Inventory control is a massive organizational function and its complexity multiplies as your business grows. This is especially true for ecommerce businesses due to the number of SKUs, competitive landscape and inherent volatility. The pandemic only added to the speed of ecommerce adoption, leaving online sellers compelled to streamline and optimize their business processes.
Using a software solution that organizes inventory control for a successful ecommerce business is necessary, but choosing the right one can be complicated. On the one hand, you have comprehensive solutions that come with the “best-in-class” tag and then there are solutions that offer “functional value.”
While there’s a huge price difference between the two types of inventory solutions, you should not give up on either of their qualities. Therefore, you need to go for the right package that helps your business realize its true potential.
In this article, we will go through various areas where the right ecommerce solution can help online sellers grow their businesses. Let’s begin:
Why Do ecommerce Stores Need Inventory Control Software?
Online selling is easy to get started with, but as time passes, business owners realize that they need to take care of many priorities. These may come in the form of business opportunities, expansion hazards, employee management, marketing plans, target platforms and audience and product life cycles..
With growth, the management of inventory control can become a complex challenge. Most online sellers begin with manual processes to keep inventory in check and then later switch to Excel or Google Spreadsheets.
Spreadsheets provide the required utility in the beginning, but as your operations grow, they become unreliable. Inventory errors start becoming common due to potential duplicate entries, false entries, lack of coordination and collaboration. In order to keep manual systems running, you need to implement stringent working policies and rely on how well your employees comply with them.
The chances of making errors multiply depending on your selling volume, headcount, number of selling channels and SKUs. These errors lead to underselling, overselling and order fulfillment problems.
Inventory Control Challenges Faced By ecommerce Businesses
Here’s an example to illustrate the issues faced by online stores when selling across multiple platforms and relying on manual processes. Consider the case of a pet products store called Mandy’s.
Mandy’s is a fresh startup that has grown rapidly in the last few years. They recently started selling on multiple platforms and bought a second warehouse. Their expansion has contributed to their overall presence. Despite high demand from the market, their business is suffering due to internal setbacks. Upon analysis, Mandy’s found that inventory related troubles were at the root.
Here’s a list of management factors that Mandy’s needs to adopt to be in full control of their inventory:
#1 Know Order Fulfillment Status Across Multiple Platforms and Warehouses
It is critical to know whether your order fulfillment operations are on schedule or not. Processes like order pickup, packing and preparing for shipment turn out to be challenging if you don’t have a clear visibility into your operations. This gets especially challenging when selling on multiple online storefronts, because each of them need to be updated in real time.
Mandy’s found it quite difficult to navigate through multiple platforms like Amazon, eBay and Etsy. Add to that the challenge of managing stock across both of their warehouses. Accurate management of order fulfillment requires constant updates to stock after each order is placed.
#2 Underselling-Overselling, Understocking-Overstocking
Mandy’s started to either undersell or oversell their products due to lack of visibility. It was caused due to mistakes like improper bookkeeping, not performing timely inventory audits, work duplication and data entry errors.
Understocking and overstocking are caused by the same errors and demonstrate that businesses like Mandy’s need proper inventory control through automated software solutions that integrate physical operations with digital record keeping and automated information processing.
#3 Demand Forecasting
Demand forecasting is another area where most growing businesses like Mandy’s struggle. It is nearly impossible to devise insights using spreadsheets since they require you to use formulas every time you want to make sense of data. This leaves no way to be sure of tracking past sales trends and correlating them with current indicators.
#4 Managing Product Pricing And Sales
Mandy’s found that they needed product bundling capabilities which required them to make complex calculations. Marketplaces like Amazon also require sellers to change pricing dynamically depending on their competitor’s activity.
For instance, if a competitor is out of stock, you can increase your selling price without fearing the loss of sales. Conversely, you would need to lower your prices if your inventory has been sitting for long and is nearing its expiration date. This is where dedicated inventory tools come in handy.
#5 Coordinating With Logistics Partners
Logistics play an important role in determining a brand’s success. Logistics operators work under tight deadlines and you need to be ready with sales insights and be ready to ship products at the right time to ensure smooth order fulfillment.
Mandy’s found that returns processing and order tracking requests were consuming a huge chunk of its customer service staff’s time.
Having an inventory management and control system along with API-based integrations with third-party logistics partners can help solve this problem as your customers can track and return orders by themselves through a self-service portal.
Benefits Of Using An Inventory Management and Control Software For Online Sellers
An ecommerce inventory control solution can help address these concerns and help scale your business with the help of automation, standardization and the streamlining of your operations. To get a better understanding of the benefits offered by these solutions, have a look at the below section:
#1 Improved Productivity
Inventory software helps collect data, process information, delegate work and provide reporting. Inventory software can automate order processing, order pickup and packaging, returns processing and reporting analysis.
Your staff members only need to focus on their core work without worrying about documentation or other administrative formalities.
#2 Simplified Inventory Handling And Record Keeping
When using automated solutions, you no longer need to note down each and every transaction manually. You can turn the entire recordkeeping process digital by integrating a barcoding solution with your inventory software. This helps in tracking the exact location of stock within your storage facilities, order pickup and packaging, along with report building.
#3 Minimize Inventory Wastage
These solutions help order the right quantity of each SKU depending on historical demand and current trends. You no longer have to manually track how long inventory has been sitting in your storage facility and if you need to sell it due to expiration.
It will prompt you to clear aging inventory by creating a stock clearance sale, offering discounts or through product bundling. Thus, you can expect minimal inventory wastage as it helps order the right products and clear your stock at the right time in appropriate quantities at the right time.
#4 Improve Customer Experience
Without a dedicated solution, you can often miss delivery deadlines, send out expired products, fail to provide order shipping data and make returns a headache for your customers.
Without software, you aren’t able to confirm orders, may oversell items and wind up dealing with product backorders. With an ecommerce inventory management and control system, you can solve all of these problems and improve the customer experience by offering consumers transparency and control.
For instance, you can track a customer’s order history to identify repeated purchases over fixed intervals. You can send them order confirmations thereby streamlining operations on your end while improving the customer experience.
#5 Offer Visibility To Management
With the digitalization of all processes, insights and resource data, you get a clear picture of how your ecommerce business is performing and if it is facing any bottlenecks.
You can exercise greater control over your sales strategy, order fulfillment, warehousing, cash flow, sales trends, demand forecasting, inventory handling and marketing. Using an ecommerce suite helps unify all teams and orchestrate their efforts in concert to support your company’s growth.
#6 Improve Finances
Last but not least, you gain significant control over financial aspects such as total sales for a given period, taxes, compliance-related filings and all accounting recordkeeping. Software facilitates inventory audits and plans out your expenses based on historical data. These solutions take the guesswork out of the equation offering a better understanding of your business finances.
How To Find The Right ecommerce Inventory Management and Control Software
Here’s a simple step-by-step overview to finding the right ecommerce inventory management software for your business:
- Understand your priorities and the areas where you are currently struggling
- Conduct a detailed market survey to get a hands-on understanding of available options
- Scrutinize the available solutions and determine the customizations your specific business requires
- Analyze the learning curve for your staff members
- List third party integrations required and check their compatibility
- Check out user reviews to weigh pros and cons
- Involve stakeholders and prepare for onboarding
It is evident that ecommerce inventory management software provides you with the ability to manage and scale your operations methodically. In the absence of such solutions, it becomes extremely difficult to operate since you have little to zero visibility of your organization, its expenses and technical difficulties. Meanwhile, your staff continues to struggle with productivity issues due to errors and manual data entry.
The right ecommerce inventory management and control software helps streamline all aspects of your online selling business and increases your bottom line. If you need further guidance on ecommerce inventory management solutions for your business, get in touch with Cin7 now!
Arms of Eve is an ethical fashion accessory business, co-founded about three years ago by husband-and-wife team Aaron and Kerryn Langer. Before starting Arms of Eve, the pair had already run a successful wholesale fashion business together in Los Angeles, flying in Australian Merino wool to the States.
“When we started having kids, our lives became very busy, and the world of ecommerce was growing quite rapidly,” Aaron says. “We didn’t have time to go to stores, or shop during store hours. We did all of our shopping — everything from baby supplies to clothes — online, and we were just enraptured by this world.”
When the two decided to move back to Kerryn’s home country, Australia, they decided to start a new, ecommerce-focused fashion business. Australia, they say, wasn’t quite as advanced as the US at ecommerce at the time, but they knew it would catch up.
“We wanted to create a really simple, one-stop shop for cool boho-chic fashion accessories, starting with scarves and ponchos. Then jewelry was something we sort of dipped our toes into and really quite enjoyed it.”
Aaron and Kerryn figured that a fashion accessory and jewelry company could afford them a lifestyle where they were able to travel to destinations like India, Indonesia and Thailand, and enjoy beaches and sight-seeing while they met their manufacturers and toured factories. It’d also enable them to give back to the world, as well as conducting business according to their personal values — all of Arms of Eve’s jewellery is handcrafted and ethically sourced.
They set up a Shopify store, and began experimenting with selling fashion accessories at weekend markets. Kerryn would wake up early, put up a pop-up store and, as she sold, worked to understand her customers, what they were looking for, and how they were wearing the jewelry. This in-real-life interaction helped them get a feel for what their online customers wanted, and the care and attention to detail they lavished on customers helped score them their first big break, when they were approached by Australian ecommerce marketplace The Iconic.
“They legitimized us in the marketplace as a ‘real brand,’” Aaron says. Soon, they were selling on high-profile online marketplaces like the UK’s Wolf & Badger, and Revolve Clothing in the US, as well as in-person and online.
Arms of Eve’s growth plans were working like a charm, but there was one sticking point: their inventory management.
Growing pains require a better fit
“We were growing really rapidly. We had our own Shopify site, we were on The Iconic and a few other marketplaces, and keeping track of stock was such a sore point,” Aaron says. “We were doing it manually on spreadsheets.”
Aaron knew that to sustain and increase growth, Arms of Eve needed two things – a solid inventory management system, and the right team to help them use it to its full potential.
To do this, they turned to Cin7, and Halkin Business Partners.
Helped by Halkin
Halkin Business Partners is a business consultancy who’ve been helping entrepreneurs and business owners scale for over 20 years, and they serve businesses of all sizes, from startups to established enterprises. A Xero platinum partner with thousands of clients and a wide-reaching consulting network, Halkin have offices all over the world, and specialize in an outsourced services model across accounting, tax compliance, strategic advisory, HR and technology.
“We have a strong foundation in numbers and accounting work, which is where we originated as a business,” says Adam Wakerman, Halkin Director. “But, at the end of the day, accounting systems are repositories of data and information, and our ability to provide clients with accurate financials and provide insights based on those, is the product of the data that actually goes into the system.”
It was with this attitude around data that Halkin began their foray into not just consulting, but operational consultancy and management. This involves, Halkin say, taking a holistic view of business, its systems and processes, and being able to understand how all those systems link together for the purpose of ensuring data integrity. Simply: if you can measure accurately, you can manage better.
“We’re able to plug in with the founders and work directly with them across not just the accounting or bookkeeping work but also across their systems, their processes, their structure, and their HR, and then also obviously their CFO related requirements,” Adam says.
Aaron met with the Halkin team, who zeroed in on Arms of Eve’s inventory management processes.
“They said, ‘You need to organize this. You need to understand the value of stock that you’re holding. And if the Iconic sells something, and Shopify sells something, how are you dealing with taking that stock off inventory? And how does it work with Xero?’” Aaron says.
“And we just shrugged our shoulders. We had no idea,” he adds.
After Halkin did their initial assessment of Arms of Eve, they recommended Cin7 for their inventory management. Initially, Aaron was resistant.
“We thought Cin7 would be really great, but we were scared initially because for a small growing business, it was a big deal. But Halkin backed that decision to such a degree that they actually fronted the money to pay for it. They said ‘You’ve got to go with Cin7, we’ll front it, and you’ll pay it off slowly as you continue to scale, but this is what you need.’”
Halkin says that, for them, helping clients upfront with their inventory software to help remove some ‘sticker shock” isn’t that unusual. When they know that Cin7 will really help a customer, they’ll do whatever they can to help them make the move.
Aaron is full of praise for how Halkin helped Arms of Eve switch to Cin7.
“Our financial team at Halkin have Cin7 experts on board, and they’ve really helped us integrate the software into the business,” Aaron says. Halkin have even gone so far as to create a custom tool that alerts Aaron to any money sitting in open invoices. If he needs any support, he can choose from a financial and software support team that includes a bookkeeper, a virtual CFO, a tax advisor, and a whole Cin7 team.
“Before and after implementation, we’re always looking to improve the process, and the business as a whole,” says Diego. “We know that we have the big picture, so after the implementation when a customer needs help, we know their process, and why they’re asking.”
Cin7 runs rings around the competition
“I just don’t know how we operated before Cin7 and Halkin, to be honest,” says Aaron. “Before, inventory management would literally keep me up at night, because I knew we were selling stock we didn’t have – and you don’t want to do that.”
Since implementing Cin7 with Halkin, things have changed dramatically for Arms of Eve. Cin7 now sits at the center of their business. Everything connects, including their multiple Shopify stores, marketplaces like The Iconic, their accounting software Xero, and Starshipit, which they use for all their fulfilment.
“The ‘before’ picture was scary as hell,” Aaron says. “But the ‘after’ picture — Cin7 is the hub, the all-important beating heart of the business. In terms of connecting all our inventory, it really makes things significantly easier, and transparent. In the days where we didn’t have that, it’s just hard to fathom how we operated.”
Now, with Cin7, the Arms of Eve team know their stock levels at the touch of a button. They better understand how to service the business, and their customers, by understanding what is selling well, or what is running out of stock. They’ve been able to streamline their order processes from end-to-end, which is a “huge time saver.”
“The reporting and data through Cin7 just makes it really easy to understand,” Aaron says. “All of our customers, all of our suppliers, everything’s in there. It’s like a one-stop shop. It’s become a huge time-saver, and time is money”
Armed with data, the business innovates
One of the best things about Cin7 is the way that it democratizes information and data at Arms of Eve. Everyone in the business has access to Cin7, and it’s an invaluable tool for all stakeholders to understand what’s going where, when.
“Our wholesale manager needs to understand stock levels, and needs to be able to write order fulfilment. There’s different people who are touching it at different points. I think that’s one of the most brilliant aspects for us – I don’t know how we would have done this without Cin7.”
This data democratization has made it easy for Arms of Eve to innovate in their product categories. They’ve created combinations of products for sale called “stacks” and “sets.” Stacks are all about styling; Kerryn, who is a designer, wanted for customers to be able to purchase several items from one category that all look great together. “I want people to say, ‘I want that great-looking bracelet. You have four bracelets and they look so good together. How would I go about getting that?’ So we’ve created bracelet stacks, necklace stacks, earring stacks.”
Sets, on the other hand, are across categories — for example, a combination of different pieces of jewelry that all look good together, like rings, necklaces, bracelets. Cin7 has enabled this innovative product bundling by allowing the creation of ‘virtual stock’ in the Bill of Materials. The software looks at the different SKUs available in inventory, and then allows stacks and sets to be built accordingly, limiting the number of virtual products that can be created by the inventory count.
“Let’s say you have 50 of two kinds of jewellery, but only 10 of another kind. The software will only allow you to make 10 stacks,” Aaron says. “Virtual stock was for us a Eureka moment. We can manage it really successfully, because when we sell a stack, it takes three individual items out of inventory to create it. With Cin7’s BOMs, we keep our inventory really neat, tidy and organized.”
With the Covid-19 pandemic making travel difficult or impossible, Arms of Eve has also had to change how it approaches suppliers and quality control. In the old days, before 2020, they could easily travel to meet suppliers, but now it all happens via WhatsApp. Kerryn designs and mocks up in Photoshop, the factories create samples and share pictures, and then Arms of Eve has all the information it needs to know if they want to enter production. Here, too, Cin7 has helped.
“Before Cin7, we weren’t really tracking those purchase orders, but now they’re coming through, and they’re the first item that gets ingested into Cin7. We’re creating new products in Cin7, we’re putting our costs in, when it arrives, it’s marked as arrived. The inventory’s now in our system, which is great.”
Cin7 even allows Arms of Eve to track any inventory they’ve gifted to influencers, who can then choose to show off their products.
Embracing Cin7, wholesale
In addition to their ecommerce channel, Arms of Eve are also using Cin7 to handle wholesale. While they don’t specialize in selling to small boutique shops, when they are approached by someone who wants to sell their products, it’s easy to set up with Cin7.
“When a wholesale order comes in, the sales order is written in Cin7,” Aaron says. “The inventory’s taken out, the wholesale costs are in there, Cin7 speaks to all our dispatch and everything.”
Dealing with smaller boutiques and lesser-known customers can be risky for a business like Arms of Eve, but Cin7 enables them to process payment instantly, with strict cash-on-demand terms.
“Wholesale payment is often handled through the Stripe account connected to Cin7,” Aaron says. “I think we’re about 50/50 in terms of people doing bank transfers, and people hitting the ‘pay now’ button in Cin7.”
“The big wins are efficiency and transparency”
Halkin says that the customers they put on to Cin7 frequently see enormous business benefits. It’s certainly been true for Arms of Eve.
“Arms of Eve now have transparency with their stock numbers, so they can make decisions. They’ve gained efficiency as well. Stuff that used to take hours to reconcile, now takes a couple of minutes. The main gains are the transparency of the financials, being able to make decisions, and understanding the big picture.”
For Aaron, looking back to where they were before they adopted Cin7, their decision is a “no-brainer.”
“Cin7 is really adaptable. It’s really smart. It does all the heavy lifting really seamlessly, and it’ll just save you headaches. For us, it’s a no-brainer, looking back. You know when they say, hindsight is 20/20, well if we hadn’t done this, our business wouldn’t be where it is today.”
Before Halkin helped him on to Cin7, Aaron says that he “hadn’t even realised that software like this existed.”
“When you think about what I understand about the business now, and how everything plugs in — well, back then I didn’t even understand what needed to be plugged where. If I could go back in time, I’d draw a diagram and put Cin7 in the centre,” Aaron says. “Everything plugs into Cin7.”
Diego from Halkin says this centralization of complex inventory functions is the exact use case that Cin7 is built for, and it’s these cases where they don’t hesitate to prescribe Cin7.
“It’s holistic and robust in terms of connecting to ecommerce, having EDI connectivity, having 3PL, logistics, and accounting connectivity as well,” Diego says. “A lot of competitor software has some of those things, but not all, so the fact that Cin7 also has APIs and the ability to connect with other vendors in the ecosystem is a big advantage.”
With Cin7 in place and running smoothly, and with Halkin on side to provide business, financial and software integration advice, Aaron says the future is bright for Arms of Eve.
“Now we’ve built an ecosystem that is running really smoothly on Cin7. It’s eureka — this is the future, this is the map.”
Hitting the first profitable quarter is an impressive milestone for any business, especially in the current global climate. Pine Apparel reached that milestone this year – and credit for this feat is largely due to Cin7, according to Director of Operations Elise Ellis.
“It’s changed our whole operation and gave us that visibility,” she says, adding that the recent success wouldn’t have been possible without Cin7. “If I didn’t have a solution like this I don’t think we would have seen what we have right now.”
Pine Apparel founder Michael Edwards started the company by selling dresses out of his car. But, years later, he continued to view the company as a “small business”, despite shipping apparel orders to boutiques throughout the United States.The systems in place before Cin7 reflected this mindset: Inventory was recorded on Excel sheets, and entire processes were recorded in Google Drive. Sales were manually deducted when they happened and then, as Elise says, “the team would rush”.
“They’d actually go and look for [the stock in the warehouse] because it wasn’t organized. And they just knew [one thing] was in the third aisle, and something else was in the eighth aisle…”
When Elise first joined the team in 2019, she was tasked with “bringing the company into the current century.” After finding better ways to organize the warehouse, the team’s inventory and accounting systems were the next major step. In previous roles, Elise had integrated big ERP systems like SAP, so she knew exactly what she was doing. The only problem was that she didn’t know what sort of inventory solution would best suit the business.
“The big challenge was, how do I find a software solution? It wasn’t only having inventory management, but we knew it had to tie into our financials. We knew we had to tie it into shipping. We knew in the end we wanted to also have an e-commerce site. So, the number one focus was starting with the end in mind.”
“I’ve got my one source of truth with Cin7”
Elise ultimately chose Cin7 over competitors for a number of reasons – the ability to work with Shopify, the seamless functionality with often-specialized apparel industry requirements and, as Elise admits, the all-important number on the back page of any proposal – the price. It’s a decision she hasn’t regretted.
“I love the journey that we’ve had with Cin7,” she says. “I love that we’ve got my one source of truth with Cin7. I’ve never had to question it, because it’s always been spot on with the integrity of our inventory.”
For an apparel wholesaler, that trust in inventory systems is vital. And it can be a tricky industry in that sense. Items are sold generally as bundles, but single stock items also need to be recorded. The same item will have a range of colors and sizes, and even one kink in the chain can bring sales to a halt. This is where Cin7 has saved significant stress and heartache for Elise. For the first time, she now has complete trust in their inventory and systems. And she knows what’s available, in real time, across all systems and platforms.
Looking back before Cin7, Elise says the difference is substantial. The company signed a contract with Cin7 in January 2020. Before that, she says she was flying blind in terms of accurate stock counts.
“I had no idea what my inventory was,” she says. “It was the first time in 36 years that we actually went through the warehouse and counted item by item to know what we own.”
Cin7 onboarding program was “a lifesaver”
Despite her complete faith in the systems and the data Cin7 provides, Elise found herself switching to Cin7 at an especially difficult time. She had initially hoped to go live with Cin7 by Superbowl Sunday, but not long before that day the Warehouse Manager resigned, leaving Elise to organise and fill in over 50,000 inventory data points. Then, Pine Apparel’s sales slowed considerably when COVID-19 hit the US in March 2020. Despite all of this, Elise says what impressed her and made the transition stress-free was the “hand-holding” and onboarding provided by the Cin7 team.
Elise says the team were still there through the set-up to answer questions and help make the transition easier – something that other systems didn’t really accommodate.
“I think in terms of the onboarding and then that implementation, that hand-holding was what was so important,” she says. “A company like SAP – they don’t offer service like that.”
And ultimately, that’s what won Elise over.
“I just think all of that – [the help with] onboarding and the implementation and then ultimately having Premium Plus support is really one of the keys to our success.”
Integrity across all platforms takes the anxiety away
Elise says Cin7 has made Pine Apparel’s growth manageable and simple for two reasons: It’s reliable, and provides true visibility right across the business.
“I have confidence in our numbers,” she says. “It’s really just the integrity. I have the real time data – with our goods going to Shopify, and then a Shopify order coming back in real time showing our inventory and what’s available to sell.”
Pine Apparel makes use of Xero, Shipstation and Shopify Cin7 integrations, and the entire team has access to and utilizes the software daily – everyone from Sales Reps to accounting and warehouse staff. So having total faith in the accuracy of data is vital to the success of the company.
“That’s what our whole strength is, it is that I’ve got that one source and I know it connects,” says Elise. “If I look at Xero, I see the same number in Xero that came from Cin7. I look at Shopify in that sales order and I see that here, I go to ShipStation and I see that same order. I’m not seeing different data.”
Cin7 means product sellers can sleep at night
“That’s what makes you sleep at night,” Elise says.
Confidence in numbers is imperative to the smooth running of an organisation that sells direct to boutiques all across the United States. In the wholesale industry, items are sold as bundles, rather than one-offs. And Sales Reps are selling to various boutiques across the country. It’s important to have a clear and precise indication of available stock in real time. This is why Cin7 has made life so much easier for this business. The visibility allows Elise and her team to have real-time, accurate sales and inventory data, and they’re able to react to it.
Ultimately, what it comes down to for Elise is the fact that Cin7 has seamlessly integrated with the company and unlocked its growth. Where she was once unable to keep track of what was selling and what was in stock, she can now know immediately what’s on hand – what sells quickly and what is popular right now. These things allow her to keep on track with orders and demand. And perhaps more importantly, she can trust what she sees.
And finally, what does the implementation of Cin7 mean for Elise and Pine Apparel?
“We can make money,” Elise says. “Why are you in business? You’re in business to make money, not just because you love to sell clothes to people.”
Cin7, she says, has enabled the business to get past its struggle with problems arising from the Covid-19 pandemic, bring on more staff, and even increase its pre-pandemic sales numbers.
“Before the year is half over, we’ll have recorded sales over our 2019 numbers, which is a huge victory,” Elise says. “So that’s a major acceleration.”
In these times of supply chain disruptions, online sellers are looking for ways to mitigate the delays caused by the scarcity of raw materials, labor, drivers and warehouse space. One option sellers have in an effort to appease impatient buyers is to shave time off the fulfillment of products they have in inventory by partnering with a 3rd party logistics provider (3PL).
Winning Supply Chain Strategies
A recent survey conducted with over 4,000 businesses found that product sellers who use 3rd party logistics providers (3PLs) to manage their warehouse network are 30% more likely to improve their profitability. Why take on the HR burden of extra employees and processes to oversee?
A reputable 3PL allows sellers to manage the geographic distribution of their products and the fulfillment operations within their warehouses.
Successful businesses are responding to the rapid developments in retail and online selling by investing in robust inventory management systems (IMS) to further streamline order management and fulfillment. Speeding product turn increases the bottom line and makes up for time lost due to supply chain disruptions. Companies that continue to rely on patching legacy, on-premises inventory systems or that rely on manual processes will lose out to more modern competitors.
Businesses would be wise to assess their current inventory and order management software solution to determine if it integrates with 3PL providers and increases product turn by shaving time off restocking, order management and fulfillment. A cloud-based IMS improves information flow, speeds the flow of physical products and introduces multiple process automation efficiencies.
Sellers can also increase the number of opportunities for buyers to find the products they’re shopping for by expanding their number of sales channels. The right IMS allows for seamless integration of multichannel sales operations.
The same survey referenced above found that in 2020 when 28% of single channel retailers experienced more than a 5% decline in revenue, 6% of multichannel product sellers achieved a more than
20% increase in sales and 23% enjoyed more than 10% growth.
The primary difference between the businesses that grew during the pandemic and the ones who suffered was the number of sales channels the winners chose to integrate with. Multiple sales channels broaden the available customer base that these successful businesses are able to sell to.
Let’s review the types of sales channels necessary to run a modern, profitable sales operation with the broadest possible market presence. Keep in mind that some IMS providers charge per sales channel connection while others include them as part of an affordable monthly subscription fee.
Successful online retailers who sell directly to consumers know that the more ecommerce channels they integrate, the more buyers they’ll reach and the faster their businesses will grow. These companies benefit most from an inventory management system that includes connections and costs to integrate multiple channels like Shopify Plus, WooCommerce, Magento and BigCommerce.
As with ecommerce channels, the same holds true for connecting to multiple online marketplaces. IMS Solutions that include connections to online marketplaces like the complete Amazon selling suite, Etsy, Walmart and Ebay help retailers to gain significant market share and rapid sales growth.
For successful online sellers who supply major retailers like Walmart, Macy’s, Bloomingdale’s and Target, an inventory management solution with built in electronic data interchange (EDI) is the key to automated order fulfillment. When EDI connections are built-in and included in the monthly cost of an IMS, major retailers replenish their stock by sending electronic POs that flow straight through to the seller’s order management system eliminating human error and delays associated with manual processes.
Finding an IMS that also offers a built-in POS solution for brick-and-mortar and connections to 3rd party POS systems is ideal for the sellers who rely on traditional retail. A robust IMS will allow for the transfer of inventory wherever it’s needed – to other geographic locations, including stores.
Innovative companies that leverage these supply chain strategies will continue to mitigate the effects of the current disruptions through 2023 and on into the future. Key to their success will be the adoption of a robust inventory and order management system that creates a coordinated ecosystem that serves their multichannel goals.
Gone are the days when inventory was managed through manual stock takes and Excel spreadsheets. Today, various inventory management systems track inventory levels, demand, forecast, etc. When choosing an inventory management system for your business needs, here are a few questions you need to ask yourself to select the right option for your business.
#1. What is the Current Size of Your Business?
The first important question is to know what size and stage of growth your business is in. If your business is small, paying a lot of money for an inventory management solution would not be worth the investment. Until your yearly sales are over about $100k, a spreadsheet is enough for your inventory needs. If your projections predict imminent growth past $100k, begin to start looking at inventory solutions.
However, many SMBs having yearly sales between $100k and $100 million find that their inventory complexity is alleviated with a robust inventory solution.
#2. What is Your Budget?
Take your time to define your budget: inventory management systems range from free to six figures. If you know the investment you’re able to make, it’s much easier to refine your search to a few offerings that best suit your budget, size and operational capacity.
With huge variation in price comes a significant variation in quality and capability. So, make sure you invest wisely by doing your homework.
#3. What Kind of Inventory Management Software Does Your Business Need?
You must have a clear idea of your business needs. The mode of operation of each business is different. For instance, if you run a clothing store, the areas you may need help with are going to be different from a restaurant.
The specific needs of the business must be taken into consideration. If you need software that helps print barcodes for your products, check if you can get one that offers you both inventory management and barcode printing.
#4. What Challenges do you Need to Solve?
If you buy an inventory management solution, make sure you know what problems the tool will solve. It’s important to be familiar with successful inventory processes and the challenges that prevent growth.
Knowing the problems you’re trying to solve will make it easier to ask the right questions when choosing an inventory management system.
#5. What Integrations do you Need?
Any good inventory management system like Cin7 will connect with the tools your business uses daily. For instance, multichannel sales through eBay, Amazon and other online marketplaces must be supported so that you can monitor inventory across third-party sales channels.
You also want to connect your accounting software like Xero or QuickBooks. Seamless integration with eCommerce platforms like Shopify, Magento or BigCommerce is necessary for an online store. The right solution will help you manage every product, order and customer in one place and across multiple stores.
#6. Who Will Use the System?
To fit your business and your team’s requirements, it’s essential to know who will be accessing the system. With a cloud-based inventory management system, any employee or business partner can gain up-to-date information without emails, texts or phone calls to double-check orders. The system has it all.
Cin7 is Your Best Bet as Inventory Management Software
With the above six questions at your disposal, you are on course to determine the best inventory management solution for your business. Cin7’s cloud based software can handle all the needs of any company, size or industry.
Our system offers countless more features than any other standard inventory management system. Not only does Cin7 offer inventory management, but it also assists you with accounting, sales, POS, purchasing, manufacturing and eCommerce.
We have proudly assisted thousands of clients from around the globe to move their business forward. Our dedicated service team is always available to help you answer any questions you have.
That something as ubiquitous as “water,” something that falls free from the sky, can succeed as a product is testament to the power of innovative thinking and bold entrepreneurs. While many water brands, despite the claims made on the label, have only their marketing to differentiate them — many are, in fact, simply filtered tap water — there are some products that really do have a genuine point of difference.
A standout from all the others is Cin7 customer Heart Water, who utilize unique patent-pending technology to harvest rainwater straight after it falls, without ever touching the ground.
“We are a bottled water facility, but we’re more than just that,” says Regina Mosely, Director of Operations at Heart Water. “ We have a rain harvesting system on the roof of our warehouse, with 300,000-gallon tanks that we collect rain water into. The water is ultra-filtered and processed into safe, sustainable, delicious drinking water. It’s all bottled right there in the facility.”
Based in Austin, Texas, Heart Water is one of very few water brands that can claim to be genuinely sustainable, utilizing both rainwater collected at the point of manufacture and sustainable packaging. Most bottled water isn’t even close to sustainable, Regina explains. “Not only do they use energy consuming pumps to get water out of the ground, and then they put it into plastic. It’s a big waste, but few people realize how wasteful it is.”
Bottled water might be seen as the ultimate luxury product — but when infrastructure is tested or under stress, it can become a necessity. “Throughout this last year, we’ve seen, unfortunately, what kind of vulnerabilities the water systems in some cities have. In Texas, we had that freak snowstorm that shut down the state for an entire week, with pipes bursting. We didn’t have water for a while. And even when it was back on, we had to boil all the drinking water. It really opened our eyes to the need, so we feel we can scale this to be about more than just bottled water as well.”
Even with a genuinely superior product, the bottled water market is hard to break into, dominated by established brands from giant corporations like Coca-Cola and Nestle. To have a shot, Heart Water needed an inventory system that gave them modern selling tools, enabling them to keep up with the big brands.
Fortunately, they found it in Cin7.
Cin7 gives Heart Water the inventory clarity they needed
Before implementing Cin7, HeartWater had been managing inventory with a hacked-together combination of QuickBooks Online and an Excel spreadsheet. “We didn’t really have a great avenue for projecting our costs of goods sold accurately,” Regina says. “We were also just estimating production and supply needs. It wasn’t providing us the scalability we’d need as we moved forward.”
The trick was finding a system that handled multichannel selling seamlessly. Because Heart Water sells both direct to customer (D2C) and wholesale (B2B), they needed a system that could keep track of production, batches, and SKUs no matter how the product ends up being sold. As water is bottled, it’s assigned to one of several different SKUs, and then batched up in pallets. “As our ecommerce orders come in, we’re shipping those out daily. And as wholesale orders come through, we either ship them out, or hand deliver,” Regina says. “We also work with distributors, who come in and do pickups and dropoffs.”
Regina knew the business needed an inventory management system to make it to the next level, but she wanted to make sure Heart Water made the right decision with a product that fit their needs at the moment but could scale up as they grew the business. She spent three months researching, evaluating solutions from very basic to very expensive, server-based legacy ERP systems. “We looked at super basic systems that weren’t very costly all the way up to NetSuite, which was really expensive. We finally settled on Cin7 — I liked the presentation, and I’d heard good things about it during my research.”
Once Cin7 was implemented, the Heart Water team saw quick wins right away. Process transparency is at the heart of efficiency for any product seller: without a system that gives decision-makers visibility into operations and profit margins, the business is going to struggle to grow. But when your inventory management is in the cloud with Cin7, you can see everything you need to run the business well, as well as benefit from the huge efficiency gains of integrating with other business-critical SaaS systems like Shopify, ShipStation, and accounting software like QuickBooks Online.
Regina says that the biggest win for Heart Water was “just knowing where our inventory is at any moment.”
“Knowing our cost of goods sold without having to incorporate a lot of spreadsheets – that’s the biggest thing. Our systems are way more streamlined and optimized,” Regina says.
“Before, when I had to look stuff up, I had to look in four or five different spreadsheets, or different platforms — look at QuickBooks, go back through emails. With Cin7, it’s nice having it all together.”
Cin7 enables business growth with scalability at the core
Another reason Heart Water chose Cin7 is the system’s inherent flexibility and scalability. It can grow as your business does, and new functionalities can be added or brought online as necessary. The Heart Water team has their eye on Cin7’s B2B module, as well as its comprehensive library of native EDI connections. As their business increases in size and scope, they know the software will be able to keep up with them, empowering them on their mission to make pure drinking water more sustainable and accessible for all.
“Another reason we went with Cin7 is because I know that B2B and EDI are capabilities Cin7 has. I do look forward to that in the future,” Regina says.
“Cin7 is a nice, one-stop shop to have all of your production, your supplies, your inventory — all in one place.”
Before Cin7, I had to look stuff up in four or five different spreadsheets. With Cin7, it’s all together.
Regina Mosely, Director of Operations, Heart Water
Amazon is one of the most customer-centric companies in the world, and this is reflected in almost each of its management approaches. Among them, FBA is a highly successful initiative, and a large number of third-party sellers leverage it. The smaller businesses especially found it very helpful as they could even store their inventory at Amazon’s FBA facilities. Keep reading to discover how Amazon’s Inventory Performance Index may impact your business.
However, Amazon found that a significant number of sellers were using FBA as a storage facility which effectively reduced the total available space. While this was contradictory to Amazon’s outlook of using these facilities for items that are ordered frequently and need to get delivered quickly, it also sabotaged the interests of Amazon, other sellers, and ultimately its customers.
Thus, it came up with an inventory performance index (IPI) in July 2018 to prevent dormant stock from choking its storage facilities. Seller Central is not the easiest platform to manage for most businesses, and it already has a number of metrics to take care of, but this was a needed inclusion.
But this is an important parameter since failing to maintain a healthy score could invite hefty penalties. If you are new to Amazon FBA or simply want to understand IPI better, you are at the right place. We have curated this article to help you understand IPI’s ins and outs in a crisp manner. So let’s get started.
What Is Amazon’s IPI And Its Important Parameters
IPI is a score out of 1000 that Amazon assigns to a third-party seller on its platform. It shows how efficiently you manage your FBA inventory, and the higher the score, the better it is. Amazon reviews it every quarter and six weeks before a quarter to remind you to take corrective measures. You need to qualify by scoring a minimum score, i.e., a threshold, which is 450, and it’s up to Amazon’s discretion to make any changes to it.
Interestingly, Amazon doesn’t declare the parameters of its IPI metric. So there is no sureshot answer on how to improve your IPI score, but a lot of experts have condensed it to a function of:
- Sell-Through Rate
- In-Stock Rate
- Excess Inventory
- Stranded Inventory
Let us understand each of these IPI determining factors in greater detail:
#1 Sell-Through Rate
It is a simple metric that tells us how quickly we are selling our inventory. It is calculated by dividing the total number of units sold in the past 90 days by the total number of units held at FBA.
#2 In-Stock Rate
The in-stock rate is given by the percentage of your Amazon ASINs that have been in stock for the last 30 days, weighted by the number of sold SKUs in the previous 60 days. In a nutshell, it describes a seller’s ability to sell without facing stock outages. A high in-stock inventory saves you from lost sales due to product shortages.
#3 Excess Inventory
Inventory that isn’t likely to be sold in the next 90 days due to lack of demand or turning obsolete is known as excess inventory. Even if the product is well in demand but if the stock is higher than 90 days worth of demand, it is considered as excess inventory.
In the past, Amazon has stated that excess inventory is among the top reasons for a low IPI score, and thus, sellers should always maintain a healthy quantity of in-hand inventory. Amazon recommends sellers to either create a sale, match the lowest offer, run advertisements or even create a removal in the worst-case scenario.
#4 Stranded Inventory
Amazon ASINs that are not available for selling due to listing issues are known as stranded inventory. Sellers have to use the “Fix listing” option to reinstate the listing which is inactive due to issues like pricing errors, listing errors, ASIN expiration, and bulk upload errors. The percentage of stranded inventory is given by:
What Happens If You Don’t Hit Amazon IPI’s Minimum Threshold Score
These are the main factors that impact your IPI score, and you need to keep them in check on a weekly basis, if not on a daily basis. If you score below the target threshold, Amazon will limit your ability to send any more inventory to its FBA centers and impose a fine of $10/cu ft on all excess inventory sitting on their platform. It will also leave a monthly storage overage fee; on the contrary, scoring above the target threshold for two consecutive score check weeks will provide you with unlimited storage space for all storage types.
Thus, scoring above the target threshold is necessary and beneficial for all third-party sellers. It is noteworthy that only FBA ASIN products fall into this evaluation.
But we would like to bring to your attention that a healthy IPI score is important not only from your Amazon selling business point of view but in terms of your overall business health too. Thus, it is not a very big challenge to ensure a good IPI score as long as your operations are running smoothly as both are interconnected.
Where To Track Your IPI Score
To check your IPI score, simply go to the Seller Central account’s inventory performance dashboard. In case your score dips below the threshold, Amazon will provide you with tips to improve it. You can also decode the factors that might need attention like the storage type and cubic feet utilization, age buckets in days, (estimated) long term storage fees, total units sold in the last 90 days, FBA units sold in the last 90 days, and your (price + shipping) against your competitors’ corresponding figures.
Using these inputs, you can make necessary changes to your operations for securing a good IPI score. Generally speaking, you need to minimize your stranded and excess inventory while maintaining a decent sell-through and in-stock rate.
Tips To Improve Your IPI Score
In this section, we will share a few measures that you can implement to keep your IPI score in a healthy range. Remember, new ASINs will not impact your IPI score until they are 90 days old. Also, if you choose to place a stock removal request, i.e., liquidate your inventory, it will no longer impact your IPI score. So let us get started with the tips that will help you maintain your IPI score above the minimum threshold apart from maintaining a good sell-through rate:
#1 Keep An Eye On Listing Issues
Stranded inventory will result in lost sales despite availability while lowering your IPI score, so it is recommended to monitor listing issues. Make it a point to check your stranded inventory percentage and maintain the proper availability of your best-selling products.
#2 Never Let Your Inventory Storage Tenure Exceed 365 Days In FBA
Having your inventory sit in Amazon’s FBA facility for a full 365 days will invite hefty long-term storage fees. Thus, you should either create a sale or a removal order to avoid paying the additional fees and lowering your score. If required, you can also get it destroyed by Amazon.
#3 Don’t Overstock
It is necessary that you refrain from overstocking when using FBA and that you do not treat it as your primary storage facility. Many new sellers who are getting started with online selling commit this mistake unknowingly, and thus, you should discard any overstocked items through sales or Amazon outlet.
Limitations Of Amazon’s Inventory Performance Index (IPI)
So far, we have covered various aspects concerning the IPI metric, but it too, comes with certain limitations:
- It is not meaningful enough for multichannel selling as the entire index is native to Amazon. Thus, it would not give you a clear idea of how your business is performing if it is not solely limited to the Amazon marketplace.
- It can be cost-intensive if overlooked, so new sellers need to be mindful of their IPI score.
- Lastly, there is no exact formula to calculate your store, so you are completely dependent on Amazon.
It is evident that Amazon’s Inventory Performance Index (IPI) isn’t something to worry much about if your business is doing well. However, you need to keep an eye on it and make timely adjustments to save yourself from any extra fees or storage limitations.
It’s that time of year again. But for many product sellers, there’s an unexpected Grinch preventing holiday gifts from making their way to customers: the supply chain.
Supply chain delays have been making headlines for nearly two years. Starting with drastic shortages and hoarding, through the Ever Given and the backlog of container ships off the California coast, the ongoing string of bottlenecks has caused frustration for unsuspecting consumers and headaches for product sellers. There’s a mainstream perception of the supply chain as increasingly unreliable and unnecessarily expensive.
These disruptions have shaped product seller actions going into the holiday season. Sellers have embraced early Black Friday kick-offs and warning consumers to get their holiday shopping done early to avoid shipping delays and shortages. But are consumers paying attention to their advice?
According to a recent survey from Cin7, the answer is yes. We surveyed 1,000 U.S. adults to help us better understand how Americans view the latest supply disruptions and their sentiment around the industry overall. The results can help guide how product sellers navigate the end of a tumultuous shopping season and adapt their inventory practices as a result.
The topline takeaways include:
They’re Shopping Earlier
58% of people are aware of supply chain delays and have shifted their shopping behavior as a result. Over half of respondents (55%) started their holiday shopping within the September/October timeframe, with only 25% of consumers waiting for the unofficial kick-off of Black Friday deals to hit before actually purchasing gifts.
But their changed behavior came with a tradeoff for product sellers to execute on their orders: while 65% of consumers expect to pay more this holiday season, 53% would return the purchase and want a refund if it didn’t arrive in time for the holidays.
They’re Shopping Local
Consumers may have moved up their shopping timetable, but the majority are still worried about shopping online. In fact, only 25% of shoppers DON’T have concerns about online shopping – the top concerns being the cost of shipping, speed of shipping and package theft.
In response, 87% of respondents are making the effort to shop local and shop at small businesses. 47% are doing so more than last year, 40% noting about the same. The majority of people (55%) are also paying attention to the location/locality of where their purchases are coming from. And 63% of people would prefer to see and touch a product in-person before buying it.
People don’t buy small and local, however, because they’re necessarily woke to Amazon or wary of big retail. Only 14% of people don’t shop at Amazon because of ethical or environmental concerns. In fact, 49% don’t have any concerns at all, and 31% have concerns but still shop on Amazon.
For product sellers, it’s critical to understand how consumer behavior is shifting this holiday shopping season. They can adapt to shifts by having a variety of channels and options to make all buying possibilities a reality for consumers. And for those consumers making more of an effort to shop small and local, product sellers must lean into this sentiment to navigate the tail end of the shopping season that has the potential to go “out with a bang” beyond Small Business Saturday.
As Product Sellers move to adapt to the “new normal” of consumer behavior and look to have continued success in the future, it is critical that they have the solution infrastructure to successfully scale their business. With more businesses taking advantage of eCommerce to expand their offering by channel and region – utilizing the right software to handle inventory and order management is crucial to an efficient multichannel operation. Adequate planning, management and execution of supply chain movements will ensure fulfillment capabilities across multiple channels and help suppliers take advantage of larger customer bases.
We’ve all been impacted by supply chain challenges, but it’s the season of good cheer after all. By diversifying inventory and changing selling strategies in response to consumer behavior, this tumultuous holiday season can still be merry and bright.