ideas-and-tool: Warehouse Management

Reasons automated order management systems are better than manual order management

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Reasons automated order management systems are better than manual order managementOrder management is the process that takes place in a company to get purchases to the customers who have bought them. That process starts the moment items and goods are paid for online; covers their collection from the storage facility along with packing and shipping; and ends when they’re successfully delivered to your customers.

On the face of it, order management is fairly straightforward, and for the longest time, companies carried it out manually, having employees make lists by hand and checking everything off as they went. But as sales companies grew larger and the selling platforms available to buyers multiplied, manual methods became inadequate and automation was introduced. Called an order management system, like any automated system, it streamlines the order management process, which increases efficiency, and eliminates many mistakes.

In this blog, we’re going to explore the benefits of OMS, and show how this digital method trumps the manual one.

 

What is an order management system?

An order management system is software that’s part of the inventory management system (IMS). Programmed with details about a company’s inventory — what it’s made up of and where each item is — it uses these data as a kind of foundation, registering incoming sales and overseeing their fulfillment. It can control all of this for orders coming in from numerous platforms — online marketplaces, social media, apps, and websites, as well as offline brick-and-mortar stores — taking care of them capably simultaneously. And because the software maintains its knowledge of the inventory, it adjusts the data as items are removed or added, giving a company accurate, up-to-date information and complete oversight of everything.

An order management system is especially useful for businesses that deal with inventory, like retailers, wholesalers and manufacturers. That’s the area we’re focusing on here.

 

A breakdown of everything OMS takes care of

  • Sales,
  • Inventory control (maintaining a specific level of inventory in the warehouse),
  • Customer relationship management (CRM),
  • Processing payments,
  • Shipping,
  • Returned goods, and
  • Reporting.

 

Automation with OMS vs. doing things manually

If you’re using a manual system to handle your order management — keeping records on spreadsheets and updating them by hand — and feel it’s working for you, you may think you don’t need to automate. If that’s the case, here are some pointers to take a close look at:

Preorders and backorders

Preordering — a customer putting in a request for an item before it’s in stock — is a well-used marketing strategy. By offering items ahead of time, a company hopes to create buzz for the product; it’s also a way for companies to gauge if there’s interest in a new product. Back orders are, of course, similar in that the customer is going to have to wait for their item to be in stock, but that’s because the company has run out of it.

In both instances, an automated system will maintain the orders in its memory until the items are in stock and the order can be filled. The system takes care of everything, and there’s nothing for employees to do. But if these orders are jotted down by hand somewhere by somebody, they could be forgotten, especially if it takes a long time to get the items in stock.

Real-time visibility

When it comes to inventory, it’s vital for a business to know exactly what it has and where it is at all times. This knowledge informs every business decision made, from buying new stock and storing it to implementing marketing strategies like sales quoting and discounts. An in-depth understanding of inventory and its turnover will also determine whether to expand the business or not.

While it’s relatively easy to log incoming and outgoing inventory on spreadsheets, the more platforms a company sells on and the more storage locations it has, the more complex tracking manually becomes and the more can go wrong.

If you’re going to make the best business decisions, the information you’re working with has to be completely reliable. Which is why an order management system is a good way to go. The automated system doesn’t just give accurate information, it does so in real time on a single screen. That means that anything and everything you need to know about sales flows and inventory levels, irrespective of the number of outlets or storage facilities you use, can be brought up instantly from anywhere.

Stockouts and overstocking

If a company runs out of an item, it has a stockout; if there’s too much of an item in stock, it’s called overstocking. Neither situation is good. With stockouts, prospective customers can go somewhere else and sales can be lost; with overstocking, a business can be stuck holding items that have gone out of fashion or that maybe even go past their expiration dates. Stockouts and overstocking can also throw off the whole order management system.

While a smaller company can prevent these scenarios by making sure they always have the right amount of stock, human error is always a possibility. Mistakes are less likely with an order management system. Automation will keep on top of inventory levels, make sure they’re consistent, and, in the case of items that have sell-by dates, make sure they’re only sent out if they’re still good.

Safety stock

Safety stock is a cushion. It’s a little bit more than you think is needed to cover for the unexpected. Safety stock levels are influenced by:

  • The belief that there will be a sudden rush on the items — like Christmas,
  • The time it takes for the supplier to fill an order for more, and
  • The length of time delivery will take, such as longer for a shipment from overseas.

These calculations can be complex, especially when a large number of items and suppliers are in play. But while an experienced employee is capable of making these calculations, there’s inevitably going to be an element of guesswork involved; guesswork that could result in miscalculations being made and stock running out. An automated system, however, is able to process the information with a preciseness that’s hard for most people to match.

Warehousing

For companies that have more than one warehouse, coordinating them is good business. For instance, if some items sell better from one location than another, more of them should be housed there. Similar items should be stored in that location in bulk. As another example, it may be logistically better to fulfill an order from one warehouse than another. In that case, the items for the order should be routed to that warehouse.

Recognizing situations like this, in good time, is difficult without automation.

Bulk actions

Items that are recalled have to be pulled from storage and sent back to their suppliers, and the customers who ordered them before this have to be told what’s happened and offered something else in its place. Without automation, each customer has to be contacted individually, but an order management system can take care of it with a single action.

Customer satisfaction

Buyers who have had a good shopping experience — measured by the fact that the buyers received the goods they wanted — are said to be satisfied customers.

An order management system helps you create satisfied customers. It automatically monitors inventory levels, reordering when stocks run low and removing them from online channels if items do run out. If an item does run out, the system lets buyers know and offers the option of backordering — placing the order and waiting until the item is in stock. Trying to handle this with spreadsheets and having someone literally look at stock to check how much of it there is is going to lead to disappointed customers.

Scaling

Whatever method is used for order management, it has to be able to cope when the business grows. This might not be the case if operations are carried out manually, but when things are automated, there are very few issues, especially when it comes to order management.

 

Final words on manual vs. automated order management systems

For order management, an order management system, such as Cin7 Omni, with automated features is faster, more reliable, and more efficient. Ultimately, that means it helps to make your company more cost efficient and more profitable.

When you’re ready to switch up to automation, give us a call. Or if you want to know more, schedule a demo with one of our experts. You’ll be glad you did.

What is the B2B2C model? What should you consider in setting up a B2B2C model for your business?

Posted on | by Cin7 team | Leave a Comment on What is the B2B2C model? What should you consider in setting up a B2B2C model for your business?

The U.S. Census Bureau News reported that the retail ecommerce sales for the first quarter of 2022 crossed $250 billion, an increase of 2.4% from the fourth quarter of 2021. It represented 14.3% of the total retail sales. The B2B2C model is the latest addition to the ecommerce scene. Let’s learn some more about the B2B2C model.

You have seen businesses that operate on the business-to-business (B2B) model. You have also seen companies that work on the business-to-customer (BTC or B2C) model. Both the models have been successful in their own ways. Now, a new model is creating waves in the ecommerce market – business-to-business-to-customer (B2B2C). If the B2B and B2C models were successful, why should you involve another business between you and the customer? Let’s talk some more and find out about the B2B2C model.

 

What is a B2B2C commerce model?

A B2B2C commerce model is where one business (B1) involves another business (B2) to sell goods or services to its customers (C). If any of the involved companies use the internet to sell goods or services, it is called the B2B2C ecommerces model. In the B2B model, the businesses sell their goods or services to other companies. And in B2C, the organizations sell their wares directly to the end consumers. The B2B2C commerce model is the culmination of both these models.

So, what was the need to involve another business in the channel?

The market was limited when business was done mainly through physical channels. But with the development of ecommerce, suddenly, the markets became wider and the possibilities for business unlimited. However, it was not possible to have it all without a little bit of assistance. If one company had the product and the other company had the means to reach the consumers, they could join hands to increase the business multifold.

The following figure shows the concept of the B2B2C commerce model:

Figure 1: A visual representation of the B2B2C ecommerce model

The first company provides the goods under its brand name, whereas the other company provides additional services, including lead generation, transport, credit, maintenance, and digital payment services.

In Figure 1, you can observe the following steps happening:

  1. The manufacturer provides goods to the network seller to sell.
  2. The network seller provides customer information and sales platform to the manufacturer in return for annual fees.
  3. The network seller uses the services of a payment gateway to receive payment securely.
  4. The customer buys the goods from the network seller, fully aware that the seller is not the manufacturer.
  5. The customer makes payment and receives goods from the network seller.
  6. The network seller makes the payment to the manufacturer.

This is a classic example of the B2B2C ecommerce model. You might have gone through a similar process when buying goods from sellers, including Amazon, Flipkart, or eBay.

 

How are B2B2C and white-labelling different?

One shouldn’t confuse B2B2C with white labelling. White-labeling is a process where the company manufactures the goods without its brand name and sells them to other businesses. These companies sell the goods under their own brand names. So, basically, the consumers are unaware of the origin of the goods. On the other hand, in B2B2C, the customers know the goods’ origins well.

For instance, some drug manufacturers provide generic medicines to other organizations. These organizations pack the drugs under their own brand name and sell them to consumers. Consumers are unaware that the drugs of two or more brand names come from the same manufacturer. They purchase goods trusting the brand name. This is called white-labelling. And in turn, the brand holder ensures the quality of the goods. On the contrary, if you are buying Nike sneakers from Amazon, you know that Nike is the manufacturer, not Amazon. This process is called B2B2C ecommerce.

 

Examples of real-life B2B2C commerce models

If you think that B2B2C is a concept in its initial stage, you might want to rethink it. Many organizations use B2B2C ecommerce in today’s market. Here are some of the examples:

Intel Inside

Intel manufactures computer processors. Intel has teamed up with original equipment manufacturers (OEMs), including Dell, HP, and Lenovo, for marketing/branding purposes. The synergy brings trustworthiness among the customers and thus increases sales.

Amazon

Amazon is an online platform for trading any type of goods. The sellers can retain their brand name while using the network base, logistic facilities, and payment gateways provided by Amazon. This increases their turnover. In return, Amazon gets fees for the facilities they provide.

App Store

Apple has devised a plan to help its customers download reliable applications and games from an Apple-approved space. It is called the App Store. It ultimately allows Apple to earn more revenue.

Affirm

The US giant Affirm is a financial organization that facilitates the customers in buying goods at present and paying later. Affirm collaborates with men’s and women’s fashion, sports and fitness goods, jewellery, electronics, and furniture brands to assist consumers in buying.

UberEats

UberEats partners with the local restaurants to deliver food to the customers. The customers can enjoy the food served by any restaurant from their homes. The restaurants make more sales than they can do remotely. Uber Eats gets a commission from every delivery they make.

 

What are the advantages of the B2B2C commerce model?

Many companies are morphing their businesses with others to reap the benefits of the B2B2C commerce model. Every organization has something to offer to the other and two organizations would merge depending on their strengths and weaknesses. Although the advantages of the B2B2C model vary in every synergy, here are some of the common ones:

Scaling

The primary goal of any business is to maximize profits, and scalability is a way in which they can achieve their goal. Scalability represents the ability of an organization to increase the output by adding resources. Instead of trying to do everything on their own, companies can adopt the B2B2C model to achieve scalability. They can partner with an existing company already providing the given services to increase growth.

Digitalization

Digitalization is the way to scale your business. You can widen your customer base by taking your business online. However, going online needs additional setup and management capabilities that are not available to everyone. Partnering with other companies specializing in these fields is a way to go forward. For example, instead of selling on your website, you can start selling on ecommerce platforms like Amazon or eBay to test whether you receive a good response. They can give you access to a client base you didn’t have before.

Brand recognition

In the B2B2C commerce model, you can sell your goods with your brand name. As your customer base grows, your brand image grows too. More and more people will recognize your products, and their reviews can bring in more customers. You can take on any competition when your brand value increases.

Cost control

Scaling begs for massive investment. Instead of starting an in-house unit, if you collaborate with another team to provide the facilities you require, you can save on setup and maintenance costs. Moreover, the cost of consumer data collection can be shared by all the relevant parties. Start-up costs, marketing costs, distribution costs, and customer acquisition costs can be controlled drastically by employing the B2B2C model.

Time management

When the manufacturers team up with the maintenance companies, the customers can get faster services. This will encourage the customers to buy from a company that provides faster after-sale services. The same principle applies to the companies that can deliver the products faster.

Customer satisfaction

The customers benefit significantly from the B2B2C models financially and otherwise. The companies can transfer some of the cost-saving to the customers as discounts. The customers also get the facility of dealing with just one company for their multiple needs. So, it becomes more accessible and more straightforward for them. For example, if a customer buys a television from a store and gets the facility of paying in installments from the same store, they would prefer it. Some banks and financial companies provide such facilities to customers in association with the stores or manufacturing companies.

 

What are the challenges to set up a B2B2C commerce model?

If you are a B2B business or a B2C business transitioning to the B2B2C model might take some time and effort. However, once you are done, the benefits are numerous. Marc Benioff, the chairman, and CEO of Salesforce.com Inc. said, “We really see every B2B company and every B2C company becoming a B2B2C company.” Some of the challenges faced by the businesses in setting up B2B2C commerce or B2B2C ecommerce model are as follows:

Identification of area for B2B2C partnership

As a business owner, you should know whether you can benefit from the B2B2C model. Some products are not suited for such models. Secondly, you should determine whether you can cope with increased demand. If you cannot produce more to keep up with the increased demand, you might face embarrassment in your business circle.

There are mainly two types of business integrations – horizontal and vertical integrations. Horizontal integrations mean increasing the capacity of the pre-existing unit and producing more of what you are already manufacturing. On the other hand, vertical integrations involve taking up one or more stages of the supply chain in addition to the existing one.

One of the significant decisions you should be making is the area where the other business can help you. You should identify the area in which your organization needs support. For instance, if you can sell your product with an extra warranty, or you can sell more if you have a logistic partner, or if you need access to customer databases to identify your customers. By identifying a particular niche, you can narrow down on potential organizations that can help you achieve your goals.

Management of inventory

When you sell on multiple channels, it becomes cumbersome to manage inventory in real-time. Imagine a scenario where you have a brick-and-mortar store and sell your goods on multiple ecommerce platforms. If you run out of stock while simultaneously operating on all, and the stock on ecommerce platforms is not updated, you might find yourself in some soup. You might actually sell more goods than you have on hand. Therefore, inventory management is one of the crucial challenge areas of the B2B2C ecommerce model.

The solution – adopt a reliable inventory management software that will help you maintain real-time inventory of all your products. An inventory management software can help you keep real-time stock of all your goods in your locations.

Brand credit

Sharing the advantages always comes with sharing the limitations. When you adopt the brand name, it might also lead to the issues it faces. And, you don’t want yourself marked ‘guilty by association.’ It is advisable to check every aspect of the company before entering into a contract for B2B2C. If the company’s goals are not in sync with yours, you might want to reconsider the association as your brand image is online.

Software compatibility

When two businesses merge, they both must have IT systems compatible with each other to transition without any hindrance. If not, you should hire an IT expert who can assist you in morphing the two systems seamlessly.

Individual contributions

Both the companies should agree on and lay out clear boundaries of contributions towards the achievement of the common goal. The agreements should be reached with mutual consent and followed by all the parties involved.

Legal agreements

In the case of B2B2C commerce, the businesses involved getting access to private information about the other business. There should be clearly defined legal agreements to protect the stakeholders’ privacy and sensitive information. Legal teams representing both parties can work out solutions that are to be adopted for more robust security.

 

Final thoughts on B2B2C commerce model

B2B2C commerce models are the way forward in today’s economy. If the businesses want to tackle competition by expanding their prowess, B2B2C models are the perfect solutions. These models provide customer satisfaction akin to B2C models and growth like B2B models. B2B2C ecommerce models can help you elevate your profitability and margins by combining the best of both worlds.

Automating the B2B2C ecommerce model on Cin7 can help you maneuver the process in a simple way. You can click here to know more about the Cin7 software.

8 ways to get the best out of warehouse inventory management

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A manufacturer’s inventory is its lifeblood, the basic ingredients for whatever is being made. When it comes to storing materials in the warehouse, there has to be enough materials on hand at all times, and they have to be in good condition. If these requirements aren’t fully met, a factory could shut down. Therefore, managing inventory in the warehouse well is incredibly important.

Warehouse inventory management is part and parcel of inventory management. Both involve overseeing and controlling stock and its levels, but whereas inventory management concerns the entire supply chain from ordering to delivering, warehouse management is about just the inventory in the warehouse. Let’s look at eight practices for streamlining inventory management in a warehouse.

 

8 practices to streamline inventory management in the warehouse

1 Have a floor plan that promotes efficiency.

The overall design of the storage facility is a critically important  factor. The layout will determine how staff and machinery maneuver the space, as well as how items are placed in, and removed from, storage. When the floor plan is a good one, inventory can be moved in, out, and around the area in a simple, free-flowing stream; when that isn’t the case, bottlenecks and errors can occur.

There are three basic designs for warehouse layouts:

  • L-shaped: Here, storage is on the long side while a loading/unloading dock is situated on the smaller adjacent side.
  • U-shaped: The ends of this shape are reserved for loading and unloading respectively, and the long curved area is used for storage.
  • I-shaped: Basically a long oblong, a loading and unloading dock is placed at one end and the rest is taken up with storage.

These three floor plans have come to be recognized as the ones that work best for warehouse design over time. This isn’t just because they’re good for flow; however, the efficiency they create is reflected in the bottom line.

2. Organize the storage space with flow in mind.

What we’re addressing here is the frequency with which items are needed, and using that measure to gauge where best to place them. You have:

  • Fast-moving items: These are the ones that are most in demand.
  • Slow-moving items: They’re used, but not very often.
  • Non-moving items: Rarely used, or no longer needed.

For the most efficient placement, fast-moving products should be placed near the front and be as easy to get to as possible, while those used but less in demand can be further back. High racks and difficult-to-access areas can be reserved for those non-moving items.

3. Track inventory accurately.

Knowing exactly what you have in storage is the core of good warehouse inventory management. While it’s relatively easy for small companies to keep on top of this, it becomes increasingly difficult for businesses as they grow. For them, technology is a necessity.

Inventory management systems (IMS) use barcodes and QR codes to track inventory. QR codes can hold much more information than barcodes. In addition to storing information about a product, QR codes know exactly where each item is stored, so they are much better for larger facilities. An inventory management software like Cin7 Omni, can maintain an accurate record of warehouse stock, letting you know exactly what’s there and tracking it as it moves in and out the storage area. This is the kind of information you need to manage the inventory on a daily basis.

4. Hire a warehouse manager you have confidence in.

The importance of the warehouse manager cannot be overstated. They don’t only oversee the pool of staff that works in the warehouse, they’re in charge of the inventory itself, making decisions every day about where to store it and when to move it. If they don’t do this in the most efficient way possible, goods can be damaged and extra costs can be incurred.

Warehouse managers should be tech-savvy. They need to be able to operate the software and handle all the automation and machinery that moves the inventory around from robots to forklifts.

5. Put a good workflow in place.

The workflow in a warehouse starts the instant inventory is brought into the building and ends the moment it leaves. It covers all the processes involved in moving the items around, including  administration. Individually, warehouse workflows depend on the design of the facility, the product, and frequency of its use. Warehouse flow is usually the province of the warehouse manager. He or she will make the decisions about how and where inventory is stored and when any of it should be moved.

A well-thought-out plan will ensure unheeded flow of the inventory and make the best use of workers’ time. Like any business plan, though, workflows should be revisited often so that updates and tweaks can be made in response to any changes.

6. Automate.

We’ve already discussed the benefits of using inventory management software to keep tabs on stock that’s in the warehouse and know at all times exactly what’s in storage. But these IMS systems can actually do much more. They can:

  • Register goods as they’re received,
  • Classify the goods,
  • Direct where the goods should be placed in warehouse,
  • Note where goods are stored and keep track of their quantity,
  • Instruct how to make the best use of the storage space,
  • Track the goods as they move around the warehouse,
  • Store and issue shipping instructions,

As mentioned, Cin7 Omni  is a good way to automate. As a complement to the functions listed here, the software will increase the speed, accuracy, and security of the inventory management process. It also reduces the employee workload, including that of the warehouse manager, leaving them free to take on other tasks.

7. Have visual oversight of the facility.

Theft, unfortunately, is a fact of life, and the possibility of it happening has to be taken into account when discussing inventory management in the warehouse. One way to stop theft is by putting up closed-circuit surveillance cameras and security systems like alarms. Letting only essential workers into the warehouse space and having them sign in and out when they report for work and go home can also be a help with this problem.

8. Carry out regular inventory audits.

Even when the inventory in your warehouse is automated, audits are necessary. In addition to checking to see that the information in your financial records tallies with the records you’re keeping on your storage space, audits are a great way to point out items you don’t need to keep any longer. These could include items that have been there for so long, they’ve gone out of style and can’t be used, or, for food, have passed their expiration dates. Apropos of #7, theft, an audit will also throw into sharp relief goods that may have “walked.”

A critical factor in warehouse inventory management, audits can be carried out internally by a member of management or externally by an outside agency. Either way, when conducted regularly they ensure that the records kept on inventory are as accurate as possible, and that, in and of itself, is a major cost saving for the company.

 

The bottom line

The way inventory is managed in the warehouse has repercussions both for the efficient handling and tracking of the stock and the bottom line of the company. We’ve laid out eight aspects of inventory management and have suggested measures that can be put in place to get the system working at its best. Hopefully, you’ll find them helpful in streamlining your system.

We think you’ll find Cin7 Omni a good tool to achieve this. To find out more about how the software can improve inventory management in your warehouse, click here to book a demo.

What is just-in-time inventory? Is it the right inventory management method for you?

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Storage facilities and large stocks of inventory can be a huge drain on a business. The physical area has to be taken care of, rent has to be paid, and personnel have to spend time overseeing and maintaining all the stock. But what if a company could function without having to have a large store of goods? What if a business could operate by getting the raw goods and items it uses as, and when, they’re needed?

There is such an inventory management method, and it’s called just-in-time. This lean approach to inventory management is not for everyone, but for some it’s a great benefit, keeping outlay low while meeting manufacturing and order demands and keeping customers satisfied.

We’re going to take a close look at the pros and cons of just-in-time inventory, so you’ll be able to judge for yourself if the system is right for you.

 

What is just-in-time inventory management?

As the name implies, just-in-time inventory management means only having the raw goods and items on hand that are needed at any given time, no extra. That means getting in raw goods and items from your suppliers only when there are orders to be filled, and only in enough quantity for those orders. By extension, for a manufacturing company, just-in-time means ending up with the right amount of product for an actual order, and no more.

Conducting a business in this way cuts down the need for a separate storage facility and all its associated costs.

 

How does just-in-time inventory management work?

The just-in-time inventory management method is dependent on two things: accurate forecasting and reliable suppliers that are nearby.

Accurate forecasting – just-in-time inventory management can’t work without it; it’s as simple as that. That’s because, when you’re working with stripped-down inventory levels, you have to have a good idea of your needs ahead of time. These projections could be based on seasonal demands, known trends, or an upcoming event. Either way, automated inventory management systems are very good at doing these forecasts, basicinng their predictions on historical data.

Reliable suppliers – Because just-in-time inventory management is about getting inventory in at the last minute, or only having the minimal amount you need on hand, you have to be sure that your suppliers will deliver. You have to be able to depend on them.

When it comes to retailers, the just-in-time approach may mean passing an order directly to the wholesaler or a third-party logistics company (3PL) for fulfillment. This way, the retailer doesn’t have to physically handle the items at all.

 

Advantages of the just-in-time inventory method

Reduces carrying costs

Carrying costs are incurred when raw materials or finished goods are stored somewhere. The longer these items are stored, the higher the carrying costs. When goods are sold before they are even produced, and inventory is only brought in as and when needed for a particular order, there’s an immediate turnaround that reduces these carrying costs to a minimum. These savings can be used to lower the price of the goods produced or items sold.

Reduces inventory losses/damage

Inventory that’s stored is open to degradation, especially if it’s held there for a long period of time. Depending on what the items are, problems can include: the wrong temperature causing spoilage, products breaking, or dust and dirt causing its own damage. And that’s not to mention the possibility of having to throw inventory out because it’s passed sell-by dates or has gone out of style. Any of these possibilities has a monetary cost that will cut into the profit margin.

With just-in-time inventory management, inventory is used as soon as it’s received, or almost as soon as it’s received, eliminating the need for lengthy storage times and avoiding the negative impacts that can have. The big upside here is that overall inventory costs can be reduced, and those are savings that can be used in other areas of your business or passed on to your customers.

Promotes local suppliers

The just-in-time method is based on getting supplies only when there are specific orders to be filled. Because by definition this means getting those supplies as soon as you have the order, getting them quickly is important. That’s why it’s best to use local suppliers.

Using local suppliers has other benefits. Reduced transportation cost is one; less impact on the environment is another. A third benefit of having suppliers nearby, one that can be overlooked, is that it’s easier to nurture good relationships with them. If they’re not far away, you can pop over and see them.

Less money tied up

In addition to the cost of warehousing, the inventory held there has had to be paid for and so is, in itself, a large investment. When you need minimum stock, you don’t have money tied up and can invest it in other areas of your business.

 

Limitations of the just-in-time inventory management system

Less flexibility

While just-in-time inventory management cuts down costs associated with inventory, sporadic orders will affect workflow, and if a run of orders stops, a company might have to shut down. On the other hand, if a company gets too many orders at once, without the capacity to store inventory it might not be able to cope. Any change in an original order or cancellation will also cause issues for the company.

A production management feature in Cin7 Omni that generates a production order directly from a sales order can give a manufacturer flexibility.

Supplier dependency

If the good part about having a local supplier is the speed at which goods are delivered, the bad part is that they may not have much competition, which could make it more difficult to negotiate rates. Also, if that supplier runs out of the items you need, you’re going to have to scramble to find another quickly.

Inaccurate forecasts

The just-in-time method is based on accurate forecasting. But if those forecasts are flawed, the preplanning necessary for the system to work will be wrong and the company could fail.

A robust inventory management system like the Cin7 Omni can help prevent this from happening. With a clear view of the market, Cin7 Omni can give you more accurate forecasts you can rely on.

 

Is just-in-time inventory management right for you?

Just-in-time inventory management is the perfect system for contractors working on tight budgets because they don’t have to lay out money for raw materials until there are orders to fill. It’s why contract manufacturers who work with large companies like Toyota, IBM, Apple, and McDonald’s operate on this system. Apple, for instance, contracts its manufacturing out to many different factories in China, but these contractors will only start production when the tech giant authorizes them to.

To judge if management your inventory with this method is right for you, you should ask yourself the following questions:

  • Are your customers OK with the time gap between you receiving an order and being able to deliver the completed goods?
  • Can you rely on your supplier to deliver the items you need quickly?
  • Can you start the manufacturing process as soon as you have an order?
  • Can you be sure your customers won’t change their orders?
  • Is your supply chain efficient enough to support a system like this?
  • Do your products go out of trend, making it redundant to store them?

If you answered yes to several of the above, the just-in-time inventory management system is probably a good bet for you.

 

Winding up

Just-in-time inventory management has upsides and downsides. If you can make the method work for you, however, there can be huge financial advantages.

If you do decide to take up just-in-time inventory management, Cin7 Omni can be a great help. To find out more, click on this link to request a demo.

7 tips for warehouse safety

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Warehouses can be hazardous. First, the items they hold are stacked high and close together to make the best use of space. Second, a lot of pickers and machinery are going back and forth between the aisles and up and down the storage bins all the time. If the items haven’t been stored properly, if a worker is careless, or if a machine malfunctions, an accident can happen.

To prevent this, there should be strong safety measures and procedures that everyone should follow, and they should be enforced. We’ve honed them down and categorized them into seven main areas.

 

7 measures to take to ensure safety in warehouses

#1 Keep all spaces clean and tidy.

Dirt, grease, or messes of any kind can be a hazard. Workers could slip on them, and machines could stumble. At the very least, if these obstacles don’t cause a bad accident, they could severely affect workflow in the warehouse.

It’s important, then, for floors and work areas to be kept as clean as possible, which means not just sweeping, but washing them frequently. Any spills should be swept or wiped up immediately; and if any of that spillage could be from harsh chemicals that are being stored, having a special spill kit that can deal with it on hand is imperative.

Hygiene is also a factor to take into account, especially when Covid is still around. Have hand sanitizer prominently placed in several areas, keep all equipment clean, and request that your employees stay home if they feel ill.

#2 Provide regular safety training.

While safety training for new employees happens frequently, it’s just as important for existing staff to review safety precautions regularly. Safety training should cover everything from ensuring work spaces and equipment are kept safe to instructions on actions to take when anything goes wrong or an unforeseen emergency happens. Providing training every three or four months is ideal. It’s also a good idea to distribute a safety manual to your workforce.

In addition to making everyone aware of safety in the warehouse, all employees should know what to do in an emergency like a fire or an earthquake. Training and drills should take place on a regular basis. It’s also important to have exit routes clearly marked and accessible at all times and to have enough of them in the building for the size of the space.

#3 Put up clear signage.

Signs that warn about potential hazards are essential. These signs should let employees know where dangerous or inflammable materials are stored, if heavy equipment is nearby, or even which items in storage are heavy. When it comes to the building itself, letting everyone know about design elements that could trip them up, like steps at the end of an aisle, is a good idea.

Since warehouses are more often than not huge spaces in which one section looks the same as another, finding your way can be a challenge in an emergency. To overcome this, there should be large signs with bold lettering that point to emergency exits.

#4 Have the right safety equipment.

Proper safety gear, like lifting belts, should be provided to ensure your employees’ well-being. Depending on the type of material your workforce has to handle or the conditions they’re working in, other forms of safety equipment, such as respirators or hearing protection, might be needed. Utility knives with protective sheathing and walkie talkies also come under this category, the latter being especially needed in ultra large warehouses.

On a wider level, fire and smoke alarms should be adequately placed, along with fire extinguishers. If your company handles hazardous materials, your fire extinguishers should be the right ones for whatever the materials are. And, of course, first aid kits should be available in easy-to-locate areas.

All safety equipment should be checked regularly.

#5 Give out protective clothing.

Here we include safety goggles, safety vests, safety gloves, hard hats and even steel-toe boots. Protective clothing should be a good fit for the individual worker. Loose clothing could get caught in machinery, and a badly fitting hard hat is no use to anyone.

#6  Ensure heavy equipment is used correctly.

Forklifts and pallet jacks could cause serious injury if not handled correctly or if someone gets in their way. Make sure heavy equipment is only operated by properly trained personnel, and that the equipment has its own pathways in the warehouse. Equipment should be restricted by a speed limit that is enforced.

#7 Store items properly.

Warehouses store items on high shelving where they are packed tightly together. To prevent anything from falling and causing injuries, everything should be placed with care, one thing stacked straight on top of another, and heavier pieces should be stored on lower shelves.

 

Make the most of your warehouse with Cin7

When you put recommended safety measures in place, you’re less likely to have downtime caused by injuries. Plus, your workforce will feel much safer.

To optimize warehouse operations even more, there are warehouse management systems (WMS) like Cin7.  This software helps organize your warehouse, which helps you maintain a safe working environment.

To find out more about Cin7’s WMS and how it can make your life as a warehouse manager easier, book a free consultation with one of our experts.

What is 3PL fulfillment?

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Fulfilling customer orders is a significant part of any business. This order-fulfillment process starts when the customer places an order and ends when it’s delivered to the doorstep.

Many companies facilitate fulfillment by using a third-party logistics (3PL) company. 3PL providers can manage the entire supply-chain process from warehousing to fulfillment. In addition to these services, 3PL can also take care of inventory forecasting. Outsourcing through a 3PL is a good solution when a business grows and is no longer able to handle its order-fulfillment processes in-house.

For any 3PL fulfillment company, there are five basic stages of the fulfillment process. The company retrieves items for the order from the warehouse, then picks, packs, ships and delivers them. Let’s better understand the steps involved to get the right product to the right customer at the right time.

 

5 stages of 3PL fulfillment

1. Receiving

Even before an order is placed, inventory has to be stocked in a warehouse. If it isn’t there, or if there isn’t enough of it, orders can’t be fulfilled. When the 3PL receives inventory for its warehouse, it will typically fill out a Warehouse Receiving Order (WRO), a document that lists the names of the items and their quantity.

After this, each item undergoes a quality check and has its barcode scanned. By doing this, the 3PL company can check the accuracy of the WRO and make sure that items are stored in the right bins. This is an essential part of their warehousing.

The process is facilitated by state-of-the-art software, such as Cin7’s warehouse-management software, which takes care of managing the inventory the 3PL holds and its warehouse operations.

2. Picking

When a customer’s order is ready to be filled, the Warehouse Management System (WMS) produces a list of the items, called a picklist, and assigns a warehouse associate to pick each of the items from their respective storage bins. To ensure the associate picks the items in the most efficient way—one that takes the most direct route around the warehouse and entails the least amount of walking—a picking pattern is produced. The software easily generates both the picklists and picking patterns.

When picking has been completed, the items of an order are scanned and set aside for packing.

3. Packing

At the packaging station, a team places the items for an order in a box and pads them with appropriate packing materials such as bubble wrap. Ideally, the 3PL fulfillment provider will choose packing material that is secure, yet lightweight enough to keep shipping expenses low. A seller can also usually ask for special packaging to be used. Once packed, the whole box is sealed tight with tape and a shipping label is attached. This contains all the information necessary to get the goods to the customer. At this stage, the packing department will also make sure that the weight and dimensions they have for the package are correct.

4. Shipping

Before being shipped, packages ready for dispatch are separated into their destination areas. This way, all packages intended for a particular geographical area are put together on the same transportation.

At this stage, the 3PL company can either take care of shipping and delivery for you, or you can arrange for a courier company like UPS or FedEx yourself. If your company is small and you don’t have many packages to deliver, it’s usually a good idea to have your 3PL take care of shipping because they will have negotiated good rates with the carriers. They will also know which shipping method to use to get your goods to your customers in the fastest time possible.

5. Returns

Returns and refunds are a fact of life, especially in online retailing where the customer doesn’t actually see the product they’ve bought until it arrives. For whatever reason a product is returned, there has to be a way for it to be done hassle-free. This ensures customer satisfaction. A good way of streamlining returns is to have your 3PL include a return label with the item they’re shipping.

Your 3PL fulfillment provider should make sure that each item they handle is in perfect order before sending it out. When an item is returned, its condition should be checked again and documented. Based on company policy, an item in good condition will either be placed back in the warehouse or be disposed of.

 

How to have a good 3PL experience

The best way for you to have a good experience from your 3PL is by being able to have oversight. If you have Cin7, you’re able to check on your inventory that’s in their warehouse in real time, know what orders are coming in from which sales channel, and batch track. Batch tracking lets you know things like which group of items a defective one came from and when expiration dates have been reached. Cin7 software will also give you advanced reporting on all aspects of the fulfillment process. Why not book a demo with our experts today?

5 elements of an optimized inventory management system

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Retail businesses have an average of 20% inventory to sales ratio. This I/S ratio compares the value of your inventory with the amount you make from selling your goods. The I/S ratio is arrived at by dividing the revenue made from overall sales by the value of the stock that’s kept. So, with a 20% I/S ratio, if you make $100 from selling your items, your stock would be valued at $20. More simply, the I/S ratio here would be five (revenue made from sales divided by value of stock). Maintaining the I/S ratio that’s best for your business is key to maximizing profit. If there’s too much stock, profits are compromised; if there’s too little stock, orders might not be filled. Optimization is the key. What are the best ways to optimize inventory? And, what are the five elements of an optimized inventory management system? Let’s find out.

If you are a businessperson, deciding the amount of inventory you should keep on hand is crucial. If your stock runs out, or if you have too much of it, the consequences could be serious. There could be financial losses and your reputation could be damaged. The only way to avoid this is by having optimum inventory on hand, or the right amount you need. This article will help you to understand what inventory optimization is and explain the five elements of an optimized inventory management system.

 

What is inventory optimization?

Inventory optimization means maintaining an optimum amount of stock, stock being defined as all the stock-keeping units (SKUs) that are being held by a business. When a company has an optimum level of stock, its working capital is being used to its best advantage.

Overstocking inventory can result in

  • Working capital being tied up in unneeded stock.
  • Stock going out of fashion and becoming unsellable.
  • Workers spending time and energy unnecessarily.
  • An elevated risk of loss of goods to theft or accidents.
  • Valuable storage space being used unnecessarily.

On the other hand, understocking and stockouts can result in

  • Turnover being halted.
  • Company reputation being damaged.
  • Production lines being broken.
  • Workers’ time being lost.

Inventory optimization can eliminate these losses. Put another way, when optimal levels of inventory are maintained, resources, like physical space, labor, and capital, can be used in their most efficient ways.

 

5 elements of an optimized inventory management system

As we saw earlier, it is crucial to optimize the amount of inventory you keep at all times. But in order to do this right, what should you be focusing on? Let’s look at the key areas in detail.

Graded policies for inventory management

First, your stock policies should be clearly defined, and you should let the relevant people know about them well in advance. It isn’t helpful if the purchasing department is kept in the dark about these policies.

The inventory turnover ratio indicates the liquidity of the inventory, or the number of times the average inventory is sold during the year. It shows the efficiency and effectiveness of the company in investing its funds.

Inventory turnover time is the number of times a company replenishes its stock in a given period, generally a year. In other words, if you sell stainless steel spoons, the inventory turnover of finished product — spoons — is the number of times you sell out of spoons and replace them. The following formula shows how to calculate the inventory turnover ratio:

Inventory turnover ratio = Cost of goods sold
Average value of inventory

 

where,

Average inventory = Opening inventory + closing inventory
2

Cost of goods sold = Opening inventory + purchase – closing inventory

Now you know how many times a year you have to refill your inventory. The following categories of inventory are dependent on this ratio.

  • Fast moving – Fast-moving inventory is that which is used or sold in a short or easily known period of time. This period is different for every industry. The inventory turnover ratio will be higher for goods in this category.
  • Slow moving – Slow-moving goods are those that stay in your warehouse for a more extended period of time. The inventory turnover ratio for these types of goods will be lower.
  • Non-moving – Non-moving or obsolete goods are those stored in your warehouse for a long time because there is no market for them. This inventory is also known as dead stock.

These three categories should be a major consideration when making purchases. Separate your stock into each one, and invest more in goods that are fast moving than those that are slow-moving.

Realistic demand forecasting

Forecasting demand is, perhaps, the first step when it comes to good inventory management. Forecasting demand accurately is not an easy task, however. There are many aspects that have to be considered: historical sales data, customer biases, future demand, and growth. Additionally, it is crucial to take technological advances and trends into account.

How can you predict demand for your products accurately? Well, quality software can help. Cin7’s system generates reliable demand forecasting reports. Cin 7’s forecasting demand report can make your job a lot easier.

Determining product life cycle

The term product life cycle is defined as the period between the product’s initial production to the time it is no longer sold. If you launch a new product, sooner or later it will stop trending and your customers will move on to something else. There are five stages to a product’s life cycle that impact your inventory management:

  • Introduction – There is less awareness at this stage, so the demand is less, and there is no need to stock a lot of products.
  • Growth – Awareness of the product is on the rise, and the company should be prepared to fill more orders.
  • Maturity – This is when demand reaches a plateau. Demand will still be high, so the company won’t have to make changes to the level of stock it maintains.
  • Decline – Here, the company realizes that demand is dropping. Customers have had enough of the product and are buying less of it. When this point is reached, the company needs to reduce production and focus on replacing it with something new. This is also the time to push more of the product by offering discounts and rewards.
  • Obsolete – Now the product is totally out of demand. Any remaining inventory you have becomes dead stock.

The life cycle of a product can be short (a few months) or long (spread over years). These life cycles have to be taken into account when forecasting demand for your product. Doing this accurately will prevent overstocking or understocking,

Timely restocking

Your purchase department should have clear restocking instructions. Every item in the inventory should have a specific reorder point (ROP), a predetermined level of goods at which they have to be restocked. When determining this reorder point, you should consider:

  • Safety level for stock: This is the minimum amount you will need on hand to tide you over until your new order arrives. You don’t want to run out of stock.
  • Logistics: You have to consider the time it takes to get your goods to your factory or warehouse.
  • External factors: These include weather, political upheavals, and labor issues. Any one of them can affect your delivery time.
  • Supplier lead time: This is the time it takes your supplier to dispatch your products. Suppliers have different lead times.

Management needs to be aware of ROP to ensure stock is replaced in a timely manner. Inventory management software like Cin7 can send alerts that let you know when you reach this ROP.

Investing in reliable inventory management software

If you find inventory management challenging and are intimidated by the sheer number of calculations that have to be made, here’s an easy solution: Cin7. This versatile and easy-to-use software can help you manage your inventory easily. Among the features it has to make your life easier are

  • Determining reorder levels,
  • Alerting you when you reach ROP,
  • Sorting third-party logistics (3PL),
  • Helping you with B2B ecommerce,
  • Generating reports on COGS, forecasting, cashflows, and inventory on hand, and
  • Integrating with other software and mobile OS.

The following video shows how Cin7 inventory management software can help you take your business to the next level:

One of the significant advantages of Cin7 is its inventory management app. This app lets you connect to your inventory management program from anywhere.

 

Final take on inventory optimization

While inventory optimization is a crucial element of a successful business, it is also painstakingly tricky and complex. Overstocking can lead to losses, while understocking can damage your reputation. How can you overcome these dilemmas? Cin7 inventory management software turns the whole ordeal into a piece of cake.

Why wait? Contact our experts for a demo, and unlock the true potential of your inventory.

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.