Product sellers who have reached a high level of success and are still bogged down by manual processes need to adopt a unified commerce software solution that allows them to interconnect each critical aspect of their operation. Many of the 8,000 product sellers we work with here at Cin7 have experienced explosive growth since the start of the pandemic made online shopping a necessity.
Often, these companies find their reliance on manual stock counts and data entry has become unsustainable and increasingly prone to human error. We find that when a company begins searching for IT help to modernize their software stack to keep up with their growth, they’re ready for the power of unified commerce.
Cin7 provides a unified commerce solution like no other on the market today. Cin7’s all-in-one unified commerce solution automates all your workflows – how and where you sell, how you manage all your inventory, how you fulfill orders and how you manage your finances.
Bring critical business functions together
Adopting and paying for disparate software programs to manage individual business needs is certainly one approach to consider, but leads to the “swivel chair” approach of having to toggle between accounting programs, spreadsheets, ecommerce backends and shipping applications. It may seem like progress, but this approach is costly in both monthly fees and staffing resources.
By bringing all of your business functions together, across sales and operations in a unified and automated workflow, Cin7 helps sell to more customers through more sales channels and process more orders – more efficiently and faster than ever before.
How unified commerce creates a top sales operation
Here’s a scenario that illustrates the concept of unified commerce:
Your company sells products to consumers both online and in brick-and-mortar locations. You also have a healthy wholesale distribution division that sells in bulk to major retailers. Over time you’ve grown to 3 branded online marketplaces, Amazon, Walmart and Ebay, 4 custom ecommerce sites and 10 physical store locations.
Adopting an end-to-end software solution that connects to marketplaces and enables you to manage your ecommerce sites combined with overall inventory management and sales tracking will streamline your operations and save thousands with the efficiencies it creates. The solution should allow you to track store inventory, transfer orders to other locations, ship orders from your stores and warehouses, and manage customer loyalty programs.
It should also let you work with the third party logistics provider (3PL) you have contracted with to manage your warehouse operations, fulfill orders, and process returns.
Because you are a fashion retailer, and fast changing trends dictate what products are popular at the moment, you require real time sales performance analysis so you are not tying up too much capital in overstocked inventory.
Unified commerce brings together all aspects of a product seller’s business. When orders are placed, either by consumers or in bulk by major retailers, transactions are automatically recorded to accounting programs like QuickBooks and corresponding adjustments are made to inventory quantities. Ongoing management of each sales outlet is maintained within the Cin7 platform.
Workflow automation is a key benefit of unified commerce. Purchase orders can be set to generate when stock levels hit a predetermined threshold. Wholesale orders can be placed directly into your system by major retailers who have established an EDI connection with you. The fulfillment process is triggered automatically, sending orders to your 3PL. Stock can be shifted from one warehouse or store location to another. A dedicated payment portal is also provided so wholesale customers can easily keep their account current.
Perhaps most importantly, the customizable analytics reporting capabilities of Cin7 give management visibility into real time, accurate financial data both in dashboard views and pivot-table ready reports.
Our research conclusively confirms that product sellers thrive, grow sales, and reduce costs when they adopt a modern tech stack with a cloud-based inventory management solution that embraces the unified commerce approach to selling.
A complete selling solution
Product sellers that capitalize on unified commerce, a holistic solution that interconnects every critical business process across sales and operations, realize several benefits:
Sync sales, accounting and inventory control in real time
Design branded B2C and B2B websites to sell to consumers and major retailers
Completely integrate your Shopify site and your retail location with included POS app
Set order thresholds to automate purchase orders when stock runs low
Refer to sales dashboards or customize demand forecast reports
Assign orders to your 3PL for accurate fulfillment and shipping
Maintain a modern cloud-based tech stack
Maximize warehouse space
Cut overhead and keep headcount trimmed
Quickly process invoices and payments from wholesale customers
Cin7 helps over 8,000 product sellers benefit from unified commerce to move more orders with greater accuracy to more satisfied buyers. Efficiencies created by unified commerce save on overhead and provide a great customer experience. Cin7 simplifies your ability to sell by bringing together over 700 established connections with online marketplaces, major retailers, shippers, third party logistics providers and accounting programs. At a fraction of the monthly subscription fee for a bloated ERP solution, Cin7 delivers all of the key functionality a modern product seller requires.
Gain the unified commerce advantage over your competitors. Request a Cin7 product demo and get unified.
Ecommerce, also called electronic commerce or internet commerce, is a business model that lets you buy and sell goods and services over the Internet. So, ecommerce software allows your online store to operate. The transaction of money (funds) is also a part of ecommerce.
ERP systems are a type of software used to manage enterprise data. ERP systems help different organizations in dealing with various departments of an enterprise. It takes care of departments like inventory management, customer order management, production planning, shipping, and accounting.
ERP systems combine all databases across the company into a single database and can be accessed by all employees of the enterprise. It helps you in the automation of the tasks involved to perform a business process.
We will learn about the fundamental differences between the two systems in this article to help you make a better choice.
What is an ERP system?
Running a business is all about juggling things from finance to operations, and sales to marketing. ERP systems aim to consolidate back-office processes into one system. They help you track, share and store information across various departments, and ensure that all the employees rely on the same data.
Popular ERPs like NetSuite, Oracle, SAP, and Microsoft Dynamics are traditional business management systems with accounting at the core. To keep up with the changing tide of retail, there are many integrations for ecommerce solutions like:
ERP monoliths are not tailored to a specific industry or line of business, so the quality of ecommerce integrations often fall short of expectations. ERPs were built based on older technology and have not kept up with the ever-changing marketplace requirements or the level of innovation that ecommerce software regularly delivers.
Most ERPs are built for back-office purposes. They are not meant for customer-facing sites like a web store that require real-time transactions and analysis.
By hinging your whole multi-channel business on an inflexible system like this, you risk non-compliance, listing errors, and other mistakes. It could cost you the right to sell on marketplaces like Amazon.
ERPs require major financial and time investments. Apart from annual subscription fees, you may face up-front and support costs running into hundreds of thousands of dollars. Plus, it may take years to implement an ERP system fully and that could lead to disruptive changes to your business.
What is ecommerce software?
Ecommerce software is the system that allows your online store to operate. Ecommerce software may include business tools like inventory management, accounting, and email marketing.
Put simply, ecommerce software lets you list products for sale and accept payments online. But, most online businesses usually need more than the bare minimum, and ecommerce software adds other business management tools.
The best ecommerce software has all the basic tools you need to get started, with an ecosystem of upgraded tools and platforms that you can use as your business grows.
Types of ecommerce software
There are mainly three types of ecommerce software:
1# Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS)
Both of the above offer ecommerce solutions via the Internet. SaaS provides solutions through cloud-based software, and if adding hardware, it becomes a PaaS. These are both straightforward options for those who are not tech-savvy.
Additional design and custom features may require some developer skills. But, patches, updates, and new features are dealt with automatically.
These services charge on a monthly basis and may include transaction fees, but provide full support when required.
2# On-premise platforms
These solutions are hosted locally on servers by the retailer and managed by their IT department. On-site professionals are required to fix any problems as they occur, add new features, and do manual updates.
If you have your own internal IT team, then on-premise may be an excellent option for you. It allows firms to gain more control over their site and create their custom storefront solution.
While researching inventory management software online, you may end up on a site that aggregates a list of providers like Capterra or GetApp that helps you compare features, benefits, and prices.
So, you can usually group your options into two main categories:
All-in-one platforms such as a supply chain management platform or an ERP
Dedicated warehouse and inventory management software
An all-in-one solution may sound enticing as it offers “full stock” in one place and can manage multiple systems and processes using one software solution. A dedicated inventory management software specializes in specific sales and accounting functions and integrates with a wide range of other software.
So, the choice depends on either using software that does everything but doesn’t specialize in a specific area or using a stack of specialized software with integrations to one another.
Businesses often choose to use an all-in-one or ERP as it offers the ability to manage all administrative tasks in one place. But, as all-in-ones are so focused on managing so many things at once, they often lack the level of granularity required to fully handle inventory and warehouse processes like ecommerce software can.
If the idea of a cloud-based SaaS solution for inventory and order management is one that appeals to you over an ERP, schedule a demo of Cin7 here and we’ll show you how it can be your centralized resource for managing sales, inventory, accounting, warehousing and fulfillment.
The word automation was first coined and used by Ford Motor Company then Vice President, Delmas Harder in 1948 when he commented that, “What we need is more automation.”
He realized that there was a need to improve material handling in-between the various production stages to compete in the market with companies like Chevrolet.
Why this is significant is because it was the first time anyone thought of automating a process in a manufacturing unit. This led to the creation of robots that are now used in the manufacturing plants, warehouses, to ease and quicken the processes.
Let’s dive into the history of how the robots came into existence.
History of robotics in warehouses
However, it was not until 1954 that George Dovel filed for a robotics patent when he created the first industrial robotic arm, Unimate.
This robot was capable of moving the materials around 12 feet away within the manufacturing unit. This also earned George Dovel the title – Grandfather of Robots.
It took until 1961 for a patent to be granted due to concerns about laborers losing their jobs. General Motors was the first company to make use of the first of these robot arms in manufacturing at their New Jersey plant in 1962.
Then came the Stanford Arm in 1969 created by Victor Scheinman. It was technically a first of its kind, electrically-powered, an automated robot arm that could move around accurately. The arm was powerful enough to assemble the Ford water pump by itself with optical and contact sensors.
This marked the beginning of a new era of using robots in the manufacturing process for achieving higher efficiency and improving lead time in the production of items.
By 1990, the use of robots started in households as well with the advent of Roomba robots developed by iRobot. Roomba was a first-generation vacuum cleaning robot that became a huge success.
Since then, there has been no looking back and the usage of robotics has come a long way in a short span of time.
In 2003, Kiva systems started creating AMR (Automated mobile robots) which were used in moving goods around warehouse and distribution centers using a conveyor system or by forklifts.
Kiva robots were so effective that Amazon bought the company itself in 2012 and now uses them across all their distribution centers.
Amazon is at the forefront of warehouse robotics development with 100,000 robots operating in their fulfillment centers across the globe.
Types of robots
As mentioned earlier, there was no looking back once the Roomba robot and Kiva robots were introduced and hugely successful in the market. Various types of robots came into existence that served various purposes.
However, for the warehouse, 5 major types of robots are used:
#1 Automated Guided Vehicles (AGV)
The Kiva robot that we are so familiar with is actually an Automated Guided Vehicle robot. This robot helps in transporting products and materials from one place to another by using magnetic stripes, sensors, or a track embedded in the warehouse floor. They are the best alternative to the manually driven forklifts and picking carts.
#2 Autonomous Mobile Robot (AMR)
AGVs have developed a lot over the years and now they can function without magnetic stripes or sensors. These are known as Autonomous Mobile Robots (AMR) loaded with warehouse maps and the location of all the inventory stored in it.
AGVs also have safety scanners embedded in it such as 3D cameras, lidar, infrared, front and rear sensors, etc. which allow them to navigate without any mishaps following maps and the established routes within the warehouse. These are also known as self-driving forklifts.
#3 Cobots or collaborative robots
As the name suggests, these are robots that work collaboratively with human workers at the warehouse. However, these are quite efficient as they are semi-autonomous mobile robots that can move around a warehouse with their human pickers.
Usually, these cobots follow the human pickers so that they can drop picked items in the bins carried by these robots. This improves efficiency amongst warehouse workers and also reduces or eliminates the effort of physically carrying products.
Cobots have sensors so that they can identify any obstacle or boxes in their way and enable them to navigate carefully through the warehouse. Cobots are picker staff best friends as they can speed up their order fulfillment capabilities.
#4 Automated storage and retrieval systems
Automated storage and retrieval systems (AS/RS) are automated technologies used in warehouses for speedy storing and retrieving of goods. This system consists of multiple technological machines such as shuttles, cranes, carousels, vertical lift modules, unit loads, and mini loads.
Since all AS/RS are computer-controlled systems, they are integrated with the warehouse management system so that it can process order fulfillment as soon as orders are received. AS/RS systems are used for moving a high volume of loads from in and out of storage.
AS/RS systems save time and effort of picking staff since in this “Good to Person” order picking, the worker does not have to physically move from one place to another to pick items. A mini-load crane, shuttle or AMR retrieve the products as per order and deliver it directly to the worker for packing and shipping.
#5 Aerial drones
We have been fascinated with the idea of drones delivering packages to our doorstep ever since Amazon began this practice. Drones have greater capabilities and we still have not fully explored their usage.
Drones are already being used in warehouses for locating and tracking inventory. They make the work much easier, quicker and can reach any nook and corner easily. In addition, a drone can be easily integrated with your warehouse management system making it an effective technology for tracking inventory and also lifting lightweight products for easy picking and packing.
Drones are autonomous and customizable, and with their cameras and RFID, drones can easily scan products, do inventory checks, conduct tracking, and map inventory.
Benefits of using robots in the warehouse
“To be or not to be” is a challenge faced for the usage of Artificial Intelligence (AI) in the manufacturing industry. Some are uncomfortable with the overall implications of AI taking over manual tasks, but recent statistics of intelligent automation capabilities are gaining attention, and therefore, cannot just be ignored.
“85% usage of intelligent automation will be seen in Supply Chain Management by 2021,” as per an IBM Report.
It is essential to stay globally competent in today’s dynamic market and using robots and artificial intelligence in the warehouse is the way to go! Here are a few of the benefits of using robots in the warehouse.
Reduces manual labor
Robots can take over work that is dangerous or time-consuming and thereby help warehouse workers to stay safe while working in coordination with robots.
Robots also help save time and effort by replacing manual scanning, picking and packing, and inventory counting. Also, it can be a very strenuous activity for the warehouse workers to keep on moving one rack to the other to fetch items ordered by customers. But autonomous mobile robots can perform these physical tasks and help workers to focus more on other order fulfillment tasks that require human intervention.
Improves warehouse accuracy and efficiency
Artificial intelligence helps in reducing human error and improves the customer experience which is the key to success for any business.
Since robots are customizable and can be programmed for a specific purpose, there are few instances of mistakes. Robots are not prone to human error and thus they eliminate wasted time and effort in redoing an incorrect task.
Accuracy in tasks like product scanning, picking, storing, and transporting products positively affects the overall performance of the warehouse. Warehouse robots work with precision and allow operators to automate the most mundane and laborious tasks.
Reduces warehouse costs
As per U.S. Census Bureau data, an average warehouse worker spends almost seven weeks per year in unnecessary motion within the warehouse. The costs of such futile activity costs the industry more than $4.3 billion USD in annual revenue.
Also, robots perform dangerous tasks efficiently in the warehouse, resulting in reduced costs spent on worker’s compensation for safety issues. There are fewer chances of workers getting injured since robots are performing the tasks instead.
The number of workers required in the warehouse also decreases as robots can fulfill most of the tasks with accuracy, creating less wastage.
Efficient picking capabilities
One of the foremost usages of a robotic arm was to move materials from one place to another up to 12 feet away. But with the technical advancements, the robotic arm has now been developed into an autonomous mobile robot that can travel far and wide in the warehouse and pick items automatically.
Some well-known companies like IAM Robotics, 6 RiverSystems, and GreyOrange, have introduced their powerful mobile robotic picking solutions in the market increasing warehouse efficiency requiring limited human resources.
These machines are programmed to travel established routes and they typically carry carts in which the products can be stored and transported to human workers.
We hope this article has helped you understand how robots are changing the supply chain within warehouses. At this point in time, robot technology is just scratching the surface. In the future, robots will prove to be much more useful and advanced as technology advances.
To learn more about Cin7 inventory and order management software and to find out how our warehouse management system can help automate your operations, request a demo here.
The global supply chain is filled with several variables that add to its complexity: government regulations, ever-changing customer demand, rising transportation costs, and international events such as pandemics. Any innovation that helps improve the supply chain’s efficiency can help increase your bottom-line profit.
Artificial intelligence (AI) is one such innovation that helps optimize the supply chain by better forecasting customer preferences and cutting costs by automating some repetitive manual tasks.
If you are considering AI-powered supply chains, here are seven benefits that could help transform and evolve your business:
#1 Warehouse automation
The warehouse should not be treated simply as a place to store goods. Furthermore, if the items in the warehouse are not properly stored, there could be difficulty in retrieving the items when required. This in turn can increase your fulfillment time, not to mention your customers’ frustration. Instead, the warehouse should be regarded as a strategic asset that can help with storage and faster fulfillment of goods, thanks to automation.
Automation can help with the timely retrieval of goods from the warehouse and facilitate a smoother fulfillment of orders. As you keep purchasing inventory, the algorithm continues to learn from the data, and – based on this purchase and supplier data – the AI can provide stocking recommendations.
Lack of real-time information can lead to inefficient warehousing. Using a warehouse management system can offer much-needed clarity and help in streamlining your operations. A warehouse manager can get real-time insights about the various parts, components, and finished inventory stored in the warehouse, since the technology takes virtually no time to process and analyze large swaths of data.
Drones are also helping to automate warehouse operations. In movies and wedding ceremonies, drones are often used for videography from a higher altitude. At the warehouse, drones scan and capture information from barcodes and RFID tags, as well as reconcile data with your warehousing software.
Apart from scanning, the drones can also pick up inventory and aid with quicker shipping. Using drones to fetch items from higher shelves also mitigates the risk of warehousing staff injuries caused by falling from height.
Helpful hint: Apart from speeding up the work and saving you time, AI automation can reduce the otherwise required number of warehousing staff and save money that would have been devoted to payroll.
#2 Minimize operational costs
Plant managers deal with several challenges in running business operations. There can be inventory shortages, unplanned machinery downtime, or a rise in raw material pricing. All these can increase overall operational costs. If you are operating on lean margins, any activity that helps with cost-cutting can be crucial for your success. To combat such supply-demand mismatches, businesses have started implementing AI technology, leading to cost minimization and delivering a better customer experience.
Helpful hint: Unlike humans, technology can run 24/7 with maximum productivity. It is free of human error and reduces workplace accidents.
#3 Predicting trends
It can be challenging to plan for the supply chain due to globalization, competition, increasing product varieties, and varying customer preferences. Unplanned events such as pandemic-related lockdowns and logistical issues can fuel the fire.
When final production relies on the timely availability of several spare parts and critical components, their unavailability can create bottlenecks in the supply chain. With a robust AI-powered forecasting system, businesses are equipped with the necessary intelligence to prepare themselves before such events disrupt production.
Along the lines of AI, there is a buzzword called “Big Data” that is commonly used. As the name suggests, Big Data refers to data that is huge in volume and keeps compounding over time. For example, when customers purchase items from Amazon, they browse through many products that can yield insights into their consumption patterns.
Through machine learning, businesses can also leverage predictive analytics. This way, companies can spot patterns from historical data and current buying patterns for better forecasting.
#4 Better fleet management
The term, “fleet,” refers to a group of vehicles owned by businesses used for transportation. Fleet management is crucial for the smooth functioning of the supply chain as it links the manufacturer (supplier) to the customer. From rising fuel costs to labor shortages, fleet managers need to tackle many challenges. Managing a large fleet can be an arduous task if the necessary information is not available in a timely manner.
Using AI in logistics can offer real-time tracking and vital information for shipments. AIcan also assist in reducing the losses arising from fleet downtime and make the most of the fuel capacity.
Inventory management lays the foundation of proper supply chain management. Effective inventory management can ensure a logical flow of goods in and out of the warehouse. With so many variables to consider – like order picking, packing and fulfillment – manual inventory management is time-consuming and prone to errors.
Inventory bottlenecks lead to delays and reductions in revenue. With the help of AI, businesses can gain complete visibility of supply chain variables and identify the processes that act as bottlenecks. Upon identifying bottlenecks, you can quickly eliminate them by strategically finding opportunities for improvement.
Apart from bottlenecks, understocking and overstocking are also issues that adversely affect your business. Understocking leads to losses arising from missed sales opportunities and risks reducing customer loyalty. Conversely, overstocking poses the risk of loss due to not being able to sell the inventory. Businesses can use demand forecasting (through AI) to avoid overstocking and accurately predict trends. Based on the data, the production and stock levels can be calibrated to maintain optimum inventory.
Cloud-based inventory management software can provide a centralized view of all inventory across multiple locations. With accurate information about their inventory, purchase managers can determine when to place new orders.
Thanks to technological advancements, even the purchase order process can be automated. By customizing quantity thresholds, a purchase order can be automatically generated and sent to suppliers to avoid stockouts.
Helpful hint: Machine learning algorithms can also mitigate fraud by automating auditing and inspections. Audits help to spot any deviations from common product patterns. Privileged credential abuse is another challenge that causes a breach in the supply chain, but with the help of AI technology, such misfortunes can be prevented.
#6 Speedy shipping
What good is producing excellent products and services if you cannot deliver them to your customers in a timely fashion? Even after using state-of-the-art technology to improve your warehousing and operational processes, if you cannot ship products on time, your profitability will suffer.
Using AI in the supply chain can not only assist you with forecasting the products’ demand but can also lead to better shipping control. It factors in customer’ locations to deliver the products, along with the time it takes to ship them.
Your operations managers can get real-time information about the delivery schedules, and the team can be warned upon detection of a discrepancy. You should not overlook last-mile delivery as it constitutes around 28% of delivery costs.
#7 Enhance customer experience
Offering a stellar buying experience is essential to fostering a better relationship with your customers. Happy customers not only lead to repeated sales but also act as ambassadors to promote your brand through positive word-of-mouth.
It is plausible that your customers have questions about your product and will contact the company. If your support team makes them wait too long, the chances of them switching to your competitor are all but guaranteed to increase.
Implementing AI-based chatbots on your website can help you tackle such issues. Chatbots are available around the clock, and studies suggest they can answer up to 80% of routine questions. As the answers are already installed in the system, the bots can quickly solve the queries, allowing your support team to prioritize other projects.
Apart from answering questions, chatbots can also act as sales agents allowing potential customers to interact with and submit purchase orders.
Amazon has a fine example of machine learning to offer a better customer experience. Their algorithm helps them to provide better product recommendations based on previous orders and searches made by the customer. They also use chatbots to offer assistance regarding purchases, returns, and refunds.
Based on the benefits examined in this article, it is evident that AI can make a breakthrough impact on the supply chain. From reducing costs to optimizing operations, it can help your business outpace the competition.
As challenges in the supply chain increase, businesses will welcome the opportunity to upgrade their technology and better serve their customers. While external variables might accelerate the adoption of AI, it is already transforming from a nice-to-have to a must-have item that will help your business stay relevant and represent the standard in supply chain management.
Cin7 inventory and order management software should be your go-to solution as you pivot towards AI for your sales operations. Gain the same advantages as the top product sellers who have already discovered Cin7’s connected multichannel solution. Book a demo with one of our consultants and take a step closer to adopting the efficiencies that await.
What do product sellers feel when they move from desktop-based accounting and inventory management software to the cloud? Most business owners say they feel happiness and relief, but the next most common emotion reported is regret — that they didn’t do it sooner!
Happily, DEAR Systems and Intuit have worked together to make it easier than ever for product businesses to move online. Thanks to Intuit CEO Sasan K. Goodarzi’s commitment to moving product based businesses to the cloud, we’ve entered a close collaboration. We share a passion for solving product sellers’ most challenging and important problems. After working closely with Intuit’s QuickBooks’ leadership team for six months, we released our DEAR Advanced subscription plan on April 13th 2022.
The DEAR Advanced plan is a perfect pairing of DEAR and Intuit’s QuickBooks Online Advanced Edition in an all-inclusive, easily-affordable DEAR Advanced plan subscription.
The reason behind offering this bundle is simple. For more than 10 years, we’ve helped thousands of product sellers move their operations online. They run their businesses more efficiently, add new sales channels more easily, and eliminate costly operational mistakes. The happiness they experience is contagious, and it inspires our mission to make it easier than ever before for thousands of desktop-bound product sellers to start enjoying the benefits of modern accounting and inventory management software. The most rewarding thing? The gains are substantial, wide- reaching, customer-pleasing, and happen very quickly.
A sharp reduction in errors is the first big gain from moving to the cloud
Product sellers who move to online accounting and inventory management tell us it’s a huge leap from where they were pre-DEAR, when they tracked all pre-orders on a spreadsheet. Both the time to complete tasks and human error are vastly reduced. Automations and filters catch any issues that would have otherwise slipped through and are automatically flagged for attention from the right, responsible manager.
Simon Coward, at outdoor equipment retailer AQ Outdoors, puts it this way: “Today, all the information is live, and all staff have access to it, and that’s been fantastic. In the last six weeks, there has been more progress in operating our business in the last nine or ten years combined. It’s pretty sick,” Simon grins.
“DEAR is a fully featured inventory software that’s simple to use – and with the right partnerships, it’s easy to make work for your particular use case,” Simon says. “Overall, the time that it saves you is way more than the price. It simplifies work processes, it automates things that otherwise can’t be automated, it reduces errors, and it’s simple for staff to use.” Simon learned a lot from moving to the cloud, and we’ve captured it for you to read.
Seeing the big picture enables growth: the second big win from moving to the cloud
“Before DEAR, I was always just guessing – the number of boxes in front of me, what’s going to be used for production that day,” Hannah, co-founder of Royal Essence, says.
“After DEAR, 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.”
After Royal Essence migrated from spreadsheets and made sure their starting inventory information was correct and in sync with their online accounting, Royal Essence immediately gained confidence and efficiency. Things that had been excruciatingly difficult — like reordering in time for the next batch of production — were suddenly easy. With DEAR implemented and day-to-day inventory tracking enabled, things improved all across their business.
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.
To learn more about their process and the benefits of moving to the cloud, check out the Royal Essence story.
Leaving inefficient, time-consuming, manual inventory management behind: The third big gain from moving to the cloud
Before adopting DEAR Systems, Ovira had no effective inventory control. They had multiple sources of truth, relying on spreadsheets, warehousing partners, and emails to track inventory. “We were literally sending emails to order stock. We were manually tracking orders and spreadsheets. Everything was very much manual, in terms of the accounting backend as well. We were managing inventory in the most shallow way you possibly could,” Tyron Gyde, supply chain manager for Ovira, said.
After only three months with DEAR, Ovira assessed their operations were 75 percent more efficient as a result of DEAR’s automations and ability to be the definitive single-source-of-truth. And, thanks to DEAR’s accurate inventory control, Ovira has supercharged its growth ambitions. They’ve launched into the UK market with a new warehousing presence there, and at the same time, they’ve been able to launch a micro-fulfilment model in the US that offers same-day delivery. “If you’re a customer in central New York, we can get you your product within two hours,” Tyron says. “There’s a lot of other really valuable initiatives we’ve been able to really dedicate time to, just from the extra time we’ve got back from using DEAR.”
To learn more about removing inefficient manual work by moving to the cloud, check out Tyron’s Ovira story.
The fourth big gain from moving to the cloud: Everything is integrated, from shipping to payments to accounting
Before adopting DEAR Systems, Intalite was facing rapidly escalating supply change troubles and struggling to add new product lines and connect their systems.
“We didn’t have an ERP system at all, really — just an accounting program that we used pretty much to the limit of what it was able to do. And the vast majority of the actual business processes were all paperwork. So for every sales order we received, we then had an invoice pad, we wrote the invoice out and had a blind carbon copy to it,” says Luke Gaffey, IT Manager at Instalite UK.
Anywhere there was an inventory process, there was duplication of effort, multiple errors, and tedious manual labor at every step. “At one point, we had more people working in accounts than working in sales,” Luke said.
This sort of approach is far from uncommon at long-established companies, but it meant Intalite were operating at their limit. Just keeping up with the day-to-day was hard enough, let alone planning for the future. To make matters worse, their desktop accounting could not integrate with their online Shopify store or any of their other online solutions they needed to run their business. As a result, their operations were manual, time-consuming, and error-prone.
Like many other businesses moving from desktop to online, Intalite soon discovered that DEAR has comprehensive native cloud integrations for everything they needed. They also found that DEAR is customizable to a remarkable degree, thanks to its comprehensive APIs.
Once DEAR was in place, Intalite hired a consultant to use DEAR’s APIs to create a script that completely automated a previously difficult and costly job. “We were able to automate that job, and save hours and hours and hours. It was someone’s full-time job at one point, just converting this particular manufacturer’s purchase orders.
Intalite many large positive impacts on the bottom line in their move online from desktop. To learn from Intalite and Luke’s experiences, check out Luke’s Intalite story.
With so much to gain from moving to the cloud, why do product sellers still use desktop accounting and outdated inventory management?
Many product sellers are fearful of change. They dread replacing their systems so much that they live on with painful, inefficient, outdated, and non-competitive ways of working. It’s only when confidence in the large gains from moving to modern online inventory management and online accounting outweigh the perceived costs of changing systems that people start moving to better technology.
As a result, for Intuit and Cin7 to help product-based businesses to experience the dramatic benefits — even life-changing benefits – of modern accounting and inventory management, we‘ve teamed up to:
Make it easier to pick the best online solution to move to, and
Increase awareness and confidence in the benefits of moving from desktop to online.
First, we need to reduce the perceived difficulty, uncertainty, and costs of moving to the cloud. Our collaboration with Intuit on the new DEAR Advanced plan provides a large step forward — by demonstrating DEAR and QuickBooks Online are so closely and well integrated that a bundle is a natural approach.
As one accountant said recently, “DEAR’s Advanced plan is like buying a car. Naturally, you expect a car to have tires. Before this DEAR + QuickBooks Advanced plan, people had to decide on which online accounting to use (which tires to buy) and what online inventory management to use (which car chassis to pick). It took weeks to make two separate decisions and increased the fear of something not working well. Now, DEAR and QuickBooks Online are together in one offering. One smart decision to move to the cloud which involves very little risk given the leading products and brands are together in the DEAR Advanced Plan.”
Second, we need to educate desktop-using product sellers about everyone who is already thriving, thanks to running their business on cloud accounting and online inventory management. The product seller comments in this blog are illustrative of what’s happening in the marketplace. We’re inspired by the success stories we hear everyday and will be doing more to share these desktop to cloud transformation success stories.
Who is the new DEAR Advanced plan for
The new DEAR Advanced plan is available for all product sellers in the United States interested in quickly boosting the success of their business. It’s available to anyone eager to try us or to jump in to get started moving to the cloud right away. Presently, the new DEAR Advanced with QuickBooks Online Advanced edition is not available outside the United States. Many product sellers outside the US are asking for it and we are collaborating with Intuit to make it available in the future.
What should product sellers outside of the United States do if they want to move to the cloud
You should move to the cloud now. You can easily do this by subscribing to QuickBooks Online or Xero. Then, sign up for DEAR or Cin7 separately. It’s that easy. We also have incredible DEAR Experts all over the world who can help you seamlessly move your operations online. Nearly 8,000 product sellers are already enjoying the many benefits of running their business in the cloud. Don’t hesitate — join the many successful product sellers who’ve already made the move today.
In today’s market, the supply and demand environment is more volatile than ever before. To make sure that you are not paying more for your stock than necessary, you will have to negotiate with suppliers more effectively.
It is said that the more you negotiate, the better the outcome for your balance sheet – but this suggestion should be taken with a grain of salt. After all, anyone can negotiate, but to successfully do it, it should be understood that the concept of supply and demand is the foundation for any negotiation. Failing to keep this in mind may end up straining or fracturing your relationships with suppliers, diminishing your reputation within the ecommerce community and placing your business in peril.
So how should you negotiate with suppliers for your ecommerce business? There are myriad negotiation hacks that will help you secure the deals you seek and build your reputation as a shrewd business owner. The experts at Cin7 have created a list of five negotiating tactics to help you get better deals with a win-win outcome. Let’s get started!
#1 Research before negotiating with suppliers
Before you begin negotiations with a potential supplier, you must first conduct comprehensive research. Since they are selling you the product(s), they will have a thorough understanding of its market costs, demand, importance in the product value chain, and they know about your competitors. You should have a fair understanding of these factors too so that you bring credibility to the negotiating table and have a productive discussion.
Doing the due diligence in researching a supplier, as well as their competition, will help you get an idea of market prices while keeping the sales goal of the supplier in mind. Based on your research, your proposal could involve promising long-term business, a shorter credit cycle, or changing the frequency of payments. Therefore, it is important to do your homework in order to proffer potential suppliers a fair, tangible, and mutual benefit in doing business with you.
Helpful Hint: As you research, be sure to note industry-specific terminology. Using it will help enhance your credibility and may be the difference in reducing the chance of suppliers quoting inflated prices.
#2 Calculate your purchasing needs
Once you have a better understanding of the supplier’s business and its needs, your next step is to make sure your proposal fits both their needs and yours.
To construct that proposal, determine the quantity of what you want to purchase, the order frequency, and the total cost of the purchases you would make during a given year. Having this information handy will provide you with more negotiation leverage and give the supplier a better idea as to how much potential you have as a business opportunity for them. The more your proposal meets the needs of the supplier, the more likely they are to offer you the discounts you seek.
Helpful Hint: Ask for bulk discounts. If you have a large order, you are in a great position to negotiate prices. Request to see their discount grids, as most suppliers use them regularly to manage sales. Be sure to refer to data gathered from your inventory management software when finalizing your tentative order size.
#3 Offer partial advance payments and deferred discounts
The next tip is to offer a partial or full advance for the first order. This is one of the best ways to establish trust and help the supplier decide to start working with you. You can always switch to their standard credit cycle down the line.
This also presents an opportunity to demonstrate a commitment to a mutually beneficial business arrangement. Specifically, when offering an advance payment, remember to ask for a discount on a total purchase volume after achieving a milestone, i.e., meeting a certain sales threshold. This is considered a deferred discounting mechanism, and it helps suppliers ensure that they are going to reach their sales goals before activating your agreed-upon discount.
#4 Be honest and transparent
There are all sorts of reasons to seek a better price for products. For example, you might urgently need a product at a lower price to keep up with the competition or to have enough profit margin to meet your own sales goals. You might be a small business owner who needs a discount to remain profitable or a combination of any of these scenarios and yet not have much to offer in terms of value to the supplier. One thing you can offer, however, is full disclosure of your status. This is a gesture of good faith and will lay the foundation for a solid professional relationship.
It is imperative that you do not use any deceitful tactics like negotiating under false pretenses or making hollow promises to get discounts from your potential suppliers. A business is only as good as the word of those who represent it, so make sure you are earnest in your negotiations.
Helpful Hint: Sometimes a negotiation results in a stalemate. Don’t shy away from pausing a negotiation in the event of a failure to reach an agreement. Keep in mind that the number of sellers for the items you need may be limited based on your purchasing capacity and expected price range.
#5 Once an agreement is reached, get it in writing
One of the most important qualities of a good negotiator is to close the deal in writing. All too many businesspeople make the mistake of not signing agreements after they have completed the negotiation simply due to procrastination or lack of operational knowhow. This can lead to a situation where the other party forgets the details of your conversation, and hence, you may have difficulty reminding them. Also, if the decision-makers forget about certain details that you previously negotiated, you may miss out on the deal you thought you had secured. Therefore, it is in your best interest to finalize and ink the deal as quickly as possible.
Helpful Hint: You may use document signing tools available online to expedite the process and then email a copy of the signed agreement to the supplier. Place your first order reflecting the explicitly stated terms and conditions.
With an inventory and order management system like Cin7, you have the option of connecting to your suppliers via a custom EDI connection streamlining future orders by placing them electronically.
Negotiating is a tough skill to master in any industry, but as an ecommerce business owner, you will put that skill into practice quite often, thanks to the shortening life cycles of various SKUs and sudden surges in demand for products. While you will naturally get better at negotiating over time, it is crucial that you apply the five tips to be a successful deal broker. Keep your eyes open for discount opportunities, negotiate your way into the best deals with your suppliers, and watch your ecommerce business thrive.
Enter into supplier negotiations armed with accurate sales data gathered from a robust inventory and order management solution like Cin7 that updates in real time with your accounting software. Request a Cin7 demo today.
A lot of new businesses have only one of two ambitions: either a nice solid start, or to set the world on fire. Lenny Vainberg wanted both — and not only is he pulling it off, he’s sharing his experience and formula for success.
Lenny is CEO of ModaConcrete™ | TerraFlame, a brand he acquired from a private equity firm a few years ago.
“We bought a brand, and essentially built a factory and set up a supply chain in Baja, Mexico to produce our products,” Lenny explains. “We adapted a factory that was set up to produce architectural precast and tooled up production to manufacture the most popular TerraFlame products. Later, we reintroduced the precast production as an online business supplying architectural precast to the trade. We now have two brands: ModaConcrete and TerraFlame coming out of the same factory, serving two divergent but complimentary markets.”
“TerraFlame,” Lenny says, “is the leader in clean-burning gel fuels, and fuel burning appliances. Our Pure Gel Fuel is the ‘razor blade’ which is available in select retail stores, online retail and through our subscription plan. You basically pop our fire fuel can into our fire bowl or fireplace and enjoy. Each TerraFlame fuel can generate 3 hours of warm, ambient , golden flame for about three hours and costs about $6. And they are food safe, which makes them perfect for Smores.”
ModaConcrete™, on the other hand, sells architectural precast concrete products that are designed to create fashionable and beautiful hardscape environments, sold and fulfilled factory direct to trade and design / build channels.
The TerraFlame brand designs and markets clever consumer products, while ModaConcrete overlaps from home owner to the trade. Both brands produce great products, but the real innovation is in what Lenny has done to grow the company by a truly astonishing margin in the two short years.
“The key is to build a capable and scalable systems foundation as early as possible”, he says, “a functional ERP for supply chain, manufacturing and inventory management.” Tying it all together is Cin7.
Cracking the cool consumables market without going up in smoke
When Lenny bought the company, it had a couple of “really cool” products that were getting good traction in retail. But, beneath the surface, big cracks had formed.
The products might have been good, but revenue was nowhere near the level they’d expected it to be. It was difficult to fully understand the true product and operating costs with little visibility between manufacturing and fulfillment. Compounding the problem was that the operations were in a very raw state. Before Cin7, the company didn’t really have any inventory management — not even the basics.
“There were no systems,” Lenny says. “It was napkins and spreadsheets and nobody knew what was going on operationally. They were looking at things without understanding the true cost of goods, because they really had no way of doing that. And filling more orders, means throwing man hours towards more manual entry. None of it was scalable.”
ModaConcrete and TerraFlame needed to find a hard fix — fast. And from previous experience, Lenny knew exactly what they needed. The only problem was that the kinds of ERP systems he’d worked with prior required significant time and capital resources, a huge investment for a company at this early stage.
“We needed to find some kind of effective ERP system that we could use to not only manage our inventory and manufacturing, but also integrate our EDI and forecasting,” Lenny says.
They considered a few other options — Lenny’s previous company had run a substantial NetSuite instance, with its own internal development group. But being new and running on a relative shoestring, the company didn’t have the time or budget to support that kind of deployment. Eventually, his search led him to Cin7.
“When we found Cin7, and started seeing the capabilities and features, we were very surprised and impressed with the functionality and the breadth of what the system could do.”
Today, ModaConcrete and TerraFlame are using Cin7 from the beginning to the end of the product journey — and it all starts with manufacturing.
ModaConcrete has a solid foundation in Cin7
About 60 percent of ModaConcrete and TerraFlame’s business is products that they manufacture in-house, so visibility is critical. And before Cin7, “it was Quickbooks and spreadsheets,” Lenny says. “People would eyeball everything from mix design to sell through and that was it. There was no inventory control, no BOM management or production management, no raw material tracking, nothing”
To manage the manufacturing, ModaConcrete and TerraFlame are using the Bill of Materials (BOM) functionality of Cin7.
“We’ll design a new product, test it, create 3D models of it, develop the mold set, then it’s on to filling, casting and finishing the parts,” Lenny says. “We have several product types and about a dozen different concrete mix designs, depending what the products are for — and we set up those mix designs as BOMs in our system.”
Essentially, every raw material that goes into making a new product is measured and tracked in Cin7 via the Bill of Materials. When the raw materials are combined into a product, that too is tracked in Cin7, where the new product can be added to inventory even as the materials used to make it are subtracted. This simplified manufacturing process management is standard in the Cin7 software.
ModaConcrete is also making use of Cin7’s Made to Order functionality. One of their bigger sales channels is B2B sales direct to trade stores, construction companies, and job sites. Customers can visit ModaConcrete.com and select from a range of products, sizes, shapes, and colors.
This order information goes into Cin7, which tells the manufacturing operation exactly what to produce. Behind the scenes, ModaConcrete has ‘blanks’ ready to be modified into the exact items the customer wants, and once items are finished and shipped, the customer gets notified that their order is on the way. No matter whether a customer is big or small, Made to Order means they get exactly what they’re after, every time. “Understanding Cin7 Made to Order has enabled us to build up preliminary stock to convert into finished goods a lot faster than trying to make them from scratch every time,” Lenny says.
For a manufacturer, operating with this level of inventory control has huge advantages. Material costs can be carefully managed, and forecasting requirements gets vastly easier. Operations know where everything is, how fast it’s being used up, and when products will be ready to be sold. Manual inventory tracking tasks are reduced, and relieved of operational overhead, staff can get on with the job of actually making and shipping products.
For ModaConcrete and TerraFlame, this was an increase in visibility by many orders of magnitude. Now, they have a clear understanding of costs from manufacturing to finished goods to shipping. “Now you can see what your true cost is, and based on that, you can make intelligent decisions on what you’re going to do,” Lenny says.
Native EDI unlocks the freedom to scale
The other big item on Lenny’s agenda was EDI. First created in the 1960s, Electronic Data Interchange is a technology that allows the automated, computer-to-computer exchange of business information. It might be old, but it’s still one of the most-spoken languages of business — and if a company can’t speak it, it’s missing out.
Cin7 is one of very few inventory management systems with native EDI integration capability, and it’s the secret weapon that’s allowed ModaConcrete and TerraFlame to grow as rapidly as they have, with their wares now available in all the biggest US retail outlets, including Target, Costco, Williams Sonoma, Amazon and more. It’s been a huge leap for the company, compared to how things were done before.
“When we bought the company, we were barely doing 300 orders a week over multiple platforms, and as you can imagine, everything was manual,” Lenny says. “Every order required at least four manual touches. Staff had to download the order from each partner portal, enter it into Quickbooks, enter it into the warehouse ship requests, manually create the label, and then enter shipment tracking back into the portal, to close out the order process. The previous thinking was that scale required more people to work faster and harder to keep up with the paper pushing.”
But all that was about to change. Once the company implemented Cin7, integrated ShipStation, and set up barcode scanning and labeling at the factory, things got much more efficient. They had a better system, instead of trying to make a broken system work harder. And after activating Cin7’s EDI capability, things went to another level again.
‘I’d say that we multiplied our throughput by seven times. Specifically the same small team that struggled to supply 300 orders per week, can comfortably handle up to 2000 orders per week today,” Lenny says, casually. “And now we’ve got that EDI rolling, we won’t bring on a customer unless they’re EDI capable and integrated with our system. We rarely accept non-EDI integrations or orders.”
It’s a bold step, but it’s one that puts them head and shoulders above similarly-sized product companies — and on the same playing field as the biggest companies in the United States.
“There’s not a lot of companies with less than $10 million in revenue requiring EDI compliance with their trading partners in order to drop ship for them, just because most of them don’t have those capabilities,” Lenny says. “But it’s these capabilities that are most important, because they give us the ability to scale. I think that’s the most important thing that came from Cin7.”
Right now, ModaConcrete and TerraFlame are managing 16 EDI connections, end to end, in Cin7. They’re managing Costco, Wayfair, Lowes, Home Depot, all the major Internet retailers, as well as some brick and mortar retailers. They’re also managing inventory in four different locations, across two different product lines, and two direct to consumer websites, as well as a third party Amazon presence. It’s all being done with Cin7.
“It gives us the ability to operate on the level of a much bigger, more capable company, despite being a small operation,” Lenny says. “We have a 10 person team in-house in Southern California where we do sales, marketing, and web strategy. And we have 60 people at our factory in Tecate. Cin7 enables that 10 person team to look and operate as a much more sophisticated company, when it comes to our trading partners.”
We’ve got control over the business. We can see what’s going on. We can order a lot more effectively. With Cin7, we have our inventory under control, and we know where things are
Lenny Vainberg, CEO, ModaConcrete & TerraFlame
With Cin7, ModaConcrete and TerraFlame’s future is bright
Pare back the varied and complex ways in which Cin7 is being put to use at ModaConcrete and TerraFlame and the reason for its success becomes clear: implementing Cin7 gave them the ability to see exactly what was happening in the business. It’s simple, but powerful.
“We further integrated Cin7 to Power BI to gain visibility into our business and trends, which allowed us to adapt to real time conditions and make notable adjustments to our operating strategy: from pricing to demand planning,” Lenny says.
“We’ve got control over the business. We can see what’s going on. We can order a lot more effectively. With Cin7, we have our inventory under control, and we know where things are.”
Now that the business is starting to function smoothly on Cin7, Lenny says they haven’t looked back. In fact, they’re looking to the future. What was meant to be an interim solution before stepping up to something bigger has become much more: the engine that’s powering their extraordinary growth.
“Originally, we thought it’d be an interim step, but now we look at it as a long-term solution for the company,” Lenny says. “Cin7 has enabled us to grow the business. When we pared it down, I’d say our real starting point was $500,000 in revenue when we started in ‘19. We are on a path to cross $10M this year, and look forward to new ways to expand reach and production in our model.
Lenny says he’d recommend Cin7 to any businesses looking to follow a similar trajectory. With its inventory management capability, combined with EDI support and simple integration to other best-of-breed software solutions, Cin7 doesn’t just equal legacy ERP solutions — it outclasses them.
“Cin7 gives you entry level NetSuite or SAP-level functionality, but with a much lower barrier to entry and a much more cost effective price point — and very powerful capabilities in the long run,” Lenny says. “And, because you are interacting with your accounting system as part of a hybrid solution suite, you are able to bring up your ERP without pulling everything down and starting from scratch.”
To most people, magnets are just what you use to pin your child’s latest artistic effort to the fridge. But there’s a lot more to these mysterious objects. Magnets, it turns out, make the world go round. They are integral everywhere, in pretty much every electronic device that exists, from headphones to computers to MRI machines.
AMF Magnetics is an Australian company that specializes in selling permanent — or “rare earth” — magnets. They’re now the largest supplier in Australia, with a range of something like 1500 products”
“It’s a very niche product, but it’s needed by all segments of society in one facet or another,” says Mark Kapo, owner of AMF. “ We’re very fortunate that we’re in this space.”
Mark wasn’t always in the magnet market. Before AMF, he owned restaurants. But after ten years in the hospitality industry, he wanted to try working on something less intensive. “We wanted a business that didn’t operate on the weekend, and was closed over the Christmas break.” Mark says. This, he reckons, made the rare-earth magnet business particularly attractive.
AMF was an established business that had been running since the early 1980s, when Mark bought it in 2006. Back then, it was very much an “analog outfit,” as Mark puts it.
“I’m from the analog era. I’m old school. But I decided that we had to push the online side of things — we were running blind. It wasn’t easy to decide what to do.” Mark’s desire for a digital transformation was complicated by the fact that the magnet business was inherently complex. AMF supplies all kinds of customers — from enormous B2B orders of hundreds of thousands of items, to specialist medical equipment with extremely high quality requirements and tight deadlines, to casual D2C customers who just want some magnets to play with. On the supply side, there are multiple suppliers in several different locations. And the complexity grows even greater with AMF’s uncompromising approach to customer service.
“We deal with everyone equally, and we take it pretty seriously. Being from a family that’s very hospitable, service is important to me. That’s not just a word, it’s not made up. We actually do care. If the customer’s not happy, we’re not happy, and that attitude just runs through the whole business.”
Over seven years, Mark managed to grow the business, but he found that inefficient operational processes were holding things back. They had managed to digitize to some extent, and were working with MYOB desktop software to manage inventory and accounting — but they found it wasn’t up to the task.
“We had MYOB, and we deal in multi-currencies, and frankly, MYOB’s management was too slow to go into the cloud and work with multi-currencies. That really held us back,” Mark says.
“But all that said, I was very comfortable with it, and it’s pretty scary transitioning from a system that you know, to one that you don’t know how to navigate.”
Even though he didn’t know for sure what the business needed in terms of its digital transformation, Mark knew how to find out. He made two particularly smart choices: hiring an exceptionally talented in-house marketing and IT team with modern software skills, including a new Marketing Manager (later CEO) — and working with external experts, including SMB Consultants.
The right hire can fire up your business
As the CEO of AMF Magnetics, Catalina Rodríguez is responsible for every aspect of business’ day-to-day operations. With an impressive resume including Deloitte Colombia, Catalina says she didn’t know much about the magnet business to start with.
“Before joining AMF I didn’t know that almost everything in this world had magnets — airpods, doors, medical devices, cars, speakers and even the superhero costumes in Marvel movies!” Catalina says.
But after sticking around a bit, Catalina learned quickly. She led a crack squad of developers, IT professionals, customer service team members, and external consultants to get AMF running as well as it possibly could, and one of the main steps she took was building a team to transition the business from MYOB to Xero.
With Xero as the accounting system of record, things were already running more smoothly across much of the business, with one exception: inventory management. Xero, by design, is not inventory management software, and Catalina and Mark both knew that to really power up the business they’d need to couple Xero’s powerful accounting capabilities with a best-of-breed inventory management solution.
To find the right one, they turned to SMB Consultants, who recommended Cin7 after an in-depth scoping session where they took time to understand AMF’s particular business requirements.
“AMF were using a server-based system called FileMaker before they came to us,” says Deepak Stevens, an integration expert at SMB Consultants. “Our job was to understand their needs, and recommend a platform that would set them up for the next ten years at least. It was quite clear that Cin7 would be a good fit for AMF Magnetics, because we were confident the system would be able to adapt to any specific needs they have.”
After the initial scoping session, SMB Consultants put together a proof-of-concept — Cin7 running to AMF’s specific requirements.
“SMB advised us that Cin7 was a perfect fit for where we wanted to take the business in the future,” Mark says. “We wanted to optimize email marketing, social media, and paid advertising, and we needed our websites to work at their very best in order to do that. And we needed the inventory system live and helping us with the accounting side of things. Cin7 covered a multitude of these areas, which other systems we looked at didn’t do.”
Working with the SMB team, Catalina and the AMF team hit on a hybrid solution. Together with another consultant out of Sydney, they integrated Cin7 with Xero, and built a custom integration between Cin7 and Shopify that suits AMFs diverse customer base and specific operational requirements. Thanks to SMB’s expert guidance, and the understanding gained through the interactive proof-of-concept, all the moving parts fit together seamlessly.
“When we did Cin7, I was a bit scared. It was going to be a big change. But to be honest, the transition was very easy,” Catalina says. “The proof-of-concept was really good, because it helped us mitigate the risks, and showed us the impact the new platform would have for the business. It was done on a weekend, and in one or two days, we were operating.”
It’s all seamless with Cin7. Orders are coming in 24 hours a day. While I’m sleeping, wherever I am in the world, there’s an order popping through. And the staff just go to work, pick it up, and start packaging it. Cin7 was really transformational.
Mark Kapo, Owner, AMF Magnetics
Hybrid approach works wonders
In just over a year since adopting Cin7, and implementing their custom-built Shopify integration, life has gotten a lot easier for both the owners and operators of AMF Magnetics.
“It’s all seamless,” Mark says. “Suddenly, we’d gone from this clunky system of typing all the invoices and printing them out. Now, orders are coming in 24 hours a day. While I’m sleeping, wherever I am in the world, there’s an order popping through. And the staff just go to work, pick it up, and start packaging it. It was really transformational”
Working with international orders, multiple currencies, and multiple websites is now effortless. Cin7’s flexibility means that they can tweak their inventory system of record to work the way they need it to. Catalina and Mark talk about the multiple successes Cin7 has enabled, in everything from using its Bill of Materials and virtual stock functionality to push products to Ebay, to changing their inventory accounting method from LIFO to FIFO.
“What I like with Cin7 is the flexibility,” Catalina says. “We did look at other inventory management systems, but they didn’t have that flexibility that Cin7 gives you.”
AMF says their move to Cin7, and the powerful automations they’ve put in place with SMB’s help, have saved them hundreds of hours, made their systems more efficient, and enabled them to move more product and grow faster.
“Reconciliation used to be quite a painful process, when dealing with multiple websites and sales channels, but getting that into one system has saved at least an hour a day,” Mark says. “Cin7 has allowed us to put more products on more sales channels. And the connections between Cin7, Shopify, Xero and Hubdoc are fantastic for accounting.”
Moving to this modern software stack with Cin7 at the center has added up quantifiable time savings across the business.
“In terms of the savings we made, we’ve almost doubled our sales without really increasing our headcount,” Mark says. “And we’ve done that because of this fantastic software, which I might add, is itself always evolving.”
CEO Catalina agrees. She says that before Cin7, simply reconciling sales across two brands, multiple Shopify websites, and other sales channels like Ebay would have taken a full half-day. “With Cin7 we can do all the reconciliation of all the websites and marketplaces in one hour. Also, before we were manually updating the inventory on the websites, needing to export and import spreadsheet files. Now, it all happens automatically.”
Mark says that thanks to Cin7’s deep level of integration with Shopify, they’ve been able to swiftly spin up new websites with almost no effort or time required.
“The beauty of Cin7 is that it integrates so well with Shopify,” Mark says. “When we moved to Shopify Plus, we could automatically put seven or eight websites straight into that platform, integrated with Cin7. And the time saved there, in terms of getting to market, was just phenomenal.”
Support, too, has been stellar. Whenever AMF Magnetics needs something, they have multiple sources of help to hand. Deepak’s depth of expertise is always there, and so is the Cin7 support team.
“I think I speak to Deepak every week!” Catalina says. “I have him in Slack. There’s always something we want or need to know. And the Cin7 call center is really, really fast and very helpful.”
AMF Magnetics say they’ll be sticking to Cin7
Mark and Catalina say that having a system like Cin7 to power your inventory isn’t just a nice-to-have. Today, it’s business-critical. Mark, with decades of pre-digital business experience behind him, says that if you’re a product seller without inventory management software, you’ll be left behind.
“This transformation from the analog world to the digital world is so amazing, but if you don’t make an effort to understand it, you’re going to be left behind and your business will be less and less viable.”
In fact, Mark says his only regret is not going with Cin7 sooner.
“Several years ago, we actually got someone in who advised us that we were looking for a Xero and Cin7 based system, and I wasn’t ready to go down that road, because I’m old school,” Mark says. “I didn’t have the experience. But if I’d listened to him, we’d have been far further down the road of digitization.
Likewise, Catalina says that an inventory management system — like Cin7, DEAR Systems, or Cin7 Orderhive — is a requirement for efficient business. And she wholeheartedly recommends taking on a Cin7 Expert like SMB Consultants to help make it a smooth move.
“If you want to grow the business, if you want to do Amazon, Ebay, you really need that level of integration,” Catalina says. “And if you’re deciding to migrate to an inventory system like Cin7, accept it’s going to be a big project, and having an external consultant is going to make that transition smooth.”
At the end of the day, AMF Magnetics say they’ll definitely be sticking with Cin7, and they’ve got a list of reasons why other companies should find the platform attractive.
“From my point of view, all these various platforms and services — Cin7, Shopify, Xero, Hubdoc, SMB Consultants, they’re all integral,” Mark says.
“They’ve allowed us to create a seamless system where a client can place an order on their phone, their computer, wherever, and we just pick it up and start putting it together. The freight company turns up, picks it up, and it’s gone. And we do that every day. We don’t wait a week to do an order — it’s done on the day. With Cin7, everything’s instant.”
Electronic Data Interchange (EDI): The electronic exchange of business information using a standardized format; a process which allows one company to send order information to another company electronically rather than by paper or email.
The top 30 retailers in the US, UK and Australia will buy over 2 trillion dollars of products from their suppliers this year. Are you getting your fair share of these purchases? Do you have the EDI technology to be a great supplier to these retailers?
Imagine if Walmart wants to order $100,000 of products from you. Which type of supplier are you? Type 1 or Type 2?
Type 1 suppliers – You’ve adopted a robust inventory and order management system that has a built-in EDI connection direct to Walmart. When Walmart needs to order from you, the purchase order is immediately received electronically by you for fulfillment because the required commercial documents have been coordinated between both parties ahead of time. And, as an added bonus, your inventory system has a seamless, bi-directional integration with your accounting software, so all of the appropriate journal entries are made and your stock count has been updated, all in real time. Supplier type 1 has a fully automated sales workflow designed to sell fast and scale over time.
Or, are you type 2? The Walmart procurement rep has to manually complete your required form fields by navigating a PDF purchase order template, double check it for accuracy, and email it to you. Then your employee has to email the procurement rep several times to clarify the order details before manually entering the PO information into an Excel spreadsheet, accounting system or inventory tracker without making any mistakes. 4 or 5 days later, the order is ready to be fulfilled. As you may already know, Walmart will stop doing business with Type 2 sellers after their first experience. So, there are very few type 2 sellers left in the world.
Wholesalers and distributors who sell products in bulk to retailers have a vested interest in streamlining the sales process as much as possible by leveraging the latest advances in transactional sales automation.
Electronic Data Interchange (EDI) is the electronic exchange of business information using a standardized format; a process which allows one company to send information to another company electronically rather than by paper or email.
EDI software provides built-in templates that are used to establish unified field formats before transferring data between vendor and retailer systems, making repeat orders a snap.
EDI is an asynchronous data transfer technology that uses a file-based, batch transfer model. The standardization levels for EDIs have matured and been accepted almost universally. Experienced EDI providers maintain these standards and customize them to meet industry-specific requirements.
Adopting an inventory and order management software solution that integrates seamlessly with accounting software like QuickBooks or Xero and that offers a full service, built-in EDI capability with hundreds of major retailers is the key to quickly growing a flourishing wholesale distribution operation.
The benefits of EDI to wholesalers and their retail customers are numerous.
Retailers who can predictably work with distributors that reliably fulfill electronic sales transactions will order more products, more often, engendering loyalty for years to come.
Wholesale sellers that offer electronic order processing and retailers who take advantage of it can both cut staffing costs.
EDI shortens the initial sales transaction, shaving days of admin work off of fulfillment time that may already be delayed due to supply chain disruptions.
Electronic order processing reduces incidents of human error resulting from manual data entry and paper-based record keeping.
Wholesale sellers that choose inventory software with hundreds of pre-built EDI connections see their operating expenses shrink and sales grow exponentially. With the right inventory and order software, wholesale distributors enjoy the following:
Secure, industry-compliant electronic connections that speed sales transactions compared to paper or email-based order processes. The faster a retailer can transact business, the more business they’ll bring you.
Retailers that prefer to do business with you over your competitors who still rely on manual transactions and can’t provide the same simplicity and immediacy that you can with built-in EDI.
Customized and automated workflows that minimize error risk, increase sales volume and lower staffing costs. When ordering is easy, retailers order more often.
Dropping that expensive third party EDI provider. It’s a much better idea to go with a comprehensive inventory management solution that has all the EDI connections you need ready and waiting.
Being directly connected to your third party logistics provider (3PL) warehouse the way you need to be. EDI connections to 3PLs streamline and automate fulfillment workflows and make the ordering process transparent from download to dispatch.
Quick and efficient electronic exchange of other types of required business documentation with retail trading partners. These include invoices, order receipt confirmations, transaction updates, order status notifications and detailed shipping status updates.
Request a demo of Cin7 today to learn even more about the advantages of an inventory and order management system with full service, built-in EDI.
For a deeper and more comprehensive understanding of EDI, check out our extensive EDI resource here.
The next time Walmart, Target, Tesco, Costco, or any large retailer opens the door for you to sell to them, will you be ready?
Technology has drastically improved how we interact with the world. Transportation has evolved from animal carts to fast cars; data transmission has changed from postal letters to instant emails. With the advent of the Internet, the world has turned into a connected village.
In such a connected world, your business needs to be able to share relevant information with stakeholders like suppliers. Thanks to technology, this process can be streamlined using EDI. You can electronically share information about purchase orders, invoices, and status information with your stakeholders using EDI.
In this article, we will discuss what EDI means and what challenges you may face while using EDI for your business. Let’s get started.
What is EDI?
EDI stands for Electronic Data Interchange, and it facilitates the computer-to-computer data transfer between two (or more) parties. In layman’s terms, EDI is similar to a chat messenger that delivers information from your device to your friend’s device.
The parties that exchange information through EDI are EDI trading partners. EDI software allows its users to create templates so that they can standardize documents shared with EDI trading partners.
Suppose you integrate EDI with your ERP (Enterprise Resource Planning) tool or inventory management system (IMS). Once complete, your EDI can automatically fetch the necessary documents from the ERP/IMS database and send it to trading partners as required. This way, you do not have to create documents from scratch.
In the absence of EDI, businesses had to rely on the postal service, faxing, or email all of which had drawbacks. Let us understand EDI better with the help of an example.
John runs an apparel business, and he replenishes the inventory by ordering goods from David – the manufacturer. In the past, his purchase manager would draft a purchase order, print it, and then postal mail to David to reorder stock. The order would be received by David’s sales representative, who would manually enter the items being ordered along with the respective quantity into the system to finalize the sale.
The process seems lengthy and time-consuming, right? With EDI, sending information takes seconds rather than its postal counterpart – which can take days (even weeks!).
John’s purchase manager simply needs to add order information – product specification, quantity – in his EDI software, which will be automatically forwarded to David’s (manufacturer) EDI software. David can easily integrate the EDI tool with his order management system, such that an order can be directly placed when John sends a purchase request through EDI.
It is evident that EDI can streamline the purchase process which is better than doing it manually. The manual process also has room for many errors; for starters, the sales representative can enter incorrect order quantities into the system.
EDI not only saves your processing time, but it also helps in boosting the accuracy as it minimizes human error.
EDI also brings labor cost savings, as you do not need to incur the charges of printing the order details and the cost of postal handling/faxing/email the documents. Even the recipient does not need to endure the hassle of sorting and storing the physical copies for the record.
Common EDI challenges
Now that we are clear about the use and benefits of EDI let us also discuss the challenges faced while implementing EDI.
#1 Compatibility with trading partners
Deciding to implement an EDI system involves revamping your database. This challenge can multiply if you choose to create and administer the EDI in-house. Even after successful implementation from your end, the challenges do not end.
As EDI facilitates the transactions between trading partners in real-time, it is essential that your EDI system successfully synchronizes with their system for accurate data transfer.
Another hurdle could be that some of your suppliers may not be so keen to implement an EDI due to a lack of knowledge and hesitation about data sharing.
Apart from the stakeholders, it is also essential to train your internal staff to work with the EDI system. You do not want your purchase manager to order 1,000 items instead of 100 accidentally! The repercussions of mistakes can be huge, and thus it makes sense to fully acquaint your employees with the relevant features of the EDI.
As the stakes are high, it is advisable to consult an EDI expert rather than trying to figure things out on your own.
#2 Standardized formatting
The complexity of EDI integration can be challenging when your trading partners customize the formatting guidelines to cater to their unique needs. For instance, the invoicing transaction code is referred to as EDI 810.
Some invoice fields are common across all trading partners. However, the partner may likely add some additional EDI segments specific to their business.
In such scenarios, compatibility can be an issue that can lead to transaction errors. Here the experience and support of EDI providers become crucial as they are experienced with handling such issues.
While doing B2G (Business-to-government) transactions, your EDI should be compliant with the document formats legislated by the government. For example, Since 2020, the majority of European governments have been mandated to accept invoices electronically. Even the federal German public bodies have stopped accepting unstructured invoices – PDFs, printed documents – and only accept e-invoices.
As your business expands, it is essential to comply with government standards to avoid penalties. The standards can be region-specific – like the VDA format in the German automobile industry – or industry-wide.
These are some widely adopted standards in the EDI industry:
UN/EDIFACT (Electronic Data Interchange for Administration) was devised by the United Nations in 1987. It created standards for the syntax and structure of the messages to ensure that EDI is compatible with multi-industry transactions.
GS1 is essentially a subset of EDIFACT, and it is widely used to standardize product data. It uses GS1 identification numbers to help identify each product, location, and trading partner. The GS1 identification numbers are usually in barcode format, which can be scanned to add the physical products into the database, and movement can be tracked.
You must also ensure that your EDI can accommodate various transmission protocols such as FTP, HTTP, SFTP, and AS2. AS2 (Applicability Statement 2) has gained popularity in the retail and consumer goods industry since its adoption by Walmart. AS2 is used to transmit EDI messages quickly, safely, and cheaply!
#3 Security considerations
Despite its wide adoption across various industries, some partners may still be concerned about implementing EDI due to the nature of information sharing.
These concerns may arise from various factors such as lack of trust and risk of information leak due to security breaches. International laws can further add to the challenges by introducing legal frameworks and data protection rules.
You must ensure that the information is shared via encrypted transfer protocols. It is best to discuss your security measures with your partners, to ensure that everyone is on the same page and comfortable with your business practices.
It should be noted that the sensitivity of the information varies, like your order data may not be as sensitive as the invoices (which can contain vital billing information). You need to take extra precautions while dealing with highly sensitive data – as with healthcare customers, for example.
A value-added network (VAN) is a hosted private network that is used to offer connectivity between EDI trading partners. It acts as the gateway to sharing documents between parties – in other words; it is like a digital postal service. You need to check the security certifications of your VAN network, like ISO 27001 accreditation.
#4 Rising EDI cost
EDI helps lower your operational costs and optimizes logistics; however, you need to spend to get started. A substantial investment to purchase the necessary infrastructure – hardware and software – for EDI transactions will be required. If you decide to build an in-house EDI, you also need a dedicated IT team for its maintenance.
If your EDI implementation does not go well, it could also tarnish your reputation amongst your trading partners. Your manufacturing vendors may even penalize you for incorrect ordering as it can impact their production lines.
To lower your costs, you can outsource to a cloud-based EDI system provider. In this case, you won’t have to invest in a dedicated set-up and transactions run in the cloud, leading to cost savings.
Additionally, a provider updates the EDI automatically, so it saves you from any hassle when scaling up.
The report further suggests that 16% of the orders placed in a month contain an incorrect price and 20% of orders are for items that are either discontinued or not available in stock. Surprisingly, 8% include a duplicate purchase order.
Such situations can be dealt with by adding EDI rules that monitor transactions for variables like price differences and PO validity. This way, the system can send alerts to your team whenever a discrepancy is found.
There are times when a manufacturer needs to increase the price of a particular product. Needless to say, it is crucial to alert the buyers so that they can alter their order quantity.
For instance, the purchase manager gets a specific budget (say $100) to order a quantity of goods. Presently, the manufacturer sells each unit at $10, so the buyer can avail of ten units ($100 budget / $10).
However, if the manufacturer increases the price from $10 to $20, the purchase manager will need to reduce the quantity from ten units to five units ($100 budget / $20). But if the manufacturer does not promptly inform the buyer about the price change, it could lead to disputes and damage their relationship.
Price changes are inevitable; to solve such issues, businesses use EDI 845 – the price authorization acknowledgment document. Vendors use it to communicate price changes to resellers. EDI 845 is used primarily in the pharmaceutical industry, but manufacturers and distributors also utilize it.
As your business operations scale, so does the volume of your EDI transactions. With greater volume, it can become challenging to avoid errors or spot missing fields. Popular EDI formats such as EDIFACT were not meant for humans to comprehend, and that is why spotting errors can be tricky.
Even if you somehow manage to do that, manual error inspection is time-consuming. Thereby, automating the error detection process can help you save time and increase your profit margins.
#6 Integration with your inventory management system
EDI should be flexible to adapt to your way of doing business instead of the other way around. The technical integration should allow you to use the formats that you prefer or commonly used by your trading partners.
Many businesses already use an ERP (Enterprise Resource Planning) system or inventory management solution to gain insights into their business processes. Look for an EDI that also integrates with your existing system so that you can directly process the EDI orders.
Instead of manually pulling the documents from EDI and then feeding them into your inventory system, you can do this in real-time by integrating them together. This helps you meet increased customer expectations.
#7 Offering transparency
As the complexities of the supply chain rise, the need for transparency between trading partners is more important than ever.
The functionality of EDI has evolved over the years. What started as a means to improve the B2B transaction process has now evolved into a tool that provides better inventory management.
You can adopt some EDI transactions that provide inventory information to boost transparency. EDI 846 can provide information about inventory levels, and EDI 214 offers buyers shipping status notifications.
With the right system, you can share alerts and notifications with your trading partners. Offering transparency ensures that information is not siloed and helps everyone to be on the same page.
We live in a period where the supply chain is constantly getting disrupted by various factors – be it pandemics or political factors. During such a period, investing in technology that can help optimize your supply chain – such as EDI – seems an obvious choice.
Implementing EDI can be beneficial as it streamlines your B2B transactions and provides much-needed transparency. Choosing the right EDI that integrates with your ERP can do wonders for your organization.
Vetting the best EDI is also vital as it contains sensitive information that can affect your business’s overall profitability.
To learn more about Cin7’s built-in EDI capabilities, request a demo.
In retail and wholesale sales, solid profits result from inventory that is closely managed. In this blog, we will discuss inventory valuation and accounting principles. We will cover why it is so important to value your inventory, different methods for inventory valuation, and how you should choose your inventory valuation method based on your business.
What is inventory, and how is it valued?
Generally speaking, inventory are goods that can be classified into 3 stages:
Items that are in production
Goods that are ready for sale
Based on your business needs, internal accounting staff may need to assign value to inventory and classify it as a company asset since inventory can turn into cash in the near future. In order to accurately value your company, all your company’s assets may need to be assessed.
When to classify inventory as an asset
There are two methods of determining income and expenses for accounting purposes: cash accounting and accrual accounting.
According to the Internal Revenue Service (IRS) if your business is holding inventory, then you are required to use the accrual method of accounting.
In accrual accounting, a transaction is recorded when it is earned, which is triggered by generating an invoice or receiving a bill. This is why it is essential to track your inventory along every phase of the business cycle.
However, the 2017 US Tax Cuts and Jobs Act states that “if your business has gross receipts of less than $25M, you can treat your inventory as “non-incidental material and supplies.” In layman’s terms, this means that the items in your inventory need not be valued and considered as assets of the company as they are bought for resale. In this case, you can use the cash method of accounting.
Inventory valuation method
At the beginning and end of the fiscal year, inventory valuation is a must. For valuation purposes, you must:
Apply Generally Accepted Accounting Principles (GAAP)
Clearly reflect your income
Maintain consistency from year to year
Since inventory moves among different stages in your organization, it’s challenging to track all the costs of individual items. GAAP provides businesses with helpful guidelines to properly evaluate their inventory.
Different methods of inventory valuation
A company can choose from various methods to determine its inventory costs suggested by GAAP. GAAP refers to a standard set of accounting principles that have been issued by the Financial Accounting Standards Board (FASB). GAAP suggests that businesses use one of two different inventory accounting methods – first-in-first-out (FIFO) or last-in-first-out (LIFO).
FIFO stands for first-in-first-out. It is a method of inventory management and valuation in which goods produced or acquired first are sold, used, or disposed of first. In other words, goods are sold in the order they were received and subsequent shipments of the same item go to the back of the line.
For reporting purposes, FIFO assumes that assets with the oldest costs are included in the income statement’s cost of goods sold (COGS). So, if you sell a product, the cost of goods sold by using the FIFO method is the value of the oldest inventory. FIFO is one of the most popular in inventory valuation methods.
Using the FIFO method has some significant advantages:
It is more realistic because most businesses ship older stock first to avoid depreciation of value or spoilage.
FIFO increases the value of your purchased inventory and company net worth in times of inflation. As a result, you apply a higher asset value.
Your operational reports are always accurate. As you are selling the oldest items first, your balance sheet will always show the actual cost price of the inventory.
LIFO stands for last-in-first-out. It is a method of inventory management and valuation in which goods produced or acquired most recently are recorded as sold first. In other words, goods that were just received are accounted for ahead of stored backstock of the same item. The cost of the newest products is the first to be accounted for as the cost of goods sold (COGS), whereas the lower price of older goods are counted in inventory.
Some accountants in the US often advise using the LIFO method for your inventory accounting when you have stock with frequently changing costs. Using LIFO as a preferred method for such scenarios helps match the latest cost of inventory with the sales revenue of the current period. This can be a more straightforward approach for initial inventory valuation as well as for tax filing purposes.
Unlike FIFO, LIFO has some disadvantages:
LIFO brings taxable income down when your cost price rises, but your profit will turn out significantly lower.
If, in the near future, you plan to expand your business, not all countries allow a LIFO valuation.
LIFO is not realistic for companies that sell perishable goods. Leaving the oldest inventory sitting idle could risk spoilage, leading to losses.
Example of FIFO
Let’s understand how FIFO is used to calculate Cost of Goods Sold (COGS).
Buys an Item
Buys the same item after inflation
Sells an item for $175
In the FIFO method, when calculating profit, its initial/oldest purchasing cost is subtracted from its selling price to calculate the reported profit.
Example of LIFO
The same example used earlier can be used to show the LIFO method for calculating the cost of goods sold (COGS).
Buys an Item
Buys the same item after inflation
Sells an item for $175
In the LIFO method, when calculating profit, the most recent purchasing cost is subtracted from its selling price to calculate the reported profit. As you can see, using the LIFO method for inventory valuation and accounting lowers your return profit.
Differences between FIFO and LIFO
FIFO or LIFO are the methods that companies use to assess their inventory and calculate profit. The amount of profit a company generates affects their income taxes.
The differences between FIFO and LIFO are shown below.
The first-in-first-out or the FIFO method assumes that the oldest products in a company’s inventory are sold first.
The last-in-first-out or the LIFO method assumes that the last item of inventory purchased is the first one sold.
No restrictions by GAAP or IFRS
IFRS forbids LIFO method
In the FIFO method, the number of journal entries decrease
In the LIFO method, the number of journal entries increases
Impact of inflation
Decreases the COGS and increases the net profit
Increases the COGS and decreases the net profit
Which method is better?
We can say with certainty that the higher the cost of inventory, the lower the profit and the tax rate. The lower the cost of inventory, the higher the profit and the tax rate.
To know which method is best suited for your business, you need to look at the way your inventory costs are changing.
If your inventory cost is increasing or is likely to increase in the near future, LIFO can be better. Because the cost of goods is higher, you will benefit from the lower taxes.
If you feel that inventory cost could be decreasing in the near future, FIFO is the best option.
If your preference is to accurately assess your inventory cost, FIFO is the better option. This is because FIFO operates on the assumption that the older and less costly items are usually sold first.
GAAP/IFRS regulations for FIFO and LIFO
Generally Accepted Accounting Principles, sets the standards for accounting procedures in the United States. Under GAAP, both FIFO and LIFO are allowed.
However, International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Body (IASB) does not permit use of the LIFO method.
Outside of the US, most other countries follow the rules laid down by the International Accounting Standards Board (IASB). This is the reason why most US based companies use the LIFO method for local financial statements and switch to the FIFO method for their overseas operations.
If you ever decide that it would be ideal for your business to switch from the LIFO method to the FIFO method, you need to file a FORM 970 with the IRS. You are allowed to go back to LIFO only if the IRS gives specific permission.
In a nutshell, we have learned about inventory valuation and its importance in business to accurately determine the total value of all your assets and liabilities. While we have seen both FIFO and LIFO methods of inventory valuation, one thing is clear. No method is a foolproof solution for your business. Both methods have their pros and cons. As such, you should choose the method that best suits your business. If you are a firm that operates internationally, FIFO is the best method outside the US because the LIFO method doesn’t meet compliance requirements in most countries.
Cin7 was built with modern businesses in mind and only supports the FIFO method. Cin7’s inventory and order management software offers a cloud-based solution that integrates all your sales channels into a single platform. Cin7 provides advanced automation processes to create seamless transactions centered around a positive customer experience.
Ditch the spreadsheets and stop manual data entry. Reach new markets with Cin7’s inventory and order management system. Check out our product overview video here.
In today’s economy, small to medium sized businesses are competing with global conglomerates. Efficient inventory and order management is one way for solopreneurs, entrepreneurs, and small business managers to level the playing field and grow their brand.
Inventory management functionality is what fast-growing businesses need to stay competitive. This article is your definitive guide to inventory management to scale your business efficiently and effectively.
What is inventory management?
Inventory management is the process of ordering, storing, using, and selling business inventory. It is a system that tracks raw materials, components, and finished products to ensure enough supplies are on hand to meet the purchasing demands of the customer.
Inventory management is measured as inventory turnover. It reflects how often your products are sold within a specified time period. A measure of business health is maintaining adequate inventory turnover where your business does not have more products than sells – or excess inventory. Poor inventory turnover leads to deadstock or unsold stock/product.
Retail inventory management
Retail is a general term used to describe businesses selling physical products to consumers. Although not exclusive to retail, inventory management plays a more critical role in this industry over others.
There are a growing number of ways to sell products including the following:
Offline. A company uses a physical brick-and-mortar location to sell its products.
Online. A company sells its products over the internet using an ecommerce website or marketplace.
Multichannel. This employs multiple ways a company sells to its customers including an online store or marketplace or a physical location. Increasingly, companies also use social media sites to sell products. With multichannel selling, each channel operates independently of each other.
Omnichannel. This way of selling creates a unified, integrated experience for customers across all offline and online channels. Where multichannel selling operates independently, omnichannel is focused on a seamless experience for the customer.
Wholesale distributors sell products to other businesses rather than individual consumers. This form of selling is referred to as business-to-business (B2B) or B2B ecommerce. B2B selling can include any of the above methods.
Regardless of how a company chooses to sell its products, inventory must be managed. However, inventory management is different depending on the constraints of how products are sold.
Importance of inventory management
Good inventory management is an essential part of running a successful retail business. It provides a seamless customer experience, maximizes profits, and improves cash flow. A company’s inventory management system should optimize fulfillment and avoid shrinkage and waste. Without an effective system in place to manage inventory, retailers risk running out of products during peak demands from their customers.
Good inventory management includes the following:
Enterprise resource planning (ERP). ERP software manages key business operations including human resources, accounting, procurement, warehousing, production, marketing, and sales. ERP systems optimized for inventory management help maintain optimal levels of stock by combining the inventory needs of staff, customers, and suppliers.
Proper warehouse management. The barcode system, first-in-first-out (FIFO), and last-in-first-out (LIFO) techniques offer a clear picture of present and past inventory available with the company and optimize warehouse functions.
Managed sales operations. Sales is a continuous process that depends on manufacturers for goods or services. Efficient inventory management minimizes the risks of unavailability of raw materials needed in manufacturing.
Customer experience. Understanding the customer buying journey mitigates risks associated with insufficient stock to fulfill orders.
Shrinkage avoidance. Shrinkage results in inventory loss attributed to employee and customer theft, administrative or cashier error, vendor fraud, damage, and spoiling.
Cash flow. Inventory levels are key to maintaining a good cash flow that ensures all aspects of the business run smoothly. Excess inventory ties up cash in products that could rather be spent on operations including salaries and other fixed costs.
Fulfillment. Product availability is essential for fulfilling orders quickly. A good inventory system delineates where products are along the supply chain.
Types of inventory management
There are numerous types of inventory management systems. Which is best for your organization depends on budget, cost, utility, and accessibility.
Barcode inventory management
The barcode system is an automated and simplified way to manage inventory. A unique number or barcode is assigned to each product. Data points assigned to that number can include information about the supplier, the product, and the inventory or stock. When a product is sold, the barcode is scanned and inventory adjusted automatically. Additionally, management can find key inventory metrics by scanning the barcode to bring up the item on a computer database.
Continuous/perpetual inventory management
A continuous or perpetual system manages inventory in real time, recording changes in inventory at the time of the transaction. It uses radio frequency identification (RFID) to passively identify tagged objects (inventory) for tracking along a supply chain.
Periodic inventory management
This is a manual process used to determine the inventory at a particular time point such as end-of-day or year’s end. This form of inventory management is most time-consuming as it involves physically counting the products on the shelves. Periodic inventory management is used primarily for inventory valuation and accounting purposes.
Identify actual stock on hand and the inventory requirements for the goods sold to determine if gaps exist between demand and supply, and reasons for those gaps.
2. Analyze spending patterns and consumer demand
Market demand forecasting helps organizations estimate production quantity to determine what is needed to maintain adequate inventory.
3. Evaluate the cost involved
Cost of goods sold includes different expenses like warehousing, maintenance, bulk discounts, transport, and supply chain costs. Each of these needs to be well analyzed.
4. Identify the extent of process automation
It is not possible for each organization to completely automate the inventory management process. However, it’s important to identify those particular areas where automation is possible.
5. Inspect supplier’s performance and practices
The supply chain is critical for maintaining adequate inventory. Identifying any holes in the supply chain or supplier’s performance is necessary. And, if needed, identify additional or alternative suppliers.
6. Classify inventories into various categories
Products must be segregated into categories based on the product type, maintenance cost, customer class, or profit margin.
7. Set objectives for all inventory categories
Set benchmark objectives and goals to efficiently track and manage the performance of all inventory categories. This can identify any issues within each of the categories.
8. Prioritize the areas of improvement
Analyzing goals and objectives allows companies to prioritize improvement needs. Improvement prioritization should be based on the impact of problems identified. Implement a hierarchy to address those areas.
The final step in implementing a good inventory management strategy is consistent and timely evaluation to determine what changes and improvements are necessary to add value and create an improved customer experience. These changes can be based on a number of factors, most notably supply and demand.
Choosing an inventory management system
Which inventory management system is right for your business depends on a number of factors. Here are just a few things to keep in mind.
There are various signs you have outgrown a standard inventory system including inventory errors and constant over stocking. When you find you’re spending more time on manual, operational tasks than growth, it is likely time to automate your inventory process.
Prepare a list of “must-haves” for your inventory management system. Do you ship orders or use digital packing? Does your company process both wholesale and retail orders? Are you manufacturing your products? All of these affect which type of inventory management system is best for your company.
Customer support is essential for set-up as well as troubleshooting should things go wrong. Support includes phone, chat, and/or email contact. Consider support hours – is the support team available when you need support?
Ease of use
Determine your staffing needs and the technical prowess of your staff. Will the inventory management system meet those needs and ability levels? The system you choose needs to be easy to use as well as transferable between departments.
Prepare a list of must-have integrations, e.g., ecommerce platform, accounting, shipping, marketplace, POS, 3PL, etc. It’s essential that the new inventory system integrates directly without requiring additional applications, middleware providers, or software managed by third parties.
Your inventory management system will manage a critical part of your business. Finding innovation-driven software using the latest technology is vital.
Cin7’s inventory management solution for multichannel selling
Cin7 was built with modern businesses in mind. Its inventory and order management software offers a cloud-based solution that integrates all your sales channels into a single platform. Cin7 provides advanced automation processes to create seamless transactions centered around a positive customer experience.
Ditch the spreadsheets and stop manual data entry. Reach new markets with Cin7’s inventory and order management system.