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What is Supply Chain Forecasting and Its Importance? What are Quantitative and Qualitative Forecasting Methods in Supply Chain?

What is Supply Chain Forecasting and Its Importance? What are Quantitative and Qualitative Forecasting Methods in Supply Chain?

Supply chain forecasting is essential for businesses that produce things for inventory. To avoid an overcapacity situation, manufacturers will use material forecasting to generate the quantity needed to satisfy their clients. The projection must also be accurate. Financial catastrophe may result from failure to maintain a precise prediction. Forecasts are created for a corporation's final items, parts, and service components. The production team uses the estimates to develop the quantities, safety stock levels, and purchase order triggers. Therefore, the prediction should be regularly evaluated by management. It must consider information about potential trends and the internal and external environments to provide a more accurate forecast. What is Supply Chain Forecasting? To assist you in making the right choices for your company, whether it be about stock inventories, cargo booking, budget planning, or entering new markets, supply chain forecasting integrates data from the historical supply with insights and understandings about demand. The majority of supply chain forecasting is comprised of supply analysis. It entails analyzing supplier data to determine when you should place orders for their goods, whether they are finished goods or raw components that will be assembled further along the supply chain. Understanding how much of your product your consumers desire during any particular week, monthly or quarterly, may be determined by analyzing demand. This is impacted by several predictable variables, like seasons and holidays, and others unforeseeable, such as world events and natural catastrophes. Without a grasp of the future, supply chain planning is all but impossible. So how does an online company go about supply chain forecasting to make more accurate forecasts and judgments, given that an eCommerce logistics supply chain has many moving parts? Businesses of all sizes may employ various supply chain forecasting techniques without hiring a psychic. There is undoubtedly a forecasting technique that suits your demands, depending on the size of your company, the items you offer, and how long you've been in operation. You will discover the significance of supply chain forecasting as well as the most popular qualitative and quantitative forecasting methods in supply chain in this article. [contactus_gynoveda] 8 Reasons Why Forecasting is Crucial in Supply Chain Management Anticipating demand, supply, and price within an industry is supply chain forecasting. To forecast the future of an enterprise, one must look at the competitors, gather information from suppliers, and examine historical trends. Therefore, a supply chain manager should be proficient in forecasting, which involves a variety of abilities that one should develop throughout their career. Various benefits are mentioned below. Planning Techniques Forecasting significantly enhances the scheduling and planning process. A supply chain may stay competitive by tracking historical and present product demand. Demand Seasonal Variations Being able to anticipate and prepare for seasonal fluctuations in demand is only one of the many reasons supply chain management needs forecasting. In a similar line, demand forecasting in supply chain is extremely helpful for organizing promotional activities and product debuts, which are both crucial. In addition, predictions supported by evidence need less guessing, which is a relief. Forecasting Product Demand In a more general sense, supply chain forecasting enables the prediction of product demand in even the most particular circumstances. But, of course, no business can accurately foresee the future. Still, a company may come as near as feasible by relying on trends and making judgments based on previous and present facts, and a company may come as close as possible. Customer Contentment In sectors that focus on products, the understanding client wants is crucial. Orders with short lead times will be delivered on time if it is possible to foresee client demand. Additionally, this will result in a rise in consumer and supplier trust. Lowering The Safety stock Safety stock is, by definition, extra inventory kept on hand as a backup in case a product's demand rises. However, with forecasting, no more precaution is required. This frees up storage space, reduces stress, and saves time. Reduce Stockouts of Inventory Demand forecasting in supply chain management is crucial for JIT (Just In Time) systems and purchasing from suppliers with long lead times. In JIT systems, demand forecasting enables products to sit in storage for a shorter time, resulting in less money being lost than if products were to occupy warehouse space for a prolonged time. In addition, demand forecasting in supply chain is necessary for suppliers with lengthy lead times so that you may receive your items on time. Enhance Shipping Every step of the supply chain forecasting process is impacted by supply and demand. For instance, supply chain managers will have more time to guarantee that there are enough workers on hand to ship a specific product if they can estimate the demand for a particular product. Conversely, orders are delayed if there are not enough employees to fulfil them. Similarly, having an excessive number of employees leads to high labour expenditures. Improved Pricing By using price forecasting, a corporation regains control. The effects of price changes on a specific supply chain segment can be anticipated and managed appropriately. Challenging Factors in Supply Chain Forecasting Supply chain forecasting planning might be complex for your company due to several issues. These consist of various factors as discussed below- Adapting the Regulations Most of us felt the COVID-19 pandemic's effects on modifying legislation in the previous year or two, mostly overnight. As a result, your short-term projections may have been thrown out the window, for instance, if you suddenly needed to place a sizable order to prepare for decreased shipment frequency because one of your leading suppliers was in an area that was placed under lockdown for a while. Returns of Goods Businesses having an online eCommerce presence have massive potential because of the continued rise in popularity of online purchasing. However, because of rules governing the acceptance of product returns, your sales data may frequently advise you to place orders for goods that will eventually return to your inventory. As a result, you are left with extra inventory. To minimize overordering, many organizations now incorporate returns projections into their supply chain forecasting by employing machine learning and other technology to anticipate a returns rate. Trends This week's hottest new product will probably be replaced by something else within a few days due to how we utilize social media nowadays. Due to this, forecasting future demand may be difficult, allowing you to walk a narrow line between sitting on mountains of extra stock and losing revenue because you couldn't keep up with demand from customers due to a shortage of inventory. Seasonality Many businesses continue to make substantial supply chain forecasting mistakes at these times, even if they know when seasonal sales will increase or decrease and have the sales history to support that knowledge. Unfortunately, you fall into this category if you have nothing on your shelves a week before Christmas or are still selling off clearance items in March! Lead Times Among the events that might abruptly cause lead times to lengthen and leave you with stockouts while you wait for things to stabilize are natural catastrophes, pandemics, armed conflict, and trade wars. Database Sets Many companies continue to maintain separate databases for their online and offline transactions. If this is you, merging data from several Excel spreadsheets will take a lot of effort. You may also face poor forecasting and understanding of demand since you are making orders based on insufficient data. Forecasting Methods in Supply Chain Management System Supply chain forecasting is a method for comparing expected future demand to actual past demand. Demand forecasting in the supply chain is used for financial, logistical, operational, and sales planning and decision-making in the future. Instead of concentrating on numerical numbers, businesses analyze and assess the opinion of experienced personnel by utilizing quantitative forecasting methods in the supply chain. These methodologies anticipate short-term or internal forecasting based on departmental heads' summative input. On the other hand, the quantitative forecasting method uses numerical data and focuses on projecting patterns based on previous company data. This forecasting technique is reliable and beneficial for the business's long-term scenario planning. While quantitative data in consumer surveys are utilized to reflect the sales prediction, expert opinion within the firm aids in predicting an organization's internal parameters. Moreover, due to its simplicity and cost-effectiveness, small businesses use qualitative forecasting methods in supply chain. On the other hand, large companies and lean manufacturing are adept at applying quantitative forecasting. How to Utilize Supply Forecasting Methods Forecasting is a dangerous endeavour in and of itself, and the forecaster has a part to play in deciding which technique of demand forecasting in supply chain is appropriate. However, each of these approaches has a clearly defined purpose. Thus it is essential to carefully consider which approach is best given the current economic climate. The situational context of the prediction, availability of historical data, expected level of accuracy, knowledge of the pillars of demand planning, and the forecast's assessed value concerning the business are all crucial when using this approach. Therefore, evaluating them using the given parameters is essential before selecting a technique. Similar to this, the product's life cycle should be considered. Is the item durable or perishable? Does it stay on the shelves, disappear from the market after being dispersed to the intermediaries, or become outdated? Is the product at its peak of development or growth? Again, having reliable data on these factors will make selecting the best forecasting technique easier. Business managers must collaborate with forecasters/demand planners for forecasting to be successful. This will make it easier to determine the forecast's objective, how it should be understood and applied to the current circumstances, and the tactics and strategy for preventive purposes. Quantitative and qualitative approaches are the two categories in supply chain forecasting methods- Qualitative Forecasting Methods in Supply Chain The subjective judgement used in the qualitative supply chain forecasting approach is based on the views of both consumers and industry professionals. When there is no historical data, this approach is used. Various qualitative methods in supply chain forecasting are as follows- Expert Judgement The opinions of subject-matter experts in the field are considered to produce accurate estimates. Since it is independent of statistical data, it may be carried out without quantifiable data. Using this simple, rapid procedure, the team often modifies the projection's outcome to match its expectations. Market Analysis A corporate organization may do market research to help with its sales prediction. The company's employees or a research organization contracted to handle it may carry out this strategy. In any case, market research may incorporate techniques like telephone, survey, or in-person interviews, as well as questionnaires. Focus Sessions This is a well-preferred technique for supply chain forecasting in qualitative forecasting methods. It entails an open-ended discussion with five to ten individuals representing a company's target market. A moderator often oversees the participants' turn-taking and asks questions on how they see the brand, goods, slogans, designs, and related ideas. Participants are anticipated to offer thoughtful replies that reflect the viewpoint of the target market. Focus group talks may include rewards, such as money or any similar gesture in the form of free goods. Historical Comparison This supply chain forecasting technique looks at the past sales of a product similar to the one sold now to project future sales. In addition, it may be used to forecast how a new product or line of items will perform on the market. This is accomplished by utilizing the historical data amassed over time from a comparable product created by the firm or a serious rival. Delphi Approach This supply chain forecasting technique uses an iterative function to integrate market orientation with the opinions of a small group of specialists. The outcomes of these iterated combinations aid in creating the following parallel intersections needed to find a precise forecast. However, the expert opinions are acquired separately to avoid the effect of a dominant personality's perspective if a group discussion technique were used. Instead, ideas are gathered, summarised, and presented to the same experts by an outside party. The circle keeps going until a meeting point is reached, and new questions may be added. For long-term forecasting, this approach has proven reliable and successful. Panel Agreement With this supply chain forecasting approach, a company firm's members from all levels collaborate to create its prediction. All participants are free to express themselves because it is an open procedure. However, there may be sentiments of intimidation and the suppression of opinions on the part of the former because it often comprises participants from the lowest level of the organizational hierarchy to superiors. For instance, a sales manager who truly comprehends the market would hesitate to disagree with the president and vice president’s statements. Ultimately, the panel consensus procedure might not be entirely transparent, equitable, and trustworthy. Quantitative Forecasting Methods in Supply Chain When historical data is available, the quantitative supply chain forecasting approach is used, and unlike the former, it is objective to the extent that the data are actual. Various methods are listed below. Average Movement This time series approach uses calculations to look at data points by constructing average series from different subsets of the whole data. A sequence of numbers and a predetermined subset size are used in the formula. By subtracting the first number from the series and adding the value that comes after it in the subset series, the forecaster alters the average of the formerly fixed subset. This statistical approach is typically used to cope with changes that last only briefly, including technical, financial data analysis and GDP evaluation. Explicit Smoothing  This straightforward supply chain forecasting approach quantifies various conclusions based on the user's preexisting hypotheses, including seasonality. Then, the future is forecasted using an algorithm that uses historical data. In contrast to several other smoothing techniques, it yields a simple conclusion without requiring a certain minimum quantity of observations. Analysis of Regression This refers to a class of forecasting techniques that rely on data from other factors (dependent and independent). It relies heavily on the user's ability to use the data generation procedure. There are two types of linear regressions: simple linear regressions, which compare an independent variable to a dependent variable, and multiple linear regressions, which compare two or more independent variables to a single dependent variable. Adaptive Smoothing Using this supply chain forecasting strategy, a business organization may input several factors to determine every possible outcome from a particular business action or decision. There are also variable and statistical data analyses involved. In businesses with ambiguous quantities, it is typical. Visual Techniques Although a statistical procedure is involved, it is straightforward and helpful for the sales projection. Using this technique, periodic sales data for different years may be visually represented using meeting points created by free-hand line drawing. The minimum is determined by the distance between the line and the facts on the graph. Modelling with Econometrics This has enhanced the regression analysis. It entails doing independent regression calculations using an equation, variables, and data. Meanwhile, economic theories are included in the statistical approach to ascertain how one economic variable affects another. Life-Cycle Analysis This supply chain forecasting technique examines and projects a new product's growth and development rates. The model combines data that various market segments have accepted or rejected, including creators, early and late adopters, early and late majority, etc. The outcome is what is utilized to forecast sales for a new product. Benefits of Demand Forecasting in Supply Chain Management Your operations and the kinds of historical data, if any, that are available will determine the types of forecasting methodologies, you apply. Several techniques may be used, including quantitative forecasting, trend forecasting, and qualitative forecasting. To receive the benefits listed below, you can include one approach or a variety of forecasting styles into your business strategy and objectives. Meeting Increased Product Demand You may plan to enhance manufacturing operations to meet strong demand and prevent eCommerce warehouses from running out of stock by forecasting client purchase habits. In addition, you can switch distribution methods to accommodate high demand so that shop shelves can stock items as you outperform the competition. You can choose which places to ramp up production to meet fulfillment centers standards when you have several manufacturing facilities spread out nationwide. This technique enables you to effectively control distribution and transportation costs and provides additional cost savings for your supply chain. Reducing Inventory Waste The production of surplus goods is one of the most significant and expensive issues supply chain forecasting networks encounter. Products occupy precious shelf and warehouse space as consumer demand declines. You can better manage your inventory levels via forecasting procedures. Surplus inventory demonstrates an uncontrolled supply chain forecasting management system. More than just essential resources are wasted, which causes wasting resources, labour, and money on production. When the old items become obsolete, you will eventually need to divert your efforts towards acquiring products from merchants or relocating things from various warehouses into other storage facilities. Streamlining Data Collection and Inventory Management Systems Other advantages of supply chain forecasting include collecting and exchanging real-time data for improved operations. Every supply chain forecasting department uses inventory management systems to gather, analyze, and share data to reduce forecasting mistakes and enhance logistical capabilities. For improved management procedures, you have greater visibility and transparency with your suppliers, manufacturers, distributors, and retailers along the supply chain. As a result, you can streamline operations for improved inventory management and reduce transportation delays. It's important to remember that every department may contribute to data collecting. This way, a  crucial database about client needs and wants can be compiled, enabling you to foresee future purchase trends and adjust your procedures accordingly. Further, it can boost client retention and generate more income. Conclusion Management can deal with the changing market with the use of forecasting. A corporate organization will be able to forecast global supply chain trends that can be controlled to make the market operate in their favour by using reliable historical data or expert views. There are two types of demand forecasting techniques: quantitative and qualitative. It should be highlighted that there are no rigid restrictions on using any forecasting techniques. It may, if necessary, be modified to suit a business firm's specific requirements. A firm may also use two or more forecasting techniques simultaneously. Reap Benefits With WareIQ’s Accurate Supply Chain Forecasting  Businesses may use WareIQ to gather real-time data to gain a detailed and comprehensive view of their inventory in real-time. Companies may use this to optimize inventory, lowering the risk of having too little or too much inventory. WareIQ has streamlined how firms manage their inventory, from tracking assets to giving real-time information regarding inventory conditions and locations. WareIQ supply chain forecasting advantages- Boost Inventory Control With WareIQ A lack of current data might cause inconsistent supply and demand. Improved forecasting accuracy can lead to better business results when real-time data is employed. Real-time stock visibility is provided by WareIQ sensors, which may also automatically initiate replenishment orders as necessary. Due to fewer stockouts, improved inventory levels, and cheaper transportation costs due to products being supplied only when necessary, revenues are enhanced. Solutions from WareIQ give companies real-time access to stock levels, enabling them to respond rapidly to changes in demand and ultimately generate more revenues. Maintain Your Businesses Stock Levels You are compelled to alter your production plans when your inventory levels are low or out of stock, which eventually reduces your manufacturing capacity and raises your expenses. However, keeping extra goods at your warehouse locks in the money and keeps you from investing in your company's more lucrative areas. You may save warehouse space and money on operations by using WareIQ's supply chain forecasting to determine the ideal stock levels. Plan production More Effectively With WareIQ One of the most excellent methods to maximize output is to use WareIQ’s fulfillment services platform to collect inventory data and sophisticated analytics to evaluate this data. As a result, you have the chance to accelerate your whole production cycle when you set up your operations based on the anticipated demand. Furthermore, by helping companies create realistic projections for each product line, manufacturers can optimize production planning and promote departmental collaboration with the aid of WareIQ. While external cooperation offers insights into purchase orders, recurring predictions, supplier details, etc., internal collaboration assures greater access to historical data and market insights. Improve Your Business Strategies With WareIQ Based on demand forecasting, businesses predict sales and allocate resources. For instance, a firm might raise production if they anticipate greater demand for a specific product. Demand forecasting in the supply chain also aids in risk reduction and improved financial judgement, boosting profit margins, cash flow, resource allocation, and expanding growth potential. In addition, businesses may lower their operational costs and total spending by using WareIQ to obtain better visibility into inventory accounting. As a result, all strategic and operational strategies may be built based on WareIQ supply chain forecasting. [signup] Supply Chain Forecasting FAQs(Frequently Asked Questions) How does forecasting affect supply chain management?To assist you in making the right choices for your company, whether it be about stock inventory, cargo booking, budget planning, or entering new markets, supply chain forecasting integrates data from the historical supply with insights and understandings about demand. Why is supply chain forecasting necessary?By using accurate forecasting, you can make sure you have an adequate supply on hand to meet demand. An inflated inventory and excessive cost are the results of overestimating demand. Many devoted customers won't obtain the things they seek if demand is underestimated. What are supply chain forecasting's aims and objectives?Supply chain management's overarching goals are to add value, develop a competitive infrastructure, take advantage of global logistics, synchronise supply and demand, and track success.

June 27, 2022

Inventory Report: Definition, Use Cases and 10 Different Types of Inventory Balance Sheets for eCommerce Businesses

Inventory Report: Definition, Use Cases and 10 Different Types of Inventory Balance Sheets for eCommerce Businesses

Inventory is one of the key aspects of any eCommerce enterprise. It is the means through which they can achieve their central goal - to sell products and generate enough revenue to offset all the expenses that were incurred in terms of research and development, production, marketing, logistics and operations and have enough left to be profitable. Therefore, managing inventory effectively and efficiently also becomes a central task for retailers. One of the main ways to do this is to maintain a systematic inventory report that summarizes important details about the current status of the available inventory. In this blog, we will go into detail about inventory reports, what their use cases are, how to create one and the different types that retailers can use. What is an Inventory Report? An inventory report, also called a stock audit report, provides a detailed look at the available inventory that a business has during a specified period of time. They can either be drafted physically or digitally and contains information regarding the number of products and units that a business can currently sell, inventory that is currently ordered or will be ordered in the future and inventory that is utilised for internal purposes. An inventory report generally needs to consist of up-to-date information and visual cues such as graphs and charts, to accurately represent the number of units of a particular item that are available in stock. This helps businesses ascertain the appropriate amount of inventory they require during a particular time period and helps in preventing overstocking and understocking situations from occurring. [contactus_lilgoodness] Use Cases of an Inventory Report Managing Inventory Inventory management is a major business operation that requires the use of an accurate and legible inventory report. For inventory management to be successful, businesses require access to data and facts that can help them make well-informed decisions, and this is provided by a stock audit report. It can help businesses determine their reorder point and prevent them from ordering fresh stock too early, which could hold up capital, heighten the risk of damaged products and requires additional storage space. Conversely, it also avoids situations where fresh stock is ordered too late, which results in items running out of stock and the inability to fulfill customer orders.  Tracking Inventory Across Fulfillment Centers Keeping track of the amount of inventory in storage is an important task for eCommerce businesses, especially ones that are expanding rapidly and have inventory stored in multiple fulfillment centers in various locations. This can seem like an insurmountable task but through the use of an inventory report, every unit of every product can be easily accounted for. Additionally, it can help to filter inventory by date, supplier it was ordered from and product type, among others and can identify products that are damaged and need to be replaced. Categorizing Inventory At the manufacturing plant, inventory needs to be segmented into categories based on their completion such as raw materials, works-in-progress and finished goods as each category has to be valued for accounting purposes. Once the goods are dispatched and have to be stored in fulfillment centers, it is up to retailers to store their inventory as per their requirements. For retailers who deal in large amounts of inventory, trying to locate a particular product in an unorganised heap of boxes can be disconcerting. Alternatively, locating products that are neatly labelled and organised based on a variety of factors such as demand, price, supplier or type can speed up the order fulfillment process and result in less wastage of time, effort and manpower. How to Create an Inventory Report in 4 Simple Steps? Shortlist Reporting Topics  Shortlisting the topics that need to be tracked and mentioned in the stock audit report depends on a variety of factors such as the goals of the business, the industry it operates in, the growth strategy it employs and the type of products it sells. Different key performance indicators (KPIs) can be used for different businesses with varying goals. Retailers need to identify the ones that are best suited to their business and can paint a clear picture of their inventory currently in stock and that needs to be ordered in the future. Frame a List of Items After coming up with a list of reporting topics, retailers need to frame a list of items which can either be exported from their inventory management system or POS system, or can be listed manually. The list of items generally needs to contain detailed information that is needed for each product such as the number of units that are currently available, different varieties if applicable, serial numbers, pricing and anything else that will help to identify it and provide the insight that is needed. Create a Time Frame Choosing a time frame is critical to frame an accurate inventory report. Keeping up to it is arguably just as important because if all the KPIs are not measured during the same time period, it can create a vast amount of disparities in the stock audit report, which will result in a flawed summary of information that can lead to misinformed business decisions. Companies with a growing volume of sales will need to constantly refresh the data in their inventory reports to account for fluctuations in variable KPIs that could lead to a change in results.  Automate Wherever You Can Companies can automate a wide range of inventory management processes by opting to use an advanced inventory management software, including the tracking of inventory by receiving real-time updates whenever inventory is purchased or sold, across multiple fulfillment centers and eCommerce marketplaces. This enables the use of more accurate and fool-proof data recording, which can be used while framing the inventory report, which helps firms make efficient decisions. Additionally, these software solutions also reduce the amount of time, effort and labour that is required to complete various important tasks. 10 Types of Inventory Balance Sheets to Scale Your Business Customer Analytics Report A customer analytics report is a type of stock audit report that tracks various customer-centric metrics such as the geographic location that has the most demand, which customers have placed repeat purchases, the income levels and spending patterns of a company’s target audience and much more. This helps retailers assess patterns in terms of customer demand and which supply chain solutions are successfully tackling that demand and which aren’t, through which they can determine what practices are generating more revenue, repeat and new customers, and enhancing customer satisfaction, as opposed to others so that the most successful ones can be permanently utilised to capitalize on the momentum.  Shipment Trends Report An inventory report that tracks trends in shipping, delivery and warehouse management is known as a shipping trends report. These reports provide insight into various factors that affect delivery speed and efficiency, customer satisfaction and warehouse performance. This allows retailers to streamline any process that is causing a delay or that is not performing up to the mark. It also assesses a shipping aggregator’s performance in comparison to other services that the retailer has used, allowing them to identify which service is providing faster and better operations. Purchase Order Report A purchase order report is a type of stock audit report that tracks KPIs relating to the purchase of inventory from a supplier or manufacturer such as pricing, rate of on-time delivery, transaction details and much more. This enables firms to assess the performance of their manufacturing partner and can suggest ways to improve certain aspects that may be delaying the shipment of inventory to the relevant fulfillment centers. Companies can also determine when they need to clear space for incoming inventory and how much space they will allocate to the new shipment. Cost of Goods Sold (COGS) Report Cost of Goods Sold (COGS) is the total amount of expenses incurred in the process of manufacturing, selling and delivering a product to the end customer. A COGS inventory report is needed to understand the collective costs that a business has spent on the sales and distribution of its inventory and how to reduce the expenditure on certain processes. It also aids in managing taxes, identifying areas that can help in scaling the business and determining if retailers need to spend more capital in their operations or inventory management. Sales Report A sales report is a stock audit report that provides vital information about a company’s sales, cash balance and an accounting summary for each selling channel such as discounts, incomes, taxes and refunds. This helps businesses in identifying their best-selling products, locations that have the highest number of sales, slow-moving items and various trends that will help them improve their sales processes to generate more revenue. Inventory Forecasting Report The primary goal of an inventory forecasting report is to attain the optimum inventory levels that are required to fulfill orders, based on product volumes that a company is expecting to sell in a specified duration. This estimation is done by analysing historical sales data, previous promotional campaigns and any other factor that affect supply and demand, in order to provide the most accurate depiction of the future inventory that is needed by a company.  Stock Levels Report A stock level inventory report provides insights into products based on their risk of running low on stock levels and the rate at which they need to be replenished. This helps firms in establishing which types of inventory sell faster and need to be restocked more often depending on the sales channel and the fulfillment center they are stored in. This data assists in optimizing inventory levels and mitigating storage and operational costs, as the accurate amount of inventory will always be kept, in order to fulfill demand. Inventory Value Report An inventory value report is a type of inventory report that summarizes inventory based on the value of each product. This provides a look into the total value of all of a company’s products, the volume that is stored across all warehouses and fulfillment centers and the performance of individual products, based on their value, lifecycle, storage duration and turnover ratio, which will help companies understand which items need to be handled with extra care and how long their shelf life will be. Inventory Profitability Report Companies generally track inventory profitability in 3 distinct phases - trending profitability, listing profitability and SKU profitability. Trending profitability is an inventory report that shows the consolidated profitability over a designated time period. Listing profitability is an inventory report that summarizes performance data per SKU, by gross and unit margins. Finally, an inventory report summarizing the SKU profitability of a company is considered to be the most important due to the ease with which profitability of each SKU can be monitored. Using an inventory profitability report, companies can become more cost-effective, limit the amount of deadstock they have and increase profits by selling better-performing products.  Inventory Performance Report An inventory performance report is a stock audit report that provides information specifically in regards to performance figures of a company such as the best-selling products, worst-selling products, yearly expansion and much more. Knowing which products are performing well and which aren’t can lead to firms customizing their product offerings by placing more focus on commodities that are generating the maximum profits for them and getting rid of items that are taking up space through sales or donations. They will also get a better idea of how the overall business is performing and can make changes and tweaks to the relevant processes. Conclusion: Which Solution is Right for You and How Can WareIQ Help? Inventory reports are a supremely important tool to keep eCommerce retailers informed about a plethora of different metrics that impact the performance of their inventory and business processes. As discussed above, there are many different types of stock audit reports and KPIs that companies can opt for but choosing the right one depends on the nature of the business and its products, the short-term and long-term goals that it envisions and the type of information that it wants to track and summarize. Once those details are figured out, it will be a much simpler process to shortlist the type of inventory reports that are needed. If you are an eCommerce retailer and need assistance with choosing the right inventory report or any other activity involved in eCommerce fulfillment, consider partnering with WareIQ. WareIQ is one the leading eCommerce fulfillment companies in India that provides a whole host of services, encompassing every aspect of the eCommerce fulfillment process. We provide assistance to more than 300 brands by enhancing their order fulfillment experience and delighting their customers. Some of the unique features we offer include: Custom WMS Our custom WMS grants users access to a variety of features such as automatic tracking of inventory, across fulfillment centers and eCommerce marketplaces, in real-time, intelligent inventory placement that provides suggestions for fulfillment center locations, based on areas of high demand and proximity to transport facilities, automation of multiple warehousing processes and much more. Choice of Shipping Aggregator We have partnered with more than 20 of the largest shipping services in the country and automatically assign the fastest and cheapest option for each individual order to enhance customer satisfaction, in addition to providing ultra-fast same-day and next-day delivery. App Store We have an intuitive and well-designed app store that allows users to download a variety of apps to enhance their productivity in different facets of eCommerce fulfillment and give them more power over their operations. No Minimum Order Requirements Unlike other 3PL fulfillment companies, we do not have any minimum order requirements for packages to be shipped. Additionally, we give users a choice of services they want to opt for and they pay only for the facilities they use which increases their profit margins and reduces their prices. RTO Shield Our custom RTO Shield employs methods to minimize RTO requests and prevents retailers from incurring RTO expenses through liability protection and insurance. Inventory Report: FAQs What information should an inventory report have?Whether it is physical or digital, an inventory report should general include information that gives an accurate representation of the total inventory available, best selling products, worst selling products, sales levels and more. What is the goal of an inventory report?An inventory report should summarize the amount of inventory that a company has in hand during a specific time period. This provides insights into how the business is performing and factors that need to be improved. Is an inventory report a part of inventory management?Yes, an inventory report is one of the factors that enables efficient inventory management decisions to be taken, using all the data that it provides. Can you use Excel to create an inventory report?Yes, inventory reports can be created in Excel. However, use it sparingly as many features are omitted and every entry will have to be done manually, which increases the scope of errors and increases the amount of time and effort needed. How can WareIQ help with inventory reporting?WareIQ has a custom WMS that automatically tracks various metrics of inventory in real-time and across multiple fulfillment centers and selling platforms and provides the data in a single centralised location.

June 25, 2022

What is a Periodic Inventory System? When and How to Use Periodic Inventory Control?

What is a Periodic Inventory System? When and How to Use Periodic Inventory Control?

Inventory management systems impact every element of business operations, from order fulfillment and revenue generation to warehouse and overhead costs. Perpetual and periodic inventory systems are two techniques for managing inventory. While perpetual systems update inventory after every transaction, periodic inventory control accounts for checking inventory levels at regular time-based periods. A periodic inventory system is the easier of the two approaches to adopt, needing less time, money, and resources. The physical counting approach to the inventory management system is through periodic inventory system techniques. It is done regularly to determine inventory data that affect the cost of goods sold. Periodic inventory control is a difficult task that requires time and effort. As a result, small enterprises with little need for inventory typically use the periodic inventory approach. However, companies of all sizes may use the periodic inventory control method. Let's talk about a periodic inventory system and how it might aid with inventory control. What is a Periodic Inventory System? The periodic examination of inventory is referred to as part of the periodic inventory management system. After a predetermined amount of time, such as monthly, quarterly, or yearly, inventory is physically counted. After one accounting quarter, businesses do the routine inventory count. The commencement of the subsequent accounting period subsequently starts with the data for the ending inventory. Businesses that use periodic inventory systems update their general ledger accounts for the ending inventory after each physical count. With successive journal entries, all other entries are connected to the accounts for purchases and payables. Businesses may also have a freight expense account. It enables them to accurately reflect the expenses of the cost of the items offered. Every time the company receives new goods, the account is updated. A firm finally uses the account to determine final inventory costs. [contactus_lilgoodness] Explaining Periodic Inventory Control System To ascertain the amount of inventory on hand and the cost of products sold, a corporation using a periodic inventory system physically counts the inventory after each period. Many businesses pick monthly, quarterly, or yearly intervals depending on their product demands and bookkeeping. Businesses use the starting inventory level, the ending inventory level, and the purchases made during that period to calculate costs rather than continually updating their records with current inventory and cost levels. Businesses that don't have a daily requirement to correctly know their current inventory levels might benefit from periodic inventory. For small enterprises that want to keep prices down, it works effectively. However, larger and expanding companies often choose a permanent inventory system, which is best managed by an ERP inventory module since they require more comprehensive inventory management. Many small firms, especially those with few unique SKUs to update at the end of each quarter, do just fine with periodic inventory, even if it does not provide business decision-makers with real-time data. Periodic Inventory System: When to Use It The cost of products sold and the precise amount of goods in inventory are typically unknown to businesses using the periodic inventory method until a physical count is done. For this reason, the system is advised for companies with a limited number of SKUs operating in a market that moves slowly. Companies that lack the resources or do not want to spend a lot of money on implementing a more intricate inventory accounting system are also advised to use the system. It could be the most incredible option for new businesses, especially those with substantial inventory made up primarily of inexpensive commodities. Periodic Inventory System: When Not to Use It The periodic Inventory System method might not be suited for large enterprises due to the high amount of inventory transactions. This is because large organisations must continually track the number of items in their inventory to make essential purchase choices. Who Uses a Periodic Inventory System? Small firms that handle a modest number of transactions or enterprises with a small inventory are the primary users of the periodic inventory technique. These businesses typically choose a periodic inventory system since it is easier to operate and more cost-effective because their sales and costs are simple to control. These enterprises include modest cafés, restaurants, auto dealerships, art galleries, and so on. How Does A Periodic Inventory System Operate? Physical inspections of the inventory are done using the periodic inventory control system. Since most of these jobs are done by hand, the process takes time and is expensive. As a result, businesses with significant inventories must allocate personnel and time each time a physical inventory count is conducted. A periodic inventory system uses a different accounting procedure than other systems like perpetual inventory. A temporary account for purchases in a periodic system serves as the foundation for inventory accounting. After purchases, the inventory account is not immediately deducted. The business first enters all new purchases into a temporary purchasing account. The firm then conducts a physical inventory count. The main inventory account is then given the statistics from the purchases account. The cost of goods sold estimates are then updated using these data. Then, using the initial inventory data, new purchases, and subtracting the ending inventory figures, the Cost of Goods Dold (COGS) is determined. The formula for cost of goods sold: COGS = Beginning inventory + New Purchases – Closing Inventory In rare circumstances, the business can substitute beginning inventory for the ending or remaining balance of inventory from the prior accounting period. Challenges of Periodic Inventory System Even though periodic inventory is simple to execute, there are several significant downsides regarding the quantity of detail you receive and how frequently your data is updated. Most business owners and managers require up-to-date information daily to make wise business decisions. With each sale or shipment, most large enterprises immediately update their inventory. With a contemporary ERP, this is simple to accomplish. When you buy anything in a physical shop or online, the merchant has complete knowledge of what was purchased and when allowing them to plan for restocking. When periodic inventory is in place, businesses might not be aware that a product is running low until a client inquires why it isn't on the shelf. Even worse, you may sell something online only to discover that your supplier has back-ordered it because it is out of stock. Both provide customers with less than optimal experiences, which may also be stressful for your team. Many small firms have inventory management systems connected to their POS or online store. The inventory is automatically updated when the cashier scans a barcode, and a customer leaves with a purchase. To ensure they never run out of supply, sophisticated firms may set up automatic reordering. The continuing data assists firms in maintaining more detailed data on cost per item sold, which plays a significant role in profit margins and overall profitability. Operating using a periodic inventory method is like running your firm while wearing blinders for huge businesses or developing enterprises. The whole image won't become clear until the conclusion of the time period. Advantages of Periodic Inventory Control System The periodic inventory approach was very well-liked before technology accounting solutions were introduced. There was no denying its shortcomings, but most business owners believed its advantages exceeded them. It's interesting to note that the method is still widely used today, and many business owners prefer it to the perpetual inventory system. However, one may be justified in supposing that the periodic inventory system has just as many detractors as supporters. This is due to the firm belief held by specific individuals that it is undesirable to submit your company to a management tool that may produce unpredictable outcomes. To ensure you are making an informed decision, the benefits of the periodic inventory system have been listed below. Excellent Choice for Small Businesses Smaller companies that don't retain a lot of stock in their inventory are best suited for a periodic inventory system. A physical inventory count is simple to complete for such firms. Estimating the cost of commodities sold over predetermined periods is likewise much simpler. This indicates that other techniques are more appropriate for businesses with a high inventory turnover rate, a high number of SKUs, demands for multichannel inventory management, or who want real-time data. Simple to Implement The simplicity of periodic inventory systems is prized, and all that's required to physically count your beginning inventory at specific periods throughout the year is a little time. As a result, a periodic inventory technique may be adopted without much planning or preparation because it doesn't need complex calculations or accounting records. Minimal Resources and Costs Spreadsheets may be used to do periodic inventory instead of inventory management software, eliminating the need for additional software or training expenditures. Additionally, since the stock is only updated occasionally, more resources are available for other corporate operations. Reduced Inventory Records A periodic inventory system might work for companies with a single location or few product lines. Estimating the current inventory levels and keeping track of sale transactions are relatively simple tasks. A straightforward inventory system will also be simpler to administer and keep up with over time. Disadvantages of Periodic Inventory Control System Remember that the advantages listed above mainly profit small enterprises that handle a few hundred transactions annually. The periodic inventory method becomes complex and challenging to maintain as stock levels increase and your business expands. Because of this, not every firm may benefit from the strategy; most companies instead employ perpetual inventory. And that's one of the system's drawbacks, amongst others, which are listed below. Prone to Human Mistakes  The possibility of a human mistake increases when you physically count all the inventory goods you have on hand. There might be mistakes in the value or the total inventory count. Any errors will also be carried over to the next quarter. After taking stock of all inventory, look for anomalies or statistics that seem noticeably higher or lower than anticipated to avoid this. Difficult to Scale  Periodic inventory is a very manual procedure that may be time-consuming and challenging to scale as a firm expands. A bottleneck may develop during an inventory count if all goods must be put aside for an extended period. Moving from a periodic inventory system to an automated perpetual inventory system may be worthwhile as your product lines expand and new locations open. Less Control and Informational In periodic inventory, only the time records at the start and end of the period are entirely correct. A company relies on predictions of its present inventory levels for the remainder of the time. One may lose sales and customers if inventory is too low or if an unnoticed inventory discrepancy in the accounts. A lack of real-time data may hamper other business choices. Does Not Permit Modifications A firm may occasionally encounter product recalls, purchases return, and misplaced products in transit. However, there is no way to consider these unforeseen changes with the periodic inventory. Therefore, up to the conclusion of the next term, inventory records remain fixed. How Does the Periodic Inventory System Calculate Cost of Goods Sold? To get the total cost of the products available for sale, add the inventory amount at the start of the year to the amount displayed on the Purchases account. You can utilise the quantity of stock left at the end of the prior period if your company doesn't have a defined beginning inventory level. This computation uses the following formula. Cost Of Goods Available For Sale = Beginning Inventory + New Purchases The physical count of each item in the inventory is then used to establish the ending inventory. Finally, you can calculate the cost of the ending or closing inventory using the weighted average price, first in, first out, or last in, first out. The cost of goods sold is then calculated by deducting the previously tallied ending inventory from the total price of the commodities offered. The second formula for calculating the Cost of Goods Sold (COGS) is the following. COGS = Beginning inventory + New Purchases – Closing Inventory This can all seem a little complex, so let's use an example to clarify the idea and demonstrate how to use these computations. Let's imagine that a corporation that sells items has a periodic inventory system and assesses its inventory at the end of the financial year. As a result, any adjustments to inventory resulting from sales or acquisitions made by the company during the year are not recognised until March 31st. Now suppose that March 31st has arrived, and the following data is accessible: At the start of the year, the beginning inventory amounts to $50,000. The total amount spent on items for the entire year is $125,000. The final ending inventory is priced at $30,000. The COGS calculation for this data would be as follows: So, Beginning Inventory + New Purchases = Cost Of Goods Available For Sale        $50,000 + $125,000 = $175,000 Now, Beginning inventory + New Purchases – Closing Inventory = COGS  $175,000 - $30,000 = $145,000  Cost of Goods Sold = $145,000  Periodic vs Perpetual Inventory Systems: Which is Better? Which is better, the perpetual or periodic inventory control system? It is a topic that is frequently discussed. It's crucial to note that both approaches are recognised by the General Accepted Accounting Principles (GAAP). This section will cover how the two systems differ and which approach is most appropriate based on your company's business strategy. Due to the development of tools like barcode scanning and inventory management software over the years, the perpetual inventory system has grown in popularity. However, most small business owners appear to have a soft place for the periodic inventory system. It's crucial to comprehend exactly what a perpetual inventory system is before we discuss its distinctions. Through point-of-sale inventory systems, the perpetual inventory system keeps track of inventory by immediately documenting any alterations. In addition, continuous inventory taking is made possible because the systems maintain a running account that is updated with each sale or return. Differences Between Perpetual And Periodic Inventory System The most crucial distinction between the two systems is that the perpetual inventory system permits ongoing inventory counting. In contrast, the periodic system counts inventory once, after a specific accounting period.In businesses, when there aren't a lot of products being sold, the perpetual method is frequently employed. Due to its simplicity, smaller firms with extensive stock typically use the systematic approach.Due to its partial dependence on technology, such as bar code scanners, the everlasting system may be costly. However, you won't incur any further expenditures because the systematic method allows you to count your finishing inventory physically.Since issues are discovered in real-time by the perpetual system's continuous surveillance, they may resolve them more quickly if they already exist. After the accounting period, when it could already be too late, the periodic system would only be able to detect underlying issues.The perpetual system's digital foundation makes it possible to back up data, quickly organise it, and even manipulate it to provide reports with plenty of specific information. On the other hand, the periodic system relies on manual labour, making it possible for a human mistake to result in data loss or misplacing.The perpetual inventory method doesn't interfere with a business's regular activities. However, depending on the number of products being tallied, the periodic system will interfere with company activities, especially on the day of the physical count.Thanks to the perpetual system, you will always have access to precise COGS numbers. However, with the systematic approach, you would have to wait until the physical count was done to obtain the exact COGS during an accounting period.You could need to hire many tech-savvy workers with expertise with the everlasting system or give your current staff substantial training to use it. However, the systematic approach is praised for its simplicity and would not need additional training for the team. Selecting One of the Two Small business owners' activities are often restricted to the cash register and fairly straightforward accounting procedures. Therefore, small business owners would benefit most from the periodic inventory system. You wouldn't need an inventory management system for companies that only supply services rather than items. This is, of course, unless you are in the hospitality sector, running a restaurant, or you have inventory products that need to be tracked, such as food or medications. But if a company grows, switching to a permanent system could be necessary since it gives you access to the cost of goods sold whenever you need them. In addition, you may use it to spot any stock flaws and take the appropriate action instantly. Due to the high amount of inventory transactions they handle and the automated nature of their accounting systems, most influential organisations favour the perpetual inventory system over the systematic approach, as was previously mentioned. Conclusion One of the most straightforward accounting procedures that enable a corporation to track its entire inventory is periodic inventory systems. Periodic inventory can be sufficient for a firm handling fewer goods, but it may be too basic for businesses with significant or changing sales volumes. Businesses frequently mix the two accounting techniques to manage inventories. While a periodic count is performed at predetermined intervals to confirm the correctness of all accounts in the inventory ledger, a perpetual inventory system is utilised to record all daily inventory movements instantaneously. If you need assistance with periodic inventory systems or any other eCommerce requirement, you can opt to partner with WareIQ. WareIQ is one of the country's leading eCommerce fulfillment companies that uses a comprehensive technology platform to provide a variety of services ranging from eCommerce fulfillment to inventory management. Our custom WMS can help in tasks such as automatic tracking and updating of inventory in real-time, across fulfillment centers and selling platforms, inventory management and a wide range of other services. Over 300 brands currently partner with WareIQ for their fulfillment services and we suggest that you do the same. [signup] Periodic Inventory System FAQs (Frequently Asked Questions) What does routine inventory taking entail?When utilising a periodic inventory system, periodic inventory taking refers to the physical count of inventory that occurs on a regular basis. Even perpetual inventory users may wish to perform a physical inventory count from time to time to allow for shrinkage (theft, broken, and obsolete items). Define a periodic inventory system with an exampleIn a periodic inventory system, inventory tracking is manually updated at the conclusion of a certain period. For instance, a small retail business with only one location can choose for periodic inventory system to make record keeping easier and might decide to update their inventory records every three months in order to calculate anticipated taxes. How to implement a periodic inventory system?You just need a team to conduct the physical inventory count and an accounting mechanism to calculate the cost of shutting inventory to deploy a periodic inventory system. The inventory weighted average approach, FIFO (first-in-first-out), and LIFO (last-in-first-out) are all viable computation methods. When to use a periodic inventory system?The periodic inventory system is a type of inventory valuation used at the end of the accounting period by small businesses & early-stage start-ups because of lesser stock in their inventory.

June 24, 2022

How to Calculate Reorder Level? Definition, Advantages, and Easy 5-Step Calculations for the Reorder Point Formula in 2022

How to Calculate Reorder Level? Definition, Advantages, and Easy 5-Step Calculations for the Reorder Point Formula in 2022

By being able to execute proper business calculations, eCommerce retailers can advance in their goals. In the eCommerce industry, knowing when and how many products you require to fulfill orders is crucial. One method to show your aptitude for forecasting inventory and assisting your business in maximizing profits is by performing these calculations precisely and efficiently. Timing and the amount of inventory ordered should be accurate. If you have all the data, you can automate the re-ordering process. Today we will go into detail about the reorder level and how to calculate it using the reorder level formula, examples in different scenarios to maintain your inventory needs, and much more. What is a Reorder Level? Reorder level, also known as reorder point in management accounting, is the inventory level at which a business would place a new order or begin a new production run. Reorder level is influenced by a company's lead time for work orders, demand during that period, and whether or not it should keep a safety stock. The time it takes the company's suppliers to manufacture and deliver the ordered units is known as the work-order lead time. It is critical to determine the appropriate reorder level. A company may receive the ordered units faster than anticipated if it places a fresh order too soon and this could result in increased carrying expenses such as storage rent, opportunity costs, etc. Conversely, if an order is placed too late, the company would incur stock-out expenses, such as missed sales and customer dissatisfaction. [contactus_uth] Advantages of Reorder Level A conventional advantage of reorder level is to avoid stock shortage. Reorder levels are important since they enable a company to increase productivity and perhaps even revenues and profits. This is due to the fact that acquiring the right quantity of inventory can help the company run effectively while avoiding uncertainties like product waste.  Reorder levels that are precise also aid in lowering carrying costs and other costs related to storing inventory. Rent, insurance, and potential spoilage are some carrying expenses that can be avoided or decreased with prudent ordering levels. Reorder level calculations are another useful tool for ensuring uniformity among team members when several people are in charge of issuing orders. The stock requirements are automatically activated at the order point. You may optimize your inventory list and reduce administrative time by using the reorder level model, which is a helpful decision-making tool. This reality enables you to concentrate on bringing value to your company while letting the system function on its own. Using this system has a number of benefits, including: Providing better service to both internal and external customersPreventing delays throughout the supply chainLowering the inventory costMaximizing the space in your inventoryStaff members focus on value-added tasks while saving timePutting facts and evidence in front of speculationForming a communication bridge between seller and manufacturerAvoiding overstockingAvoiding getting the items too earlyPreventing your capital from getting held upMaking inbound and outbound logistics more efficient Reorder Level Formula: Calculation in 5 Simple Steps in 2022 Reorder Level or Reorder Points can be calculated in 5 Easy Steps explained below; Determine Your Average Demand The very first step is determining the average demand for a product or material. This refers to how many units of a specific commodity you sell or utilize over a certain period of time. There could be several retail items you require each day, week, or month, such as dishes, shoes, laptops, etc. You might also need a specific quantity of manufacturing material over time. Because demand may change from one period of time to the next, try estimating your inventory utilization over several of your chosen time periods and calculate the average of those results. This might be especially true for businesses or products that depend on outside factors. Calculate Your Lead Time The lead time is the period of time between when you place an order till the time you receive the shipment of goods. Use the same time unit (days, weeks, months, etc.) that you used to establish your average demand to calculate your lead time. You should calculate your lead time in days if your average daily demand is 100 goods. The wait time would be measured in weeks if your demand was 100 products per week. If deliveries are regular, you can generally automatically establish your lead time by looking up your order and delivery history. If delivery times are unpredictable, get the average lead times of a large number of orders. If outside circumstances affect how long it takes to get a delivery, use alternative lead times. Decide if You Should Keep a Safety Stock Determining whether you maintain a safety stock or not, depends on your preference. You will have to use a different formula for your reorder level for different situations. A business may retain some goods or materials on hand as safety stock in case certain circumstances arise, such as an unexpected spike in demand or a delivery problem. If you want to know if your inventory needs a safety buffer, compare the amount of stock you maintain on hand versus the amount you sell or use. You can also work with a business executive to determine whether your organization has a policy of maintaining a safety stock on hand and whether you should factor this into your reorder level. Any adjustments you might make or recommend making to your inventory levels should be communicated clearly. Use the Reorder Level Formula Calculate reorder levels with the proper formula using your average demand, lead time, and safety stock. The formula is as follows: Reorder Level Formula = (Average Demand × Lead Time) The formula in case safety stock is kept by the company: Reorder level = [(Average Demand × Lead Time) + Safety Stock] Your average demand and lead time should be calculated in the same unit of time. Your lead time should be calculated in days if your demand is calculated in units of products per day. Your lead time should also be measured in weeks if your demand is too. To ensure accuracy, think about working on your calculations simultaneously or asking a teammate to do so. You can also read this detailed article on Reorder Quantity Formula. Assess and Adjust as Required Finally, review your reorder level calculations and make any necessary adjustments. You might need to adjust your reorder level to account for the increased demand if, for instance, you find you are running low on the item before your next purchase comes in. You might need to modify your reorder level if orders start showing up with time changes. Determining a Fixed Reorder Level Stock While determining a fixed Reorder Level Stock the following factors are involved: Rate of Material Consumption It is the amount of material or number of items you sell in a lead time period. The material and items are averaged as per the duration of the time frame taken. Safety Margin Before you calculate the reorder level, you should keep a safety margin of stocks with you in case of higher demand than the average demand level.  Delivery Period or Lead Time The average delivery period or average lead time is the time taken to get the stock after placing an order to your merchant or directly to the manufacturer. Maintaining a Minimum Stock Level Minimum stock level maintenance specifically helps small and medium-sized sellers and sellers who have limited storage space in different locations. This keeps your business supplied with stock and helps avoid uncertainty in inventory. Storage Fees and Interest on Materials-Related Capital Investments This is the crucial part to think about. You may calculate and order inventory as per your demand and your capacity to fulfill orders. This is not applicable if you have your own storage facilities but if you partner with a 3PL fulfillment company and use their fulfillment centers to store inventory, you will have to pay monthly subscription fees or for the amount of storage you are utilizing. Having an Emergency Fund Keep aside an excess amount of capital in liquid form to tackle uncertainties like machine breakdowns, supply-chain failures, increases in rates, etc. Many times, work is on hold in the logistics chain because of payment dues for certain processes. Read how should you plan your logistics in eCommerce. The Reorder Level of Stock Calculation in Different Circumstances Case 1 – Without Safety Stock Mr. Sanjay’s bookstore sells 200 books on average in a week. The maximum demand in a week is 217 laptops. If the lead time is 3 weeks then the reorder level calculation using the reorder level formula would be: Reorder level = Maximum usage(weekly) × Lead time (in weeks) = 217 units × 3 weeks = 651 units It means that every time the number of books decreases to 651, Mr. Sanjay’s bookstore must place a new order. Case 2 – With Safety Stock Suppose you are a bike seller with the following figures: Demand Minimum Demand: 40 bikes per month Average Demand: 50 bikes per month Maximum Demand: 60 bikes per month Safety Stock: 15 bikes Lead Time Minimum Lead Time: 1 month Average Lead Time: 1.25 months Maximum Lead Time: 1.5 months The reorder level of your outlet using the reorder point formula would be: Reorder Level = (Maximum Demand × Maximum Lead Time) + Safety Stock = (60 units × 1.5 weeks) + 15 units = 90 units + 15 units = 105 units Note: Both demand and lead time must be expressed in the same time unit, i.e., in days, weeks, etc. Modified Reorder Level Formula The amount of reordering presumes a constant pace of inventory consumption, which is usually false. For instance, if usage levels fluctuate often, the reorder level will be too low, resulting in a lack of inventory when it is required for production. On the other hand, this reorder procedure will result in having too much inventory on hand if actual usage decreases. It might be helpful to account for extra stock on hand and replace the average daily usage rate with the maximum daily usage rate in the reorder point formula in order to prevent stock-out situations. The revised reorder level formula is as follows: | [(Maximum Daily Usage Rate x Lead Time) + Safety Stock] | Conclusion: Choosing WareIQ for Faster and More Accurate Reorder Levels After understanding the importance of reorder level, it is understood that establishing reorder points is beneficial so that you can reduce your capital investments and make sure that your company is running as efficiently as possible in terms of both inbound and outbound logistics. The requirement for accurate data for supply chain planning and presenting a precise picture of customer demand is the most crucial and occasionally, most difficult aspect of effectively calculating reorder levels. You could wind up with too much or too little stock if the data is incorrect and the calculation is wrong. WareIQ can help eCommerce firms to manage inventory, anticipate demand, pack orders, cut shipping costs, and meet consumer expectations. In case you seek to store inventory in multiple WareIQ fulfillment centers, we will automate your reordering levels, optimize your data and reshuffle your inventory to relevant warehouses that are close to high-demand locations and transport hubs. WareIQ assists brands in enhancing their shipping strategies with a network of fulfillment centers spread out across the country and technology that is integrated with the top eCommerce platforms. Reorder Level Formula FAQs How do you calculate reorder level?The reorder point formula is used to calculate reorder levels which is as follows:Reorder Level = [(Average Demand × Lead Time) + Safety Stock] Why is the reordering point important?Effective inventory management requires a reorder point. Ensuring that there is always enough stock in your inventory reduces holding costs and avoids stockouts, overstocking and lost sales. What is the Safety Stock Formula?The safety stock is calculated by multiplying your desired service factor, which represents the amount and frequency by which the average lead time deviates from the actual lead time. What is the EOQ Reorder Level?The Economic Order Quantity or EOQ reorder point is a formula used to calculate the number of units of inventory to order by which the lowest possible total order cost occurs.

June 24, 2022

What is eCommerce Fulfillment Definition & Process? A Detailed Guide to Grow Your Business in 2022

What is eCommerce Fulfillment Definition & Process? A Detailed Guide to Grow Your Business in 2022

The number of people who are opting to shop online as opposed to the more traditional way of shopping at traditional brick-and-mortar stores has skyrocketed. It is in the best interest of eCommerce fulfillment companies and online retailers to have a system in place that gives customers the ability to keep track of orders every step of the way until it is delivered to the correct location. This also enables both sellers and buyers to know if each process has gone smoothly and can follow the outline set by this process. What is eCommerce Fulfillment? eCommerce fulfillment comprises the post-order placement experience of the customer. It begins when the customer places the order and ends with the product being delivered to the customer’s address. It also includes the product being replaced or returned to the seller. eCommerce fulfillment service companies provide sellers with the most efficient and cost-effective way of transporting the goods from the Sellers’ fulfillment service company’s warehouse to the customer. This involves order management, packing, sorting, storage, inventory management, transportation, post-order tracking, and managing returns. Thus, the fulfillment stage is integral to both the B2B and B2C segments and the entire eCommerce industry. [contactus_uth] 6 Processes That are Involved in eCommerce Fulfillment eCommerce fulfillment is more of an umbrella word to include the various stages and actions undertaken to deliver a package. It is not limited to just picking and sorting a product from the warehouse shelf. The process can be justified by breaking it down into the following components: Inventory Management No or low stock or high inventory costs due to excessive inventory can cause huge losses for a seller. Thus, inventory management and accurate inventory forecasting are crucial to maintaining adequate inventory, no matter what kind of fulfillment model is employed. Storage/Warehousing The warehouse layout, the ideal aisle width, and other minute details like the availability of cold storage facility, forecasting order volumes & labour demand, etc affect the entire picking & shipping process and count towards the overall fulfillment duration. Order Management Inventory and Warehouse Management must be in sync to ensure that a customer does not place an order for an out-of-stock product. Thus, order management does not include just receiving an order; it also involves coordination with the warehouse management team to ensure the customer orders a product in stock. Picking, Sorting, and Packing This phrase determines how fast the product is ready to be shipped. Numerous models are prepared to ensure that the picking process can be made more efficient. Many warehouses use completely automated processes to reduce time spent picking, sort & packing in order to improve efficiency. Logistics/Shipping This covers the entire first-mile delivery to last-mile delivery and involves 3PL fulfillment companies with expertise in providing logistical solutions. This phase of the eCommerce fulfillment cycle depends on multiple external factors, and thus, the term “AGWWP (All goes well, weather permitting)” is commonly used here. This stage ensures the product's safe delivery to the customer’s doorstep without damage. Returns Certain product categories, such as clothing, account for a very high return percentage (75%). Thus, ensuring the product is returned intact from the customer to the seller is crucial. This phase of the eCommerce fulfillment cycle is important for sellers, especially as they require the product to be received back in the best condition with no further damage and can be resold after repairs to another customer who has placed the same order. 3 of the Most Common Misconceptions Regarding eCommerce Fulfillment Services Like any industry, the eCommerce fulfillment services industry also struggles with common misconceptions held by those not so well associated with the industry. Some of these misconceptions are: The Cheapest Way is Self-Fulfillment Smaller sellers, generally with less than 50 orders per month, can afford to spend time packing, going to the courier service, and getting it posted, and may find self-fulfillment more cost-effective. But as the business expands, this could eat up the seller's crucial time, which could be utilised for more important aspects such as preparing a growth plan. Even for bigger players with an established business set-up, capital investment (leasing of new land, setting up warehouses) and maintenance costs (labour costs, machinery costs) can tremendously affect the business’s balance sheet. Fulfillment is Just Warehousing It is often assumed that fulfillment refers to just the storage of goods and their dispatch from the warehouse. On the contrary, eCommerce warehousing is a subpart of fulfillment, and eCommerce fulfillment is an end-to-end process that involves storage and distribution. It also means efficiently picking the product and shipping it to the customer most efficiently and cost-effectively. Fulfillment Centers in Rural / Tier 2 or 3 Cities are Better or Closer to the Seller’s Business Location While the land costs may seem cheaper, most of the customer base still exists in metro and tier 1 cities. Thus, over time, the seller will have to pay more in shipping charges to cover the distance from the warehouse to the bulk of customers. What are the Various Challenges & Costs Involved in eCommerce Fulfillment? eCommerce fulfillment endures significant challenges and issues, primarily due to the involvement of multiple stakeholders and parties in the entire process. These issues lead to additional costs incurred by the eCommerce fulfillment service company and the sellers. Some of the challenges faced are listed below: Returns Returns continue to be one of the biggest challenges faced by eCommerce fulfillment services, as it involves capital investment into establishing a reverse supply chain and ensuring the product reaches back to the seller without any damage. Information Inaccuracy A wrong address, or a wrong pin code, is often realised in the last-mile delivery phase of the supply chain, leading to irreversible delays and costs. Because of this wrong information, inaccuracy can occur at any stage, be it during order placement or while sorting, and it is realised only during the last-mile delivery stages. Last mile delivery software can help better manage this process. Inventory Management Issues Inventory Management is every seller’s most common issue, be it choosing between the Newsvendor Model, the Economic Order Quantity (EOQ), the Continuous Review (ROP), or the Periodic Review. The lack of appropriate forecasting leads to significant inventory management issues at the beginning of the supply chain, which travels down, eventually causing the Bullwhip Effect. Related Article: Inventory Management in Supply Chain Delays During Pre-Shipping In some supply chains where the Push-Pull boundary is extremely high up in the chain, delays during the pre-shipping stage, caused by processing and producing the order, put added pressure on eCommerce fulfillment services companies to fulfill the order within the promised time. This is often seen with customizable products. Exceptions These exceptions can often occur from natural disasters to a massive container ship blocking the Suez Canal. Despite the best preparations by the largest eCommerce fulfillment companies, there is sometimes no getting around such situations, which eventually lead to delays or damages. 5 Main Benefits of eCommerce Fulfillment eCommerce fulfillment service companies are specialized companies that understand the industry and cater to the needs of both sellers and buyers. Thus, they provide an efficient and cost-effective service to the seller and enhance the end customer's consumer experience. With 38% of online shoppers willing to abandon a package if it takes longer than expected, sellers cannot afford to lose sales because of undertaking self-fulfillment. Some of the benefits of eCommerce Fulfillment are listed below: Enhanced Customer Satisfaction eCommerce fulfillment services have established infrastructure and supply chains and ensure that the customers get their products on time and in the best condition. With 33% of customers leaving after the very first bad experience and 16% of customers willing to pay higher for a better customer experience, it is prudent for any seller to ensure they can uphold their service promise to the customer. Reduced Delivery Times Warehouses and fulfillment centers of eCommerce fulfillment services companies are spread nationwide. With the inventory stored across these warehouses, the time taken for the product to reach any customer nationwide is reduced drastically compared to having it shipped from the seller’s location. Optimized Inventory Management The importance of inventory management is something that few are aware of, and its repercussions can lead to a product’s failure. eCommerce fulfillment services provide sellers with the power to remotely manage their inventory while providing insights to them through the data collected. Thus, designing the best inventory management system for their product optimizes the shipping process and the storage within the warehouse for which the sellers have to pay. Improved Branding and Packaging Personalized branding and packaging is a feature of eCommerce Fulfilment that sets it apart from regular order processing and helps boost customer satisfaction by providing them with a personalized feeling. Effective Returns Management Ensures effective returns management, with certain product categories that have high returns, eCommerce Fulfilment services help cater to them and ensure a smoother overall process from the time the customer raises the return request to the product reaching back to the seller. The 3 Different Types of eCommerce Fulfillment Models eCommerce fulfillment can be carried out in multiple ways as there is no single fixed method. This is primarily due to the difference in products, inventory, and customer requirements. The 3 most commonly utilized models are listed below: Self Fulfillment The seller manages the entire fulfillment process, which starts from receiving the order, storing it on their premises, packing it, and also ensuring its transportation through established courier services. It is suitable for businesses that have just started out with a handful of orders per month. 3PL Fulfillment 3PL (Third Party) fulfillment services companies cater to sellers who outsource their fulfillment needs. 3PL fulfillment companies cater to the end-to-end service requirements of the seller by providing access to the company’s established warehouses, logistics and supply chain, and inventory management system. 3PL fulfillment companies use economies of scale by catering to multiple sellers. Thus, these companies spread the cost amongst all, proving cost-effective for each seller, both in the B2B and B2C domains. Dropshipping In this model, the seller does not hold any inventory, and the product is shipped directly from the seller’s manufacturer or wholesaler. Although ideal for sellers starting out, it provides no inventory management solution. Read the blog on dropshipping vs order fulfillment to know which fulfillment model is right for your online business. Differences among the 3 types of eCommerce fulfillment The 3 eCommerce Fulfilment models can be confusing for new and small businesses to figure out. Thus, in the table mentioned below, the salient features of each model have been mentioned for Sellers to make an informed decision. [table id=1 /] Suggested Read: What is Hybrid Fulfillment? How to Choose an eCommerce Fulfillment Provider that is Right for Your Business in 2022? Who is going to be the fulfillment company for my business? This is a question that comes to every seller’s mind and is probably one of the most important decisions that a seller has to make. Some points that should be kept in mind before taking this decision are listed below: Shipping Speed In this era of 10-minute hyperlocal delivery, it is crucial to partner with an eCommerce fulfillment service provider that keeps the seller one step ahead of the competition. Read how to increase shipping speed. Warehouse Location With eCommerce gaining confidence in Tier 2 and 3 cities, it is important that warehouses have a nationwide network to fulfill the needs of the expanding customer base. Shared Ideologies Synergy in ideology is a critical aspect that can be overlooked and realised much later after it is too late. For example, a seller dealing in organic products, who ensures that the backend supply chain is sustainable, would also want to ensure that the eCommerce fulfillment service provider is making efforts towards sustainable usage of transport for the logistics aspect and also in the warehouses. Order Fulfillment Software Data plays a crucial role in optimising the fulfillment process, along with software that understands the data generated from the orders. It is crucial that the software is easily integrated with the Seller’s order processing and data handling software. The use of AI and ML should be considered a norm in this software. Small business order fulfillment services are very important for smaller retailers. WareIQ's WMS Recommendation Transparency and Visibility Sellers must have full access to the details of their products at any stage in the order fulfillment process, especially during the shipping phase. This service should be extended to the customer as well because such services are now considered amongst the most basic aspects of the eCommerce fulfillment service process. Scalability The eCommerce fulfillment service provider must be able to handle demand surges as well as the fall in demand without causing significant losses to the seller by using appropriate forecasting methods. This ensures to the seller that the service provider is prepared for most of the events that can be faced during a demand cycle. Packaging and Branding eCommerce fulfillment service providers are known to provide customized packaging and branding options to sellers for their products. This adds to the overall customer experience and increases the customer’s trust and want for the seller’s product. Certifications The eCommerce fulfillment service provider should never compromise on quality, and a good verification of that is the company's qualifications.   Customer Support The fulfillment service provider should have efficient customer support facilities that can quickly resolve issues. How Can eCommerce Fulfillment Contribute to the Success of Your Online Business? eCommerce fulfillment services in India provide the catapult that is needed by every product, regardless of how amazing it is. Some important numbers that every sellers must remember are: 38% of shoppers will cancel a delivery if it takes more than a week73.6% of consumers believe that delivery is the most crucial part of the eCommerce shopping experience94% of consumers blame the seller for poor delivery From the above numbers, it is evident how much the consumer is influenced by the delivery experience and also how the consumer believes that the seller is to blame for late delivery. Thus, it is extremely important for sellers to ensure that they team up with an eCommerce fulfillment services provider that propels them in order to expand their business in the eCommerce industry. Sammy Gibson’s idea of custom neon signs was a success because he managed to boost his sales through an eCommerce fulfillment services provider and deliver his products all the way to America and Canada, from Australia. Should You Outsource Your eCommerce Fulfillment? 5 Benefits of Doing it eCommerce fulfillment can often be a challenge for smaller businesses that don't have access to advanced software solutions or enough resources to provide features such as ultra-fast delivery and discounted shipping. Outsourcing eCommerce fulfillment requirements to 3PL companies can take away a tremendous burden for these sellers, who are now able to focus on more central business activities. Here are some of the main benefits of outsourcing eCommerce fulfillment: Ability to Focus on Core Business Activities Order fulfillment often takes up a lot of time for both small and big businesses alike. The difference is that big company have multiple teams focusing on different tasks while small businesses may have to rely on a few members to take care of a variety of processes. Fortunately, if they partner with a 3PL, they can offload the entire fulfillment process which frees up time to focus on core activities of the business such as marketing, running promotional offers, expanding their product range and enhancing existing products. Access to Lower Shipping Costs Businesses that do not have a large number of orders to fulfill every month are often the victims of the highest shipping costs as they cannot take advantage of bulk shipping discounts. However, 3PL companies often partner with multiple shipping aggregators and offer a choice between them. Additionally, companies like WareIQ automatically assigns the courier service that will deliver particular orders in the shortest amount of time and at the lowest shipping rates, enabling retailers to significantly reduce their shipping expenditures. Ability to Provide Faster Shipping Next-day, same-day, and even 10-minute delivery are becoming commonplace so it is in every retailer's best interests to provide the fastest possible shipping. While this may be hard to tackle on their own, when they partner with 3PL companies, they instantly get access to ultra-fast shipping at cost-effective rates that are guaranteed to have a positive impact on them and their customers. Access to Advanced Software 3PL companies are often equipped with highly advanced software systems that sellers would not have access to if they fulfilled orders on their own. When they choose to partner with these 3PL companies, they can take advantage of features such as automated reorder triggers, integrations across selling platforms, intelligent suggestions for placement of inventory based on areas of high demand, inventory management and much more. Provision of Order Tracking Facilities Order tracking is a must if sellers want to keep their customers constantly updated and satisfied about the fact that the order is on its way. Some 3PLs not only provide generic order tracking facilities but companies like WareIQ offer customisable branded tracking pages that can be customised with a whole host of information that is guaranteed to keep your customer delighted and informed. How Can WareIQ be the Best eCommerce Fulfillment Partner for Your Business? Today, the coronavirus pandemic has further accelerated the already growing e-commerce economy since 2020, and customer demand is only expected to rise. The growing demand has led to supply chain management becoming more complex than ever before. However, what hasn’t changed is the customer’s expectation of fast, Amazon-like, delivery. Customers don’t want to wait for orders to reach them within 5-15 working days, instead by default, they end up comparing all shipping options to Amazon and expect their orders to reach them within 2 working days. Evidently, e-commerce stores that don’t offer this will lose customers to Amazon. To survive and remain competitive e-commerce businesses have to ‘deliver’ on this expectation.  WareIQ is an end-to-end solution for e-commerce fulfillment that allows you to ship 90% of your orders across India in 1 day – just like Amazon.  WareIQ's technology prioritizes speed and scale to give you complete control over your eCommerce logistics and offer Amazon-like delivery to your customers. WareIQ unifies all your logistics operations into one platform so you can manage everything in one place – from inventory, orders, and warehousing, to shipping, delivery, and returns. No more wasted resources and fragmented data from a hundred different tools.  6 ways in which WareIQ helps e-commerce & DTC brands ace their logistics game:  Faster reach & reduced delivery times: WareIQ allows you to reach a larger audience in a shorter period of time with storage facilities spread across India and closer to your demand centers. Our smart inventory placement ensures that your demand centers are well-stocked and enables efficient & prompt delivery. As per reports, 61% of consumers are willing to pay more for 1-day shipping speed and 40% of customers prefer to shop from stores that offer 2-day shipping. We help you evolve from a 5-15 day delivery system to the same day/next day Amazon-like delivery system and are already helping 100+ other brands in India to do so. Reduced overhead costs: WareIQ’s customers save resources that are typically spent on establishing infrastructure. We offer you the flexibility to store inventory in several or one fulfillment center as per your business needs. Our team’s expertise in logistics and our extensive warehousing network across India enables greater influence during negotiations, resulting in volume discounts for our clients. Expert support: Given the vastness of the logistics involved we provide the expertise needed to improve and advance your supply chain for India’s ever-changing-commerce environment. It is difficult to foresee and accommodate the internal expertise required across functions and geographical regions – that’s where we come in. Our teams support your day-to-day on-ground operations along with other requirements such as transport documentation, import and export licenses, compliances and economic regulations. Rich insights: WareIQ’s tech platform leverages real-time data to enable your organisation to predict demand. With this data, you can make wise data-driven decisions promptly thereby reducing costly delays and enabling supply chain efficiencies frequently.Scalability: When there is a surge in demand, your enterprise can upscale quickly, similarly, in the case of a slack, downscaling is effortless. Our pay-as-you-go model allows simplified and flexible scalability. There are no redundant investments or under-utilised resources. With the world evolving as it is, scalability has proved itself to be the make-or-break factor for a large number of e-commerce businesses.Improved customer satisfaction: As discussed earlier, the success of your e-commerce business not only depends on your product quality but also on the time it takes to reach your customer. With WareIQ’s real-time data and prompt response times, you can ensure timely deliveries and greater brand reliability. This translates to satisfied customers — the most crucial success metric for DTC brands in a competitive space like India. [signup] Ecommerce Fulfillment FAQs (Frequently Asked Questions) What is a fulfillment service?A fulfillment service stores your inventory, picks, packs and ships your products. They handle the logistics of getting orders into the hands of customers. What do you mean by eCommerce fulfillment partner?A fulfillment partner is a 3PL or 4PL logistics service provider who offers inventory, order processing, and shipping services, and provides customer satisfaction to other businesses. What is the role of a fulfillment partner?Fulfillment partners will be responsible for offloading stock deliveries, processing work orders, locating products and packaging orders for dispatch. They also operate and will train your staff on how to use warehouse equipment like forklifts, cherry pickers, and pallet jacks. How much does it cost to use an eCommerce fulfillment service?It depends. Typically costs for a fulfillment service will vary based on the scale, complexity and nature of your business. The cost can vary from hundreds to thousands of dollars. What are common eCommerce fulfillment options?Some common types of eCommerce fulfillment are:• In-house fulfillment• Third-party fulfillment• Fulfillment by Amazon• Multi-channel eCommerce fulfillment

June 23, 2022

What is eCommerce Warehousing? 6 Main Factors to be Considered While Selecting Warehouses in 2022

What is eCommerce Warehousing? 6 Main Factors to be Considered While Selecting Warehouses in 2022

Warehousing plays a pivotal role in traditional enterprises’ functioning. Every eCommerce warehousing supply chain should focus on key factors like location, layout, inventory management, and variety served among others in order to help the organization win over customers on the basis of the cost of the item, quantity, quality, etc. Modern eCommerce firms are no different from traditional organizations in certain regards. It is just that they require a completely different warehousing strategy to meet their customer’s expectations. As per IBEF, India became the eighth-largest market for e-commerce in 2020 with a turnover of over $50 billion, with 19,000+ eCommerce companies, just trailing France but a position ahead of Canada. The industry has leased approximately 4 million square feet of warehouse space, and the top two leaders, Flipkart and Amazon alone, preside over a quarter of the market share. It is also estimated that India will see approximately 7 million square feet of urban logistics space demand in its urban centers by 2022. The stats state that we’re headed for growth in the warehousing and storage sector as companies have started expanding their operations and are looking to diversify their supply chain strategy. Notably, not all companies have the same type of requirement for warehousing, and to understand the nuances, we need to get a better understanding of what eCommerce warehousing actually is. What is eCommerce Warehousing? eCommerce warehousing includes traditional warehouses where the inventory/goods stored are specifically for online retail. Just like ordinary warehouses, the critical functions of eCommerce warehouses also include receiving, storing, packing and shipping. If we look at an eCommerce organization in its infancy, people tend to operate out of their homes. It is manageable to use it as both the receiving and shipping point, while other rooms can be used to carry out the storage and picking functions. It helps save costs and is easier to manage if it is just the family running the organization. This strategy will not last if there is a slight uptick in demand. The minute it picks up the scale, priorities naturally change for such organizations. Depending on the retailer’s strategy, the storage, packing, and shipping methods vary to provide faster fulfillment and to ensure that there is always a stock of in-demand products. Some processes in warehousing and storage in commerce include: Tracking of employee and labour attendanceReceiving goods in the warehousePassing quality checks (if required)Management of inventory (layout, stock keeping, safety stock, and replenishment levels)Picking and packing of orders (based on demand)Shipping/outward bound and reverse logistics. You can read more about Warehouse Management here. [contactus_uth] What are the 8 Different Types of eCommerce Warehousing? Like any other asset of an organization, warehousing can be owned, rented, or shared. Apart from ownership, warehouses are also classified based on their capabilities. Depending upon the warehouse’s cost, usage, functionalities or facilities and the value an organization intends to derive from eCommerce warehousing, it can choose any of the following warehouse types: Public Warehouses Public warehouses are a form of warehousing and storage places that are owned by the government but are managed by private entities. They are very affordable and accessible for early-stage eCommerce organizations to store their inventory. They are typically charged for storage and transactions. Government Warehouses Government warehouses are a form of eCommerce warehousing that is owned and managed by the government directly. Common examples of government warehouses are shipping ports and railway courier stations found in harbours and railway stations across India. They are highly affordable, but if the business is unable to pay on time, the government has the right to seize the warehouse and get its dues by selling the inventory of the company. Private Warehouses Large organizations or retailers where eCommerce warehousing requirements are critical, tend to own private warehouses. They are a costlier option as the organization will start incurring warehousing acquisition costs (owning or renting), administration costs such as payments for staff, and securities and running costs such as infrastructure management like water, electricity, etc. eCommerce warehousing owned by giants like Amazon, Flipkart, etc., are examples of private warehouses. Cooperative Warehouses eCommerce warehousing where different businesses come together and use a shared warehouse space is called cooperative warehouses. Companies jointly own this space, and each pays a share of the rent based on their utilized area. Such businesses can either be from the same industry such as an entire village’s farmers owning a warehouse during harvest season or from different industries such as a large-scale construction project with multiple partners. Each one stores its inventory in the warehouse. Even businesses outside the joint ownership contract can place their goods in the warehouse but are usually charged a higher price. Bonded Warehouses Bonded warehouses are a form of eCommerce warehousing that is typically used in cross-border trading. Importers can safely store their goods in bonded warehouses provided by the authorities either for shorter or longer durations before the items are cleared by customs. Importers also use these warehouses to store things until they find a buyer and then start the customs clearance paperwork.  Smart Warehouses Smart warehouses are a form of eCommerce warehousing that is based on the functionalities present in the warehouse. These warehouses are called “smart” because they are usually integrated with cutting-edge technology like Artificial Intelligence, Machine Learning, robotics, etc. This helps the team track and manage inventory in a more efficient way. Fulfillment Centers Fulfillment centers are sometimes also called Distribution Centers. Unlike traditional warehouses, the inventory is usually not stored in fulfillment centers for more than a day. They are used in the downstream supply chain (towards end consumers), where these centers can break up multiple shipments and then pick and pack logistics as per specific customer orders. Consolidated Warehouses Another technique of eCommerce warehousing that traditional firms follow, is leasing a consolidated warehouse, either for bulking together source orders to be delivered to different customers or for bulking together customer orders from various sources. In the first case, it acts as a collection center, and in the second case, it essentially serves as a fulfillment center. Still, the inventory might be stored in consolidated warehouses for more than a day. While the first five types differentiate eCommerce warehousing based on ownership, the last three types of warehousing describe their capabilities and functionalities. Apart from the eight common types, some warehouses have cold storage capabilities, and they are found among businesses dealing with fresh produce, meat, and the processed food industry. How to Maximize Efficiency While Using eCommerce Warehousing? Maximizing the capabilities of eCommerce Warehousing (private, public or cooperative) is common among eCommerce companies that have a decent number of orders being processed daily. In such cases, eCommerce companies should possess the appropriate warehouse area and maximize their efficiency to be competitive. This can be done in the following ways: Network Design It is important to note that a company’s eCommerce warehousing and storage network design plays a crucial role in determining its supply chain efficiency and customer satisfaction. Companies need to decide the number of warehouses along with their location. They can opt for them to either be closer to the source or destination. Notably, as we keep increasing the number of warehouses, transportation costs might decrease, but warehousing costs increase. Apart from the warehouse location, other factors that contribute to network design are transportation policies, practices, modes, service times, costs, taxes, cash flows, and a proper P&L calculation to determine its efficiency. Warehouse Layout Once the number and location of the warehouse have been decided, the eCommerce company needs to determine the size and the layout of the warehouse. This plays a crucial role when organizations try to maximize the efficiency of the warehouse. There are three significant warehouse layouts designs that 3PL companies follow: U-Shaped Warehouse LayoutI-Shaped Warehouse LayoutL-Shaped Warehouse Layout Although a U-shaped warehouse is the most common layout, factors that influence picking a suitable eCommerce warehousing layout include: The number and location of receiving and shipping docks within the warehouse.The Storage and size that is required, along with the designated picking and packing areas.The amount of space that employees can access and move around. Depending upon overall objectives, processes involved, and the warehouse blueprint that has been finalized, some companies tend to process as high as 1.5 tons in 100 square feet. In contrast, others can hardly process 150 kilograms in 100 square feet (considering tonnage processed per 100 square feet as a metric). Inventory Management It is necessary to ensure that there’s a good amount of inventory stored in the warehouses so that customers get their orders on time. Overstocking should be avoided, which increases eCommerce warehousing costs and inventory carrying prices. Although manufacturing organizations strive to be just in time, it is necessary for eCommerce warehouses to store products based on necessity. By analyzing how products are stored within the warehouse and the movement of goods in and out of the warehouse, it is possible to state that it has a well-developed system. Some standard methods used by warehouse managers for inventory analysis include; ABC analysis: Stocks are ranked based on the highest amount of revenue and margins to the lowest amount of revenue.VED analysis: Items are classified as vital, essential, and desirable.FSN analysis: Inventory is classified as fast, slow and non-moving Apart from those mentioned above, other techniques include HML and SDE analysis, which are standard in eCommerce warehousing with raw material inventory for manufacturing. These items are classified as high, medium, and low cost, based on FIFO or LIFO inventory cost accounting, or as scarce, difficult, and readily available, based on availability. Warehouse Management Systems Warehouse Management Systems (WMS) provides end-to-end solutions, from employee attendance to final dispatches. Warehouse management systems are in sync with the warehouse design. The layout, picking and packing, and labour and dock management processes are done smoothly and on time. Warehouse management systems can also vary widely in complexity. Smaller organizations tend to stick to essential hard copy documents or spreadsheet files to track the storage and movement of inventory. However, as smaller businesses grow to become medium-sized businesses or enterprise companies, it would be beneficial for them to have sophisticated WMS software. These warehouse managing systems could either be a part of the enterprise resource planning systems (ERP) or standalone WMS systems integrated with ERP for record maintenance purposes. When deciding to own a warehouse, some companies build their warehouse management system from scratch to accommodate all the required configurations, while others implement existing software programs, customized for different use cases. Having a warehouse managing system will only help the organization maximize efficiency while using eCommerce warehousing. WareIQ Fulfillment Centers What are the Benefits of eCommerce Warehousing and Storage? eCommerce Warehousing has unique capabilities that enable the best service to eCommerce companies. This is mainly due to the differing priorities between traditional and eCommerce companies. Some obvious benefits include: Single Item Picking Traditional companies’ warehouses are typically planned to cater to bulk orders. Bulk orders could either be a single large appliance or multiple smaller items. For example, in a retail supermarket chain, the warehouses are used to process large replenishments of orders for the actual supermarket. They usually tend to be a whole truckload of items to serve different outlets across the region. The end customer buys the final item, which is either a single product or an entire cart of groceries. In the case of eCommerce warehousing, we skip the retail outlet part and enable the customer to order directly from the warehouse. Customers can order an item as small as a box that can be shipped from across the nation. Faster Delivery One of the biggest advantages for eCommerce companies has been the speed of delivery promised to customers. Thanks to eCommerce warehousing companies, same-day delivery has now become a norm. We have also seen companies slowly trying to capture the instantaneous delivery market were promised delivery times are as low as 10 minutes. All of these have been made possible by eCommerce warehousing, which looks at factors right from the network design of fulfillment centers to the way operations are planned within the dark store models for faster picking and delivery. Read our blog on shipping aggregators to better understand how they can complement warehousing facilities to enhance your fulfillment services to your customers. Inventory Tracking Some pain points of traditional warehouses include missing, damaged, or wrong item cases and all of this arises due to a lack of proper inventory tracking mechanisms. Some warehouses still tend to operate with pen-and-paper processes, which results in a lot of manual errors. In the case of eCommerce warehousing, they are usually led by technology. This enables them to track every aspect of inventory management which reduces manual errors to a great extent and some services also provide fulfillment status services to both the retailer and customer. Moreover, the orders are tracked at the customer level, and customer feedback is immediately mapped to the order to take corrective and preventive actions in case of any errors. eCommerce Warehousing With a 3PL. How Does it Make Your Life Easier in 2022? 3PL companies often provide features and facilities in their warehouses that companies simply could not obtain on their own without spending a significant amount of capital in doing the research and implementing the technology. It is always easier for eCommerce companies to partner with a 3PL so that they can take advantage of the wide range of benefits on offer. Additionally, these services are often very cost-effective because 3PL companies do their best to win over customers from the competition by gaining their attention with attractive pricing. Some of the reasons that eCommerce companies should opt for eCommerce warehousing with a 3PL company are: Access to advanced technology such as WMSAbility to automate multiple important warehouse processesMitigation of errors and accidentsUse of smart inventory placement to strategically place inventoryAccess to cheaper and more transparent pricingReduction in time and effort in order fulfillmentAccess to ultra-fast deliveryChoice of a variety of shipping aggregatorsAccess to multiple warehouses and fulfillment centers across the countrySpecialised features such as cold storage and climate-control facilities 6 Main Factors to Consider while Selecting an eCommerce Warehousing Service The choice of which eCommerce warehousing service is right for your business is determined by many factors such as ownership, network design, cost, and service levels. If the company plans to own the warehouse, network design comes into the picture. The number of warehouses relates to the appropriate level of service for the clients. For example, if there is only a single warehouse for the whole country, it will have a negative impact on the delivery timelines of goods to the customer. In the case of owning the warehouse, it also becomes a tedious task to strategize ways for efficient management while scaling the organization. In most cases, retailers partner with warehousing organizations that already have the necessary infrastructure to support scale. Here are the best practices for selecting an eCommerce warehousing service; Count of Warehouses The number of warehouses possessed by the eCommerce warehousing service and their locations plays an essential role in determining viability. eCommerce companies need to be clear on where they want the warehouses to be located to maintain a steady supply of goods and maintain customer relationships. Capacity of Warehouses eCommerce warehousing services have a defined capacity. It is always essential to understand the companies’ capabilities and ensure it aligns with the eCommerce warehousing service before deciding to partner with them. Capability of Warehouses eCommerce warehousing capabilities broadly include faster shipping times, better inventory management, tracking capabilities, transport partnerships, cold storage facilities, technological advancement and much more. Cost of Warehouses Even though the costs of maintaining a warehouse do not fall directly under eCommerce companies now, they need to consider other expenses like storage cost per day, the transaction cost for shipping, etc. Client Base of Warehouses The existing client base of eCommerce warehousing services speaks volumes about their capabilities and offerings. It is easier to evaluate them based on customer reviews. Communication of Warehouses Communication serves two purposes. In the case of newer warehousing and storage services that are entering the market, it is difficult to evaluate them based on their clientele, as they have fewer clients that can speak on behalf of the eCommerce Warehousing service that they have partnered with. During such situations, the timely communication practised by its operators plays a crucial role in determining their services. Also, expecting accurate analytics such as reports of inventory stored and on-time deliveries is vital for eCommerce businesses to measure the performance of their supply chain. Most eCommerce storage and warehousing services give clear ideas about their services and work as partners to enable the growth of their partner organizations. The eCommerce companies need to pick and choose the right fulfillment partner and scale from there. Read our blog on logistics costs to get an idea of what expenses an eCommerce retailer incurs and how to mitigate them. Conclusion: Why is eCommerce Warehousing Right for Your Business? The frequency of emergence of online retailers is the result of multiple benefits that come with operating on the virtual market. One of these is the lack of necessity to own a warehouse as eCommerce warehousing requirements can be offloaded to dedicated companies. Furthermore, firms try to operate by the Just-in-Time system that envisages possessing the least amount of warehouse stocks. Attempts to restrict them are associated with the desire to reduce costs; however, there are no possibility to eliminate them. The flow of material goods within the framework of the logistics chain is not constant but first and foremost results from restrictions on geography and time. Hence, although owning a warehouse is not necessary in the case of an online shop, availing its surface area as a temporary place for storing goods appears to be an intrinsic process in the servicing of the eCommerce supply chain. These days, most online sellers opt to partner with fulfillment companies to ease the requirements of their business which helps them in eCommerce warehousing. These fulfillment centers not only provide warehousing services, but also assist with branded shipping, eCommerce logistics, and a lot more during both pre and post-sale of any products. WareIQ can step in to empower businesses to flourish online. WareIQ is a top player in the eCommerce fulfillment services space for some of the most reputed brands in India. WareIQ enables same-day delivery and next day delivery – an Amazon Prime-like experience for eCommerce players by storing inventory closer to the end customers. WareIQ optimises delivery speed & costs through a nationwide network of fulfillment centers, micro-fulfillment centers & urban dark stores. It empowers online & D2C brands to sell faster, sell everywhere & sell more by providing easy integrations to 20+ online marketplaces/platforms. With world-class WMS functionalities, WareIQ handles the entire range of intricate operations in the eCommerce fulfillment process, ranging from Inbound Operations such as scanning and quality check, through 100% accurate Pick and Pack, to Inventory Management across all channels. WareIQ’s next day delivery and same-day delivery services are helping eCommerce businesses set new standards with respect to setting customer expectations and fulfilling them with high efficacy. At the same time, WareIQ customers realise significant cost savings and wider reach due to better negotiations with shipping partners, strategically placed warehouses, economies of scale and scope in warehousing, and data-driven decision making. [signup] eCommerce Warehousing: FAQs What is eCommerce warehousing and how does it work? The storage of physical items before they are sold online is referred to as eCommerce warehousing. Warehousing entails not just storing products safely and securely but also keeping track of where they are, when they arrived, how long they've been in stock and the quantity available at any particular time. Does eCommerce involve warehousing?In an eCommerce business, warehousing plays a vital role. It does not matter if your business is big or small, you will always need to keep your inventory safe and secure in storage and that is what warehouses are for.  Warehousing vs Distribution Center. What is the difference?Warehousing is a place where you only store the inventory. On the contrary, distribution center stores products, distributes them and ships them to the final consumer. How many types of warehouses are there?There are many types of warehouses but 6 of the most common have been listed below:• Distribution Centers.• Public Warehouses.• Private Warehouses.• Bonded Warehouses.• Climate-Controlled Warehouses.• Smart Warehouses. How to set up an eCommerce warehousing and storage center?• First, finalize how much space you require• Note down all the essential warehouse equipment you need• Figure out ways to automate processes that need to be repeated• Optimize pick paths• Establish warehouse guidelines• Upskill and train your staff• Choose the right Warehouse Management Software Why are many eCommerce warehouses garages and living rooms?Garages and living rooms are commonly substituted as storage spaces by smaller companies, companies that don't have the financial resources to partner with a 3PL or lease a warehouse and companies that have not expanded to a point where they require more storage so they utilise what they have. Does WareIQ provide eCommerce warehousing?Yes, WareIQ has a network of warehouses, fulfillment centers, micro-fulfillment centers and urban dark stores across India that allows eCommerce businesses to store inventory closer to their customers & reach them faster.

June 23, 2022

Ultimate Guide To Inventory Optimization: Definitions, Importance, Challenges & 10 Strategies to Optimize Inventory in 2022

Ultimate Guide To Inventory Optimization: Definitions, Importance, Challenges & 10 Strategies to Optimize Inventory in 2022

Inventory plays a vital role in generating revenue for eCommerce businesses. Because it is such a valuable resource, it is in the best interest of retailers to have practices in place to make the best use of it to avoid wastage and higher costs involved in storage. This is where inventory optimization comes into play, to be able to streamline inventory management to get the most out of it. In this blog, we will be discussing the meaning of inventory optimization, its importance, challenges, and 10 strategies to implement it. What is Inventory Optimization? Inventory optimization refers to a series of best practices that allow an organization to use the least amount of capital while maintaining an optimum level of inventory that has a high turnover rate. It forms a part of inventory management that depends on the supply and demand scenario that is faced by the organization. Inventory optimization in supply chain management helps control stock quantities by employing real-time data gathering tools and processes to keep track of your stock. It facilitates investment management set against your business goals and supply targets and also empowers better demand forecasting. [contactus_gynoveda] Key Elements of Inventory Optimization in Supply Chain Management Inventory Optimization in supply chain management involves the following elements: Forecast Demand Forecasting accurate inventory demand is crucial for your sales cycle as incorrect predictions can affect the supply and sales numbers. Therefore, you need to consider the following numbers for proper analysis of the upcoming demand. Supply and demand numbers in the previous periodAccounting sales dataFeedback and suggestions from your sales personnel A correct demand forecast can do wonders for your inventory optimization. It can save you from stockouts and prevent you from missing your sales targets. Analyze Inventory Levels Overstocking can freeze unnecessary amounts of your capital and understocking can lead to missed sales targets and a dip in revenue. That’s why analyzing inventory levels is a critical part of inventory optimization. This analysis further helps you draft an inventory policy for your organization. You can categorize products based on their consumption and demand. As a result, you can replenish the fast-moving products more frequently and in larger quantities and refill the slow-moving inventory less regularly. In addition, you can avoid a stockout due to sudden demand surges by frequently analyzing inventory levels. Check on Inventory Storage Optimized stock storage is a necessity for smoother operations. A robust inventory management system helps you be ready to consistently meet customer demand and nurture business growth. You should often check the inventory levels to calculate the reorder point and order quantities. This monitoring enables you to convert the numbers into actual orders. Briefly, it helps you ascertain when to replenish the stock to avoid missing the demand-supply gap. Importance of Inventory Optimization in eCommerce Inventory Optimization holds a high value and can be a game-changer for players in the eCommerce industry. This line of business is highly dynamic, volatile, and prone to sudden changes in demand, thus profoundly influencing the supply of products. Here are a few factors as to why inventory optimization in supply chain management is critical for eCommerce businesses: Mitigates Recurring Costs Overstocking leads to frozen capital that does not bring immediate profits and may even result in the occurrence of losses. Conversely, understocking leads to lost sales. In the eCommerce industry, volatility adds to financial losses. You can reduce your supplier lead time when you have accurate information about your stock levels. Effective inventory optimization can highlight the recurring flow of expenses relating to purchases, transport, logistics, and many more, thus helping you curb them and avoid any probable losses. Provides Access to Faster Delivery Inventory optimization in the supply chain assists businesses to monitor their warehouse and SKU performance. As a result, you have relevant knowledge about the inventory presence across locations which helps you allocate merchandise where it is needed. For instance, if the demand for product A is more in Delhi, you can allocate its bulk quantities to be stored in a warehouse close by. This promotes timely and faster delivery and adds to the customer experience. Additionally, because inventory placement is organized, it takes less time to locate inventory, package it and send it out for delivery. An advanced WMS such as the one offered by WareIQ can automate these processes to make life easier for you. Stabilizes Inventory Levels Inventory optimization gives you complete visibility of the existing stock levels and their locations from the moment they arrive at your warehouse till they are dispatched and delivered to the end customer. Such insight also informs website users when a product is in stock, out of stock, or taken off the inventory list. This tool empowers you to track your website orders more efficiently and can result in fewer lost sales and greater customer satisfaction. Enhances Customer Satisfaction Every customer expects an accurate and timely flow of information from eCommerce companies. If their desired item is out of stock, notify them as to when it will be replenished. Inventory optimization helps you gather this data regularly and make it available to the customer. It provides critical insights into customer behaviour, and preferences and, thus, enhances their experience with your brand. Automated inventory management also keeps a tab on the flow of merchandise flow and when replenishment is required. This information can be synced to the online website, thus enabling customers to receive transparent information and enabling them to make the right purchase decision. Prevents the Occurrence of Overstocking & Understocking Inventory optimization helps in forecasting future demand based on historical data to assist in avoiding overstocking and understocking situations so that just the right amount of inventory can be stored to be able to fulfill orders, mitigating wastage of time, inventory, money, and other resources. Both overstocking and understocking are counterproductive to your capital inflow and can adversely affect your business results. Challenges of Inventory Optimization in Supply Chain Procedures Supply Chain Disruptions Many factors such as global health crises, natural calamities, or even disruptions within the organization such as the wrong product being packed at the warehouse, the product incurring damage while in transit or the failure of a machine during can manufacturing, can cause an interruption in the supply chain. It increases the pressure on businesses to enable effective inventory optimization to keep it secure from unforeseen adversities. Reacting to Unstable Consumer Demand Your business must be ready for volatile customer expectations and sudden demand surges for some products. Sometimes, requests for a particular item escalate overnight and only a few players in the market can supply. This is a big challenge for inventory optimization because forecasting sometimes cannot predict sudden surges and falls in customer demand for various products. This is why it is imperative for firms to keep some buffer stock aside to have a safety net for similar situations. Maintaining Frequency of Order Fulfillment Challenges in operational functions and supply chain management can constantly disrupt your inventory optimization procedures. While you may try to fulfill customers’ expectations, your stock level depends on the sales targets, the need for a stock refill, and pushing out existing inventory at the earliest. Each process needs to be optimized so the chances of it causing a disruption to the overall supply chain are minimized. 10 Strategies to Optimize Your Inventory Utilize Supply Chain KPIs You can only improve what you can monitor. Deciding and implementing KPIs for your supply chain can keep track of your logistical performance and highlight deviations for you to work on. There are multiple KPIs so you need to determine which ones would be the best to track the performance metrics of your supply chain, based on the goals you want to achieve. Some common supply chain KPIs are inventory turnover rate, fill rate, inventory days of supply, and much more. Use ABC Analysis ABC analysis utilizes the Pareto principle, which opines that 80% of the results are determined by 20% of the causes. Therefore, it is effective to categorize your inventory into A, B, and C classes depending on their consumption value within a fixed period.  The three categories are as follows: A: Products with the highest consumption value or salesB: Products with medium consumption value or salesC: Products with the lowest consumption value or sales Each of these categories is based on SKU profitability and enables different restocking strategies for other products. For instance, if you sell washing machines worth Rs 25,000 each and a cover worth Rs 250 for each piece, you will stock them differently as per their values. Organize Slow and Obsolete Stocks (SLOB) Slow inventory is the gradually-moving stock that doesn’t get sold frequently. Obsolete inventory is the merchandise that has reached the end of its product life cycle. These products may not have been dispatched from the storage unit in a long time, which can be anywhere from a year to much longer, depending on their perishability. This dead inventory is a grave situation that indicates poor inventory management. These two versions of the stockpile in your warehouse demand your attention for inventory optimization in supply chain management. First, your records must highlight the inventory that hasn’t moved in a while or moves rather slowly. These stockpiles must be attended to by either discarding them or selling them off at discounted rates. Dealing with SLOB has some advantages: It creates more space for the faster-moving itemsIt reduces your cost overheadsIt increases working capitalIt brings in surprise revenue from sudden sales at discounted rates to customers or vendors Accept Shortages of Low-Demand Products It is impossible to serve every customer that comes to your door successfully because to do that, you will need to keep 100% stock for all products, which will be financially and logistically unviable. The only solution is to accept that being short on some low-demand or slow-moving products is good for the long-term profitability of the business because they often cost more in terms of storage and logistical fees than what they are worth. It is a small price to pay to ensure that you are always stocked with high-demand products. Shorten Lead Time Lead time is the waiting period between order placement and receipt from your supplier. For example, if you ordered a batch of products from your supplier today and it arrives five days later, your lead time will be five days. Lead time calculation helps in business forecasting and affects the strength of your supply chain. When the lead time is higher, your supply chain is not as strong as it should be and your inventory cannot be optimized properly. Therefore, shorten it as much as possible to reduce carrying costs, streamline your logistical functions, improve productivity and replenishment speed, avoid stockouts and optimize inventory. You can reduce lead time by: Signing a contract with your suppliersIncreasing your reorder speed by ordering more frequentlyShare your sales information with the suppliers to alert them of an incoming orderEmploy inventory management software for better optimization Use Proper Forecasts Knowing how much to stock up on a particular product is as important as knowing when to do so. Predicting inventory levels can help you decide how to push sales through flash discount schemes or when to acquire more space to store your existing and incoming stock. Besides, you need good forecasting tools to understand the nuances of safety stock and reordering. Safety stock is the buffer you keep in hand in case of sudden demand surges or any other emergency. To calculate the safety stock you need to consider the following numbers: Maximum daily usageMaximum lead timeAverage daily usageAverage lead time Safety Stock = [Maximum Daily Usage x Maximum Lead Time] – [Average Daily Usage x Average Lead Time] Your reorder point must ensure proper utilization of existing inventory levels without allowing overstocking or understocking. Here is how you can calculate it. Reorder Point = Lead Time Demand + Safety Stock Reduce Uncertainty in Demand and Supply Keep a closer tab on your incoming and outgoing inventory by employing diverse automation and skilled manpower. Conduct regular audits and streamline warehouse receiving and dispatch processes. In fact, integrating your SKUs with inventory management software can enable inventory optimization through timely and accurate tracking and updates. It gives you access to the following features: Real-time visibility of your stock levelGenerates alerts for restockingGives suggestions on bundling options for a similar variety of productsChurns out analytical reports for business intelligence Centralize Your Inventory Keeping your inventory according to demand figures is a good strategy that optimizes operations and saves expenses. Also, strategically distributing your stock at one centralized location like an inventory hub, warehouse, retail store or any other type of storage facility is financially viable as well. In this case, only the storage facility is centralized, not the sales operations. You may have multiple stores across the county to sell your products but an  SKU at one location to replenish your shelves. It helps streamline all your crucial supply chain functions under one roof. It enhances inventory visibility and reduces storage and logistical overheads. As a result, it is suited for businesses that don’t operate in too vast and distant geographical locations. Automate Replenishment of Inventory Automation can help you integrate all your storage units and warehouses and monitor their inventory levels, sales channels, fulfillment centers, and delivery locations. It enhances your visibility and productivity with a constant flow of accurate data. There is a software solution to suit the needs of every business. Robust inventory management software regulates the inventory flow from your warehouses and alerts you when a product needs replenishment or is about to become obsolete. They also give you analytical reports to observe the logistical performance. Limit the Number of Available Products Having a highly diversified product range does not guarantee success. However, if you keep a limited number of product offerings, you can better optimize your inventory and deliver enhanced value and a productive experience to your customers. Apple is one of the best examples of properly utilizing a limited number of products. Their limited product range has been enough to lure queues of customers and generate massive amounts of sales. Conclusion: How Can WareIQ Help With Inventory Optimization? Inventory Optimization in supply chain management is crucial in influencing your business outcomes. Two supportive factors can alter the game for your business: cutting-edge technology and a team of experts. WareIQ’s single platform for all your warehousing and fulfillment needs ensures you get access to all the information you need from one place. Our cutting-edge WMS can manage warehouse operations, inventory optimization, shipping, and delivery tracking from our end-to-end fulfillment services platform. Plus, you get the support of our team of industry experts who have revolutionized the way the supply chain moves in India. Inventory Optimization: FAQs Why is inventory optimization important?Inventory optimization allows for a significant reduction in overall expenditure while increasing profit margins due to smarter use of inventory and storage. How can inventory be monitored?Inventory monitoring can typically be done through 2 methods:Cycle Count: This refers to counting a limited sample of your inventory to compare with digital records and make sure it is accurate.Physical Count: This is a more time-consuming process that involves the counting of every unit of inventory by hand to make sure that there are no discrepancies between the physical count and the inventory records. What is multi-stage inventory optimization?A multi-stage inventory optimization process recommends the optimum inventory levels at every stage of the supply chain by optimizing inventory levels in different locations. How can WareIQ help with inventory optimization?Our highly advanced WMS conducts and automates various inventory optimization processes such as providing real-time updates to inventory levels across fulfillment centers and selling channels, intelligent inventory placement that suggests the best storage facility for each unit of inventory, forecasting demand levels based on historical data, providing automatic replenishment triggers and much more.

June 23, 2022

What are Fulfillment Services for eCommerce? A Detailed Guide in 2022

What are Fulfillment Services for eCommerce? A Detailed Guide in 2022

To understand what fulfillment services are, why it's essential in 2022, and their benefits for your business, we need to first talk about the supply chain issues faced by many eCommerce retailers. Since the pandemic began, we've all been experiencing problems with shipping aggregation and the supply chain. The challenges we have experienced began with pandemic-related restrictions and shutdowns. Without supply chains that can keep up with current demand, vendors have had trouble getting the supplies and goods they needed. This negatively impacts customers, as they waited for their products to be delivered. The delays were worsened by other factors such as weather, lack of warehouses, labour shortages, etc. These factors were compounded when they created a flow that caused delays. This was a trend across eCommerce enterprises and affected all parties involved. Many fulfillment services that deliver goods suffered cash flow issues due to the pandemic. The customer’s impression of your company is determined by how they feel while receiving their order. Successful fulfillment platforms and branded shipping improve customer satisfaction and build a better brand presence. For customer satisfaction, streamlining and optimising your fulfillment services is critical. The online and offline elements of the business should work together to ensure that customers are satisfied with the service they receive, both in-store and through the shipped product. What is eCommerce Fulfillment? eCommerce fulfillment is the process of completing online orders. If someone orders your product via one of your online stores, you must deliver it quickly and at a reasonable price. An eCommerce fulfillment service deals with the process of customer orders, specifically receiving, storing, and shipping. It is also responsible for processing orders and dealing with customer returns. A well-planned and professionally managed eCommerce fulfillment service saves both time and money and is only one of the necessary parts of an extensive eCommerce business. The core feature of successful online retail are well-executed fulfillment services that help you expand your market reach and build customer loyalty by improving your efficiency. [contactus_gynoveda] What are the Steps Involved in the eCommerce Fulfillment Process?  Product Receiving The first operation included in fulfillment services is receiving. When your products are delivered to the fulfillment center, they are entered into inventory and placed on shelves where they are ready to be shipped. It is useful to organise these products according to their delivery dates. You can accept and fulfill requests manually. Or, if you switch to using software to do it, you can integrate your cart or marketplace that will automatically look for orders based on the inventory. Inventory Management Proper inventory management means systematically tracking all products so that if and when you run out of goods, they are immediately replenished (know more about stock replenishment). The IMS can store and manage products in your inventory, meaning you won't have to worry about the logistics costs of product handling. Continuous processes such as audit functions should be performed regularly to avoid complications in fulfillment services. Inspect your stock to ensure that items are in good shape, and discard any damaged items. If you're missing an SKU, refer to your inventory or CRM software to track it down. One of the main challenges that retailers face is inventory management because they may not know what their customers want and need. Partnering with a competent fulfillment service provider, being organised, and staying informed about inventory levels can solve this issue. Order Fulfillment An eCommerce business can self-fulfill their orders or hire fulfillment services to do it for them. This includes the following three activities: Picking: It can take days for a company to fill an order. Selecting the product to be fulfilled is the first step in the process. You can pick from a single location or multiple locations across your warehouse if you have different products at each site. To quickly fulfill orders, find reliable staff that can handle the logistics at your warehouse. If your business receives many orders, it will be best to have staff dedicated to this process. The speed increase with this methodology is significant. Faster and hassle-free automation as well as partnering with fulfillment partners can be implemented to improve the pick and order process. Automation can create smaller orders and send them to the consumer in one batch. Packing: Once all the items in an order have been picked up, they must be adequately and attractively packaged. Packaging is an essential aspect of order fulfillment services because it is a physical reflection of your brand presence. Hence, you should concentrate on various packaging plans and choose what works best for your brand image. You should make sure that your packages are labeled and ready to be shipped. In either case, you should use a good packing strategy to ensure the safety of your package. Custom packaging could also be made available.  Shipping: Logistics is crucial in order fulfillment services. Having a timely shipping experience can boost the experience of your customers and make any trouble or delays with shipping, less likely. The transport of goods often includes selecting a transport company and fulfillment services. Reverse/Return Logistics Reverse logistics is about tackling all the items that were returned. Rising competition in the market means that return orders are inevitable. Any company must manage this process efficiently. If your fulfillment service processes your items faster, they will quickly process the refunds. This would lead to the items and the refund being completed faster. Many fulfillment service providers allow you to automate your non-delivery report and handle the refund of orders. Since they take responsibility for all rebates, they can also dramatically lower the number of returns you may have to process. What are Some Common Misconceptions About Fulfillment Services?   Warehousing and Fulfillment are Interchangeable Terms This statement is false. The terms warehousing and fulfillment are not the same. Warehousing refers to storing products in a particular place until they are ready to be distributed. Fulfillment refers to the entire process of delivering a product to the end customer. A distribution center created by 3PL fulfillment services is traditionally used only for order fulfillment and inventory management. Fulfillment centers, however, also take on order management duties and fulfill orders given by purchasing departments.  The Fulfillment Center Should be Closer to the Business Location Shipping can become more expensive if you're shipping to your location (business) rather than your customer's location. You have to pay for the extra cost of having items shipped from the fulfillment center closer to your location. It can be challenging to maintain inventory and storage, as you will have to make compromises on-site. You need to try and have your fulfillment centers located closer to the customers to enable faster delivery. Self-Fulfillment is the Cheapest Way to Fulfill Orders Automation is beneficial if you ship out less than ten orders per day. But if you ship more than 20 to 30 orders each day, we recommend taking a shot at outsourcing your needs to fulfillment services. Training facilities and resources are necessary for a business's success. Without these, it would be hard to innovate and update products quickly. It Will be Much Cheaper if a Fulfillment Center is Located in a Tier-2 or Tier-3 City It can be challenging to maintain inventory and storage, as you will have to make compromises at the location. It might be cheaper in the short run to store your products in a remote, out-of-the-way place and deal with slower shipping, but you need to research the area of your target audience to avoid higher combined shipping costs. Try to have your fulfillment centers closer to the customers to reduce costs. What are the Benefits of eCommerce Fulfillment Services? Focusing on Core Business Outsourcing can free up time spent on mundane tasks. Rather than wasting time taping boxes, invest your time in growing your business. As a business grows, order fulfillment becomes more complex and risky. You can lower your risk of delays by outsourcing the shipping process to a third-party eCommerce fulfillment service. It will give you the time and resources to focus on other tasks like designing your products, marketing them, and selling them. Lowering Shipping Costs You won't benefit from the negotiated shipping rate if you ship orders yourself. Fulfillment services have warehouses all over the country and divide your inventory, so you don't have to pay for distribution in one location. They utilise tools to compare rates with couriers to reduce shipping fees. By partnering with a 3PL eCommerce fulfillment partner, you can get your inventory to the customer's door quicker and cheaper. By shipping from more than one location, you can maintain bulk items closer to customers, which leads to faster delivery. Increasing Shipping Speed Outsourcing fulfillment services will allow you to provide faster delivery. You can place inventory closer to your buyers and have warehouses all over the country for efficiency. Retailers need to be able to ship products quickly to customers and meet demand. An eCommerce fulfillment partner can help you do just that by meeting expectations and competing with big stores. Establishing Fulfillment Infrastructure It can be a nightmare to deal with the storage of orders if you handle them on your own. Storage entails a lot of eCommerce warehousing and operating tasks, which can be solved using asset and inventory management software. To have a fulfilling infrastructure, you need to have people working for you and providing storage and security.  All of this comes at a significant monetary investment. When you outsource to a 3PL eCommerce fulfillment service, you will have access to improved storage space and won't be penalised for your usage. If you have fluctuations in sales volume, they have plenty of resources to deploy according to your order demands. WareIQ's Fulfillment Solution Keeping Buyers Up-to-Date Online buyers need consistency and transparency when buying products to trust the company they are purchasing from. If you use fulfillment services or outsource your needs to a third-party eCommerce fulfillment service, you can provide accurate delivery confirmation at the checkout page. They have an experienced workforce, and the capacity to deliver on time. Reducing Operating Costs Moving fulfillment services to an external location can be costly, but businesses often overlook the fact that self-fulfillment also has costs. Inventory storage is a significant expense and will continue to grow as eCommerce retail evolves. Additionally, outsourcing fulfillment services often lead to high rental fees for warehouse space. Outsourcing to third-party eCommerce fulfillment providers can save overhead costs by only paying for necessary items. You are also insulated against seasonal changes in sales volume. Expanding Your Reach You can receive orders from any state or country with an exemplary eCommerce fulfillment service. Organised and efficient fulfillment will help you reach your business goals. It can be intimidating to understand complicated international shipping and customs rules when managing orders on your own. International shipping rates are even more complex because they are governed by different regulations and currencies. As a result, many retailers keep their shipping options local or regional. But outsourcing fulfillment services can help you get your products to more people. Many fulfillment services have the infrastructure for shipping around the world. Accessing Superior Technology With a tech-enabled 3PL eCommerce fulfillment service, you can gain access to periodic inventory reports and crucial metrics that can assist you in making strategic decisions. A 3PL will provide you with real-time access to essential data such as insights on inventory and orders, forecasting, determining zones for distribution, and performance reports.  What are the Costs Associated with Fulfillment Services?  When calculating the costs of an eCommerce fulfillment service, different models need to be considered. There need to be calculations on the warehousing and fulfillment services and the channels and types of distribution.  Self-Fulfillment When it comes to self-fulfilling orders, you need to take out loans due to the excessive use of resources. Staff needs to be trained in picking and packaging, and storage space and shipping services must also be obtained. 3PL Fulfillment 3pl Fulfillment services are a great way to scale your business up. It is a cost-effective solution, as it allows people to avoid all sorts of expenses, including labour costs and other miscellaneous costs. You only need to find a 3PL eCommerce fulfillment service and choose the fees you want to pay. Customers must pick 3PL fulfillment services closer to their location for an optimal experience. Dropshipping Early in a business, you don't have to invest any real money. Instead, your suppliers cover all the manufacturing, storage, and shipping costs with very little administrative or customer interaction. However, as your business grows, it can be hard to scale up if you need to maintain relationships with multiple channels. Fulfillment by Amazon Fulfillment by Amazon is when an Amazon.com seller sends their products directly to Amazon fulfillment centers. It's only for products on Amazon that have Prime status, and it's the most expensive option when selling on Amazon. With Seller-Fulfilled Prime (SFP), Amazon shipping can be outsourced to different sellers who are trustworthy. Sellers can receive their orders within two days with FBA. FBM, which has a lower cost, renders all Fulfillment services through the seller and is responsible for purchasing and maintaining inventory and handling customer service but provides no Amazon packaging. Which Types of Businesses are Best-Suited for eCommerce Fulfillment Services?  One way for businesses to sell products more efficiently is by using an eCommerce fulfillment service. It can be beneficial for some industries, such as eCommerce retail. Accessories Fulfillment If you sell accessories, you can rely on more efficient third-party fulfillment services by automatically fulfilling any orders at the time of purchase. Beauty & Makeup Fulfillment You want to make sure that your makeup is shipped carefully so your customers can conveniently pick it up. Make it a point to consider the ease of transmission - even if you're sending a small package. Clothes Fulfillment Delivery of your clothing items is integral to running a successful garment outfit. With discrepancies in sizing, colour, and styles, working with 3PL fulfillment services that competently coordinate order volume is essential. A 3PL eCommerce fulfillment service should also offer the provision of a return, mainly when customers try on their order before purchase. Diet & Supplement Fulfillment The US FDA doesn't regulate dietary supplements, but for a rapidly growing market, it is essential to be able to ship and track inventory. 3PL fulfillment services ensure that this innovative business can expediently deliver products. Electronic Appliances Fulfillment Customers often need customer service when they order items online. Ensure your company offers customer service in addition to quality products and proper storage. Toys Fulfillment Selling toys is unpredictable unless you forecast and plan. Inventory and forecasting tools work better with 3PL fulfillment services with software to manage the process. Pets Accessory Fulfillment Customers are trusting when they purchase pet accessories from a company. They have high expectations for transparency during the purchases of your brand's products. 3PL fulfillment services are necessary to create and fulfill consumer desires. Collectibles Fulfillment eCommerce brands need help storing inventory and fulfilling orders. Etsy and Facebook Marketplace are some companies that cover the growing market for other items people are willing to buy. Home & Kitchen Appliances Fulfillment Kitchen appliances are constantly being developed, with people looking for the following new and innovative products that can be bought on the internet. Luxurious Goods Fulfillment Luxury goods can be vulnerable and fragile, so 3pl fulfillment services take excellent care to ensure your items are finely handled throughout storage and processing. They have virtually no cases of broken or damaged luxury goods. Games Fulfillment If you have an excellent idea for a game, the eCommerce market is the best place to sell it. However, the industry can be competitive, so optimising your retail fulfillment process is one way to stand out. Equipment Gear & Outdoor Fulfillment You need a reliable logistics eCommerce fulfillment service infrastructure to survive in the outdoor equipment and gear eCommerce industry. Cymatic offers a warehouse distribution network with drop gate technology that can help you compete in this saturated market. Healthcare Fulfillment It is critical to have the proper eCommerce fulfillment service when expanding your online store. Without the correct location or team, it isn't easy to fulfill an order on time and manage inventory efficiently. Home and Household Goods Fulfillment eCommerce homeowners and brands can now receive high-quality eCommerce fulfillment service support from 3PL fulfillment services, which have highly skilled fulfillment experts. It will save you time and money as you scale your brand, but it will also help optimise your supply chain. F&B Fulfillment Customers rely on eCommerce businesses to get food and beverages delivered more than ever. Consumers expect food and drinks to be fresh and perishable. Food that is provided by an eCommerce business needs to be stored and supplied carefully. Which are the Right Situations to Switch to eCommerce Fulfillment Services? If you're fulfilling orders for your business and see a significant influx, it's time to reach out about scaling. Use fulfillment services to help ship and process these orders quickly. If you are not using technology to optimise operations, your business will grow inefficiently. To do so, be sure to have an eCommerce fulfillment service that provides software that will suit your needs and the company's growth. Here are some questions to help determine if you should outsource your fulfillment requirements to 3PL fulfillment services. Do You Struggle in Determining How to Plan for Storage and Inventory? If the answer to this question is yes, consider outsourcing your inventory and warehouse management to third-party fulfillment services. Do You Spend Too Much Time Fulfilling Orders? If you can fulfill orders on your own, then there is no need to invest in fulfillment services for your business. However, if you are unable to do that, it may be worth looking into an eCommerce fulfillment service for any excess orders. How Do You Check Your Customer's Shipping Preferences? If you want to store products closer to home, take advantage of fulfillment services How Do You Plan to Grow the Business? If your business is projecting enormous growth, it's time to switch to 3PL fulfillment services. Conclusion: Is it Worth Partnering with an eCommerce Fulfillment Company in 2022? There are many advantages and benefits that come with partnering with 3PL fulfillment services. A few of them are listed below: Improved Time Management Saving time on fulfillment through fulfillment companies can help grow your business. Outsourcing it to a more conveniently located company will ensure timely delivery and better rates for shipping. Cost Benefits Upfront costs of in-house fulfillment come with seasonally shifting overhead expenses that require employing a full-time staff team. Outsourcing gives you more flexible, stable prices and better deals on storage and insurance. Improved Technology Outsourcing fulfillment requirements to an eCommerce fulfillment service can help utilise their existing technology and infrastructure, freeing up your time and money for other uses. Integrating your eCommerce platform with that of fulfillment services is a smart option.  Business Growth Outsourcing your fulfillment responsibilities can help you focus on other aspects of the business and provide higher-quality service to customers. Market Reach Choosing an eCommerce fulfillment service can help your business reach global audiences without you having to deal with the logistics. You can focus on what's important for your business, like marketing and sales, knowing that your partner will handle the other tasks. If you are seeking to benefit from all the advantages of partnering with fulfillment services and much more, WareIQ can be of great assistance. Established in 2019, WareIQ, a Y-combinator backed startup, has rapidly grown to be the leading provider of full-stack eCommerce fulfillment services for some of the most reputed brands in India. WareIQ offers a full-stack platform for eCommerce companies to enable same-day delivery and next day delivery to customers – an Amazon Prime-like experience but accessible to everyone. WareIQ has empowered brands to sell more, sell faster & sell everywhere due to: Access to WareIQ’s strong nationwide network of fulfillment centers, micro-fulfillment centers & urban dark stores near their customersAccess to all major national & hyperlocal last-mile couriers at discounted rates for making same/next day deliveries possibleEasy integration across multiple online platforms & marketplaces enhancing multi-channel sellingHorizontal marketplaces: Flipkart, Amazon, etc.Vertical marketplaces: Nykaa, Myntra, etc.D2C platforms: Shopify, Magento marketplace, WooCommerce, etc.Social commerce platforms: BikayiAccess to a superior centralised tech platform for eCommerce operationsML-based prediction engine for efficient warehouse network design & smart inventory placementCentralised platform for core fulfillment & shipping operationsPost-shipping apps for a delightful experience & zero to minimum supply chain leakages (Branded tracking page with smart marketing placements; Trigger-based updates & smart communication platform) WareIQ has customised offerings for merchants experiencing different order volumes as well as having different delivery speed expectations. WareIQ is probably one of the very few fulfillment tech companies in the world that have same-day delivery service for their customers under their product “WareIQ RUSH”. With world-class WMS functionalities, WareIQ handles the entire range of intricate operations in the eCommerce fulfillment process, ranging from Inbound Operations such as scanning and quality check, through 100% accurate Pick and Pack, to Inventory Management across all channels. WareIQ’s next-day delivery and same-day delivery services are helping eCommerce businesses set new standards with respect to setting customer expectations and fulfilling them with high efficacy. At the same time, WareIQ customers realize significant cost savings and wider reach due to better negotiations with shipping partners, strategically placed warehouses, economies of scale and scope in eCommerce warehousing, and data-driven decision-making. WareIQ’s WMS, a centralized tech platform helps to better manage undelivered orders by reducing NDR processing time by 12 hours – a multifunctional NDR dashboard helps to track and take immediate action for undelivered orders in real-time, thereby reducing RTO by up to 10%. Automatic replenishment recommendations and easy purchase order creation capabilities on the WareIQ platform further empower eCommerce companies to leverage all possible ways of increasing their ROI. [signup] Fulfillment Services: FAQs What are the different types of fulfillment?They are as follows:• In-House• Outsourced• Dropshipping• Hybrid What is meant by fulfillment activities?Order fulfillment services refer to the processes taken by a firm between receiving a new order and delivering it to the customer. The process includes warehousing, picking and packing the product, shipping it and notifying the consumer by automated order tracking that the purchase is on its way. What is a 3PL fulfillment service?3PL or Third-party fulfillment is an outsourced fulfillment option in which you hire a fulfillment service company to store items, pick and pack orders and handle logistics on your behalf.  What does the fulfillment cost mean?The fulfillment fee or cost is linked with receiving and storing products along with processing orders from handling to shipping and any other activity that order fulfillment encompasses. How to hire WareIQ for eCommerce fulfillment services?You can contact and request a quote here. Does fulfillment drive revenue?Fulfillment is responsible for transporting goods to customers whenever orders are confirmed. Without fulfillment, companies would not be able to generate revenue because customers would not be able to receive their orders. Additionally, efficient fulfillment processes can lead to customer satisfaction, thus creating positive feedback which will ultimately lead to new and repeat customers which will drive up revenue even further.

June 23, 2022

7 Best eCommerce Fulfillment Services for Same Day and Next Day Delivery in 2022

7 Best eCommerce Fulfillment Services for Same Day and Next Day Delivery in 2022

Have you wondered how eCommerce market leaders achieve exemplary growth and customer satisfaction metrics? As the eCommerce boom continues and customer preferences change rapidly, powered by the plethora of options available to end customers, differentiation in offerings will be the key game-changer for eCommerce businesses. This differentiation can be achieved through the selection of the best eCommerce fulfillment services, more specifically, a reliable partner that offers the most recent trends in fulfillment, such as same-day delivery and next day delivery services. Keep reading to better understand how you can select the best eCommerce fulfillment services for your business and how WareIQ can be the best fulfillment partner in your growth journey. What are Fulfillment Services? Fulfillment services are similar to third party (3PL) logistics service providers that take care of preparing an order and shipping it to the end consumer on behalf of the seller and also provide a multitude of related services such as taking complete responsibility for receiving, managing and completing the order. As customer expectations of same day delivery and next day delivery grow at an ever-increasing and unimaginable pace, eCommerce fulfillment services are fast evolving as the preferred choice for eCommerce businesses across the globe. The best eCommerce fulfillment services enable businesses to reliably, accurately and efficiently fulfill their customer orders while minimising capital expenditure. While fulfillment services vary with regard to their exposure to the value chain, they mostly act as a command center for handling the entire order preparation and dispatch process as well as doubling up as a buffer inventory for holding the clients’ products. [contactus_uth] What Does an eCommerce Fulfillment Provider Do? An eCommerce fulfillment service provider takes up a broad span of responsibilities ranging from receiving stock, storing it in warehouses, order processing, shipping and transportation. The success of any eCommerce business largely depends on setting new expectations for customer experiences and fulfilling them effectively. With the eCommerce boom, customers have started expecting same day delivery and next day delivery as a general standard. However, for any eCommerce company, handling so many things single-handedly becomes cumbersome and the team starts losing focus on their core business processes. There is heavy capital investment, manpower hiring and management bandwidth allocation that is involved. Hence, outsourcing these requirements to the best eCommerce fulfillment services has proved to be a simple but very effective way of addressing this issue while riding on the growth engine along with competitors.  An eCommerce fulfillment service’s task begins as soon as an order is placed by the customer and continues till the order reaches the doorstep of the customer or is returned due to some unavoidable reason. The best eCommerce fulfillment services give the seller access to a more dynamic eCommerce warehousing space, help negotiate more favourable terms with shippers, prevent stockouts and provide real-time tracking information of the order consignments. What are the Factors to Consider while Choosing the Best eCommerce Fulfillment Services? While selecting the best eCommerce fulfillment services, a number of factors should carefully be considered and it can be a big burden for retailers to determine them. The decision depends both on the business objectives and personal preferences of the decision-maker. Broadly, the following factors must be taken into account while selecting the best eCommerce fulfillment services provider: Spectrum of service offeringsScalabilityFlexibility with respect to same day delivery and next day deliveryCost structure, pricing plans and price transparencyEase of onboardingEfficiency of customer service and reachabilityeCommerce and startup friendlinessIntuitive business intelligence dashboard for real-time monitoringExtent of integration and security Micro eCommerce Fulfillment: The Move to Same Day and Next Day Delivery Same day delivery and next day delivery are rapidly becoming the most preferred delivery models for customers globally. According to some recent survey reports, over 60% of eCommerce shoppers consider delivery speed as a significant factor in their purchase decisions and 80% of shoppers are likely to turn to a competitor brand if they encounter long delivery periods. Let us take a look at the meaning of each: When an item is delivered to a customer within 24 hours of it being ordered, usually on the day on which it was ordered, it is referred to as same day delivery. To accomplish this humongous task, the item must be delivered from the inventory, also called a micro fulfilment center, located as close as possible to the consumption clusters. Next day delivery, on the other hand, means that the customer receives the item at their doorstep on the following day from when it was ordered. It involves bundling multiple orders throughout the day destined for a given region of distribution and making scheduled delivery stops by the shipping partner. However, there are multiple challenges to this micro fulfillment revolution such as heavy capital expenditure on numerous warehousing facilities, investment in robotic product handling, rapid order processing and packing, and lack of transport infrastructure in remote locations. Hence the micro fulfillment model used by eCommerce fulfillment services is fast evolving to provide a more customised experience for eCommerce sellers with same day delivery and next day delivery offerings. 7 Best eCommerce Fulfillment Services Offering Same Day and Next Day Delivery in 2022 We have listed down the 7 best eCommerce fulfillment services that offer same day delivery and next day delivery services, which will boost customer satisfaction, leverage loyalty and increase online sales for eCommerce businesses. WareIQ  Source Established in 2019, WareIQ, a Y-combinator backed startup, has rapidly grown to be the leading provider of full-stack eCommerce fulfilment tech solutions for some of the most reputed brands in India. WareIQ offers a full-stack platform for eCommerce companies to enable same day delivery and next day delivery to customers – an Amazon Prime-like experience but accessible to everyone.  WareIQ has empowered brands to sell more, sell faster & sell everywhere due to: Access to WareIQ’s strong nationwide network of fulfilment centres & urban darkstores near their customersAccess to all major national & hyperlocal last mile couriers at discounted rates for making same/next day deliveries possibleEasy integration across multiple online platforms & marketplacesHorizontal marketplaces: Flipkart, Amazon etc.Vertical marketplaces: Nykaa, Myntra etc.D2C platforms: Shopify, Magento 2 , WooCommerce etc.Social commerce platforms: BikayiAccess to a superior centralised tech platform for ecommerce operationsML-based prediction engine for efficient warehouse network design & smart inventory placementCentralised platform for core fulfilment & shipping operationsPost-shipping apps for delightful experience & zero to minimum supply chain leakages (Branded tracking page with smart marketing placements; Trigger-based updates & smart communication platform) WareIQ has customised offerings for merchants experiencing different order volumes as well as having different delivery speed expectations. WareIQ is probably one of the very few fulfilment tech companies in the world that have same day delivery offering for their customers under their product “WareIQ RUSH”. With world-class WMS functionalities, WareIQ handles the entire range of intricate operations in the eCommerce fulfillment process, ranging from inbound operations such as scanning and quality checks through 100% accurate pick and pack to inventory management across all channels. WareIQ’s next day delivery and same day delivery services are helping eCommerce businesses set new standards with respect to setting customer expectations and fulfilling them with high efficacy. At the same time, WareIQ customers realise significant cost savings and wider reach due to better negotiations with shipping partners, strategically placed warehouses, economies of scale and scope in warehousing and data-driven decision making. WareIQ’s WMS, a centralised tech platform, is its core offering, with the following functionalities: Shipping Management Integration to all major national couriers and same-day delivery partners through WareIQ's platform with discounted ratesGeneration of bulk shipping labels & invoices in a few clicksOffering a branded tracking page and sending auto-alerts to inform customers of their shipment statusReduction in RTO % (Return to Origin) by automating cases of failed delivery attempts (NDRs) by the shipping partnerPreemption of COD frauds through an integrated AI engine flagging risky orders Orders managementTracking of orders across multiple channels Filtering of orders by statusSearching for specific ordersQuick timeline view of where the order is in the fulfillment process (e.g. when an order is picked, packed, or shipped)Shipping-related information (e.g. weights, dimensions or carrier service) Quick snapshot of any orders that require actionSyncing WareIQ’s out-of-the-box integrations with sales channels to eliminate manual importing of data and triggering all the necessary notifications to the end-customers Inventory managementTracking of inventory levels across multiple locations & sales channels including websites and marketplacesUsing WareIQ platform to distribute inventory to multiple locations optimizing for speed & cost/orderSetting reminders to proactively replenish inventory, bundle products for promotions, make inventory transfer requests and much more Warehouse managementManaging multiple warehouses and offline stores on WareIQ's platform100% inventory accuracy ​​​with scan-based operationsAutomated reconciliation tool which helps to keep track of returns and unsettled invoicesIntegrations with all major ERP & Accounting systemsAssured tag on Flipkart without physically dedicating inventory to them The central platform helps to better manage undelivered orders by reducing NDR processing time by 12 hours – a multifunctional NDR dashboard helps to track and take immediate action for undelivered orders in real-time, thereby reducing RTO by up to 10%. Automatic replenishment recommendations and easy purchase order creation capabilities on the WareIQ platform further empower eCommerce companies to leverage all possible ways of increasing their ROI. More than 300 companies such as The Man Company, Future Group, Kama Ayurveda and Wingreens Farms have trusted WareIQ as a reliable partner in their growth journeys. No minimum order quantity requirements make it suitable even for eCommerce firms having low order quantities to take advantage of the latest trends such as same day delivery and next day delivery. The onboarding process is simple, convenient and less time-consuming, while the pricing policy is clear and transparent. WareIQ also undertakes strict safety precautions at its warehouses and complete ownership of operations, thereby minimising the risk exposure of customers. ShipBob Source ShipBob was founded in Chicago in 2014 as a global logistics, technology and eCommerce fulfillment services company that fulfils orders for D2C brands with next day delivery. With a claimed accuracy rate of 99.95% and serving more than 7000 customers worldwide, ShipBob provides end-to-end solutions for eCommerce fulfillment. It offers 2-day shipping at affordable and transparent prices, along with a robust software platform that allows integrations to the eCommerce providers’ own platform with a developer-friendly API. According to independent customer review reports, ShipBob ranks high with respect to: A broad network of warehouses across distant locationsA superb easy-to-use user interfaceThe ease of integration with other platforms However, customers have reported dissatisfaction on the following issues with ShipBob: Difficult to understand pricing plansNot-so-active customer supportNon-availability of refrigeration facilities for perishable productsInflexibility for B2B operations Shipbob also provides predictive analytics to eCommerce customers to better handle stock-outs during peak sales periods. ShipMonk Source Also established in 2014, ShipMonk is based out of Florida and serves medium and small-sized eCommerce companies with comprehensive fulfillment solutions including warehousing, smart inventory management, subscription box fulfillment and campaign fulfillment. ShipMonk’s warehouses are located strategically across the USA and it has plans to establish warehouses in Europe, so as to provide more customised fulfillment, including 2-day delivery and next day delivery to D2C eCommerce brands. ShipMonk is equipped with robust and eco-friendly modern technologies such as locus robots, kardex machines, cubiscans and software that integrates easily with 75+ marketplaces and shopping carts. It offers customised packaging solutions and delivery protection schemes for willing eCommerce companies. ShipMonk allows a convenient pricing model that allows customers to pay on a per-unit basis for 1 to 10,000 fulfilled orders per day. It also enables customers to better understand the returns management process with accurate and real-time data and round-the-clock customer support. ShipMonk has a respectable mindshare among its customers with respect to: Heavy discounts and affordable shipping ratesComplete paperwork and claims settlementZero setup feesZero inventory receiving feesEasy integration with eCommerce platformsAbility to handle international orders and subscription boxes effectively However, Shipmonk’s software is not integrable with eCommerce company websites hosted on Wix. Amazon Source Amazon has been the pioneer in the eCommerce fulfillment space with same day delivery and next day delivery services for Prime members across a long list of cities. To add to customer delight, Amazon has gone to the extent of fulfilling certain eCommerce orders within a few hours of placing the order. Amazon makes it possible through a very carefully placed network of fulfillment centers, comprising of warehouses and phantom godowns, close to the sites of maximum orders, based on their past order data and projections. The same day delivery concept evolved from the 2-day delivery promise that Amazon inherently made to its Prime members. While most eCommerce companies, especially small and medium businesses, admit to having benefited largely from the same day delivery offering of Amazon, the associated costs have been heavy for eCommerce companies having less frequent and uneven rates of orders. Moreover, the same day delivery and next day delivery services of Amazon are available only for registered vendors and sellers of Amazon; external parties selling through other platforms cannot avail of these services, thereby restricting their reach. Deliverr Source Established in 2017 in San Francisco, Deliverr provides superior fulfillment solutions to small eCommerce companies, with a 2-day delivery service. Transparent pricing, badges similar to Amazon Prime and a hassle-free experience stand at the core of Deliverr's services. eCommerce companies can leverage the live data tracking options of Deliverr to predict their future fulfillment performance and even next day delivery for D2C customers located in close proximity of the warehouses. Deliverr ranks high on the following parameters: Online Customer supportEase of onboarding and integrationTransparency in pricingMulti-platform integration for companies The primary disadvantages of Deliverr are: Unavailability of International deliveryTelephonic customer supportNon-adaptability with subscription boxes Rakuten Super Logistics  Source Originally established as a 3PL company in 2001, Rakuten Super Logistics has established its strong foothold in the eCommerce fulfillment domain since 2013. A nationwide fulfillment network helps eCommerce companies minimise shipping periods, control costs and increase accuracy in eCommerce order fulfillment. RSL has partnered with some of the leading shipping carriers to handle a diverse range of parcel sizes for eCommerce platforms. While currently offering only next day delivery, it plans to introduce same day delivery services in the very near future to compete with Amazon. Rakuten customers have reported a plethora of advantages including: Dedicated customer support managers, available through phoneTwo-way inventory management and address verificationSpeciality fulfillmentDiscounts with bulk orders The main barrier for smaller eCommerce companies in partnering with Rakuten Super Logistics is its minimum order quantity of 250 monthly orders, although the company plans to shred down this limit in future. The other disadvantage is that eCommerce websites hosted on Wix cannot integrate with the API of RSL directly. Also, Rakuten Super Logistics does not offer a live chat feature and 24*7 customer support. FedEx Source FedEx, formerly Federal Express Corporation, was founded in 1971 as an urgent delivery services company. Over the years, Federal Express has grown and evolved as a multinational eCommerce fulfillment provider, serving diverse sectors such as healthcare, transportation, D2C, B2B and B2C eCommerce fulfillment solutions. Having operations across 200+ countries, FedEx has many large multinational conglomerates among its customer base and continues to innovate supply chain solutions to meet changing customer expectations. Moreover, FedEx offers the convenience of shipping pre-ordered consignments without storing them in a warehouse. However, the main disadvantages are that FedEx does not ship oversized and overweight products and it does not integrate with Amazon - an essential requirement from any eCommerce fulfillment service. Conclusion So, by now, you must have gained a fair understanding of the importance of having a strong fulfillment services partner, which is capable of providing same day and next day delivery services, which will boost the ability of your eCommerce company to become more customer-friendly. There is no standard one-size-fits-all approach for selecting the best eCommerce fulfilment services. So, it is best to trust WareIQ, the fulfillment company that provides you with the right flexibility with respect to order size and pricing. WareIQ has been constantly working on incorporating feedback from customers and strengthening the focal points in the fulfillment chain to provide you with a consistent improvement in customer satisfaction. We help you not only to reduce your logistic costs but also your delivery timelines – this could be the game-changer for your business.  [signup] eCommerce Fulfillment Services: FAQs What is an ecommerce fulfillment service?The part of your eCommerce business that involves operations after receiving an order is known as fulfillment. These tasks include picking of a product, packing, shipping and delivering it to the customer's door. What is the difference between eCommerce fulfillment and drop shipping?eCommerce fulfillment is a business model that involves purchasing items in wholesale quantities, selling them online and fulfilling each order in-house. Dropshipping involves retailers selling items where they do not have to keep inventory in stock. As and when customers place orders, the merchants purchase products from suppliers & directly ship to end customers. When should you go ahead with an ecommerce fulfillment service?If you don't want to have to deal with shipping or if you've grown beyond your existing warehousing capabilities to a point where you can't ship items manually anymore, you should opt for a fulfillment service. What is a fulfillment partner?For an ecommerce business, a fulfillment partner (like WareIQ) provides ecommerce fulfillment services such as order processing, warehousing and shipping of orders. Fulfillment partners can help eCommerce businesses save money by getting shipments to customers faster with same day or next day delivery options without having to rent a warehouse, buy equipment, recruit a workforce or manage the day-to-day operations of eCommerce fulfillment. Many eCommerce fulfillment companies not only pick, pack and ship orders but also provide technology and data to help eCommerce businesses make better supply chain decisions. In how many locations does WareIQ have fulfillment centers?WareIQ has a pan-India network of 40+ fulfillment centers in all major metros & 30 other cities that helps you store your inventory closer to your customers for faster delivery and managing returns. Which is the best eCommerce fulfillment service in India?WareIQ has rapidly grown to be the leading provider of full-stack eCommerce fulfillment tech services for some of the most reputed brands in India. WareIQ is amongst the best in the industry as it enables Amazon-like same day and next day delivery to customers. How do eCommerce fulfillment services make money?eCommerce fulfillment services have various pricing plans, subscription models and minimum order requirements that vary between companies. Companies such as WareIQ do not have any minimum order requirements and customers only pay for the facilities they use.

June 22, 2022

Inventory Turnover Ratio: Definition, Importance, Calculations, and 10 Inventory Turnover Optimisation Techniques in 2022

Inventory Turnover Ratio: Definition, Importance, Calculations, and 10 Inventory Turnover Optimisation Techniques in 2022

Inventory is the primary asset of a business. A seller purchases the required amount and wishes to sell it as soon as possible. A product may fly off the shelf at any time on its own merit, even though there is no major discount offered on it. In most cases, though, products float somewhere in the middle, necessitating the need for all businesses to keep track of what is in demand and how fast it is selling. Everything from pricing strategy and supplier relationships, to promotions and the product life cycle is influenced by inventory turnover. The inventory turnover ratio measures how well a company manages inbound inventory from suppliers and outbound inventory from warehousing to the rest of the supply chain. Turnover is critical for every business, whether it is a B2B or DTC fulfillment company. A company's inventory turnover rate also relays information about its inventory forecasting, inventory management, and sales and marketing skills. A high inventory turn rate indicates that sales are robust or that inventory is insufficient to support current sales volumes. A low inventory turn rate, on the other hand, suggests low sales, low market demand or an inventory surplus. Knowing which direction the sales winds are blowing will help you achieve an accurate inventory turnover ratio. What Is Inventory Turnover? Inventory turnover refers to the amount of inventory that a company purchases and has sold for a particular time period. A complete inventory turnover rate shows that a company has sold all of the stock it bought, excluding any items lost due to expiry or damage. Inventory turnover is common in successful businesses. However, it varies by industry and product category. Inventory management issues such as shifting client demand, poor supply chain planning and overstocking can all have an impact on the inventory turnover rate. Definition of Inventory Turnover Ratio The inventory turnover ratio is the number of times a company's inventory has been sold and re-stocked in a certain period of time. The method is also used to determine how long it will take to sell the present inventory. The inventory turnover ratio is calculated using a formula that divides the total cost of items sold by the average inventory during the same time period. A higher ratio is preferable to a low ratio since a high ratio indicates robust sales. Effective inventory control, also known as stock control, where the organization has a strong understanding of what it has on hand, is required to determine your turnover ratio. Examples of Inventory Turnover Rate Inventory Turnover Ratio (ITR) = Cost of Goods Sold (COGS) / Average Inventory For example, if your COGS was 100,000 rupees in the last fiscal year and your average value of inventory was 25,000 rupees, your inventory turnover ratio would be 4. Inventory Turnover = number of units sold / average number of units on-hand  If you sell 100 units in a year while having an average of 20 units on-hand at any given time during the year, your inventory turnover rate is 5. [contactus_lilgoodness] Why is Inventory Turns Important? Inventory turns or inventory turnover is important for a variety of reasons. A sluggish turnover may imply that there is lower market demand for certain things, allowing sellers to adjust pricing, offer incentives to drain inventory faster or change the mix of goods available for sale in the future. These are all critical decisions for a business to make in order to stay financially healthy and competitive. A company's product mix must be aligned with its client's demand. Fast inventory turns are a signal that a company's purchasing strategy is not syncing up with market demand and that there are delays somewhere in the supply chain or that demand for a specific item is increasing. This data can aid a business in determining whether to raise prices, increase orders, diversify suppliers, sell a product more prominently or purchase additional related inventory. Material requirements planning (MRP) is a related technique for determining inventory needs while balancing supply and demand. How to Calculate Inventory Turnover Ratio? You can figure out how to calculate the inventory turnover ratio by doing two things - determining COGS and average inventory. Let’s assume you already have the figure for your COGS.  Average Inventory The estimation of the value (in monetary terms) or number (units) of particular categories of inventory at any given time throughout a set time period is known as average inventory. If you don't know how to calculate average inventory, here's how you can do it: (Inventory at the Start + Inventory at the End) / 2 It is the sum of beginning inventory and ending inventory — from a certain time period — divided by two. Inventory Turnover Ratio Formula The inventory turnover ratio formula is simple if you have your COGS and average inventory. It is as follows: Inventory Turnover Ratio (ITR) = Cost of Goods Sold (COGS) / Average Inventory Alternate Ways to Use the Inventory Turnover Ratio You can use the inventory turnover ratio to analyze how fast an organization is selling its inventory and compare its efficiency in doing so against the industry standards. For most industries, the best inventory turnover ratio falls between 5 and 10. However, the average inventory turnover rate varies from one industry to another, depending on the complexity of the business environment and the nature of its products. Inventory turnover is mainly used to analyze the inventory sales speed of an eCommerce business and compare its efficiency with the industry standards or competitors. There are a few more ways by which inventory turnover ratios are utilized. A few of them are: Trending Turns to Manage ITR Inventory turnover ratios are one of the best approaches to spot market demand-driven patterns as well as outmoded or slow-moving inventory. That way, you will have a head start on deciding whether to scale up or decrease any product line or brand. You'll have far better inventory control and a higher harvest of sales possibilities as a result of this. At the same time, you will be searched and visible on trending platforms which will help your brand attain new customers. SKUs and Segments For strict controls on specific stock levels, inventory turnover is generally measured at the SKU (stock-keeping unit) or segment level. Inventory segmentation is the process of categorizing or segmenting SKUs based on parameters that make sense for your company. Inventory turnover can also be employed at an aggregated level when divergent goods are grouped based on factors such as the geographic location of retail outlets. Using the Pareto Principle The Pareto principle or 80/20 inventory turnover ratio rule suggests that 80% of your company's sales revenues are generated by 20% of the SKUs you carry. The idea specifies selling a few products for low or negligible profit. It will persuade buyers to purchase more and at the same time, enables sellers to store more profitable goods. It is important to understand what stock segment you are dealing with so you can maintain the appropriate amount of goods in hand. What is an Ideal Inventory Turnover Rate? For the eCommerce industry, a lower inventory turnover rate may indicate sluggish sales and dwindling market demand for a product. So generally, the greater ratio number is supposed to be better, as it reflects robust sales most of the time.  There are certain exceptions to this theory. Luxury products have a low inventory turnover rate. On the other hand, sometimes a high inventory turnover ratio is self-defeating. In case you order a small amount of inventory but the frequency is high, the inventory turnover rate will increase which means you are not purchasing enough inventory to support the rate of sales. So in that instance, you may not be making as much profit as you could be so you need to check whether gradually increasing pricing stabilizes the ratio while raising unit margins. High Inventory turnover is common in high-volume, low-margin businesses. Low-volume, high-margin sectors, on the other hand, tend to have substantially lower inventory turnover percentages. The ideal inventory turnover ratio is between 5 and 10, implying that goods should be sold and restocked every one to two months. For perishable goods companies like florists and grocers, the recommended ratio will be higher to avoid inventory losses due to the risk of spoilage. Top 10 Techniques of Inventory Turnover Optimization Make the Supply Chain More Efficient To do this, low-cost logistics partners could be the best option. Faster delivery is important but assurance of the delivery of an undamaged product is more important for any seller. If a damaged product is delivered, it will be returned which will not be counted as inventory turnover and will also lead to more expenses. Eliminating inefficiencies in the supply chain will boost your sales, revenues and total margins. Make Changes to Your Pricing Approach Adjust your product pricing to gain higher profit margins on high-demand items and free up capital by getting rid of outdated inventory, commonly known as dead stock or obsolete inventory. If items are proving difficult to sell, consider donating them to charity and receiving a tax deduction or selling them through a secondary channel. Check Your Rank in the Industry Is your inventory turnover rate high or low compared to the rest of your industry? When you notice growing tendencies in your inventory ratios, are there opportunities for you to steer a stronger strategic position on competitive items? By effectively answering these questions and managing your inventory, you can get greater market share and improve your industry rating. Comparing yourself with competitors will enable you to analyse what you are doing right or wrong and you can use some of their best practices to gain an advantage. Improve Your Forecasting Skills Sales figures and inventory reports provide useful concrete data for more precise inventory forecasts. This information can also aid in future sales planning, such as recommending methods to improve your product mix or creatively bundling things to move slower inventory at a better margin. Either way, forecasting inventory is a necessary tool that eCommerce retailers need to employ in order to achieve an optimum inventory turnover ratio. Automate Your Purchase Orders Automation improves efficiency and has the potential to reduce expenses on its own. However, when you combine it with an order management system that allows for easy reordering of popular inventory so that it is constantly available, you gain even more benefits. Consider adopting an inventory system that generates purchase orders automatically to save yourself time and effort. The result will be better control and fewer errors. Use Technology Use the latest technology to optimize inventory turnover. With the help of technology, you can place inventory items strategically such as high-demand items being placed in a more accessible way and bulky items being placed close to cargo bays. Humans are susceptible to making errors that technology simply doesn’t so it will make your overall business operations more efficient.  Hire Experts or Train Your Employees An expert inventory planner can save you a lot of time and money by saving taxes, optimizing the storage of your inventory and generally employing the best practices to increase your inventory turnover rate. They can handle every situation whether it is inventory shortage or overstocking and can suggest a better way to free your inventory. These processes can then be followed by your employees to make inventory management more effective. Encourage Sales of Old Stock When you have a huge quantity of old and outdated stock, you need to get rid of it as soon as possible because it not only freezes your capital but also takes up storage space, loses value and defames your brand’s name. If they are sold through a sale, inventory turnover increases rapidly. The brand gets more visibility and increased sales velocity. This enables you to not only prevent a loss due to outdated products but also to generate more revenue from sales that you may not have been expecting. Encourage Your Customers to Pre-Order You can have instant and guaranteed sales of your items if you can convince your clients to preorder and register for certain products. This will enhance your turnover but be sure you have enough inventory to handle the requests you receive. Smart marketing and high-demand products are often required to entice buyers to pre-order, so try creating a specific sales and marketing plan around preorders for popular items and see what happens. This will also help you more accurately forecast the amount of inventory you require in advance. Employ Effective Marketing To improve your inventory turnover rate, you will require a strong marketing plan. You should concentrate on underperforming products and connect with elusive clients. You can achieve your goal of boosting sales and thereby improving your inventory turnover rate by pursuing new markets and utilizing all available marketing channels. In order to attract new clients and keep existing ones engaged, businesses can use social media, SEO, paid advertising, content marketing and email marketing. Inventory Turnover vs Days Sales of Inventory Inventory turnover measures how rapidly the inventory of a company can be sold. Days sales of inventory (DSI) measure the average time it takes for a company to convert its inventory into sales. The inverse of inventory turnover for a given period is DSI, which is calculated as (inventory / COGS) X 365. DSI is the number of days it takes to turn inventory into sales, whereas inventory turnover is the number of times inventory is sold in a year. [table id=31 /] Improving Inventory Turnover with Inventory Management Software Moving average inventory can be used by companies that use the perpetual inventory technique rather than a periodic inventory system to compare mean inventory levels over vast periods of time. To facilitate a more realistic comparison of the performance, moving average inventory adapts pricing to the current market standard. For improving inventory turnover rates, inventory management software has several features that can assist you in modernizing and optimizing your inventory management policies and practices. Such software enables your organization to switch to the constant inventory methods of accounting with a continuous real-time inventory record. Automated point-of-sale systems and company asset management software will immediately reflect changes in inventory by tracking sales, inventory depletion and restocking frequency. It enables you to set a demand formula after gathering data and forecasting upcoming demand. At the same time, you can apply the formula with respect to your inventory and optimize ordering costs. Inventory management software, when used in combination with an ERP system, can assist in optimizing your supply chain, assigning and managing SKUs, automating purchase orders and much more. This will reduce errors, increase efficiency, give you more control, boost customer satisfaction and make your business more profitable overall. How Can WareIQ Help to Manage Your Inventory Turnover Ratio? WareIQ has smart technologies for warehouse management. We check what is your current inventory turnover ratio and suggest the accurate amount of inventory to keep in order to maintain the perfect inventory turnover ratio and prevent any shortages or overstocking situations from occurring. When you have a facility to give you a better customer experience and tackle other lengthy eCommerce processes, your business starts generating more returns. WareIQ resolves most of the problems and takes care of each step after you get an order, from picking and packing to delivering it to the customer and even returns management.  Inventory Turnover Ratio: FAQs What factors affect the inventory turnover ratio?Turnover rates often rise during a new product launch and growth phase, peaking as the product approaches maturity. Sales and inventory turnover eventually fall due to market saturation, advancements in existing technology and changing client preferences. What does the inventory turnover ratio tell you?The inventory turnover ratio is a calculation of how frequently inventory is sold over a specific time period. Why is it important to analyze the inventory turnover ratio?The inventory turnover ratio is a productivity metric that determines how successfully a company manages its inventory. Higher rotation rates minimize storage and other holding expenses so achieving a high ratio is important. Should inventory turnover increase or decrease?Companies seek higher inventory turnover ratios in general. When the stock turnover ratio falls below industry requirements, it is necessary to improve it. What does high inventory turnover indicate?If the inventory of a company turnover is high, it reflects that its product is in high demand. It could also reflect that the company ran a successful advertising campaign or a sales promotion that resulted in an increase in sales. In any case, it shows that the business is effectively transferring inventory during normal business operations.

June 22, 2022