KARRICO

Working with Cin7 and SMB Consultants allowed KARRICO to successfully expand into new sales channels in the U.S. market while managing everything remotely from a different time zone in Australia.

Searching for the right technology

KARRICO’s existing business in Australia was heavily focused on product design and development. Julian Grant, GM of Commercial Operations for KARRICO Inc.’s parent company, Grant Studios, explains that prior to the expansion his team didn’t have to manage stock, handle logistics, or project sales demand.

That said, Julian knew expanding into the U.S. would involve increasing their capabilities to include inventory and logistics management.

However, he wanted to ensure that the company’s growth didn’t overburden his existing team, which was already inundated with work. As such, Julian knew being proactive about finding the right technology partners was crucial.

Without the right software and implementation, he explains, “You just end up creating more work manually…We needed to make sure we didn’t add too much stress to the business we have right now.”

Julian’s introduction to Jeff Atizado, the CEO of SMB Consultants, was facilitated by The Hope Factory, the agency responsible for designing and building KARRICO’s Shopify site. This meeting was pivotal for Julian, as it offered an opportunity to collaborate with Jeff in finding the ideal inventory solution for KARRICO, ensuring its effective implementation and optimization. KARRICO’s needs included:

  • An impressive 3PL system
  • Support for eCommerce platforms including Amazon and Shopify
  • Features that enable seamless automation

KARRICO also wanted software that could handle a diverse bill of materials and accurately calculate the cost of their products.

After meeting with Julian, Jeff recommended Cin7 Omni as the comprehensive inventory solution to empower KARRICO to grow without additional manual work.

Implementing a centralized business hub

Cin7 Omni proved to be a powerful solution that could handle KARRICO’s new 3PL integrations, easily calculate diverse costs, and generate precise figures for freight costs and volumes, enabling KARRICO to use accurate business data to inform their decisions.

During the implementation and execution process, Julian found that the key to success was the combination of Cin7 Omni’s well-integrated platform and the guidance he received from SMB Consultants.

Working with SMB Consultants allowed KARRICO to get their new inventory implementation right the first time and realize the value of Cin7 faster than they would have on their own.

“We didn’t know what we didn’t know,” says Julian. He goes on to explain that SMB Consultants “helped navigate us through the best way to achieve what we were trying to achieve through the software and help us configure those workflows. That was critical to us.”

With a custom Cin7 Omni integration enabled by SMB Consultants, KARRICO can operate with a centralized hub, transferring stock to different fulfillment centers and getting live inventory updates. That let them manage the new business remotely from Australia and sleep soundly, trusting Cin7 to keep inventory running smoothly at the U.S. warehouses.

“Having really sophisticated software and being able to basically key orders directly from Australia in our own time, and manage all branch transfers and workflows is absolutely critical since we don’t have a lot of crossover time with our fulfillment centers and with our warehouse,” says Julian.

Enjoying the benefits of a sophisticated solution

One of the main benefits of Cin7 Omni is the high level of customization it offers. With Cin7, KARRICO was able to tailor their tech stack to fit a sophisticated logistics model and enable smooth operations.

Julian cites SMB Consultants as critical for helping KARRICO understand the capabilities of software like Cin7 and tailor it to “optimize workflows…and optimize the goals and the value that you’re going to get out of that system.”

“Because the workflow had to deal with lots of different elements to that calculation like customs duties and tariffs, but also at the same time managing the volumetric size of the products that we were shipping and factoring that into the calculation, we were asking a lot. To have that expert knowledge from SMB Consultants to design that workflow has been incredible,” explains Julian.

When asked about Cin7 Omni, Julian noted, “It’s so feature-rich and has such brilliant architecture and integration capabilities that are open to do whatever it is that you want to achieve out of the system.”

Looking forward, Julian sees even more potential working with Cin7 and SMB Consultants, explaining that “As the business grows, we want to implement more and more features and solutions… We see it as a critical partnership that’s ongoing.”

Enabling growth now and into the future

Put simply, the Cin7 Omni solution and partnership with SMB Consultants is what enabled KARRICO to grow. “If we didn’t have this system, we wouldn’t be able to scale,” says Julian.

What’s amazing to Julian is how Cin7 Omni and SMB Consultants worked with him to achieve his goal of scaling the business without adding extra manual work. Julian says, “We haven’t added any staff at all to manage this new business…which is a completely new venture in a new country, a completely new business model that we’ve never done before.”

KARRICO can maximize its supply chain and margins and automate operations for less stress and better results. As Julian puts it, “This has given us the confidence to scale and not to worry about whether we’ll be able to handle the growth.”

If you’re ready to scale your business and enable seamless growth today, explore Cin7 Omni.

Royal Essence

Great tech and great advice are the reasons why most product sellers can’t hold a candle to Royal Essence

There’s not really any such thing as overnight success. Most of what people perceive as “overnight” achievement is actually a combination of hard work, learning, great advice, and good fortune, sustained over a long time.

But, with that said, when all the right ingredients come together, sometimes the speed of success can be truly staggering.

Paul and Hannah Chamberlain, founders of Royal Essence, know all about the dizzying acceleration that happens when everything lines up just right. Together, the husband-and-wife team have taken a brand that they jokingly call “Kinder Surprise for women” from their garage to a seven-figure international ecommerce business in just a few years.

But, unlike a lot of ecommerce sellers, things were pretty big for Royal Essence right from the start.

“We did a million in our first year, and we’ve averaged 150 percent growth year on year since then,” says Paul.

How did they manage what so many haven’t? For Royal Essence, it started with a great idea, but they’ve managed to sustain their success thanks to trustworthy partnerships, talented advisors – and great inventory management with Cin7 Core.

 

Lighting up social media leads to burning the candle at both ends

Royal Essence’s product is tailor-made for the age of memes, social media influencers, and the rise of Tik-Tok.

They sell mainly scented candles and bath bombs, with a unique twist: each comes with a very welcome jewellery surprise inside — which can be worth anything from $90 to $5000.

Paul and Hannah came up with the idea for Royal Essence when Paul was working as an ecommerce marketing director.

“I’m always trying little side hustles. I saw this one, and no-one was doing it well. I made a few candles in the garage while Hannah was away on holiday, and sent her a photo,” Paul says.

“She thought, ‘Okay, another crazy idea, here we go again.’ But then it took off, basically immediately.”

Hannah says that the results of the first ads they placed for their first tiny batch of candles were incredibly encouraging, but even better was the reaction on social media, where the product was an immediate viral hit.

“We had a pre-sale that ran for two weeks, and the number of orders was just ridiculous. And suddenly I had to make maybe thousands of candles, in that short amount of time.”

“The first six months, we were just trying to keep up. We’d be up at 2 AM pouring candles in the freezing winter,” Paul adds. But it was well worth it. In the first month, they made $10k. Month two was $19K. By the six-month mark, Paul and Hannah’s garage business was making an incredible $70,000 in monthly revenue.

@emmayeyah

these candles are so cool! #royalessence #royalessencecandle #foryou #21st #birthday #2021 #nz #foryoupage

♬ Sunny Day – Ted Fresco

“Paul had a full-time job, so it was basically all me!” Hannah says. “And I was working at a fish-and-chip shop at the same time, two days a week, and did wedding photography on the weekend, so it was pretty full on.”

Adding to the toll taken on their personal lives was the fact that their sheer sales volume meant they suddenly had an enormous inventory to manage — and no good way to do it.

“We had no idea. We were just starting the business. We were completely lost as to how inventory even works,” Paul says.

After a year of struggling with spreadsheets and guesstimates, things came to a head. For the business to keep growing, and for Paul and Hannah to spend less time in the daily grind, they needed an effective inventory management solution.

 

Instant wins from Cin7 Core

All the best success stories start on the shoulders of giants. For Paul, an important mentor was his former boss, who had encouraged him in his side-hustle and now helped as he transitioned to making Royal Essence his and Hannah’s full-time living.

“He’s a good guy. He loves anyone who gets into business,” Paul says of his mentor. “I stayed for a couple of months, while he figured out someone else for my position, and he helped me out. He recommended a Cin7 Core consultant in Adelaide to help us get set up.”

Paul and Hannah’s consultant helped them migrate their data from spreadsheets and made sure their starting inventory information was correct from the start. Right away, Royal Essence felt the impact of accurate inventory tracking. Things that had been excruciatingly difficult — like reordering in time for the next batch of production — were suddenly easy.

“Before Cin7 Core, I was always just guessing – the number of boxes in front of me, what’s going to be used for production that day,” Hannah says. “After Cin7 Core, the instant win for us was we were able to see the big picture. You can definitely see the movement of the raw materials, and I was able to do our reorders in time. That’s a really big thing for a small business, especially because during that time we were growing so fast.”

With Cin7 Core implemented and day-to-day inventory tracking enabled, things were already much better. But that’s only a fraction of Cin7 Core’s capability. For Hannah and Paul’s burgeoning ecommerce business, now selling all over the world, they needed to be able to track inventory on the financial side. For that, they needed a specialist ecommerce accounting partner, and that’s how they found Bean Ninjas.

 

Fast and agile ecommerce accounting

Bean Ninjas is an e-commerce specialty accounting firm, with a very clearly defined target market — seven-figure-plus ecommerce companies. “We consider ourselves tax agents and accountants, but there’s a big advisory piece as well,” director Tracey Newman says.

Ecommerce businesses that sell in multiple markets have a lot of considerations that other businesses don’t, Tracey explains. Merchants charge varying fees depending where the business is located, and the tax compliance requirements can be enormously complex. And when inventory isn’t being tracked accurately, the accounting falls apart. Sellers, already buried under enormous workloads, find themselves faced with compliance and logistics challenges that are impossible to work through themselves. Then, as they try to grow, they’ll often find that cashflow runs short, and banks won’t lend to them because the financial picture isn’t clear. That’s where Bean Ninjas come in.

“Very commonly, successful ecommerce sellers are husbands and wives, or friends, who work out of their own houses. They haven’t really had an opportunity to get data like benchmarking, or advisory services, and there seems to be a big uptake for that all-around advice,” Tracey says.

“One of the things I say to my clients when I’m recommending Cin7 Core is that I really like how Cin7 Core takes a focus on balance sheet, as well as on profit and loss,” Tracey says. “Very few other inventory solutions do that.”

For Royal Essence, Bean Ninjas were able to help on multiple fronts. Using Cin7 Core as the single source of truth for inventory meant that everything could be lined up correctly in Royal Essence’s accounting system of record, Xero.

With Bean Ninjas advising, Royal Essence moved their manufacturing operations overseas, which massively increased their gross margins. With banks now eager to lend, they had the operating capital to expand their ecommerce operations to the UK and Europe.

“Where Cin7 Core really helps these days is with multiple channels, and syncing locations, and ensuring that our accounting is nice and up to date,” Paul says. “We don’t have to stress at the end of the year because our books aren’t correct and we have to spend a month going through it all. Instead, it’s all up to the accountant.”

What’s more, Royal Essence could track their product through every stage of production and sales: from manufacturing, to freighting and landing, to selling and shipping. The increased transparency and reduced workload meant they could grow — and so they did.

 

End-to end transparency: Cin7 Core tracks inventory from production through to sales and shipping

Transparency is the key that unlocks growth for many product sellers. Being able to see what’s happening, and how much it all costs, during all stages of the product life cycle means sellers know exactly how to optimize their supply chain.

Royal Essence has a simple product, with a complex product journey. Materials are sourced from overseas suppliers, and then combined in a different manufacturing facility. From there, the goods are freighted to third-party logistics (3PL) warehouses around the world, where customer orders are processed and shipped.

“It starts from making a purchase order from our two suppliers — the supplier of the actual product, and the supplier of the jewelry,” Hannah says. “Then it goes to be manufactured, and Cin7 Core shows that picture for us. Then it’s assembled, and it even shows when they’re in the container, so we know there’s stock on the water, on the way.”

This entire process is in Cin7 Core, so inventory is always up-to-date. Whenever raw materials are purchased, this is noted in Cin7 Core. When these components go to manufacturing, they’re virtually assembled in Cin7 Core as well, becoming the finished product.

“That helps a lot,” Hannah says. “You can see how much the raw materials cost, and the cost per finished item.We get visibility on exchange rates, so when the product is cheaper to buy, and profit margins on raw materials. We can even see, across different locations in three continents, how much we have, or how much is arriving.”

This visibility means that, unlike many ecommerce companies without a good view of cashflow, the business knows exactly how much it can spend on getting new customers in the door with Paul’s specialty subject: marketing.

“It dictates how much I can spend on marketing, basically,” Paul says. “I need to know what our cost of goods is, what our gross margin is, in order to know how much I can spend. Having the data from Cin7 Core means I can focus on sales, and marketing, and getting more customers in the door.”

@megan00jay

£3000 ring reveal bath crumble!! #fyp #foryou #JDAirMaxYourWay #bathbomb #bathtok #viral #royalessence #imperialcandles #LiftYourDream #reveal #bath

♬ Lofi – Domknowz

 

Cin7 Core’s 3PL sync is the secret to rapid scale

Cin7 Core continues to offer full transparency and visibility even as goods are landed in their destination countries and taken to 3PL warehouses. They’ve got a 3PL in Sydney, which takes care of the Australian market (which still accounts for 70 percent of their business) another in Pennsylvania that serves the US and Canadian markets, and two in the UK.

“When it arrives in our 3PL, our 3PL receives it, and it syncs to Cin7 Core that they’ve received it,” Hannah says. “So we can see the inventory in all different places — some is being manufactured overseas, some is on the water, and some is ready to be sold to consumers.”

The whole system provides an incredible snapshot of a business in motion, Royal Essence says. “Being a numbers guy, I personally love seeing those landed costs, because it’s so hard to calculate without Cin7 Core,” Paul says. “It’s so good that you can just jump into Cin7 Core, search the SKU, and just see it there.”

The system also keeps pace with customer orders, enabling swift and hassle-free fulfilment. As stock is shipped to customers, the 3PLs sync their inventory with Cin7 Core, daily. They also manage stock adjustments when necessary, making time-consuming, laborious manual stock counts a thing of the past.

“I couldn’t stand doing stock-take,” Paul says. “It felt like a waste of time — often just to find out we’d miscounted! It’s so good having someone else do all that for us, and we just do an auto-sync through Cin7 Core.”

This is the secret to rapid scale, Paul and Hannah says. They have the marketing, personnel, and other systems set up, and entering a new market is almost as easy as CtrlC + CtrlV.

“It’s 100 percent repeatable,” Paul says. “We’ve already proven that a couple of times. And we’re about to do it again in the EU, so we’re looking at setting up another 3PL in the Netherlands. We’ve done it before, it’s the same process. We’ve got a team that knows how to use Cin7 Core, and it’s just a matter of copy and paste from here.”

@royalessenceco

What a perfect way to end your bath 🤩 @itskatematee #royalessence #bath #surprise #ringcandle #reveal

♬ Sunny Day – Ted Fresco

 

The transparency provided by Cin7 Core is the jewel in Royal Essence’s crown

With Cin7 Core powering their inventory and acting as the single source of truth for every business process from manufacturing to shipping, Royal Essence has been able to hit milestone after milestone. Even the Covid-19 pandemic, which spelled doom for many product sellers who weren’t ready to move online, didn’t disrupt their momentum. In fact, it boosted their sales by up to 40 percent.

“We feel very lucky. I know a lot of businesses struggled through COVID, but we just got an uplift in sales,” Paul says. “I think everyone was at home and didn’t know what to do with their time and money, so they decided to buy some candles with jewelry in them.”

Paul and Hannah have now set their sites on a number of new markets, aiming to repeat and refine their proven business process in each. Cin7 Core has even enabled them to automate some selling on Amazon, a notoriously tricky platform for ecommerce sellers, but one that offers enormous rewards to those that master it.

“The thing with having software like Cin7 Core — because the UI is so straightforward and simple, it lays it out in front of you as to how to go about things,” Paul says. “Just the accuracy, and detail, and feature set that the product has.”

On the accounting side of things, Bean Ninjas say that in their experience, accurate financial results are the most important thing to get right for businesses that want to grow and prosper.

“There’s an incredible correlation between accurate financial results and almost every other impact in your business,” Tracey says.  “By having knowledge and control from a system like Cin7 Core and making sure you understand all of the moving parts, it has an impact on your cash balance. I’m a little biased but I think it’s one of the most important pieces to get correct.”

Cin7 Core, Tracey says, comes as a huge relief to clients once it’s set up and running smoothly. Things that were tear-your-hair out headaches, time-consuming, or downright impossible become a breeze with the right inventory management system, especially when integrated with best-of-breed financial and sales software like Xero and Shopify.

“Cin7 Core means one less human making mistakes,” Tracey says. “It’s such a relief for clients to have a totally integrated system that produces reports at the end of the month, that integrates directly into Xero, and that gives you meaningful, accurate financial information. I see clients going from confusion and bewilderment before using a system like Cin7 Core, to a much better sense of financial control and process improvement after implementing.”

Royal Essence, with four years of running on Cin7 Core, are in full agreement. They’re thrilled with the visibility Cin7 Core gives them in the day-to-day running of the business, the increased efficiency of operation, and the ability to plan for even greater business growth — because they’re not done yet.

“It’s the transparency for the whole organization,” Paul says. “I’m not in the product side of things, but I can just jump in and see what I need to see. And then it organizes everything for the accountant, so we’re not spending hours and hours. It just saves us a lot of time.”

What Is Cost of Goods Sold (COGS) + How to Calculate It

If you’ve been hanging around the accounting department, chances are you’ve heard the term cost of goods sold (COGS) thrown around a few times. But while COGS is  important, it’s also a concept people tend to misunderstand.

Knowing what COGS is will help you better understand all of the costs associated with your product and your profit margins. In this article, we’ll go over this common accounting term, including what it is, and how to calculate yours.

What is the cost of goods sold?

Cost of Goods Sold (COGS) refers to the cost of producing the goods that have been sold by a business. COGS is classified as an expense account on your income statement, representing the amount you have to recover from each sale to break even before bringing in profits.

COGS is only recognized upon the sale of inventory and is reported in the financial period in which those sales occur. For example, let’s say you have a clothing business with $5,000 worth of inventory. If you sell $2,500 worth of that inventory in the second quarter, you would record $2,500 in COGS. The rest would continue to stay in your inventory account.

As you can see in the example, the cost of inventory sold and COGS match. That’s because the value of your inventory stems from the direct costs of the items that make up that inventory, whether you’ve bought the materials to manufacture the items or purchased them for resale.

It also includes additional charges directly related to preparing products ready for sale, like packaging and delivery charges.

So, if we go back to the clothing store example, the $5,000 inventory number doesn’t come from thin air — the total includes the cost of the fabric, labor, packaging materials used, and delivery fees.

However, note that COGS excludes indirect expenses such as sales and marketing, so the costs associated with trying to sell t-shirts or jeans wouldn’t factor into the overall calculation.

Put simply, COGS equals the direct cost related to producing or purchasing products sold. Beyond that, just remember that the value of your inventory on hand is considered an asset until the inventory is sold.

Why is it important to calculate the cost of COGS?

Most businesses are in it to be profitable, and calculating your COGS is an important step to getting in the black. When you know your COGS, you can work to reduce the costs associated with selling, including the cost of your inventory.

COGS informs a business about the direct expenditures incurred in getting products ready for sale. For instance, if you know t-shirt fabric costs $5/yard, the labor to sew the shirts is $15/hour, and an average of $1 is spent on packaging each item, you can accurately price your t-shirts at a point where you can profit off the sale.

In this case, setting the t-shirts at $15 wouldn’t make you any money. Assuming each t-shirt uses two yards of fabric and takes 30 minutes to make, you need to price the t-shirts at $30 or more before you can even see a small profit.

Seriously, calculating COGS can make or break your business. Here are some of the other benefits of calculating COGS:

1. Helps create a pricing strategy

As demonstrated above, you can determine your selling price by knowing the direct costs incurred in producing or procuring products. Once you know these costs, you can figure out how to price your products to also cover your indirect expenses and earn a profit from the sale. But if you don’t know your COGS, you are honestly just guessing.

Overall, knowing COGS helps you determine how much profit margin you can keep on the products you sell.

2. Helps determine the total expenses incurred in selling products

Your profit and loss statement needs to list all your income and expenditures. By calculating the direct costs you have spent acquiring your stock, you can arrive at the total expenses incurred by including indirect expenses like your overhead, sales, and marketing costs.

You also need to know COGS before calculating your Inventory Turnover Ratio, which can help you make more informed decisions regarding your inventory and cut expenses further.

For example, if you calculate your inventory turnover ratio and find it’s pretty low, you’ll know you don’t need to replenish your inventory as often. That, in turn, means you can negotiate better deals with suppliers to further reduce costs.

3. Compare the market value of your product with your competitors

Determining profit margin by only considering direct costs incurred is an incomplete picture. If your prices are higher than your competitors you may make fewer sales.

If your prices are lower than your competitors, you can still incur a loss since your low profit margin might not cover your indirect expenses. COGS helps you to sell your product at a competitive price, grow sales, and, by extension, earn profits.

Now that you know the importance of calculating COGS, let’s learn the formula to calculate COGS.

How to calculate COGS

Here’s the formula to derive COGS:

COGS = Beginning Inventory + Purchases made during the period – Ending Inventory

To calculate the COGS for a reporting period, start with the value of the beginning inventory. If additional inventory was added during the reporting period, be sure to add the value of any new inventory produced or purchased to the value of the existing stock. Now, subtract the value of ending inventory from COGS sold for that reporting period.

Note, that this is a basic  formula and does not take into account items like returns, discounts, obsolete stock, and the inventory valuation method used. It’s still really useful, however, as shown in our breakdown below.

Example of COGS

Let’s assume that company X uses the calendar year to record their inventory. The beginning inventory value was recorded on the 1st of January, and the ending inventory value was recorded on the 31st of December.

The beginning inventory value was $20,000. During the year, the retailer realized that the business would sell more than the inventory received earlier in the year, so additional inventory worth $7,000 was purchased. At the end of the calendar year, the ending inventory value was worth $4,000.

Now, let’s work out the COGS for the entire year by using the following formula:

COGS = Beginning Inventory + Purchases made during the period – Ending inventory

COGS = $20,000. + $7,000 – $4,000.

Therefore, COGS = $23,000.

The COGS equals $23,000, as calculated. Use this formula to help with production, purchasing, and pricing decisions.

Calculating COGS can also help you calculate your profit for a reporting period and help with decisions to ensure that indirect costs are covered.

Suppose your revenue is $75,000 in a reporting period. Knowing the COGS, you can determine your profit will be $75,000 – $23,000 = $52,000.

COGS – Key business takeaways

The COGS formula can be used at an individual product level to help with decision-making before producing, procuring, and selling that product. It can help you make decisions like how much inventory you need to purchase or whether you might need to focus on marketing a slow-selling product, and it’s useful when tax season rolls around, too.

The COGS for a reporting period is the total COGS for all product sales for that reporting period. It is a vital metric included in your financial statements and used to calculate your gross profit for that reporting period.

Gross profit is a profitability measure that shows how well a business can cover its indirect expenses and earn a profit. The value of COGS will always depend on the direct costs of the products sold and the inventory valuation method used by the business.

Frequently asked questions

What is the difference between COGS and expenses?

COGS is a measure of the expenses associated with selling your goods. In particular, the direct expenses like labor, manufacturing, and materials. It does not include indirect expenses like rent or general office materials.

Is the cost of goods sold the same as profit?

No. The name cost of goods sold gives you a hint that COGS covers some of your expenses. However, you can figure out your profit if you know your COGS. To do that, use the following formula:

Revenue – Cost of Goods Sold = Gross Profit.

Remember, COGS tells you how much your items cost to make and sell; profit is how much you keep after these expenses.

Is the cost of goods sold taxable income?

In general, the IRS allows businesses to deduct some COGS-related expenses. For example, the IRS states you can include some business expenses in your COGS, which you subtract from your revenue to arrive at your gross profit (your taxable income).

If you calculate this way, you are not allowed to deduct those expenses a second time as a business expense!

Closing remarks

COGS is a big part of running a profitable business, and your inventory is a big part of COGS. To keep track of it all, you should invest in a cloud-based inventory and order management system like Cin7.

When you add in an inventory management system, you have a much clearer view of how to address any slumps, slow-downs, or sales. Working with Cin7 can help your business hold onto less while making more. Request a demo today.

How to make improvements to inventory control in 2023

Inventory is the backbone of retail and manufacturing companies, and managing it as it moves through the supply chain is a crucial task for businesses. From ordering to storing to using inventory in manufacturing processes or shipping it out to customers, there has to be oversight to ensure there’s always enough stock to meet demand.

Managers and company owners have to balance this demand with the cost of both the product and storing it. That’s what inventory control is all about. We’re going to look at the ways good inventory control makes businesses more efficient and put forward ideas to make the system better.

 

Why inventory control is important

More chance of items staying in peak condition

Any stock that’s damaged in storage is a financial loss for your company. Inventory control can reduce or eliminate damaged goods by tracking items closely as they move through the supply chain. When carried out thoroughly and accurately, stock gets rotated through the system faster. This means items spend less time in storage where they could sustain damage, resulting in a higher probability of goods being top quality.

Maintains the right levels

While there always has to be enough in stock to satisfy demand, having too much of any item is not good for the bottom line. Good inventory control finds those correct levels, ensuring they’re maintained while adding a bit more for emergencies – safety stock.

Simplifies audits

When the inventory control is on point, all the information needed for an audit is at your fingertips. This saves a company time and money.

Less waste

Inventory control doesn’t just mean keeping a close eye on stock as it moves through the supply chain and its levels in storage, it also provides data about which items are selling and which are not. This informs buying decisions, ensuring you’re not left holding unwanted stock. Unwanted stock is a drain on resources, both space in the warehouse and finances.

 

Ways to improve inventory control

Create a good floor plan.

A good floor plan in a warehouse makes everything easily accessible and facilitates movement around it, giving a boost to productivity. To achieve this, items that move faster should be upfront, heavy items should be in low shelving, and walkways should be easy to navigate. Signage that’s large and clear needs to be posted everywhere too. It’s how warehouse workers find their way around.

Strengthen relationships with suppliers.

Good relationships come down to communication, and that starts with getting to know the contact person at each of your suppliers. When you have a dialogue, you build trust, something that, in turn, puts you in a position to negotiate better rates, return anything unsold, and turn your purchase orders around faster.

Use a warehouse management system.

An inventory control system keeps tabs on items as they move through your entire supply chain, and a warehouse management system maintains complete oversight over the storage facility. Adding a warehouse management system increases efficiency and reduces errors and confusion.

Conduct regular audits.

It’s important to know that your financial records accurately reflect the stock you actually have. That’s why you have to conduct these audits regularly. Fortunately, your inventory control system makes this relatively easy and painless.

Label properly.

For your supply chain to work as efficiently as possible, every item has to be clearly and correctly labeled. Nowadays that means using barcodes, QR codes, and scanners. These digitized systems also help with real-time inventory control.

Create reports.

Inventory control systems collect and store a lot of data, and the data can be incorporated into reports about your inventory. These reports can contain information that stretches from stock levels to items that are out of stock to items that have become obsolete to financial statements. Configure this information in whatever way you want, but do produce the reports regularly. It will help you keep oversight on your business.

Cycle count.

Basically a quicker and more efficient method for stock taking, a cycle count only involves a small section of the warehouse at a time. It’s usually practiced as a continual process, systematically working from one end of the facility to another, then starting at the beginning again when the process reaches the end. Cycle counting means you don’t have to shut operations down for a few days, as with traditional stock audits that count everything at the same time. In addition to keeping the supply chain in running order, counting a section at a time like this is actually more accurate.

 

Wrapping up

Having good control over inventory is essential for a business to thrive.Cin7 Omni can be a great help. With an array of tools to track inventory and maintain good levels, you’ll have the control you need to have. Our experts are standing by to tell you more and give you a demo. Click here to schedule a time that’s right for you.

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

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.

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

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

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

 

Bottlenecks defined and how to spot them

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

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

 

Common areas where bottlenecks happen

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

Labor

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

Typically, workers fall into four categories:

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

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

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

Capital

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

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

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

Planning

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

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

Communication

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

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

Technology

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

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

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

 

Steps to identify and prevent bottlenecks

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

Find out where bottlenecks are occurring.

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

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

Carry out data analysis.

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

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

Map out a detailed plan.

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

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

Automate the supply chain procedures.

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

 

In a nutshell

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

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

How to manage inventory for planned and unplanned plant shutdowns

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

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

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

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

 

Managing inventory to prevent or mitigate a shutdown

Here are things you can do:

Limit inventory before a planned shutdown

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

Prepare for unplanned shutdowns by limiting inventory

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

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

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

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

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

Prevent shutdowns caused by stockouts

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

 

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

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

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

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

 

The final analysis

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

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

7 tips for warehouse safety

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.