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What is procurement? A quick guide (2023)

Posted on | by Cin7 team | Leave a Comment on What is procurement? A quick guide (2023)
In business, procurement refers to the process of sourcing and obtaining goods or services. Direct procurement refers to the sourcing of goods and services that are critical to a business. Indirect procurement refers to the sourcing of goods and services that are important but aren’t critical.

It’s no secret that global supply chains have experienced issues over the last few years. For example, the war in Ukraine increased the price of commodities like gas and oil, food products, and fertilizers across the globe in 2022. Hurricane Ian hit Florida in 2022 and led to port and rail transportation shutdowns. Port Tampa Bay alone had a “$17 billion economic impact.” In a global environment, procurement teams need to be creative and plan to stay ahead of disruptions and competitors.

So, what is procurement? In the broadest business sense, procurement is the process of sourcing and obtaining goods or services. Procurement begins with identifying business needs and ends with paying a supplier for goods and services. The process involves a lot of communication, strategy, documentation, and financial analysis. Procurement involves many stakeholders including:

  • Suppliers
  • Accountants
  • Legal teams
  • Product and manufacturing teams
  • Procurement managers

We’ve outlined the four types of procurement, how the process works from start to finish, procurement software, and more. We hope this guide helps you consider the process and its impact on your business.

Why procurement is important for business

Procurement is important because it’s vital to a business’s ability to function. Without certain goods and services, most businesses cannot operate. Direct procurement addresses the core functions of a business, and indirect procurement addresses the less direct elements, such as rent and HR services. For example, car manufacturers need to procure goods such as steel, rubber, and plastic, as these raw materials are critical to their ability to create a product. Any changes in availability or cost can have a significant impact.

Since procurement takes up 40%-80% of a business’s external spending, even a small difference in cost can significantly affect profit. Strategic approaches to procurement can minimize the cost of goods sold and also mitigate potential supply-related issues and disruptions that can impact business performance, such as:

  • Supplier delays
  • Supply chain issues
  • Increased cost of goods and services

Supply chain disruptions and market shifts are inevitable, and the global marketplace must respond to remain buoyant. For example, a sudden increase in fuel costs can impact the associated costs of transportation and storage. To mitigate the impact of those rising costs, companies might use procurement analytics to manage their potential risk and remain profitable. In fact, procurement analytics is becoming so critical to navigating a turbulent supply chain that the market is projected to reach $19 billion by 2023, according to a recent study by Verified Market Research.

4 types of procurement

The four different types of procurement.

The four types of procurement include direct, indirect, goods, and services. Whether procurement is direct or indirect depends on the type of product a business creates. For example, car manufacturers indirectly procure office supplies, but office supplies are not an integral element of a vehicle. On the other hand, an office supply store directly procures office supplies from a wholesaler. This is considered direct procurement because office supplies are core to their retail business. Procurement types are important for planning and prioritization.

Direct procurement

Direct procurement refers to the procurement of goods and services that are critical to a business. Think of direct procurement as “directly related.” These goods and services generally get procured in large quantities at a low frequency. In a broad sense, this encompasses anything a business needs for creating a finished product.

Examples of direct procurement include:

  • Raw materials such as coal, metal, plastic, corn, lumber, and more.
  • Semi-finished goods and works in progress, including computer chips, sugar, paper, and anything processed.
  • Finished products that retailers purchase from wholesalers, such as t-shirts and candles.

Indirect procurement

Indirect procurement refers to the procurement of goods and services that are important but not critical to a business. These goods and services generally get procured in smaller quantities and at a higher frequency. Think of indirect procurement as “indirectly related” to the business. However, don’t be misled, these goods and services are just as vital for the day-to-day operations of a business.

Examples of indirect procurement include:

  • Office supplies such as computers, task management software, pencils, and more.
  • Operation consumables like lubricant, water, sewing machine needles, bobbins, and chemicals.
  • Outsourced services such as maintenance services, marketing services, business consultants, and any third-party services that help the business function.

Goods Procurement

Goods procurement refers to the process of acquiring physical items, which can range from a simple lightbulb to a fleet of vehicles. Unlike services, goods require transportation and storage. It’s important to note that software is considered a good, while software as a service (SaaS) is considered a service.

Examples of goods procurement include:

  • Raw materials such as tin, grain, cotton, and petroleum.
  • Semi-finished goods like steel, canola oil, yarn, and sugar.
  • Finished products such as smartphones, clothing, cooked sausages, or furniture.
  • Software, including on-premise software and non-subscription software.

Services Procurement

Service procurement refers to the process of sourcing and purchasing services. We can categorize this type of procurement under indirect and direct procurement, depending on how critical the service is to the company’s core function.

Examples of services procurement include:

  • Business consultants like legal consultants, operational consultants, and HR consultants.
  • Marketing agencies such as advertising agencies, PR agencies, and digital marketing agencies.
  • Building maintenance services that include janitorial, landscaping, HVAC.
  • Software as a Service (SaaS) like Amazon Web Services (AWS), Salesforce, and Slack.

Procurement misconceptions

With such a complex subject, it’s no surprise that people frequently misuse the term procurement. In this section, we’ll explore some of the most common misconceptions surrounding the topic, how it relates to the larger inventory management lifecycle, and how to avoid any miscommunication.

Procurement vs. purchasing

Purchasing is a part of the procurement process, but isn’t interchangeable with procurement. The two terms often get mixed up because they both involve acquiring goods and services. However, procurement addresses larger business concerns like profitability, while purchasing addresses lesser concerns such as order costs.

The purchasing process involves creating purchase orders, auditing shipments, and making payments. This stage of procurement does not involve identifying business needs or selecting vendors.

Procurement vs. supply chain management

Procurement is a significant part of the supply chain lifecycle that supports creating a product, but we shouldn’t confuse it with the entire supply chain management (SCM) process. Procurement and SCM both support the creation of a product, meaning they’re both concerned with materials, vendors, and manufacturing.

The procurement process ends when all the materials are in place for creating a final product. Procurement isn’t directly involved in manufacturing, distribution, and retail locations.

Procurement vs. sourcing

Sourcing plays a crucial role in the procurement process. It starts once the business identifies its needs and seeks potential vendors, vets them, and chooses the best option to fulfill the business’s needs.

Sourcing is a very early stage of procurement. Once sourcing is complete, the purchasing stage of procurement can begin. This stage involves ordering, monitoring, receiving, and making final payments for goods.

Procurement vs. contract management

Contract management is part of the procurement process, which addresses vendor relationships, purchase orders, and payment for goods received. Contract management is the process of managing those agreements.

Contract management and procurement share the same goal of building positive vendor relationships, making contract management relevant to each stage of the procurement process. But the terms should not be used interchangeably.

 

How the procurement process works (8 steps)

The eight steps in the procurement process.

1. Identify business needs

This first stage of the procurement process identifies what a business needs to create a product or provide a service. Consulting with relevant stakeholders can ensure the satisfaction of all parties. This process is sometimes referred to as a business needs analysis (BNA).

These granular product details will inform sourcing and purchasing in the following stages. Departments make requests for a wide range of needs, which can range from raw materials to office buildings. The procurement process continues once the business has adequately identified its needs.

2. Research vendors and suppliers

Following the BNA, procurement specialists begin to research vendors and suppliers. Knowing what they require for products and services is only half the battle, as this research-heavy stage of procurement informs larger business strategies.

Vendor considerations can include:

  • Cost of goods or services: How much the business will pay the vendor.
  • Scope of the contract: How long the contract will last.
  • Timing for payment: When to make payment.
  • Termination requirements: What conditions can support the termination of the contract.
  • Insurance details: Who will handle insurance during the transportation stage.
  • Consequences: Details of the ramifications that can occur when contractual obligations are not fulfilled.

Strategy occurs during this stage using data analysis, market research, and supplier negotiation. This concept is known as strategic sourcing. For example, market research can inform a choice of suppliers from a particular geographic location, and internal demand data can support the choice of vendors and suppliers.

3. Choose vendors and suppliers

With all the necessary research in place, it’s time to choose vendors and suppliers. Before reaching out, the business will consider the budget and analyze the requested goods and services again. This stage includes validating the vendors before the business makes any commitments. This helps the business avoid potential scams, illegitimate claims, or other negative outcomes.

At this stage, the business will send a request for quotation (RFQ) to potential vendors. With an approved vendor quote, the business can send an official purchase order.

4. Create the purchase order

After selecting a vendor and receiving a quote, the business creates a purchase order (PO). Depending on its size and cost, the POs may require approval from various departments. Once approved, the PO is sent to the supplier.

Purchase orders contain important information, such as:

  • An internal PO tracking number
  • A description of goods being purchased
  • Quality and quantity specifications
  • Detailed vendor information
  • Terms and conditions
  • Payment terms and conditions

Once the vendor accepts the PO from a business, it becomes a legally binding contract between the two parties, complete with pertinent information. For example, the PO will indicate when the vendor receives payment from the business.

5. Monitor order

The order will be monitored as the supplier fulfills it, and as it moves through transit towards the paying business. Orders in transit can get lost, damaged, or delayed, and businesses and suppliers will share these supply chain visibility concerns. With so many stakeholders, it’s important that procurement specialists communicate diligently.

Procurement specialists and stakeholders need to prepare for:

  • Receiving the order
  • Auditing the order
  • Storing the order

Businesses need to monitor shipments so relevant stakeholders can stay informed and prepared. The monitoring process begins with the creation of a purchase order. From there, procurement will stay in contact with the supplier who will send advanced shipping notifications (ASNs). The ASN is a document that provides all the necessary details about the incoming order, allowing the business to stay informed and keep track of their order.

6. Receive and audit goods

You must audit received goods for quality control and to ensure all agreements have been met. Document irregularities in case of vendor error or fraud. An internal auditor, or auditing team, will be in charge of the auditing process, and the PO will assess whether the goods meet expectations.

The PO will help answer questions like:

  • Were all ordered goods received?
  • What is the quality of the goods?
  • Was the order received on time?

Detailed documentation is vital for informing the final phase of procurement. You can’t release payment for the order without a successful audit and an approved invoice.

The auditing process can provide useful insights to improve a business’s efficiency and profitability. Insights made during the audit can be compared against internal departments and external trends in the market.

7. Review and approve invoice

The invoice and PO are different documents that serve separate functions. The invoice is the document that needs approval before a vendor receives payment. While the PO is made available when receiving goods, the invoice may arrive at a later date.

Once they receive an invoice, the accounting team will typically perform three-way matching. Three-way matching ensures the PO matches the order receipt and invoice.

This stage ensures that:

  • Payment is deserved (following audit)
  • Payment is only for the items received
  • Negotiated discounts will be honored
  • Funds will be dispersed correctly

8. Make payment and update records

Payment is finally issued upon the approval of accounts payable. Businesses need to have an efficient approval process in place to ensure invoices are paid in a timely manner. Both parties have stipulations outlined in the final purchase order.

It is absolutely important to keep these records updated. Businesses must be prepared for potential audits or contractual disputes. Well-maintained records can also support data analysis. These accounting records may inform strategies, and can help improve inventory management, vendor relationships, and the procurement process overall.

Procurement software

 

What is procurement software?

Procurement software streamlines and simplifies tasks associated with the procurement process. Procurement software simplifies redundant manual tasks and increases efficiency simultaneously. The right software can make data accessible and help improve business efficiency.

Our inventory management platform provides robust reporting for small and medium-size businesses. And Cin7’s ability to integrate with commerce platforms makes it an all-in-one system for product sellers.

Sign up for a free trial to see how Cin7 Core can help you reach your business goals quicker and easier.

4 ways order management can improve your customer experience in 2023

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What goes on behind the scenes to get goods to a customer after clicking the “buy” button is a lot more complicated than most realize. While the process for getting an online order to a shopper breaks down to collecting, packing, and shipping the goods off when you consider the vast number of orders that consistently come in from many different online channels, you can see there could be complications that have to be overcome. Factor in the possibility of these goods being stored in any one of several gigantic warehouses, and you understand how important it is to have everything well organized. That organization, basically, is order management.

When order management works at its best, your customers are left satisfied. That’s because a well-run system keeps them and their needs in mind at every step. In this blog, we will closely examine how order management and an order management system make it all happen.

 

What an order management system does

An order management system (OMS) is a software application that automates every aspect of order management. It keeps accurate records of everything from the inventory you hold and the purchase orders you issue to your sales and payments. It also handles invoicing and maintains relevant customer information. All the information the system manages is stored in one location that can be accessed from anywhere.

With all the data and information it collects, a reliable and robust OMS, such as Cin7 Omni, can make forecasts about your inventory, letting you know what items to stock up on. Forecasting inventory is possible because the system knows what items are selling best and which storage locations they’re selling best from. As for working out the most efficient way to fill each order, the software can use its knowledge of where items are stored to determine which facility is best placed to fill them. This stored information about who buys what and where can also be used to make important business decisions, like offering a new fulfillment option such as curbside pickup.

 

4 order management functions that give shoppers a better buying experience

1. Inventory control

When prospective customers think of buying something from a website, they like to know that the item is available before they opt to purchase it. If your site lets them go through the whole purchase procedure — from selecting the size, color, and quantity to choosing payment options and filling in their details — and only then lets them know an item they want is unavailable, they’re going to be a little annoyed. If they go through the whole online purchase procedure, and you later send an email saying the item is unavailable or that it’s going to take a while to arrive, they’re going to be even more annoyed.

A good OMS lets you know how much inventory you have in stock and gives this information to your customers. Cin7 Omni’s inventory management software syncs your website or social media with real-time inventory availability, so customers can make more informed choices. This knowledge also enables the automated system to let your online customers know when particular items they want will be available.

So when it comes to inventory, with an order management system, you’re on top of everything, and your customers have every reason to trust you and your company. It’s what they call a win-win.

2. Delivery

Today’s shoppers like to have options, especially when choosing which way to get their orders into their hands. These options could be anything from delivery times, like one-day, two-day, or three-day shipping delivered to their homes, to curbside pickup to collecting their packages at a brick-and-mortar store (that’s BOPIS or buy online, pick up in-store.)

With its integrated warehouse management software, Cin7 Omni is designed to enhance your order fulfillment processes by expediting shipping, reducing errors, and boosting your team’s productivity. This feature is equipped with advanced tools that enable efficient management of all aspects of shipping, including order tracking, stocktaking, and label printing.

Again, a win-win.

3. Multichannel fulfillment

Just as shoppers have a lot of online and offline options when they want to buy something, you, the seller, have options. These run from numerous online marketplaces and social media to apps, email, and even brick-and-mortar stores. Nowadays, it’s called omnichannel marketing. For you as a seller, it means getting more visibility for your products and getting your name out.

Cin7 Omni offers a comprehensive solution that automates the entire order process by seamlessly integrating with all sales channels, allowing you to conveniently manage your sales from one system. By connecting all of your sales channels in one place, Cin7 Omni enables you to easily collect information about which items are being purchased from which source. This eliminates the need to manually enter and manage orders from multiple channels, saving time and reducing potential errors.

4. Reverse logistics

Last but not least, businesses often have to deal with return requests due to late deliveries, delivery of wrong items, damaged products, and more. While this can cause short-term dissatisfaction, a displeased consumer could be placated with effective return management.

Cin7 Omni can boost customer loyalty with quicker and more efficient returns and replacement logistics. You can establish the return policy and eligibility and initiate client-specific return processing. Furthermore, depending on its condition, you can choose whether to refurbish, refill, or discard the returned item.

 

Upgrade your order management system to Cin7 Omni

An OMS is good for you and your customers, but management systems do more than just handle inventory and orders. They also connect with CRM, ERP, sales, service, and commerce systems and other software you use that impacts the purchasing process. The beauty of an OMS is that when all these systems are integrated, the information each holds is available on a single platform and can easily be accessed by employees.

If you’re looking for an order management system that can help you improve your customer experience, Cin7 Omni could be the way to go. Book a demo today to learn more and understand why Cin7 Omni is the right choice for you.

Order tracking in ecommerce: It’s importance and good ways to implement it

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Any customer buying online is taking a leap of faith. They’re trusting that the item they’re buying is everything they think it is, and they’re trusting that the website they’re buying from is honest.

As an ecommerce seller, the best way to assure customers that you won’t be running off with their money is to provide a window into your fulfillment process. Let your customers know at every step that their items are reliably on their way. This way, they will feel confident in their purchase and feel good about you as a seller. The window you provide is called order tracking.

We’re going to take a close look at order tracking: what it does, its benefits, and how to make the best use of it.

 

What order tracking software is and how it works

Order tracking software is part of, and runs in tandem with, an order management system (OMS). This software knows where an order is at every stage of the fulfillment process and can post that information for the buyer as, and when, requested.

Here’s basically what the order tracking software does:

  • As soon as an order has been placed, it will send the buyer an email confirming the order has been received. This email lists all the details of the order and gives it a tracking number.
  • This tracking number identifies the order through the picking/packing stages, and a notice on the website will let the buyer know their order is being processed.
  • The buyer can visit the website and enter the tracking number to check the live order status and expected delivery date.

All this reporting is in real time.

Reasons to have an order tracking feature

1. It builds trust.

Order tracking gives your company transparency. It’s like you’re opening your doors to your buyers and inviting them to see how you operate. And when you do that, there’s no reason for them to mistrust you.

Customer trust is the foundation of repeat business. While this maxim applies to all sales businesses, it’s especially true for ecommerce where there’s no personal connection and where products can only be seen in an image.

Being able to follow their orders through the system also gives buyers a sense of control, and that will leave them feeling that they’ve had a good shopping experience. It’s the kind of satisfaction that will also lead to repeat business; plus, it will give your buyers a reason to recommend you to their friends.

2. It frees up customer support staff.

Ecommerce sites that don’t have an order tracking feature will have to dedicate precious customer service hours to dealing with inquiries about order status. If your customer service staff have to spend all their time doing this, (a) they won’t be able to do anything else, and (b) you’re going to have to hire a lot of them.

With an order tracking feature your customers can use at any time, your customer support staff can focus on resolving those rare issues when things go wrong for the buyer. That, in turn, will make even those shoppers who’ve had complaints feel they’ve had a good experience with your company.

3. It helps you stay on top of your fulfillment process.

The order tracking software doesn’t just let buyers know the status of their orders, it tells you where every item is in the system. Monitoring in this way provides a valuable way for you to gauge how well your fulfillment process is working. It will tell you where bottlenecks are occurring and identify areas that aren’t running as efficiently as they could. With this information, you can make adjustments to smooth things out.

 

Ways to make the most of order tracking

1. Confirm you’ve received an order and provide a tracking number.

You have to keep your buyers in the loop at all times, and you have to do this from the minute they’ve placed an order to the minute it’s delivered to them. Start with an email that confirms you’ve received the order and have processed their payment. Use this email to let your buyers know that the order you have is correct by listing every item and all relevant information about those items. Then provide the tracking number you’ve assigned the order, explain what it is, and provide the URL of your site and the page they should open for tracking.

Make sure your tracking page is simple and easy to navigate.

2. Put all relevant information on your website’s tracking page.

The following, ideally, should be included:

  • Complete details of all the items in the order – size, color, quantity,
  • The stage of the process the order is in – being processed, being shipped, etc., and
  • Estimated date/time of delivery.

This information should be in real time.

3. Send frequent notifications to buyers.

In addition to posting up-to-date tracking information on your site, you could also update customers via email and text. It’s a simple enough thing to do with the software, and it tells your buyers you care about them.

4. Make recommendations for other purchases.

Since you know your buyers are going to visit your online tracking page regularly, it provides a great opportunity to upsell or cross-sell your other products.

5. Get feedback.

Don’t be shy about asking your customers to rate your performance as a company as well as giving an opinion on the products they’ve received. You can also ask them how they felt about the shipping company that delivered the goods. It’s information you can put to good use, and gives your customers more input into the process.

 

Cin7 Omni’s track order feature

Cin7 Omni can take care of all the aspects of order tracking described above and more. The perfect tool, it can accept orders from several different platforms, keeping them in their separate silos as the software logs and reports tracking details. These platforms include Amazon, Shopify and WooCommerce, as well as social media sites and your own website.

Call one of our experts today and book a free demo.

How to identify bottlenecks in the supply chain, and ways to prevent them from happening

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Any company aims to have their operation run so smoothly and efficiently that they’ll have minimal outlay and make maximum profit. Sadly, many fall short of that goal because of holdups along their internal supply chains. These holdups create bottlenecks, jams in the system that slow the process down at the point they’re happening and have a domino effect on everything that follows.

In this blog, we’re going to look at overarching causes of these bottlenecks and put forward ways to overcome them or, better yet, ways to prevent them from happening in the first place.

 

Bottlenecks defined and how to spot them

The term literally comes from the shape of a bottle, specifically the way the top of it – the neck –  is narrower than the bottom. As this shape restricts, or slows, the flow of liquid when it’s poured out, so, in a manufacturing process, a bottleneck is where there’s an obstruction that holds everything up.

It is, of course, essential for a manager to know where these bottlenecks are occurring, to find these obstructions, and the best way of doing this is to conduct a “bottleneck analysis.” That basically involves taking a close look at every step in the supply chain, from the beginning – receiving raw materials – to the end – the final product, and everything in between.

 

Common areas where bottlenecks happen

While individual companies will have bottlenecks in their supply chains that only apply to them, there are general areas common to all that can also cause obstructions in the workflow. These areas are:

Labor

It’s important to have the right amount of employees to carry out a particular task; too many or not enough and inefficiencies creep in. It’s equally important to assign tasks to those that have the right skill set for them; again the over- or under-qualified will slow operations down.

Typically, workers fall into four categories:

  • Unskilled,
  • Skilled,
  • Highly-skilled,
  • Professional.

Making the best use of the talent each worker brings isn’t the only consideration for management when it comes to labor. Employee morale is important too. Employees who feel valued and have job satisfaction work better. This includes making sure one department isn’t favored over another. Allowing that to happen could create interdepartmental rivalry and could lead to a bad working environment for all.

Misuse of labor in any of the ways described above will affect the speed of the workflow and be the reason for bottlenecks.

Capital

Capital for a business is divided into fixed and working. The former applies to permanent assets like factories, warehouses, and equipment, while the latter refers to liquid assets, those finances needed to run the company day to day like payroll, bills, and inventory.

While having enough capital is, of course, important, it’s also essential to use the money wisely. You should invest the right amount of it in those areas where it’s most needed, and have sufficient funds on hand to keep everything flowing. It goes against your interests to put a large chunk of your capital into a larger-than-you-need, state-of-the-art warehouse when you can’t afford to fill it with inventory, even if you are doing that with future expansion in mind.

While an expert will be able to do a thorough analysis of your use of capital and highlight those areas where you may be investing too much or not enough, it’s important to keep in mind that an imbalance will create bottlenecks. Not being able to afford an extra truck when orders spike, for instance, will result in your deliveries slowing down in a major way.

Planning

Here we’re talking about working out precisely what each employee, department, and division is responsible for and letting them know that. For example, if a production department goes directly to a supplier for new stock when they’re running low, bypassing the purchasing department, there could be confusion about who’s responsible for reordering next time. The result could be a stockout that might shut the whole operation down. To avoid a scenario like that, exact planning has to be in place, meaning that everyone has to be clear on their specific area of responsibility, and everyone in the company has to be aware of it.

If there’s any kind of confusion in your company about who’s responsible for what, automation could be a big help. An inventory management system (IMS) gives a clear picture of your entire operation, and that’s information you can use to set up those planning guidelines. Once they’re in place, your operation will run seamlessly, eliminating any bottlenecks you had before in that area.

Communication

Miscommunication can lead to all sorts of problems, each of which could be a potential bottleneck. To avoid this, the right information has to be given to the right person at the right time. It’s no good giving your supplier an order if you haven’t listed all the details they need or let them know exactly where they’re supposed to deliver the items to; and you’re not going to get the results you want if one of your departments doesn’t let every other one know when they have a problem that will affect the entire supply chain. Good communication is key to everything.

To ensure good communication, everyone has to know who they report to and when to report to them, and they should be responsible enough to pass on the correct information in an easily digestible way.

Technology

While most manufacturing and sales companies are automated now, some try to save money by sticking to old technology thinking that it’s good enough and works for them. But that’s probably not the case.

An older automated system might not integrate all departments, and it probably won’t be able to “speak” to systems used by outside suppliers and contractors. These capabilities are found in newer systems, and they are a great boon to a company’s operation because they help speed everything up and create smooth processes. When you have that, you’ve gone a long way to eliminating supply chain bottlenecks, especially those that are unique to your company.

If you’re in the market to upgrade your software, check to see that it’s compatible with your existing in-house applications; it’s also a good idea to verify that the system will communicate with the software used by the outside contractors you deal with.

 

Steps to identify and prevent bottlenecks

In addition to the overarching areas that can cause the bottlenecks listed above, there are blockages that are unique to every company. While it’s up to each of these companies to identify their individual holdups and rectify them, there are some preventative steps all managers can take:

Find out where bottlenecks are occurring.

It can be difficult to locate exactly where the bottlenecks are in a large, complex operation. Examining your supply chain from different perspectives in detail may give you answers, though if you’re going to do something as complicated as that it would be easier and quicker to have an expert take a look.

A better idea is to use your supply chain management system, which can highlight those areas that are not working as efficiently as they should – those bottlenecks. If you haven’t already automated your supply chain management, you should seriously consider doing so.

Carry out data analysis.

Your data can be a good friend when identifying and overcoming bottlenecks. While any automated system you use will produce a lot of data, you can sort the data to get pertinent information about what’s happening at every part of your supply chain.

A reliable software like Cin7 Omni, will give you data that can point out trends, which is another way of uncovering bottlenecks. You can discover these trends by comparing data produced over a period of time. For instance, your data may show that a supplier is taking longer and longer to ship your orders, something that may not be a problem right away, but which could be later on. With that information, you can address it.

Map out a detailed plan.

When the company doesn’t have a detailed plan, it is often observed that all the departments follow their own agenda rather than working collectively towards a common goal. This kind of erratic behavior will lead to several bottlenecks in the supply chain. The management must consider all the options before setting out a plan. This plan should be based on historical data and future predictions. Every department should follow this plan to achieve maximum success.

Moreover, the company management must analyze and revise the plan when the circumstances change. Continuously updating the plan can prevent bottlenecks in the process.

Automate the supply chain procedures.

Automating the supply chain procedures can help eliminate the bottlenecks arising from manual management. Cin7 Omni inventory management software can not only help you to manage your inventory but also to regularize the supply chain bottlenecks. In addition, it can also seamlessly integrate with supply chain planning software like StockTrim, Streamline, Health Check, and Toolio, among others.

 

In a nutshell

Bottlenecks slow down the supply chain and affect your bottom line, so it’s important to find them and put an end to them, or at least mitigate their effects. The best way to do that is by conducting regular analysis of your processes and operations, and the simplest way of doing that is with an automated system like inventory management. More than just being the most reliable way to identify and prevent bottlenecks, automation is a great way to improve your company’s operation all round.

To learn more about Cin7 Omni’s inventory management system and how you can use it to prevent bottlenecks in your supply chain, click on the link to request a demo.

How to manage inventory for planned and unplanned plant shutdowns

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Although not very often, factory shutdowns happen. Whether planned or unplanned, shutdowns cause major disruptions and financial losses, and therefore, you must understand how to deal with them.

Planned plant closures are usually for maintenance purposes. Essential to keep machinery and equipment in good working order, they usually happen once or twice a year. During these inspections, repairs may be made, worn-out parts may be replaced, and upgrades or new machinery may be introduced.

Unplanned plant closures usually result from sudden power outages and machines breaking down. An unannounced strike is another reason. A drop in demand can also be a cause. And in a worst-case scenario, a production line will close down when the facility runs out of raw material — more on that later.

Knowing that a plant will shut down at some point means you can plan for the event, and with pre planning in place, negative impacts can be mitigated. The best pre planning involves inventory control, and that’s what we’re going to examine here.

 

Managing inventory to prevent or mitigate a shutdown

Here are things you can do:

Limit inventory before a planned shutdown

When you know you’re going to have to shut your operations down, either for scheduled maintenance, upgrades, or audits, you can ease the pain by reducing the level of stock you’re holding beforehand. Keeping inventory has its own costs: A workforce has to maintain it, and capital is tied up in it. So if you make sure you only have the least amount you can get away with, literally only what you need to restart, you’ll cut down on expenses and mitigate the losses the shutdown creates.

Prepare for unplanned shutdowns by limiting inventory

A good way of mitigating the effects of an unplanned closure is to have a lean inventory management system in place. As the name implies, this system is all about getting rid of waste, unneeded excess. For inventory specifically, it’s about having only as much as is needed at any given time. The system operates on the “pull” system where inventory is “pulled in” when needed, as opposed to the “push” system that always has more stock than is needed and “pushes” it out.

Introduced by Toyota in its manufacturing unit in 1950, and later explored in the book Lean Thinking: Banish Waste and Create Wealth in Your Corporation by James Womack and Daniel Jones, lean inventory management keeps stock at minimal levels, so if an unplanned shutdown happens, the company is prepared and losses can be controlled.

Lean inventory management puts stock into three categories, A, B, and C, each one based on the items’ cumulative annual consumption value. The annual consumption value is arrived at by multiplying the number of units sold in a specified time, say a year, by the cost per unit. When that’s been worked out, a company will know exactly which items have the most value for them and can organize their storage and oversight appropriately.

  • Category A:  Pricier items. Though typically making up only 20% of a company’s stock, these more expensive items usually account for 70% of items used when the annual consumption value is applied.
  • Category B: Less pricey, the items here usually account for 25% of the total annual consumption value.
  • Category C: These least pricey items account for 5% of the annual consumption value.

Inventory management software like Cin7 can easily work out annual consumption values and do the categorization for you.

Prevent shutdowns caused by stockouts

It’s possible for raw materials to run out and cause a shutdown. Maybe an error was made in counting the number in storage; maybe a supplier didn’t deliver; maybe there was an issue with the supply chain. Whatever the reason, you can make sure you’ll be able to cover for these situations by having buffer stock. Buffer stock is a little bit extra for emergencies. The amount of buffer stock a company holds has to be carefully weighed. Too much and it’ll be a drag on company outlay; too little and it might not be enough to cover your needs. An inventory management system like Cin7 can solve this conundrum.

 

Reasons for shutdowns, and best ways to plan your inventory levels

Shutdowns are caused by specific events, and in order to plan your inventory levels, you have to have a good idea which ones are more likely to happen to you. Consider the following scenarios:

  • External factors: If a shutdown is likely to happen because of bad weather, a natural disaster, government regulations, or a strike, you should have buffer stock on hand.
  • Internal factors: Here we’re talking about a power outage or machines breaking down. For machine breakdowns, spare parts should be readily available at all times. For inventory, there has to be enough available to restart production.

Cin7 can analyze your data quickly and help identify which inventory control method is best for you.

 

The final analysis

Factory shutdowns, whether planned or unplanned, cause unwanted stoppages that will affect the bottom line. When it comes to inventory, there are ways to mitigate these losses and help you ride the closures out.

Cin7 is a good way to help you figure out the best way to manage your inventory. To find out more, click here to schedule a live demo with one of our experts.

Why is purchase order management important?

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There are two areas of purchase order management: the number of POs issued and the timing of them. The first means finding the right balance – failing to write up enough of the orders could result in stock shortages, which could lead to you being unable to fill your customers’ orders; writing up too many could result in you being overstocked. If you’re overstocked, the additional cost of extra storage space and labor mean your business runs inefficiently. The second, your timing, refers to when you actually issue the PO. Do you wait until you’ve used up all your stocked items, or do you take care of restocking before reaching that point? When making these decisions, you have to keep in mind not just the amount of stock you want to keep tied up in storage, but the length of time it will take for your supplier to get your goods to you. If your supplier is in another country, for instance, your order could take months to get to you. It’s all about making sure you have enough of your items on hand at all times to keep your customers supplied and happy, but not too much of it.

You can see that managing your purchase orders can help your business run better. Let’s explore purchase orders in detail.

 

What is a purchase order?

A purchase order is a contractual agreement between a buyer and a supplier. In the United States, it becomes legally binding when the supplier accepts it. Purchase orders are issued by a company when it wants to purchase more goods from its supplier. Basically it is an instruction for the supplier. The description lists the names of the products, their stock numbers, colors, quantity, cost, the place they’re to be delivered to, and any other requirements.

Now that you know what a purchase order is, let’s check out the role they play in the buying process.

1. Issuing purchase orders

A purchase order is written up when a company needs to add items to its inventory. If the company is small, this can be the responsibility of the owner. But if it is a large company with many divisions, the PO may have to go through several administrators for approval. The PO will be sent over to the supplier at the completion of this stage.

2. Supplier approval

When the supplier receives the PO, they go over it to make sure they can fill the order and are comfortable with any stipulations it contains. They may ask the buyer to make some changes, and there may be some negotiating between the two parties. When both parties reach an agreement, the supplier has, in effect, accepted the PO, and it’s then that it becomes a legally binding contract.

3. Delivery of goods

The supplier sends the items requested on the PO to the buyer and issues an invoice. This invoice itemizes the goods the supplier has packed and shipped off, as well as the cost of each item and the full amount the buyer owes the seller. An invoice lets the buyer check a) that it is receiving everything it has ordered, and b) that it has been sent everything it is being charged for. The buyer will also, at this stage, carefully inspect the items to make sure they’re of high quality.

4. Payment

The buyer indicates that the items are accepted by sending the supplier a goods received note (GRN). The GRN is a confirmation of having received the goods in good order. Like the PO and the invoice, it lists the products, but as a legal document, it indicates the date and time of delivery and is signed by someone who has the authority to do so.  Payment of the invoice is dependent on the terms of the PO. These terms could indicate an immediate payment by the buyer, or a stated period of time after satisfactory receipt of the goods.

 

Explaining purchase order management

Purchase order management is an umbrella term that covers the process a business uses to handle their purchase orders. It covers everything from creating POs to dispatching them to maintaining records of them.

For a new company that’s still small, this process can be simple. Along with emails and phone calls, in these early days, a spreadsheet could be all that’s needed to record and keep track of purchase orders. But the information on spreadsheets has to be put in manually, making the system time consuming and prone to human error. These downsides only get worse as a business grows and the volume of orders increases. When that happens, a better, more manageable system is needed. That’s where purchase order management software comes into the picture.

Before we jump to PO management software, however, let’s check out the benefits of managing your purchase orders efficiently.

 

The importance of purchase order management

When you pay attention to purchase order management, your organization benefits in the following ways:

1. Better control over the amount you spend

Having department heads or managers approve purchase orders is a good way to control spending. In addition to making warehouse staff think about the items they put on a PO, it gives these supervisors the ability to make sure that everything being ordered is really needed and that their cost will not exceed the budget that’s been allocated for inventory. This approval process also gives managers a clear picture of how their department’s money is being spent.

2. Reduced storage costs

Keeping hold of more inventory than you need may ensure that you’ll always be able to fill an order, but it also means using up more storage space than is necessary. This unwanted, additional warehousing cost can be cut by controlling the amount you purchase. Controlling the amount you purchase is a major part of purchase order management. It means you only order when your stock is too low to cover your sales.

3. Help when it comes to avoiding stockouts

Purchase order management software automates the restocking process. This is how it works: The computer program recognizes when the inventory, or particular items in your stock, falls to a set lower limit. When that happens, the system automatically sends a PO to the supplier for more goods.

Computerizing your warehousing this way means always having the right amount of inventory to cover sales.

 

How Cin7 can help you with purchase order management

Cin7 is an integrated tool with several power-packed features. It can help you manage and control everything from the inventory you keep on hand to your restocking of it.

Cin7 keeps a record of all the purchase orders you create through our platform. With Cin7, you can instantly pull up specific purchase orders and generate reports for each one of them. These reports, customized by you, can include vital information such as the currency used for the order, exchange rates, customs and freight fees.

Our computerized system also allows you to save supplier details in the database. This information can be used to automatically add addresses and telephone numbers to forms, or it can generate purchase orders. It can even send the PO to the supplier. More than a time saver, when you can take care of your restocking like this, you get peace of mind.

As mentioned, Cin7 can be programmed to take care of restocking automatically. When the amount of stock you’re holding reaches a predetermined low, the system will automatically trigger a PO and send it directly to your supplier. You won’t have to worry about stockouts, and your business operations will run smoothly.

In addition to keeping track of your inventory and POs, Cin7 integrates accounting software like QuickBooks. This feature enables you to import all your POs and PO reports into your accounting system. It’s another aspect of Cin7 that improves and streamlines your business, making sure it’s as efficient as it can be.

To learn more about how Cin7 can help you manage purchase orders, schedule a call with one of our experts today.

Complete guide to expedited shipping

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Your customers hate waiting to receive their products. According to a study by Oracle retail, 13% of them won’t buy from you again if you don’t deliver on time.

Offering expedited shipping can help you meet your customers’ expectations and increase your profitability.

 

What is expedited shipping?

Expedited shipping is performed to deliver orders faster than the regular shipping time. For instance, if your standard shipping time is a week, then using expedited shipping would ensure that consumers receive the product in two days.

Expedited shipping allows you to serve time-sensitive customers, many of whom don’t mind paying a premium to receive their shipments as fast as possible.

 

How fast is expedited shipping?

The exact turnaround time for shipments varies based on factors such as the size and weight of the products and the location of the customer. It’s possible that your standard shipping time could be equivalent to another seller’s expedited shipping.

Let’s look at different shipping options and compare them with expedited shipping.

Standard shipping vs expedited shipping

Cost-wise, standard shipping is cheaper than expedited shipping. That’s why standard shipping is often incentivized with free shipping.

Standard shipping is best for orders that aren’t urgent, whereas expedited shipping is ideal for situations where you need goods faster. Pharmaceutical supplies, seasonal products, and perishable items such as frozen food are suitable for expedited shipping.

Express shipping vs expedited shipping

Express shipping can be used to deliver items on the same day of ordering or the next day. Expedited shipping is simply quicker than the standard shipping delivery time. That can be within three days or the same day as well. If a seller offers both express and expedited shipping, the express shipping option is generally faster.

 

Benefits of offering expedited shipping

#1 Meets customers’ expectations

There is a rising trend of customers preferring faster shipping. Infact, a survey by MetaPack found that speed of delivery is a top priority for 26.6% of respondents. Another survey found that 77% of consumers are more likely to make the purchase if the delivery time is two days or less.

Your potential customers will likely opt for your competitors if they have faster shipping options. Therefore, offering a faster delivery option can provide you with a competitive advantage and help you build brand loyalty. Partnering with a third-party logistics (3PL) company can help with strategic warehousing so that there’s less distance between the warehouse and the customer. In addition to choosing a fast shipping provider, a lesser distance to travel can be another crucial component in executing expedited delivery.

#2 Minimizes cart abandonment

In the 2016 State of Ecommerce Delivery Report by MetaPack, 39% of the respondents admitted to abandoning their cart if the delivery option they wanted was not available. By offering expedited delivery, you can prevent cart abandonment issues and boost your sales.

#3 Retains customers

Consumer satisfaction is essential for repeat purchases. By meeting their expectations about faster delivery, customers will not just buy more from you but also generate positive word of mouth, increasing your profitability.

#4 Ensures delivery of fresh items

Perishable items like fruits, frozen food, and dairy products face the risk of getting spoilt over time. Shipping them using expedited delivery can ensure that your customers receive fresh items.

#5 Reduces loss or theft

During standard shipping, products often need to stop at various points, which increases the risk of transit damage as well as theft. Through expedited shipping, the packages stop at fewer locations, reducing the odds of cargo loss.

 

Challenges associated with expedited shipping

There are some drawbacks to expedited shipping.

#1 Higher cost

Around 80% of people preferred to buy from Amazon in 2020 because of their free and fast shipping. Amazon also offers free same-day or two-day delivery with its prime membership.
To remain competitive, you may want to offer expedited shipping. However, expedited shipping costs more than standard shipping, and most retailers don’t have deep enough pockets to offer expedited shipping services for free.

To deal with this, you can often pass on the higher shipping costs to your customers. This way, customers who want fast shipping pay a premium for the benefits. You can also add a minimum cart value to make the order eligible for expedited shipping.

#2 Limited availability

Expedited shipping isn’t offered by all delivery companies. You may need to change your existing delivery partners if they don’t offer expedited shipping.

 

How does your inventory management speed up your shipping?

There’s no magic spell that can miraculously help in teleporting your products. Instead, optimizing your fulfillment process and using effective inventory management can smooth operations and make expedited shipping easier.

Cin7 can help you in this. With Cin7, you can optimize your warehouse’s picking and packing processes, and the software integrates with shipping software, such as Shipstation, so you can expedite delivery.

If getting your products to your customers quickly is a priority for your business, book a call with our experts, to learn more about how Cin7 can help with shipping.

7 Common mistakes wholesalers and distributors make

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Business models such as ecommerce and direct-to-consumer (DTC) are giving a tough time to wholesalers as well as retailers. You may already be struggling with razor-thin margins, and during such situations committing mistakes can cost you dearly. You need to be on top of your game.

This article will share some common mistakes that wholesalers and distributors make while running the business. Understanding these mistakes is a stepping stone to avoiding them.

 

Some common mistakes that wholesalers and distributors make

1. Using outdated methods

It’s surprising to think about how many businesses still rely on manual approaches, like using pen and paper to manage their businesses. Although pen and paper do have their own merit, for starters, they don’t need any electricity to run. However, papers can be easily misplaced or stolen, which you don’t want. Storing them can be a headache too as it will take significant space in your office premises. Plus, it’s not convenient to share them with your business partners.

While some people have migrated to digital forms like spreadsheets, it’s not enough to be successful today. Spreadsheets can get really messy, and you’ll have to spend a considerable amount of time updating them regularly. Plus, it’ll take digital storage space, which is risky if your storage drive gets corrupt.

The best solution is to use a cloud-based inventory management solution. The data gets updated in real-time, so you get accurate visibility over your inventory. As the data is securely stored in the cloud, there’s no risk of losing it.

 

2. Sales representatives lacking information and resources

Sales is the primary revenue generating activity for your wholesaling business. Your sales representatives are entrusted with the responsibility to drive sales, and thus, they must be equipped with all the right tools and knowledge. They need to have full visibility over your inventory and should be well versed with your product and promotional information.

It’s best to also acquaint them with your business process so that they can confidently answer queries about delivery time and product returns. Failing to do this will affect your customer service, and you’ll lose out on loyal customers.

You can leverage Cin7’s inventory management solution to empower your sales team. They can easily get data about your customers, suppliers, and all necessary product-related information. The features of Cin7 aren’t just limited to inventory management. You can also use it to streamline your sales quoting process. Cin7 allows you to offer accurate quotes/prices to your B2B customers and also set the payment terms. On top of that, you can receive payments and generate invoices.

Cin7 is your one-stop solution for managing your sales and inventory.

 

3. Inadequate customer management

Customers can make or break your wholesaling business. You need to ensure that you manage them well and satisfy their expectations so that they continue doing business with you. It is necessary to take their feedback about their experiences with your service, and you should improve accordingly.

You should be fair in your treatment of your business customers irrespective of the revenue that they generate. On top of that, you should also regularly communicate with your customers. Thanks to digitalization, this process is easier than it has ever been. You can use email sequences to broadcast information to your customers so that they feel informed and valued. You can also segment your customer base and then target them effectively with specific messaging in emails.

 

4. Monitoring stock levels

Being a wholesaler, you deal in large volumes of stock. It can be challenging to monitor your stock levels when you’re dealing with multiple buyers and deliveries being made daily. But you can’t afford to lose track of inventory as poor inventory management can lead to situations such as understocking and overstocking (both being undesirable).

You need clear visibility about when the items enter and exit your warehouse. This way, you’ll be able to track and share inventory updates with your customers. Cin7 can help you with inventory control as you get real-time visibility over your inventory in the warehouse. This would help in optimizing your processes to ensure a smooth workflow.

 

5. Ignoring business relationships

In the race to raise your profits, you shouldn’t overlook business relationships. Relationships are necessary, especially in the B2B arrangement that you deal with. Positive experience with customers can lead to more business opportunities as they can endorse you to their business partners. This is the key to long-term success.

Better relationships will ensure that your customers stick even through market fluctuations. Do your best to build these relationships by offering great customer service, making transactions convenient, and fulfilling orders quickly. Good relationships can also help in better negotiation with the suppliers so that you can lower your costs.

 

6. Not monitoring the cash flow

Healthy cash flow is the fuel for your business. Offering credit to your customers can help with increasing your sales. However, overextending the credit is risky for your business as it can lead to defaults.

You should thrive to proactively remind your customers about their payables and you should make it easier and more convenient for them to pay their invoices.

Cin7 can generate sales reports using which you can not only gauge the financial health of your business but can also ascertain your inventory’s performance. To sweeten the pot, we have integration with several accounting softwares such as Xero and Quickbooks.

 

7. Not following up with your customers

The relationship between you and the customers shouldn’t end after finalizing the sale. You need to nurture them so that you make repeat purchases.

You should follow up with your customers after they receive their offerings to check whether everything happened as per their expectations or not. You can send a follow-up email after the product is delivered.

 

Conclusion

Avoiding these common mistakes will help you improve your business practices. As you look for solutions to some common mistakes, consider new software, like Cin7’s inventory management, as part of your solution.

Book a demo now.

How to execute a year-end inventory count

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Whether you’re running an auto body shop, a law firm, or a retail store, doing a year-end inventory count helps your business close the books on the past 12 months and organize yourself for the year ahead. In fact, the year-end inventory count is necessary for successful inventory management throughout the year. It allows you to clean up records and gives your business verified data to analyze.

Since retailers have a lot of inventory to manage, counting inventory correctly is crucial and allows you to make informed buying decisions later. Learn how to execute a year-end inventory count and how your annual count can help forecast demand for the year ahead in this article.

 

What is a year-end inventory count?

A year-end inventory count is a physical count of all the inventory on hand at the end of the year. The count is performed to verify that the physical inventory matches the numbers in your inventory management system.

A year-end inventory count is different from an inventory cycle count, which audits a smaller portion of inventory. While a cycle count allows you to monitor your inventory by sampling your inventory throughout the year, a year-end inventory is a physical count of everything you have on hand at one given point in time.

 

How do you conduct a year-end inventory count?

These are the steps that you need to follow for inventory counting:

  • First and foremost, you need to plan the day for conducting inventory count. It’s crucial to pause your warehousing operations while you do perform the counting so that you get an accurate snapshot of your inventory. You should plan a day that causes minimal impact on pausing the operations.
  • Once you finalize the date, you should form the team who will perform the stock counting. It is important to train them about your counting process and acquaint them with the warehouse’s premises. Dry runs can be organized a few days before the actual counting day.
  • You should also prepare your warehouse for the stock counting process. It should be thoroughly cleaned, and steps should be taken to ensure that there’s no scattered inventory. If there are boxes lying around the warehouse, it will slow down the workers who are counting.
  • The warehouse should be organized, and the areas (count zones) should be divided amongst the counting team so that everyone knows their responsibilities.
  • It’s crucial to equip your team with the right tools for counting. For manual counting, you can use counting tags. If you are using tags, then it’s best to let your team work in pairs so that one person can count the inventory while the other can note the values in the counting tag and stick it near the inventory. It’s best to get the counting tags signed by the respective team as it gives you clarity about the person associated with counting for a specific section.
  • To cross-check the accuracy of the counting, you can personally examine the areas to cross-verify the values mentioned in the counting tags. Otherwise, you can allocate members from other teams to cross-check the tag values. Cross-checking is crucial to get an accurate representation of your inventory. In case your inventory is also stored at other locations, you should coordinate to get the accurate values from those locations as well.
  • Performing inventory counts using manual sheets and counting tags can be time-consuming and prone to human errors. Using an inventory management software like Cin7 can be of great help. Instead of using tags and sheets, you can use barcode scanners to scan the inventories on the shelves. The software reconciles the inventory values with the ones already present in the system. This way, you can easily gauge the discrepancies in the inventory that’s physically present with you.

 

Why do year-end inventory count?

The year-end inventory count is essential because it ensures the stock you have on your shelves matches your records. By getting an exact look at your inventory, you can comply with tax requirements, manage corporate audits, and offer accurate data to your accounting team.

Once you complete your inventory count, you’ll have the data you need to complete an annual financial analysis. You also get the data you need to detect inventory shrinkage and forecast how much inventory you’ll need in the year ahead. On top of that, you get the chance to get inventory organized for the new year.

Knowing your year-end inventory allows you to

  • Get a better understanding of what products you have.
  • Hold accurate inventory records for accounting purposes.
  • Gain insight into products that don’t sell well that you shouldn’t order in the future.
  • Understand which products require a new selling strategy.
  • Know the demand and profitability for expansion consideration.
  • Consider adjusting periodic automatic replenishment (PAR) levels for top-selling products.
  • Determine the cost of goods sold and total net income.
  • Make business decisions based on data instead of intuition.
  • Analyze pricing strategy and identify room for improvement.

 

Does your business have inventory shrinkage?

Inventory shrinkage occurs when there’s less physical inventory than what’s listed in your inventory records. Shrinkage occurs due to human error, damaged stock, vendor shortages, lost inventory, or stolen inventory. It can drastically affect profits and is a problem that always needs to be investigated further. Businesses usually uncover inventory shrinkage as they do their year-end inventory counts.

How to handle inventory shrinkage

If you uncover inventory shrinkage during your year-end inventory count, your team should look for more information about what happened. If you are using inventory management software, you can examine past inventory records to determine if there are any trends that need investigation. Significant, widespread shrinkage can indicate theft or fraud, while one-off mistakes tend to reveal clerical errors. Damaged goods are self-explanatory.

Once you uncover and investigate the cause of inventory shrinkage, you can put guardrails on processes to prevent further loss. Some common preventive measures include:

  • Tightening security where inventory is stored.
  • Installing cameras or locking up high-value items.
  • Training employees about proper inventory counting.
  • Allowing only trained employees to accept and inspect new inventory.
  • Reviewing daily transactions on inventory apps.
  • Verifying purchase orders, invoices, and delivery slips when new inventory arrives.
  • Checking inventory shrinkage via cycle counts.

Discovering inventory shrinkage isn’t fun — but it’s a wake-up call for many businesses.

 

What if you have too much inventory?

Once you complete your year-end inventory, you might realize that you have more physical inventory than expected. If you have a lot more inventory than you need or want, you may have to figure out how to deal with the surplus. The first step is to determine if the excess inventory is still good to sell. Then you can adjust plans, orders, and budgets accordingly.

Once you figure out what your business needs for the year ahead, it’s time to get creative. What kind of promotions or sales can you have? What items should be sold at a discount? There may also be items in your inventory that can be repurposed or donated. If you donate excess inventory, talk to your accountant about writing them off for tax purposes.

Finally, you should talk with a liquidator about buying excess inventory. It may not be very profitable, but you can cut losses, clear up space, and move on.

 

Using year-end inventory to predict next year’s demand

One of the best reasons for conducting year-end inventory counts is to understand how your business used (or didn’t use) items over the past 12 months. A detailed snapshot of available inventory helps your business forecast demand for the year ahead.

By reviewing what hasn’t sold, you can plan sales, promotions, and marketing campaigns. These strategies can help you move old inventory and lets you focus on restocking only what your customers want.

 

Cin7’s inventory management software simplifies inventory counts

Cin7 inventory management software allows your business to track inventory using modern technology and powerful automation features. Cin7 is the best choice for inventory management software because it helps save you time, money, and stress. When you switch to Cin7, you’ll be able to:

  • Access your data at any time and place.
  • Set it up quickly, easily, and to your liking.
  • Use ready-to-scan barcodes with your phone’s camera.
  • Customize and allow access to teams, vendors, and suppliers.
  • Generate custom barcodes for unlabeled stock.
  • Create data-rich, shareable reports to help you understand inventory.
  • Get alerts when you’re running low on a product, if it’s expiring, or approaching warranty.
  • Create product histories to answer who, what, and when details.

Ready to see how our inventory software makes your year-end inventory count easier? Book your Demo now.

How consumerization in B2B is driving growth in sales

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In today’s crowded space, businesses are doing what they can to grab and keep their customer’s attention. As a result, marketing has gotten much more personal. This trend began with B2C companies creating personalized, relatable content for their audiences, and is known as consumerization.

However, a popular myth associated with consumerization is that it only applies to B2C companies. This simply isn’t true. Consumerization is visible today in the marketing strategies of most B2B companies as well.

In this blog, we’ll try to understand the phenomenon of B2B consumerization and how it impacts sales.

 

What is B2B consumerization?

In simple words, B2B consumerization is the result of companies using more technology to engage with their clients. As in the B2C space, where consumers expect to be able to immediately access information and purchase products through digital means, B2B buyers now expect such options from the companies they do business with.

The shift towards B2B ecommerce is widespread. According to 2020 Gartner research, 80% of total B2B sales interactions will be digital by the year 2025. What’s in it for the B2B Sellers?

Makes sales more efficient

Any B2B marketer will tell you that, conventionally, B2B sales have relied heavily on personal relationships with clients. The biggest investment is the time put in to close a sale.

However, with digital products, companies are able to save their sales teams valuable time. By developing deeper insights into the targeted audience’s behavior before approaching the sale, sales teams can curate personalized sales strategies and offerings for their potential clients. This makes it easier to close more deals faster.

Leverage multiple access points

An access point, or a customer touchpoint, is any point through which the customer comes in contact with your brand. That includes radio ads, pay-per-click (PPC) banners, or elevator pitches.

Today, your business most likely interacts with your target audience using multiple touchpoints. Some of the most commonly used channels for B2B marketing are:

  • Blogs/articles,
  • Emails and newsletters,
  • Push notifications,
  • Digital and conventional advertising, and
  • Social media.

Using multichannel selling, your clients become familiar with your products or services while you have the opportunity to directly interact with potential customers.

Naturally, you’ll  want to reach your target market using as many touchpoints as possible. By collecting data from your customers, and with a bit of computing prowess, you can monitor and predict how your target market will react to your products or services.

 

And the result?

A much more efficient sales strategy with higher sales numbers. If you wish to scale your B2B business, try Cin7. Cin7 not only makes it effortless to manage your B2B orders but also helps in creating an online B2B store. Use it to showcase your product portfolio and boost your sales. Cin7 also comes with built-in inventory management features, so you efficiently manage your stock and prevent stockouts.

To learn more about how Cin7 can help in boosting your B2B business, book a demo with our experts.

Effective inventory management: The secret to Black Friday success

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Black Friday, Small Business Saturday, and Cyber Monday traditionally kick off the holiday shopping season. Large and small businesses often prepare for months to capitalize on shoppers looking for deals on these days.

Any glitches, such as not having enough inventory or problems with shipping and delivery, can lead to substantial reductions in profit.

Automated inventory management can ensure the entire sales cycle is managed well throughout the holiday shopping season. And the bonus? When customers have a good experience, they become returning customers.

This blog discusses how a seamless supply chain impacts online merchants and suggests inventory management tips for your upcoming holiday season.

 

Inventory management and supply chain for online merchants

In retail, the supply chain is defined as the process from order inventory to product delivery. Supply chain management consists of manufacturing, fulfillment, storage, and shipping. If any part of the process weakens, sales are negatively affected.

Merchants selling products online must plan for issues that could come up this holiday season.

 

Tips to manage your supply chain and inventory this holiday season

Choose the best suppliers

Online merchants usually work with international suppliers as a cost-saving measure. It’s better to work with domestic suppliers as you can:

  • Prevent customs delays and cross-border shipping.
  • Avoid unexpected new tariffs.
  • Replenish stock quickly and easily.

If you still work with international suppliers for your business, diversify your suppliers. By ordering from suppliers in several countries, you have a backup if there are problems with delivery from one country.

Plan the fulfillment process

If you are a merchant with a large volume of inventory, you can send it directly to a third-party logistics (3PL) provider. The 3PL company can handle fulfillment and shipping on your behalf and let you focus on what you do best: ecommerce strategy and marketing.

You must think carefully while choosing warehouses whether or not you work with a 3PL service. Use a warehouse close to the suppliers and begin ordering inventory early. By planning ahead with time, you will give the warehouse staff enough margin to organize and categorize the products correctly.

Merchants with unused brick-and-mortar stores should consider using the space as a warehouse. Using your own space as a warehouse gives you an excellent visual idea of how quickly your stock sells. It helps you decide which products to push with holiday sales. Thus, you can save money on external services and have more control over stock management.

Another popular holiday season shopping method is buy online, pick up in-store (BOPIS). This method became popular during the Covid-19 pandemic. These click and collect options remove complications related to shipping and let you enhance the customer service you can offer. If you look to implement store pick up this season, ensure your customers know how it works by including instructions on your site’s checkout page.

Talk to supply chain partners early

Your partners in the supply chain are your suppliers and manufacturers. You all must work and succeed together, so take the time to discuss order volume and develop a process that works for everyone.

Contact your suppliers as soon as possible to work out potential issues in the supply chain. The earlier you begin, the more you can anticipate and head off any problems. When discussing the order volume of the inventory, be specific and tell suppliers exactly how much you expect. If they flag any potential holiday supply issues, adjust the product range or diversity accordingly.

Keep in touch with 3PL companies regularly for likely changes as well. They could have staff shortages or a lack of drivers, delivery restrictions, or warehouse closures. Integrated warehouse management software can help you head off fulfillment issues.

Price your products strategically

After deciding on inventory value, vary product prices to control stock levels. Lowering the rates of well-stocked products means you can sell more. Raising the prices of items you have less of may reduce the number you sell.

Adjusting prices is all about finding the sweet spot to meet your inventory goals while maintaining your brand image. The rule of thumb is to keep pricing consistent. Making your products too cheap or too expensive can confuse the customers.

If you look to position yourself as a luxury brand, increase the prices and do a cost-benefit analysis to see what is more beneficial for your company. Lower prices on the products can shift more inventory, but higher prices return better profits and prevent you from running out of stock quickly.

One alternative to amending the products’ prices is to give discount coupons. You can shift the discounts to emphasize different products across your holiday sales season based on inventory levels.

 

Conclusion

Black Friday and other holiday sales events are so much more than placing a few ads and expecting high sales volumes. From a business perspective, they’re more about effective inventory management and best fulfillment practices.

Optimizing warehouse operations for accuracy and speed should be a top priority for any business during the holiday season.

That’s what Cin7 inventory management software is all about.

If your business sells hundreds or thousands of products towards the end of the year, you need an inventory management software with forecasting tools from a reputed company like Cin7. The Cin7 team will be more than happy to help you with your inventory management solution decisions.

Book your demo today!

Top 10 technologies driving ecommerce growth in 2022

Posted on | by Cin7 team | Leave a Comment on Top 10 technologies driving ecommerce growth in 2022

New technologies continue to drive innovation in the ecommerce world. How is your site keeping up? Check out our predictions for the top 10 technologies that will drive ecommerce growth in 2022.

 

1. Voice and image search

Increasingly, consumers are using their voice and images to search online. As a result, businesses that want search bots to find them should incorporate text that mimics spoken questions into their sites along with high quality images.

 

2. AI chatbots

AI chatbots may be the future for the ecommerce industry. Their sophisticated programming allows the AI chatbot to respond to customers as if the chatbot were a real human being.

Unlike rule-based chatbots, AI chatbots are constantly learning from their conversations and can develop unscripted responses to queries. They are designed to read tone and emotion as well as help customers get the best recommendations for the products and services they are seeking.

 

3. Smarter mobile shopping tools

Brick-and-mortar retailers do not like seeing customers looking at their phone screens, for it indicates that the customer is price shopping or using their store as a showroom for a later online purchase elsewhere.

Therefore, savvy retailers offer their own GPS-enabled mobile shopping experiences to help customers buy in-store or anywhere else. For any retailer, a mobile-optimized site and store is a fundamental element of a positive ecommerce experience.

 

4. Omnichannel presence and support

The term omnichannel refers to the integration of multiple channels for ecommerce, such as an online storefront, website, or social media page. When you offer omnichannel support, your customers can enter information in one channel, and you can access it in another, providing a more seamless customer experience across channels.

 

5. Fast and secure e-wallet functionality

Speedy and secure e-wallet technology allows customers to store all of their payment information digitally in one place. This increases efficiency when shopping online because instead of having to enter information for each purchase, customers can check out of a site with just one or two clicks of a button.

Businesses equipped to accept e-wallet payments can level themselves up in the ecommerce market with better scalability of services and reciprocal security to attract even more customers.

 

6. Metaverse and other gaming platforms to facilitate sales

The concept of the Metaverse is still evolving, and it isn’t ready as an advertising platform. However, it represents a potent potential marketing channel for various ecommerce brands. Global brands like Nike, Coca-Cola, Vans, and Gucci are already gearing up to treat their customers with virtual products.

Various gaming systems have also opened their platforms to ecommerce brands. For instance, leading fashion brand Balenciaga recently teamed up with Epic Games to launch its Fortnight clothing line. Nike turned to Roblox to launch Nikeland for purchasing virtual Nike gear for the gaming avatars.

 

7. Livestream commerce

Remember TV shopping channels? Livestream commerce or Livestream shopping is almost like that. It is a video streamed on a commercial platform where the host shows viewers various goods in real-time. Thus, the audience can easily buy products directly from the shopping site.

This type of ecommerce is very popular in China. For instance, in 2020, during the Global Shopping Festival on the Taobao platform, live broadcast generated sales of about $6 billion. Companies in the US have also noticed a tendency toward this upgraded version of ‘shoptainment.’

This approach to online retail lets you present items in every dynamic and develop client interest by creating urgency with limited-quantity or limited-time offers.

 

8. Headless and API-driven ecommerce

Headless commerce is a solution that lets an online store’s ecommerce platform de-couple from the front-end presentation layer. More ecommerce businesses have adopted headless technology due to its flexibility on the backend, added SEO and digital experience capabilities, and content marketing.

 

9. Progressive web apps

The progressive web app is a technology that lets you create web applications that look like native mobile apps. While building these solutions, developers use web technologies like JavaScript, CSS, and HTML.

Retail giants like Walmart and Alibaba have used PWA to generate more revenue and increase conversion rates. Progressive web apps are perfectly suitable for any small and medium-sized organization.

PWA’s primary functions include:

  • Offline application access
  • Application access via the smartphone’s home screen
  • Push notifications

 

10. Cin7 inventory management

Popular brands know that the bigger your business, the more crucial it is to have a scalable infrastructure. Cin7’s flexible, future-proofed and hyper-scalable inventory management software is purposely built for retail businesses.

It offers various integrations with a speedy, expert-led implementation having a success rate of 97%.

 

Wrapping up

More innovations in ecommerce technology are likely to evolve in 2022. As you evaluate whether a new technology is worth incorporating in your business, consider magnitude, relevancy, and functionality. While some may provide a huge value, others might be out of touch with your particular customer demographic or be too costly. One technology we certainly recommend is Cin7 inventory management software.

Cin7 inventory management software makes all your business operations, like purchasing, selling, warehousing, accounting, and shipping, hassle-free and virtually effortless in order for you and your management team to focus more on other aspects of your business.

Book your demo now!