know that they are getting what they paid for. You also build a relationship based on trust, which helps with future sales. Not to mention, tracking information helps prevent missing packages. Your customers can rest assured knowing where their product is at all times.
Save Money as You Grow With Good Inventory Control
As your company begins to scale, you’ll have trouble staying on top of inventory in the warehouse. Inventory management software can boost insight by giving you real-time access to the processes happening in the warehouse. The automatic updates and alerts for low or surplus stock saves you money and frees up resources for investment elsewhere.
Need to add more marketplaces to your operation? Don’t waste valuable time manually updating inventory levels. Instead, use an inventory management system to push accurate inventory numbers to each marketplace. Since stock is the biggest asset for retail businesses, it’s essential to nail your sales forecast and maintain accurate inventory levels to improve operations.
BONUS: Learn how Logiwa's inventory management software can help you save money and increase efficiency by downloading our free whitepaper.
Make Your Business Operations More Efficient
Great inventory management can help you make better business decisions. An inventory management system can provide data on your best and worst performing products. Then you can capitalize on the trends your software recognized, resulting in more sales.A great inventory management system can help you work better with the other elements of your supply chain. Integrations are a key feature of the best inventory management systems. By automating your processes in the warehouse, you can:
Optimize picking routes
Save time in the packing process
Help your employees fulfill orders faster
Granular inventory data can help you with business decisions like your warehouse design and layout. Your warehouse layout should contribute to faster picking, packing, and shipping. Inventory data can help you plan your layout based on factors like slow-moving products versus fast-moving products. Placing items close together that are often picked for the same orders can increase picking efficiency.
Inventory Data Crunching Done For You
As a retailer, it can be a nightmare to calculate KPI’s and inventory benchmarks, especially as the buying and selling seasons fluctuate. An inventory management system calculates benchmark numbers such as inventory turnover ration, ATP, reorder points, and safety stock. The system will catch minor fluctuations and patterns over time that a human might miss!
Safety stock, or buffer stock, is a set amount of extra stock that mitigates out-of-stock risk during lead time. Your safety stock level is usually above the reorder point level, but just enough to account for fluctuations in demand. A good safety stock level makes sure that you always have sufficient inventory. This means that if sales unexpectedly increase, you’ll still have some inventory in the bank while you’re waiting for a purchase order restock.
Unlike safety stock, which is used as a buffer if demand fluctuates or unforeseen delays arise, ATP is what you have available in the near future. ATP is the projected amount of inventory you have left to sell, not including allocated inventory. It’s like a promise that you’ll always have a specific amount of inventory to sell. WMS systems help calculate Available to Promise inventory, or ATP. ATP tells you the amount of inventory you have available to sell, making sure you don’t sell inventory you don’t have.
Use Data to Understand Your Supply Chain Relationships
Inventory management isn’t just for inventory going out. You can use your software to better inform your supplier relationships as well. Does the data show you that one of your suppliers consistently delivers late? How do these late deliveries ripple through your supply chain? Do you buy extra to compensate for late delivery? Perhaps it’s time to develop a new relationship. You shouldn’t have to tie up capital to in excess inventory to compensate for another business’ failings.
Be sure to grow relationships who treat you like you treat your own customers: like a priority.
Proper Inventory Management = Increased Profits and Sales
Can inventory management affect profitability? For good or for ill, the answer is yes. Retail e-commerce businesses have two main avenues to increase their profit margins. That’s by lowering their operating costs or increasing their prices. External factors, like competition, influence your price points. Operations are internal, and completely within your control.
Optimizing your processes and operations lowers how much it costs to run your business. When you prioritize your bottom line profit over your top line sales, you build a more solid company.
Bottom Line Versus Top Line for Your E-Commerce Business
Optimizing your inventory control processes improves your bottom line, but what does that mean? We’ll explain both terms in order to show how both are important for your business.
Top line profit is your gross or total revenue. You can increase top-line growth through more sales without actually increasing your profitability if your operating costs rise with your sales.
You’ve probably heard the phrase “bottom line” referring to money. Something can add to or hit the bottom line. Your bottom line is your take-home profit or your net profit. This is how much you have left over after you subtract things like your operating costs. So if you gross $1 million, but your operating costs total $500,000, then your net profit, your bottom line is $500,000.
So by innovating your business with inventory management software, you can increase your bottom line growth by reducing your operating costs. You can provide the frictionless experience your customers are looking for from the start of their shopping to fulfillment.
Written by Erhan Musaoglu
Erhan Musaoglu is the CEO and Co-Founder of Logiwa.