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What is The Meaning Of Inventory Records? 4 Methods Of Maintaining Accurate Inventory Books In 2022

What is The Meaning Of Inventory Records? 4 Methods Of Maintaining Accurate Inventory Books In 2022

Inventory is the lifeblood of your company and it is continuously in motion across the supply chain. Examples of the movement of inventory include new shipments of inventory reaching your warehouse, items being serviced and packaged, and more inventory being purchased, shipped, processed, and stored. Businesses need an efficient way of keeping track of all these inventory movements and transactions and this is where inventory records can assist. In this blog, we will take a deeper look into what an inventory record system entails, the importance of keeping these inventory records, the various methods you can use to track them, and the various features that it consists of. What are Inventory Records? An inventory record is the collection of all data pertaining to various aspects of the inventory that is maintained by your business. An inventory record comprises information on the type and quantity of merchandise a company has in stock. Merchandise on hand, inventory on order, and inventory on hold for work-in-progress are all included in the inventory books. It is often referred to as a stock record. Inventory records can be considered as archives of data for every item in a brand's product range, including: The quantity of stock at the SKU levelThe quantity of stock that has been sold and reorderedThe total value of each productThe location where the inventory is storedOther business-related information, such as work-in-process (WIP) inventory data Each entry must have a description of its SKU and other relevant data. Inventory records can be made and maintained digitally as well as manually. An accurate inventory record system helps track sales patterns and distinguish between fast-moving and slow-moving items. This helps you to anticipate and plan for surges in demand, ensuring that your most popular goods are properly supplied. This will prevent supply shortages, which can irritate consumers and harm your company's reputation. [contactus_gynoveda] Importance of Maintaining Accurate Inventory Books Inventory records may be used for various purposes, ranging from providing information on daily finances to completing yearly taxes. It may be used to establish strategies, increase operational cost-effectiveness and track output volume. An accurate inventory record shows that you are more likely to be able to fulfill client orders effectively. Customers will trust you if you know exactly what stock you have, where it is, and how much you may need to order to achieve optimum levels. An accurate inventory record system guarantees that you will always have in-demand items on hand, ensuring you never run out of them. Some ways in which inventory records are essential for your business are as follows: Ensures Accuracy of Inventory Tracking  Keeping track of the inventory that is being received and is being used continuously promotes inventory visibility and leads to proper balancing of inventory levels. Inadequate inventory accounts for inventory shrinkage, i.e., the stock being less than the recorded amount in the accounting system and it can produce large disparities that can adversely affect profitability and other financials by creating confusion regarding the availability of items and how much of each item was ordered. Simplifies Inventory Accounting Inventory accounting is made considerably easier when accurate inventory records are maintained. The Financial Accounting Standards Board (FASB) and Generally Accepted Accounting Principles (GAAP) require all merchants and manufacturers to keep track of inventory value and count. To avoid overstating profit by understating inventory value, GAAP requires inventory to be correctly accounted for according to a highly specific set of rules. The GAAP guidelines also prevent a corporation from overstating its worth by overstating the value of its inventory. Inventory influences the total worth of the organization since it is an asset. You can track changes in value and know how much your inventory is worth at the completion of each accounting period by maintaining a comprehensive inventory recordkeeping method. Prevents Overstocking and Out-of-Stock Situations Keeping accurate inventory records allows you to avoid overstocking and better understand when you need to reorder more stock. Determining the exact quantity of stock for numerous product types is a difficult undertaking, whether it is sourcing raw materials for production or estimating the ever-changing client demand for retail sales. If done incorrectly, it might result in one of two equally aggravating issues: overstocking and out-of-stock situations. Not having enough inventory can lead to out-of-stock problems, while too much inventory can raise carrying costs, potentially leading to too much wastage. Since inventory moves continually across the retail distribution network, using real-time inventory management systems makes it easier to check whether every item of inventory is available and accounted for while comparing stock levels and electronic records. Mitigates Uninformed Decisions Made Through Inaccurate Data Outdated and unsynced inventory records may lead to you and your team running the risk of making crucial business decisions based on incorrect information.  Errors can be minimized by reducing time-consuming, manual efforts by employing technology to manage inventory in real-time. Inventory management systems, such as inventory applications or a more complex system like ERP inventory software, can be used to track inventory in real-time. These solutions enable you to combine information by integrating your upstream production methods with your downstream sales. With real-time data linked to inventory, you can also discover patterns and estimate demand, enabling better forecasts on inventory reorder amounts and levels. 4 Methods to Achieve an Up-to-Date Inventory Record System To run a successful business, you must keep your inventory precise, simplified, and up to date at all times. If you want to be competitive, you must maintain your inventory with accuracy. When you lose grasp of your inventory, you instantly lose control of your company's profitability. Furthermore, out-of-stock situations usually result in customer displeasure and losses for businesses. Thus, an up-to-date inventory system is a prerequisite for the smooth functioning of your business. The 4 most prominent methods for achieving an up-to-date inventory record system are as follows: Store Tangible Backups Businesses need to compare their inventory levels from time to time. An inventory audit is a practice of comparing a company's actual inventory levels to its financial records to assist with proper inventory accounting. To improve inventory auditing efficiency, businesses should preserve physical records of every item of inventory as well as online backups.  In certain countries, keeping original hard copies may be required by law. It also safeguards your data in the event that the security of your cloud server is breached and valuable information is lost. Consult Your Accountant on the Relevant Information Needed For the proper management of inventory records and thereby ensuring the smooth running of your business operations, professional help is an important requisite. You should enlist the services of a reliable accountant and ask them for advice on maintaining proper inventory records for your firm. In most circumstances, the information you require during the accounting period comprises COGS, production inventory (if relevant), beginning inventory, and the value of ending inventory, i.e., what remains at the conclusion of an accounting period. You may also consult with your accountant about the appropriate inventory valuation technique based on the products you sell and your average sales volume. Maintain Consistency in Your Accounting Methods There are numerous techniques for tracking and recording inventory. Whatever approach you use, the most essential aspect is maintaining consistency to ensure accuracy. Consistency is the key to having proper inventory records. At the end of each accounting period or fiscal year, you must determine the value of your inventory. The following are the most frequent eCommerce valuation methods: FIFO (First-in, First-out)LIFO (Last-in, First-out)Weighted Average of Inventory (WAC)Specific identification method Utilize Advanced Inventory Management Software Inventory Management systems are concerned with keeping an account of physical quantities and the total monetary worth of goods sold and those in hand. It aids you in tracking items as they arrive at the warehouse or godown and when they are issued for sale. It guarantees that the commercial enterprise's records are entirely up to speed. You have two choices while maintaining inventory records: After a specific accounting period, update your records (periodic inventory system)Every transaction should result in an update to the records (perpetual inventory system) Adopting a definite inventory system is your best choice as your business expands. This may be accomplished by purchasing inventory management software, which allows you to track inventory movement in real-time, record daily coverage with minimal effort, and automate multiple aspects of inventory management such as record-keeping and tracking data. Features Offered by Inventory Management Software   An effective inventory management software is crucial for simple and effective inventory books. You can optimize inventory to match demand and increase supply chain efficiency by automating the monitoring of all inventory along with real-time adjustments. You can simply download records and custom reports with the correct software to have all the relevant data you need when it's time to consult your accountant and also for the smooth and effortless management of inventory. Some of the more critical features provided by an inventory management software are explained below: Real-Time Insights Across Platforms As your business grows, you will expand to other avenues besides selling online. Direct-to-consumer (DTC) firms may increase their client reach by selling through marketplaces (like Amazon) and social media platforms (such as Instagram).As a result, many businesses use multichannel inventory management software, which manages inventory across channels and gathers information in one location.Inventory levels are continuously updated in real-time as bought or returned products arrive or leave and sales occur through multiple channels.You get visibility into your inventory, save time identifying essential products and eliminate interruptions, theft, and overselling with real-time data sharing.Image attachment and barcode/RFID scanning capabilities are two essential tools that enhance tracking and help speed up picking operations. They aid in increasing accuracy and reducing discrepancies.When you work with a technology-enabled 3PL, you have access to inventory management systems that allow you to track inventory across channels and distribution centers from one location.Instead of depending on different suppliers, retailers can distribute goods across several fulfillment locations and manage inventory in real-time through a single dashboard.  Automated Generation of Reports The reporting of various business operations is one of the most valuable instruments of an inventory management system.  People in charge of the inventory of a business must be informed about different business operations such as the availability of delivery personnel, the state of goods, information about the shipment of the order, and so on.Many technologies can be integrated into the inventory management software to facilitate reporting of these metrics.According to some experts, your inventory management software is only as good as the inventory reports it creates.Calculating and tracking this information in spreadsheets or via various integrations might be difficult.Inventory management software automatically gathers data, allowing you to generate customized reports whenever you need them. Reorder Thresholds Based on Past Data Inventory management software allows you to automatically establish reorder point notifications, allowing you to resupply inventory on time without having to manage to restock manually when each order is placed. For many supply managers, automating reordering is one of the most appreciated and stress-relieving aspects of IMS. The IMS can be designed to detect low stock levels and subsequently develop and submit purchase orders for the required products, including items sold in packages or packs.You can also establish personalized notifications to notify you when you hit the reorder point because you are running low on particular goods.The merchandise management program uses past sales data to provide insights on when it is appropriate to reorder more inventory per SKU, allowing you to establish a predefined reorder point. It is pointless knowing your exact inventory count and where it is located if it doesn't prevent you from avoiding stock-out situations.As a result, your inventory management software must be capable of establishing automatic notifications when critical stock is running low and must also have the ability to swiftly produce a purchase order in response to that warning. Conclusion The finest data in the world won't help your business if you can't locate what you're looking for when you need it. Inventory records are utilized for organizing and managing files, both physically and digitally. Inventory record systems may be used for various purposes, ranging from providing information on daily finances to completing yearly taxes. It may be used to establish strategies, increase operational cost-effectiveness and track output volume. It is feasible to increase operational efficiency by rearranging and retaining stock in the most advantageous position for production by understanding where and how much of each product is available in stores. It may also assist a business in ensuring that inventory is not wasted, abused, damaged, or lost. Maintaining inventory records independently as your company starts to grow can be a challenge so it is beneficial to partner with a 3PL company like WareIQ. WareIQ is one of the fastest expanding eCommerce fulfillment companies in India and can help retailers with a wide range of inventory requirements, including maintaining inventory records. Our advanced WMS provides data and insights on every metric of inventory you need to keep track of it and can automate multiple processes of inventory management to take the burden off you. Inventory Records: FAQs What should be included in an inventory record?Generally, inventory records consist of a description of each item, how many units are available, where it is stored, identification number, etc. It should paint a clear picture of every item that is available in the inventory. For how long should historical inventory records be maintained?If you are using an inventory management software or online inventory tracker, you will always have access to all inventory records that were updated since you first started using the platform. When is the best time to record inventory?Inventory should be recorded every time an item is sold. Inventory is shown on a company’s balance sheet as a cost so when an item is sold, it is recorded in the income statement as the cost of goods sold. How can WareIQ help you to record inventory?WareIQ has a custom WMS that tracks inventory automatically and can generate reports whenever you need them. Thus, inventory records are always maintained and updated every time a purchase or sale is made.

June 17, 2022

Inventory Valuation: Importance, Objectives, Methods and Challenges in 2022

Inventory Valuation: Importance, Objectives, Methods and Challenges in 2022

When you become an eCommerce seller, inventory becomes your biggest asset and a majority of your capital investment goes into procuring it and storing it until it gets sold and starts to recover your expenditure. The value of the assets of any business provides an insight into the financial condition of that business. A business is believed to be in good condition if its balance sheet shows that it has more assets than liabilities. It can be calculated if the business has kept records of every asset, sale, order, profit margin, liability, etc.  In terms of business, these records are referred to as inventory valuation. The most important aspect of calculating inventory is knowing how much your inventory is worth during a financial time period like a quarter or fiscal year. Inventory valuation impacts the cost of goods sold (COGS) which ultimately determines the overall financial health of your business.  In this inventory valuation guide, we will review the critical aspects of inventory valuation, the different methods used and how to control inventory. What is Inventory Valuation? Inventory valuation is a term used for calculating the value of inventory a company has during a particular time period. Inventory is a prime asset of an organization and to record it in the balance sheet, it needs to have a monetary value. This value can help you measure your inventory turnover, which will help you to plan your purchasing decisions. Inventory valuation is based on the total costs incurred to acquire the inventory and get it ready for sale. You can find out your Inventory valuation by evaluating your cost of goods sold (COGS) and ultimately, your profitability. The most widely used inventory valuation methods are WAC (Weighted Average Cost), FIFO (First-in, First-out) and LIFO (Last-in, First-out). [contactus_uth] Importance of Inventory Valuation The cost of goods sold (COGS), gross income and the monetary worth of inventory remaining at the end of each accounting period are all affected by how a company conducts inventory valuation. As a result, inventory valuation has an impact on a company's profitability and prospective value as shown in its financial accounts. A few points that stress the importance of inventory valuation are listed below: Impact on the Cost of Goods Sold If the volume of goods sold is high at the end of the period of calculating inventory valuation, the total cost of goods sold will also be higher which means that most products from the inventory have been sold. Alternatively, if inventory has a lower valuation, holding costs will increase which will also lead to a higher overall cost. As a result, inventory valuation has a significant impact on the profit levels reported. Impact on Multiple Records If the inventory valuation is not calculated correctly and on time, the errors may be recorded repeatedly for the next quarter/fiscal year and because of the incorrect ending balance in the first period, it will be carried forward into the beginning inventory balance of the next reporting period, causing multiple errors in reported profits in two consecutive quarters or years, because of which, the balance sheet will not tally as more assets will always be shown. Impact on Loan Ratios If a business owner wants to take a loan for their business, the lender will base the loan on the company valuation and after passing it successfully, a restriction on the permitted proportions of current assets to current liabilities may be included in the loan agreement if a business has received a loan from a bank or lender. The lender has the option to cancel the loan if the entity fails to satisfy the target ratio. Inventory valuation is important because inventory is often the major component of the current ratio. Impact on Income Taxes When the balance sheet is involved during company valuation, the amount of income tax paid can be affected by the inventory valuation method used. The LIFO (Last-in, First-out) approach is widely used to lower income taxes paid during periods of rising prices. LIFO matches current sales and current costs of those sales with historical sales. If the production costs of an item increase due to inflation, the cost of goods sold is increased under LIFO, which creates a higher cost of goods sold tax deduction and thus, a lower taxable income. What Are the Objectives of Inventory Valuation? The term inventory refers to products that are for sale. It covers raw materials, semi-finished items and finished goods. At the end of each fiscal year, inventory valuation is performed to determine the cost of goods sold and the cost of unsold inventory. This is critical because any excesses or shortfalls in inventory have an impact on a company's production and profitability. There are various reasons to evaluate inventory. A few of them are: To Evaluate the Capital Invested in the Business You must have spent a lot of capital on your business, like most other retailers. Some of that money must have been spent on fixed assets like stores, warehouses, furniture, computers, etc. and most of it on assets that are variable in nature. Getting the value of fixed assets is a relatively simple task but knowing the monetary value of inventory is much more difficult so this is where inventory valuation can help.  To Get the Sales Velocity of the Company If you operate a small eCommerce business, it is much easier to conduct inventory valuation but when you provide the data of a specific time period in your balance sheet, it shows how many items you sold in that certain time period. This can give you an idea of how smartly you rotate your money on buying and selling your inventory.  To Determine the MOQ and EOQ When you evaluate inventory at the end of an accounting period, you are able to figure out how many products you have sold during that period so you know how much inventory you need to keep in stock to avoid overstocking and understocking. You can calculate the economic order quantity (EOQ) to get the ideal order size and the minimum order quantity (MOQ) so that you have an idea of the least amount of money you will need to spend on procuring inventory. To Get Help in Taking Valuation-Based Loans When a business owner wants to expand their business by adding more products to their selling list, listing the available products on multiple selling channels and arranging for storage in multiple warehouse locations, it requires a steady amount of investment. Most of the time, sellers take loans to invest in infrastructure for expansion. So for that purpose, banks demand access to the balance sheet to check the inventory valuation of the company to determine if they are eligible for the loan or not. To Determine the Gross Income As your inventory is stored with the ultimate goal to sell it and generate revenue, inventory valuation can easily show you the money that has been invested, earned and is held up in procuring it.  To determine the gross profit, match the cost of goods sold with the revenue of the accounting period. Cost of goods sold = Stock at beginning of accounting period + Purchases – Stock at the end of an accounting period. The equation shows how inventory valuation influences cost and ultimately, the gross profit. To Reflect the Financial Position of the Business Inventory after closing is considered as a current asset. The financial status of the business is determined by the value of the shares while filling out the final balance Sheet. Overvaluation or undervaluation can show a false image of a company's working capital and overall financial position. To Show Any Gaps Between Assets and Liabilities An asset valuation tells you about the total value of assets you have at the end of a particular time period. When you have a strong idea about the figure of the valuable assets in your business, you can compare it with the liabilities and implement processes to reduce them such as extra warehouses, removing non-performing assets, getting rid of useless supply chain partners, etc. 4 Most Prominent Inventory Valuation Methods First-In, First-Out (FIFO) This strategy works with the idea that the first inventory purchased should be sold first. The remaining inventory assets are then matched and marked as the most recently purchased or produced assets. Because it is simple and easy to implement, it is one of the most commonly used inventory valuation methods by eCommerce sellers. The FIFO approach gives you a higher value of remaining inventory, a lower cost of goods sold and a higher gross profit if there is inflation. During inflation, when prices rise quickly, the FIFO model fails to provide a realistic picture of the costs. It also does not provide any tax benefits, unlike the LIFO technique. Last-In, First-Out (LIFO) As the name suggests, this inventory valuation method works on the idea that newer goods are sold first while the older inventory remains in stock. Businesses rarely adopt this strategy since older inventory can increase holding costs and become obsolete over time. The business suffers a big loss as a result of this. The LIFO method is used at a time when eCommerce businesses expect inventory costs to rise over time because of price inflation. Businesses’ declared profit levels can be reduced by transferring high-cost inventory to the cost of goods sold which enables companies to pay less tax as a result of this. Specific Identification Method Every item in your inventory is recorded using this inventory valuation method from the time it is stocked until the time it is sold. It is typically reserved for large items that are immediately identifiable and have a wide range of features and costs associated with them. The ability to trace each item individually using an RFID tag, stamped receipt date or serial number is the most important prerequisite for this system. While this method provides a high level of accuracy in inventory valuation, it is limited to valuing uncommon, high-value items that require these extra procedures. Weighted Average Cost Method Under the weighted average cost method, the weighted average is used to determine the amount that goes into the cost of goods sold and inventory. The weighted average cost per unit is calculated as follows: Average Cost Per Unit = Total Cost of Inventory Goods / Sum of Total Units in Inventory The above inventory valuation method is mainly used to determine the cost for the total sum of units that are indistinguishable from one another and when it is difficult to track the cost of individual items. It can be used to calculate inventory valuation by very niche businesses. It does not provide the actual inventory valuation of a business. Challenges of Inventory Valuation Determining the Total Cost of Inventory Use COGS for calculating the cost of your inventory: COGS = Inventory at starting + Purchases – Inventory left Therefore: Inventory left = Inventory at starting + Purchases – COGS The value of Inventory at the start and end of an accounting period may not be as simple as it appears. Anything you can't sell for MRP due to damage, obsolescence or even shifting consumer tastes must be marked down and valued properly. This makes determining the total cost of inventory a challenging affair. Determining the Amount of Inventory Left This is more challenging than it appears. If a business has products in transit, it must decide whether or not to include them in the inventory valuation. Many businesses keep track of goods using a periodic inventory system. Companies use this technique to evaluate inventory after each accounting period. A perpetual inventory system, on the other hand, tracks every purchase order and sale, and updates inventory to reflect those transactions regularly. Adding Other Related Costs When you evaluate your inventory, you do not only add up the costs of the products you have but also the costs of procuring it like the transportation cost, inventory holding cost, delivery cost, insurance cost, packing and picking cost, etc. Even electricity that is utilized to store your inventory can be added to your inventory valuation. Adding the exact value of these expenses with the ratio of remaining inventory can be a challenge for a seller. It is nearly impossible to determine the actual expenses that occur due to the leftover inventory and the further expenses to keep it safe and fresh for as long as possible. Calculating Depreciation Depreciation is also a big factor that affects your inventory valuation. With time, inflation not only surges but object values also depreciate. Most of the time, electronic items depreciate when the latest and updated versions come into the market. For example, if you are selling a mobile phone and after a period of a few months, the same company launches a model with more features at the same price, the product sales of the older phone will reduce or stop entirely so ultimately, the company will have to sell it at a lower price. Valuating Damaged Products Products after they occur damage are difficult to monetarily evaluate. A seller cannot command its actual price. They can try to sell it as a refurbished product during sales or sell it to a second-hand dealer like Cashify. The same thing happens with perishable products after a specific duration because storing perishable products is more expensive than the incomes they fetch in a highly competitive market space. Some perishable products demand special warehousing facilities like temperature control, special containers, etc. Identifying Stock Discrepancy Stock discrepancy is the difference between the physically available stock or inventory and the current inventory that is recorded in the system. To run a successful business, maintaining accurate stock is important but inventory discrepancy is a common scenario in real-life eCommerce operations. When it comes to inventory valuation, stock discrepancy is a big hurdle. To find out the inventory valuation, you should have an accurate figure for your inventory. If there is a disparity in the count, sellers need to find the mismatched amount of inventory by calling the manufacturer, rechecking old bills, etc. and after that lengthy process is done, the seller may not be able to account for those missing items so it can go to waste and cause differences in the final valuation. Valuing Seasonal Items The value and pricing of seasonal items change over time. When a season ends, the manufacturers also start offering heavy discounts and when sellers take advantage and procure items, the price of the same product will vary compared to the price it was bought at the beginning of the season. For example, if you are a garments seller and you sell coats during winter but the weather doesn’t get as cold as you expected which results in lower demand for coats, you will have to store all that inventory till the next winter which can damage the products or make them obsolete as newer designs are introduced in the market. If you always keep a record of your inventory with the help of inventory planning through inventory management software, you may not find any challenges during inventory valuation. How to Choose the Right Inventory Valuation Method and How can WareIQ Help? When choosing the right inventory valuation method, there is not an absolute formula. It depends on the purpose of doing it and the type of inventory. WareIQ is a trusted eCommerce fulfillment brand that helps many companies store their inventory and dispatches for delivery when an order is placed. We take care of your inventory and give you transparency in valuating it to measure the profitability and success of your business. WareIQ helps you to know the actual value of your inventory through its different inventory valuation methods, handled by experts.  A few things to note about choosing the right inventory valuation method are: FIFO generates the highest gross income at the present time while LIFO generates the least and WAC is somewhere in the middle. Assuming a normal inflationary scenario in which supply costs rise over time, FIFO generates the greatest taxes, while LIFO generates the lowest with WAC again in the center. It minimizes the consequences of inflation and deflation by matching recent income with recent costs. When you or your customers want to know the cost and selling price of each unit, Specific Identification is the logical solution. People who buy and sell art may be curious about how the price of a certain piece altered from the year it was last purchased to the year it was sold. LIFO, FIFO, WAC and Specific Identification are the most common inventory valuation methods. Some of the others which are used according to the preference of many sellers are: First-In, Last-Out (FILO): Seller sells the firstly stored items at last.First-Expired, First-Out (FEFO): Seller sells the earliest-expiring inventory first.Highest-In, First-Out (HIFO): Seller sells the highest-cost inventory first.Lowest-In, First-Out (LOFO): Seller sells the lowest-cost inventory first. Conclusion After getting this detailed information on inventory valuation, you must have gotten an idea of how it is helpful in the growth of your business. It is important for you to partner with a company that provides inventory management services by using the best procedures and the most advanced technology. We at WareIQ provide our partners with the count, location (warehouse or transit) as well as the monetary value of your inventory. WareIQ offers customizable fulfillment services that stores your inventory, receive orders and take the responsibility of delivering it to the buyer at the fastest and most cost-effective methods possible. WareIQ provides the actual figure of your inventory valuation as well as the value of each and every item that is available in stock through our custom WMS. To achieve better results in inventory valuation at the end of the financial period, WareIQ can help in: Inventory planningMultiple location storageGiving actual sale velocity figuresLIFO and FIFO methodsExperts to handle every procedureDeciding MOQs and EOQsGetting RTO insurance  Inventory Valuation: FAQs How is inventory valuation calculated?Inventory values can be calculated by multiplying the number of items left in hand with the price of a single item. What is the inventory valuation formula?The formula for inventory valuation of a company is equal to the figure of its assets subtracted from its liabilities. Anything that has a monetary worth, such as real estate, equipment or inventory, is considered a business asset. Which method is best for inventory valuation?When it comes to inventory accounting methods, the FIFO approach is most commonly used since it provides the most accurate picture of costs and profits. What is the objective of inventory valuation?The primary goal of inventory valuation is to determine the company's actual income and true financial situation. Why should inventory be valued at its cost price?Items in inventory are often valued at their cost rather than their selling prices because of the cost principle which says assets, liabilities and equity investments should be recorded on any financial record at their cost price.

June 17, 2022

Inventory to Sales Ratio: A Detailed Guide Including Definitions, Calculations and Metrics Used In 2022

Inventory to Sales Ratio: A Detailed Guide Including Definitions, Calculations and Metrics Used In 2022

There are many aspects of running an eCommerce business that retailers need to focus on but one of the most important aspects is inventory and having a proper method in place for inventory management. Inventory can comprise a range of products, at various stages of completion, but the most significant are finished goods because those are what are ultimately sold to end consumers and earn revenue for the business.  When a business generates the maximum number of sales from the available inventory, it is considered a successful business. The way to measure this success is through the inventory to sales ratio. We will go in-depth on what it is, how to calculate it, understand its importance, and how WareIQ can help. What is the Inventory to Sales Ratio? The inventory to sales ratio, also called the stock turnover ratio, is a metric used to measure the amount of inventory a company has for sale. This ratio can assess whether a company has too much or too little inventory relative to its sales volume. It can be a helpful tool for managing inventory levels. A high inventory to sales ratio may indicate that a company carries too much inventory, which can tie up working capital and lead to higher storage and handling costs. On the other hand, a low ratio could suggest that a company is not carrying enough inventory to meet customer demand, which could lead to lost sales. An ideal ratio will vary depending on the industry and type of business so it is essential to compare a company's stock turnover ratio with others in its sector. The inventory to sales ratio is a helpful tool for managing inventory levels. Still, it is important to remember that it is just one metric that should be considered when making decisions about inventory. Other factors such as lead time, customer demand, and seasonality can also impact inventory levels and should be considered. [contactus_gynoveda] How to Calculate the Stock Turnover Ratio? The stock turnover ratio is a key performance indicator that measures the number of times inventory is sold or used. There are two ways to calculate the stock turnover ratio: Average Inventory/Cost of Goods SoldInventory on Hand/Cost of Goods Sold Average Inventory/Cost of Goods Sold This is more common and provides a better understanding of how well a company manages its inventory. To calculate the stock turnover ratio using the average inventory method, divide the average inventory by the cost of goods sold.  Inventory on Hand/Cost of Goods Sold This method can be useful for companies with high levels of stock. To calculate the stock turnover ratio using the inventory on hand method, divide the inventory on hand by the cost of goods sold. The stock turnover ratio is important because it shows how efficiently a company uses its inventory. A high ratio means that inventory is being turned over quickly and a low ratio means it takes longer to sell stock. A high stock turnover ratio is generally seen as a good thing because it means a company sells its inventory and makes money. However, a very high stock turnover ratio could also indicate that a company cannot keep up with demand, which could lead to lost sales. To get the most accurate picture of a company's stock turnover ratio, it is essential to compare it to other companies in the same industry. This will give you a better idea of what is considered normal for that industry and whether or not the company's stock turnover ratio is good or bad. Why is it Important to Know the Inventory to Sales Ratio? Provides an Accurate Depiction of Business Performance The inventory to sales ratio is a key metric for businesses, indicating how well a company manages its inventory. If the ratio is too high, it may indicate that the company is carrying too much stock and not selling it quickly enough. This can tie up working capital and lead to cash flow problems. On the other hand, if the ratio is too low, it may indicate that the company is not carrying enough inventory to meet customer demand. This can lead to lost sales and missed opportunities. Helps to Mitigate Uncertainty It is essential for businesses to monitor their inventory to sales ratio and strive to maintain an optimal level. The ideal ratio will vary from industry to industry and even company to company, depending on product turnover rates and seasonality factors. However, as a general rule of thumb, a healthy inventory to sales ratio is usually between 0.16 and 0.25. This will help businesses maintain accurate levels of inventory even when unforeseen circumstances arise. Determines the Optimum Level of Inventory A high stock turnover ratio indicates that inventory is selling quickly and efficiently. Ideally, you want a high stock turnover ratio because your inventory is fresh and you're not spending much money on unsold goods. A high stock turnover ratio also indicates that you have efficient ordering and stocking procedures. On the other hand, a low stock turnover ratio could be a sign that you're overstocking or carrying slow-moving items. Either way, the stock turnover ratio helps you determine the optimum amounts of inventory you need to store in order to satisfy demand and reduce operational costs. Compares Your Business With Competitors In some cases, you may want to reevaluate your inventory levels and product mix. You can also compare your company's stock turnover ratio to industry norms to see how you stack up. If your ratio is significantly higher or lower than the average, it could indicate something is amiss. This will help you to understand what needs to be changed and can reduce any competitive advantage that rival companies had previously. Understanding the 80/20 Rule of the Inventory to Sales Ratio The 80/20 rule is a guideline that states that 80% of a company's inventory is typically sold 20% of the time. This rule can help businesses manage their inventory levels and ensure they are not carrying too much stock. The 80/20 rule is based on the Pareto principle, which states that roughly 80% of the effects come from 20% of the causes of many events. The 80/20 rule applies in various situations, including business and economics. Inventory management is critical to any business, as it can directly impact profitability. Too much inventory can tie up working capital and lead to storage expenses and other costs, while too little stock can result in lost sales and customer dissatisfaction. The 80/20 rule can be a helpful tool for managing inventory levels. By understanding that most of the sales will come from a small portion of the inventory, businesses can focus on ensuring they have enough stock of the items that are most popular with customers and can limit the supply of slow-moving or low-demand items. There are a few different ways to apply the 80/20 rule to inventory management :  One approach is to keep a close eye on the inventory turnover rate, which measures how often the average item in stock is sold. A high turnover rate indicates that items are selling quickly and may need to be replenished more frequently, while a low turnover rate suggests too much stock is on hand. Another way to use the 80/20 rule is to track the sales of each stock-keeping unit (SKU). This information can help businesses identify which items are selling well and which may need to be discontinued. Finally, the 80/20 rule can also be applied to pricing. By understanding that most sales will come from a small portion of the inventory, businesses can price their products accordingly. For example, if a company knows that 80% of its sales come from 20% of its SKUs, it may choose to offer discounts on the remaining 80% of SKUs to boost overall sales. The 80/20 rule is a helpful tool for managing inventory levels but it is essential to remember that it is only a guideline. No hard and fast rule says precisely how much inventory should be kept on hand. Each business needs to tailor its inventory management strategy to its unique needs and circumstances. What Metrics are Used to Measure the Stock Turnover Ratio? A few different metrics can be used to measure the stock turnover ratio. Let us take a look at the most common ones: Frequency of Sales The most common metric is simply the number of times that inventory is sold over time. This metric can be expressed as a rate (e.g., how many times per year stock is sold) or as a percentage (e.g., what percentage of inventory is sold each year) and helps in gauging if a product is doing well or poorly and actions can be taken accordingly. Average Inventory Level Another standard metric is the average inventory level, which measures how much inventory is on hand at any given time. This metric is important because it helps show how quickly stock moves through the company and which items need to be replenished at a faster rate than others. It also shows which items are being underutilized and are eating up storage space. Day Sales in Inventory Finally, another metric sometimes used to measure the stock turnover ratio is the day's sales in inventory (DSI) metric. This measures the days it takes to sell all the inventory on hand. This metric is important because it can help show how efficiently a company sells its inventory. It also helps companies analyze which parts of their sales strategy are working and which aren't. To calculate the day's sales of inventory, you can use the day's sales of inventory formula: Days Sales of Inventory = (Average Inventory ÷ COGS), multiplied by 365. All of these metrics are important in measuring the stock turnover ratio. Still, the most important one is probably the number of times that inventory is sold. This metric gives the clearest picture of how quickly inventory moves through the company. How Can WareIQ Assist? WareIQ provides a comprehensive and intuitive solution that can help you optimize your warehouse operations, reduce costs and improve customer satisfaction. Our WMS software is designed to give visibility into every aspect of your warehouse operations, from inventory management to order fulfillment. We also offer tools to help you streamline all your eCommerce processes and improve efficiency all along the supply chain. Whether you're looking to improve your current process or build a new one from scratch, WareIQ can help. In terms of inventory to sales ratio, WareIQ can help you keep track of all the important metrics you need to calculate it in the most efficient way possible to help you understand how much inventory you require in relation to sales, what processes need to be changed or improved and how to achieve the ideal stock turnover ratio. Conclusion The stock turnover ratio is a crucial metric for businesses to understand, showing how efficiently inventory moves through the company. The most important metric in measuring the stock turnover ratio is the number of times inventory is sold. It can help you improve inventory management efficiency and reduce holding costs by freeing up storage space by generating more sales. You can opt to partner with WareIQ to achieve a healthy inventory-to-sales ratio. WareIQ is one of the most rapidly growing eCommerce fulfillment companies in India and provides a comprehensive and intuitive solution to help businesses optimize their warehouse operations and enhance their inventory-to-sales ratio. We also offer tools to help you streamline all your eCommerce activities to provide an exceptional experience to both you and your customers. Whether you're looking to improve your current business or build a new one from scratch, WareIQ can help. Inventory to Sales Ratio: FAQs What is the goal of the inventory to sales ratio?The inventory to sales ratio helps you understand the amount of available inventory in relation to the number of sales you have made. Its primary goal is to help you to optimize the amount of inventory you have in storage and which products are desirable and which aren't. What happens if your inventory to sales ratio is too high?A higher than average inventory to sales ratio could indicate that you have surplus inventory in stock that is being utilized which could increase your operational expenses. What is the ideal inventory to sales ratio?Generally, if you have an inventory-to-sales ratio between 0.16 and 1.25, you are doing alright. However, growing businesses can often have higher ratios due to the expanding rate of order fulfillment. How can you improve your inventory to sales ratio?You can use the following methods to improve your inventory-to-sales ratio:1. Better forecasting2. Improving sales3. Reducing prices4. Focus on high-demand products5. Better order management6. Eliminate safety stock and old inventory7. Reduce purchase quantity

June 17, 2022

What Are the 10 Inventory Management KPIs? Why Are the KPIs Important to Measure in 2022?

What Are the 10 Inventory Management KPIs? Why Are the KPIs Important to Measure in 2022?

Inventory management refers to ordering, storing and making the best possible use of a company's inventory. Inventory typically consists of raw materials, components and finished products. Inventory management optimizes inventory levels to avoid situations of overstocking or understocking. Materials Requirement Planning and Just in time inventory systems are critical inventory management systems. A good way to organise inventory is through key performance indicators or inventory management KPIs to be able to understand how your business stacks up based on these predetermined factors. We will be discussing inventory management KPIs in more detail including types, methods, importance and benefits. Read along. What are Inventory Management KPIs? Inventory management KPIs are linked with inventory management supply chain metrics. It consists of various mathematical ratios compared against the established norms, which vary by industry, functional area and the KPI itself. The variances between the actual and the benchmark ratios identify any disparities and help determine which areas of inventory management need improvement and which processes are successful.  KPIs ideally contribute to achieving the organisation's goals - whether it is growth strategies or profitability targets. KPIs need to be smart, measurable, achievable, relevant and timely.  [contactus_uth] 10 prominent Inventory Management KPIs  Inventory Turnover Ratio This inventory KPI ratio is measured as the Cost of Goods Sold divided by Average Inventory Value. The inventory turnover ratio measures the number of times the inventory is sold, replaced or turned over in a year which helps businesses determine what products are successful and need constant replenishment and what products are being underutilized and taking up precious space in the warehouse. Customer Satisfaction Levels Inventory management KPIs such as this can be measured through customer feedback like when the customer assigns a score between 1-3 or 1-10 for their satisfaction level for the product or service they have purchased from your business. It is a subjective score, based on customers’ individual experiences but it can be analysed to see if there is a recurring theme of positive or negative feedback and measures can be taken to move forward accordingly. Inventory Accuracy Ratio This inventory KPI measures the number of items in stock versus the number of items showing as per official records. This fraction is divided by 100. This measures the accuracy of warehouse record-keeping and identifies any disparity in the numbers, which helps companies determine if there has been any damage, breakages, theft, counting error or any other factor that has caused it  Inventory to Sales Ratio This inventory KPI measures the total value of the inventory and analyses the organisation's sales performance. When these ratios are high, it is a cause for concern because that means there is overstocking of inventory occurring and there is a danger of the inventory becoming obsolete due to the low sales figure which can lead to increased storage and operational costs. Order Cycle Time Order cycle time is the time it takes to prepare and place an order with your supplier. The greater the frequency of orders being placed, the lower the stocking costs. For instance, in the case of a Just-in-Time inventory system, inventory is not stocked but repeated orders are placed in small quantities, which results in minimum inventory holding and capital costs.  Out of Stock Items This inventory KPI measures the effect of out-of-stock SKUs. Even one out-of-stock item can reduce customer satisfaction and have a snowball effect further down the supply chain and can affect repeat sales and lead to poor customer reviews. eCommerce stores should avoid out-of-stock items to the maximum extent possible by implementing an inventory management system where items running low on stock are automatically notified to the management so that they can be replenished instantly. Carrying Cost of Inventory There are four components to the carrying cost of inventory: Capital costs: These costs are measured as the sum of the following three costs:Cost of the stockInterest in the working capital financeOpportunity cost of the capital invested in inventoryInventory service costs: This covers all costs, including costs relating to the inventory management system, hardware depreciation and inventory handling.Storage costs: This relates to the warehouse rent or interest on the mortgage and regular maintenance costs such as lighting, heating and air-conditioning.Inventory risk costs: This cost deals with the loss of inventory value due to shrinkage or obsolescence. Demand Forecast Accuracy This measures the gap between forecasted demand and actual demand. The more accurate the demand forecast, the higher the efficiency of inventory usage and turnover will be. This will lead to lower stockouts and lower inventory carrying costs. Many enterprises use planning system resources to help get a correct estimation of demand so that the optimum level of inventory can be stored. Supplier Quality Index This measures the percentage of the supplier’s total quality cost to the purchase price. This goes beyond just securing a low-cost supplier or getting bulk discounts on orders. It also includes the costs of communicating, transacting, resolving problems or switching suppliers. A proactive and collaborative approach with suppliers is required to maintain a high level of the supplier quality index which will lead to higher quality goods being delivered at a faster pace and at cheaper prices. Labour Cost Per Item Labour cost per unit itemises and collates all costs related to the labour used in managing inventory. This includes order receipts, packing and dispatch of items ordered to the end customer. It also includes the costs of labour involved in receiving, unpacking and storing the various items of inventory from suppliers in the warehouse. A lower labour cost per item means that businesses are running efficiently and effectively. Methods to Choose the Best Inventory KPIs for an eCommerce Business Refrain from Using Vanity Metrics Oftentimes, many third-party KPI tools prompt businesses to choose KPIs that showcase their business to be more efficient than it actually is. These inventory KPIs are called vanity metrics because they give businesses a false sense of security that everything is all and well when in reality, it may not be. You should focus on choosing inventory management KPIs that paint an accurate picture of your business operations, even if it exposes a harsher reality because it will enable you to make the necessary improvements to those processes. Stress on Answering Business-Related Queries It is important to focus on your business and the strategy it employs. While focusing on choosing inventory management KPIs, you need to opt for ones that will give you clear insights into the actual successes and failures of your business strategies so that you can tweak them and make improvements wherever they are needed which will lead to long-term success. Always Keep Customers in Mind While choosing inventory management KPIs to focus on, make sure you choose some customer-centric ones so that you get an idea of where you are going right, in terms of positive feedback, so that you can continue to implement those processes and where you are going wrong, in terms of issues and complaints, so that you can sort them out instantly and avoid other customers having a similar negative experience. This will help your business increase its overall customer satisfaction levels and will lead to more sales and repeat customers. Track and Analyse Trends Analysing trends in your past performances through inventory KPIs will give you a vast amount of insights in terms of the success and failures of your business. You can check which products had the highest demands, during which time of the year and whether you were running a promotion or ad campaign to enable that high demand. Conversely, you can analyse when there were slumps in sales and track the similar factors which may have led to it so you can avoid repeating those same errors in the future. Similarly, you can analyse trends in the market for similar products, price points and business types. Don’t Bank on Statistics Alone While pure statistics and numbers play an important role in ascertaining key points about the success or failure of a business, you need to analyse some inventory management KPIs that focus on the human aspect of your business. While those KPIs are still quantifiable, they help you gauge a more accurate idea of why certain things were successful and others weren’t. Customer behaviour is an underrated trait and businesses that can successfully analyse it will often come out on top. Why Are Inventory KPIs Important to Measure in eCommerce? Tracking and measuring inventory management KPIs is important because, without inventory, eCommerce businesses could lose vital customers. Inventory KPIs also ensure that eCommerce businesses know when to restock items and maintain the optimum stock levels. Prevents Poor Customer Satisfaction It enables eCommerce stores to provide adequate customer satisfaction. Stock-outs leave a bad taste in the customer’s mouth and negatively affect online feedback and reviews provided. Avoids Overstocking and Understocking Inventory KPIs help eCommerce stores maintain optimum inventory levels, avoid high finance costs due to overstocking, and prevent stockout situations. This ensures a healthy cash flow for the business. It also enables planning for Just in time inventory or a drop shipping model, which helps an eCommerce business avoid both excess stock and stockout situations.  Assists in Framing of Return Policies Proper return policies ensure return customers. When eCommerce stores do not have a favourable return policy, it does not bode well for them. It helps businesses in finding the right balance between offering returns and maintaining their profit margins. Helps in Building the Right Brand Image  Inventory KPIs facilitate efficient inventory management practices, boosting customer satisfaction and leading to positive feedback and reviews which will lead to other customers giving your business a chance because they have a positive perception of it.  Prevents Exploitation From Competitors Poor inventory management systems and improper inventory KPIs will lead to customers opting for competitors who may offer various incentives such as cheaper rates or free shipping. Measuring inventory KPIs will help businesses keep pace with their competitors to avoid losing out on customers to them.  Conclusion Inventory management is the very heart of an eCommerce store's success. Inventory management is a critical task for eCommerce merchants. It’s a good practice to track and control inventory orders, analyse the process and keep up with the usage and storage of readily available stocks. Without proper solutions to inventory management, no eCommerce technology is sufficient. For any eCommerce website, it is a challenge to manage multiple product lines or various product categories of different brands. Using inventory KPIs to maintain safety stocks to prevent stockout situations, find the right balance of inventory to maintain optimum inventory levels, put together the correct kitting offers, analyse past purchases to predict future patterns in stocking levels and be smart with the storage of various SKUs in the warehouses will help deliver the optimum performance at an organisational level. If you need assistance with finding the right inventory management KPIs for your business and inventory management as a whole, WareIQ can definitely help. WareIQ is one of the fastest-growing eCommerce fulfillment companies in the country and has a state-of-the-art WMS which keeps track of major inventory KPIs to keep your business at the top of the game. Inventory Management KPIs: FAQs What are some of the best inventory management KPIs for your business?Some important inventory KPIs are listed below:- Inventory Turnover or Days on Hand- Average Days to Sell Inventory (DSI)- Average Inventory- Holding Costs- Stock-Out- Service Level- Lead Time- Rate of Return How can inventory KPI accuracy be measured?Inventory accuracy can be calculated by counting the products available in your inventory, dividing it by the official recorded inventory count and multiplying it by 100. What are the 5 SMART criteria that KPIs should abide by?SMART is an acronym for Specific, Measurable, Assignable, Relevant, and Time-bound. All of these factors help to improve your business performance. How can KPIs be monitored?KPIs can be tracked and measured using a variety of online tools such as Google Analytics.

June 16, 2022

What is Inventory Analytics? Types, Inventory Analytics Metrics, 5 Benefits of Inventory Data Analysis

What is Inventory Analytics? Types, Inventory Analytics Metrics, 5 Benefits of Inventory Data Analysis

It is supremely important for every eCommerce business to have an idea about their previous performance, whether it was strong or weak, to understand the factors that contributed to those results so they can either replicate it or mitigate it in the future. The main way to do this is through inventory analytics which helps retailers analyse a variety of metrics such as high demand products, low demand products, storage costs and much more. In this article, we will go into depth about inventory analytics and understand the types, metrics and benefits. What is Inventory Analytics? Inventory analytics studies inventory to estimate the quantity of a product a company should have on hand. Companies may decrease expenditures and enhance operational efficiency by managing inventory levels. Inventory analytics provides crucial insights into product management, allowing organizations to implement cost-effective solutions and improve operations. Companies cannot track items efficiently as they move through the supply chain without a robust inventory data analysis. This can lead to inconsistencies, low supply levels, and backorders.Inventory analytics aims to quantify essential performance metrics, allowing businesses to monitor and adapt management approaches in real-time.Managers may enhance their decision-making by incorporating inventory data into their daily activities.Inventory analysis ensures that you have the proper quantity of inventory on hand, lowers your operating expenses and encourages improved demand forecasts. Types of Inventory Analytics Thanks to inventory data analysis, inventory management has become more advanced and demand forecasting can be done in an efficient manner. Inventory analytics may also reveal information about client behaviour, product performance and channel performance. There are different types of inventory analytics, depending on the values provided by the data. These are classified as below: Descriptive Inventory Analytics Descriptive inventory analytics reveal the status of inventory in a descriptive way. This method is the simplest to implement, with major inventory management platforms supplying predefined descriptive statistics straight away. Analytics include system information, such as the number of items in stock and price per unit. The descriptive analytics stage provides visibility into inventory levels across the supply chain.End-to-end reports reveal the location of inventory in the supply chain.They can demonstrate how the stockpiles of raw materials, intermediate products and final products cover sales.People learn to think in terms of value rather than just units. And they begin to realise how stocks at all levels pile up to satisfy the same levels of demand. Diagnostic Inventory Analytics Diagnostic inventory analytics explain the reason behind a trend that is occurring. Principle cause analysis is a diagnostic process, which is necessary when presenting information to make decisions.  For example, simply knowing that a firm grew month on month is not useful. Leaders must understand why there was this increase, in order to apply the lessons learned to other operations or products. Diagnostic analytics assists in identifying and understanding shortages and overstocks.It urges managers to look beyond overall inventory value. It distinguishes between healthy and unhealthy inventory by displaying the inventory quality.To do this, the organisation needs comprehensive inventory objectives but these targets do not need to be accurate.Simple procedures are generally adequate to establish the appropriate minimum and maximum stock levels. Predictive Inventory Analytics Predictive inventory analytics attempt to forecast the future pattern of inventory. You can use these tools to plan ahead of time and make changes as needed.  For example, machine learning is all about leveraging automation to learn from historical data and predict future patterns. Professionals can employ predictive analytics to look at seasonal needs from the prior year or they can use past knowledge of why something occurred.Predictive analytics can alert you to potential shortages and hazards associated with slow-moving or outdated stocks.Algorithms can inform planners if stockpiles are approaching the end of their shelf life by combining data on inventory and demand.They can issue alerts if inventory levels go dangerously low, resulting in lost sales very quickly. Prescriptive Inventory Analytics Prescriptive inventory analytics is a highly sophisticated approach to inventory data analysis. These numbers will tell you precisely what should be done. A correct prescriptive analysis with relevant data may be able to help you determine the different stock levels to meet different sizes of orders. With the relevant data, inventory management analysis systems may estimate the quantities of an item necessary to meet 90% of requests in three days. Prescriptive analytics can give suggestions for methods to improve inventory efficiency.Such a suggestion should originate from the planning system.Inventory analytics should be able to suggest solutions that a standard planning system cannot, such as "move additional products from location A to location B to reduce the risk of expiration."  [contactus_lilgoodness] Important Inventory Data Analytics to Keep Track of Once you’ve been acquainted with various inventory measurements, you need to understand how to get value out of them. It's critical to keep track of your inventory statistics on a regular basis so that you can include them in making appropriate decisions. There are various measures that should be utilised to assess performance and find opportunities for improvement. They are listed below: Gross Margin Returns on Investment (GMROI) GMROI is a straightforward ratio used to assess the profitability of your inventory over a certain time period. It calculates a retailer's gross profit for every dollar of goods acquired. The formula for figuring out your GMROI is: Gross Margin / Average Inventory Cost Any GMROI ratio less than 1.0 indicates that a firm is losing money for every dollar invested in inventory. Anything above 1.0 indicates that a company is selling things for more than they cost the company to acquire. It should be noted that this is not a measure of bottom-line profitability, because only COGS is included as a cost, not total spending. However, this provides a clear indicator of how lucrative your inventory is, based on current pricing points and purchasing practices. Average Fulfillment Cost Per Order Average fulfillment cost per order tells you how much it costs to choose, pack and ship each order. There are numerous costs to consider when looking at the full retail fulfillment process. Examine the following expenses to determine overall fulfillment costs: Receiving, storing and controlling inventoryStandard or customised packagingPick and pack labourPostage and shipping labels Shipping supplies and expensesOutfitting and assembly (if applicable)Returns management procedure The cost of fulfillment varies depending on whether you complete processes in-house or work with a 3PL according to their pricing model. Total Units in Storage Real-time monitoring of inventory analytics accounts for all of your items across all fulfillment locations and can assist you in calculating total units in storage or total inventory. This number is continuously changing, as you sell and reorder units, add new goods and process returns. The more SKUs you have, the more careful you need to be about storage expenses, overstocking and the amount of capital locked up in inventory. Many organisations overpay for storage they don't need, raising their inventory holding expenses needlessly. Inventory Reconciliation A procedure for inventory reconciliation can help you eliminate stock inconsistencies and better understand why they exist in the first place. Inventory reconciliations should be performed on a regular basis to verify that you are tracking and documenting value fluctuations due to outdated inventory or shifts in product demand. Here's a quick rundown of the processes to correctly reconcile inventory: Examine your physical inventoryContrast the physical count with the inventory recordsExamine the most recent inventory deliveries and shipmentsDetermine if there are any inconsistencies Inventory reconciliations must be scheduled at regular, preset periods to ensure consistency and accuracy. Backorder Rate A backorder occurs when a sale is made but the merchandise for the order is not yet available. This slows down order fulfillment and shipment, as well as last-mile delivery. The item is then supplied to the client at a later date since it is not in stock. Backorders can arise for high-demand items. However, frequent back-ordering might result in poor consumer satisfaction. The backorder rate of a corporation is the percentage of orders made that will be delivered at a later date owing to a lack of available inventory.  It is calculated as follows: (Number of Undeliverable Orders/ Total Number of Orders) x 100 A high backorder rate can indicate an unusual shift in demand, a lack of safety stock or manufacturing delays. Inventory Turnover Ratio The inventory turnover ratio calculates how many times a corporation sold and replenished (i.e., turned over) its inventory during a certain time period. Because a high turnover rate is related to selling a lot of items, inventory turnover may really confirm the efficiency of your organisation. The following formula is used to determine turnover: Inventory turnover ratio = [cost of goods sold average inventory] A benchmark inventory turnover ratio of 2 to 4 is good for analysing the findings but keep in mind that it might vary depending on your business. A ratio within this range indicates: Your logistics, both incoming and outgoing, are optimised.You are replenishing inventory that corresponds to your sales cycle.You are receiving new goods on schedule, based on manufacturing and warehouse receiving lead times. Inventory Shrinkage When actual inventory levels do not match inventory records, it is referred to as inventory shrinkage. This might be due to a variety of circumstances, such as theft, shipment damage or inventory accounting problems. Shrinkage is an inherent challenge for retailers but understanding the scope of the problem can help them gain better control over their inventory. Choosing and sticking to an inventory valuation system may promote consistency and accuracy, saving a lot of hassles during tax season. Here is a formula for calculating the rate of inventory shrinkage: {(Recorded Inventory – Actual Inventory) / Recorded} x 100 Inventory Carrying Costs Carrying costs encompass all charges that are connected with retaining or storing acquired and unsold finished items. Common carrying costs include storage, labour and insurance but they can also include opportunity and inventory depreciation costs. Carrying costs account for around 30% of overall inventory expenses and the exact costs vary depending on a variety of factors, including the number of total SKUs being stored and your typical inventory turnover rate. To get an understanding of how carrying costs are calculated, sum up all of your inventory expenditures and divide the total by your current inventory value to obtain a percentage of how much you're really spending to keep inventory. The formula is as follows: (Storage Costs + Employee Salaries + Opportunity Costs + Depreciation Costs) / Total Value of Annual Inventory Benefits of Inventory Data Analysis Achieve Optimum Levels of Inventory Stock visibility increases when you do frequent checks of inventory levels and other related indicators like total units in demand, cost of storage, etc. A comprehensive picture of stocks generated from these systems can help you in determining the number of stocks that are required to be ordered currently and the approximate time for reordering. You gain better control over your firm by retaining just enough inventory to fulfill client demand while avoiding excess or stale products. Reduce Wastage of Inventory To create a supply network that can be regarded as continual, you must account for all the purchases and sales occurring in your setup. Reduce writing off and writing down inventory in order to boost a company's inventory value and revenue. Consider establishing programs and checks that will assist you in tracking critical inventory data and making better inventory optimisation decisions by utilising automation. Reduce Costs Associated with Inventory As your inventory is likely to hold 30-50% of your working capital, a lot of money is invested in it. A proper analysis can help to judge the reasons for high costs at different levels with respect to inventory. Based on the facts, you may take corrective action to improve your bottom line. Reduce the Amount of Backorders Too many backorders reflect negatively on your company. To ensure an optimal stock level, you will need data and clarity on your inventory levels at all times, to make informed and calculated decisions based on real-time data. For example, studying patterns such as previous season data might help you forecast future demand and thus, stocks to be maintained based on seasonality factors. It will also cut stockout expenses and backorders. Accurate Forecasting of Inventory Levels Dead stock is frequently the consequence of incorrect inventory forecasting, which is why an inventory analysis system is essential. Reliable inventory analysis and reporting plan will collect data on all of your SKUs, which will ultimately increase forecasting and reordering accuracy. Furthermore, this information can be utilised to modify prices and increase revenue. What Inventory Analytics Services Does a 3PL Company Like WareIQ Provide? Third-party logistics (3PL) firms like WareIQ work with eCommerce businesses ranging from startups to Fortune 500 corporations to handle everything from storage and inventory management to swiftly, effectively and precisely delivering consumer orders. We have a custom Warehouse Management System (WMS) which is a WMS software system that monitors and handles practically all warehouse activities, such as: Physical inventory administrationPicking, packing and processing of productsOptimisation of warehouse picking patternsOrder labelling, shipment and trackingCustomer Returns ManagementAutomation of inventory management processes A 3PL inventory system can track each client's inventory conveniently, including stock availability, pallet ID numbers, serial numbers and expiration dates. eCommerce clients of WareIQ can access this data in real-time, allowing them to manage their warehouse, inventory and shipping operations in a hassle-free and convenient way. A 3PL inventory system boosts warehouse productivity and efficiency by speeding up operational processes such as picking, packaging, shipping and reverse logistics, thus making it the best fit for all your business needs. Our software also provides measurable inventory analytics that will help in demand forecasting and can help you ascertain how much inventory you need to keep of each product during a certain time period. Inventory Analytics: FAQs How can inventory analytics be used for inventory management?Since inventory analytics provide insights into measurable and quantifiable data, it helps businesses better determine inventory levels needed for the future, based on past performance of supply and demand. They can also analyse the highs and lows of previous periods and what caused them. How can you efficiently keep track of inventory levels?- Prioritizing inventory- Tracking product information- Auditing inventory- Analyzing supplier performance- Practising the 80/20 inventory rule- Being consistent in how the stock is received- Tracking sales- Ordering restocks yourself What is the 80/20 rule in inventory management?It is an unofficial rule that suggests that 80% of a company's profits should be met by 20% of their products How can WareIQ help keep track of your inventory analytics?WareIQ’s custom WMS keeps track of every important metric of your inventory grouped by product type, manufacturer, age and much more to help give you an insight into every aspect of every product in your inventory catalogue to help you make more informed decisions.

June 16, 2022

10 Best Shiprocket Alternatives for eCommerce Businesses in 2022

10 Best Shiprocket Alternatives for eCommerce Businesses in 2022

The eCommerce space is rife with competition, both in terms of retailers pining for business from customers and 3PL companies battling it out to be the fulfillment partners for these retailers.  Shiprocket has become synonymous with providing third-party fulfillment services to eCommerce sellers. It is primarily a shipping aggregation firm that was founded in India and is currently based in Delhi. Since its inception in 2012, it has given retailers access to multiple carriers, has allowed them to automate a significant portion of their operations and allows them to tailor services according to their users’ preferences. The company currently has partners in more than 200 countries and processes upwards of 200,000 orders a day. However, there is often a case to be made for retailers to seek Shiprocket alternatives based on their requirements, financial resources and locations they operate in. Each 3PL company often performs better than its competitors in different segments of the eCommerce fulfillment chain so it is up to companies to decide which one is the best fit for their precise requirements. In this article, we will take a look at the reasons that companies search for Shiprocket competitors and other options, the top 10 Shiprocket alternatives and a feature comparison of each. Top 5 Reasons Companies Search for Shiprocket Alternatives Additional Service Requirements While Shiprocket may be known for its shipping services, it isn’t always the best option for transporting high-end commodities such as jewelry or expensive electronics and bulky products such as furniture and large appliances because its operations are centered around standardized packaging which is best suited towards non-perishable items such as clothing and smaller electronic items. If a retailer deals in expensive or perishable products that require special packaging and careful handling, in addition to other services that might be required by specialized goods, it can pay dividends to opt for Shiprocket alternatives that offer these services. Specific Industry-Related Services Shiprocket is responsible for transporting a large number of items that span many industries such as clothing, electronics, consumer goods, and much more. However, the company does not offer services that are required by specific industries such as cold storage facilities and ultra-fast delivery. If the nature of the industry a retailer operates in is such that their products need to be refrigerated or stored in a specific way such as groceries, food & beverages, and breakable items, it may be prudent for them to seek Shiprocket alternatives that offer these industry-specific services. Growing Number of Operations It would benefit retailers to look for Shiprocket alternatives if their business is growing and expanding its services and product range rapidly. While Shiprocket commands a relatively low cost for initial setup, prices can quickly rise as retailers need to take advantage of more services and have more orders to fulfill. There are many Shiprocket competitors that offer more competitive rates and faster shipping services. Quicker and More Frequent Delivery Services There are many Shiprocket alternatives that provide ultra-fast shipping and distribution services at lower rates than Shiprocket. With customers getting accustomed to next-day, same-day and even 10-minute delivery, retailers who require rapid delivery speeds would be better suited to partner with a company that offers these services. Additionally, it would greatly benefit retailers who sell their products across the country, to take advantage of services such as micro fulfillment centers and a nationwide network of warehouses so they can place their inventory in close proximity to areas of high demand and transportation facilities. All these factors will greatly aid retailers to increase the speed at which their customers receive orders and in turn, will increase their overall satisfaction. Enhanced Customer Satisfaction There are many Shiprocket alternatives in India that offer advanced customer support facilities such as 24/7 customer care, automated chatbots, and branded tracking pages with contact information, in addition to many others. Retailers who require heightened customer support services would be better off by partnering with a company that offers all these facilities so that their customers would always receive priority and would never be left wanting in regard to queries, issues, or company-related communication. [contactus_uth] 10 Best Shiprocket Alternatives & Competitors in 2022 WareIQ Source WareIQ is one of India’s most rapidly expanding eCommerce fulfillment companies that uses technology as a central pillar to enable multiple eCommerce services such as order fulfillment, inventory management, ultra-fast delivery services, customer care, reverse logistics, and much more. The company is Y-Combinator backed and was founded with the aim of bringing ultra-fast delivery to every pin code in India by building a vast infrastructure of fulfillment centers and dark stores across India that enables eCommerce sellers to store inventory closer to their customers. The company has many unique features such as a custom WMS that can integrate with multiple eCommerce selling platforms, an app store where users can download various apps to enhance their experience, and an RTO shield to protect retailers from incurring the cost of returns management and much more. A few features of WareIQ that make it one of the best Shiprocket alternative in India: Does not have any minimum order requirementsOffers a pan-India network of warehouses and fulfillment centersOffers cost-effective and transparent pricingProvides customisable branded tracking facilitiesOffers customisable packaging services Vertically integrated fulfillment platform to unify OMS & WMS FedEx Source FedEx is a global conglomerate that focuses on providing eCommerce fulfillment, supply chain, and shipping solutions across multiple sectors such as retail, consumer goods, electronics, and healthcare. Currently based in Memphis, Tennessee, FedEx currently provides shipping services to more than 220 countries across the world and equips retailers with the ability to synchronize their orders across multiple platforms in a single location in addition to warehouse and inventory management. A few features of FedEx that make it one of the best Shiprocket alternatives are: Provides a global network of servicesOffers a variety of integrations with multiple selling platformsHas an intuitive and easy-to-operate platformOffers a comprehensive delivery networkProvides fast delivery and reverse logistics services DHL Source DHL, which is an acronym for Dalsey, Hillblom, and Lynn, is a courier and shipping solutions provider that was pioneered in and is currently based in Germany. The company is renowned around the world for its courier services and warehousing solutions and it currently operates in more than 220 countries. Its distribution arm provides door-to-door delivery and freight forwarding services through air and sea. A big advantage that DHL provides to eCommerce retailers is its ability to seamlessly clear customs and other challenges that may arise during international distribution and also provides insurance on every package. A few features of DHL that make it one of the best Shiprocket alternatives are: Offers a centralised technology platform for order fulfillment, inventory management, and other eCommerce operationsProvides next-day delivery services in more than 80 cities in IndiaHas a wide variety of B2C & B2B eCommerce servicesOffers efficient logistics managementProvides integration and optimisation of inventory across sales channels Vamaship Source Vamaship is primarily a shipping aggregation and logistics company that was founded in 2016 and is currently headquartered in Mumbai, Maharashtra. It currently operates in more than 200 countries across the world and helps businesses ship their goods at the cheapest possible rates through air, land, and sea and also enables them to automate many of their shipping processes to make them faster and more efficient. It also provides users with a consolidated platform to manage shipping partners and shipping-related tools. A few features of Vamaship that make it one of the best Shiprocket alternatives are: Offers a choice of multiple shipping partnersOffers integrations with multiple online selling platforms such as Magento, Shopify, Amazon and many more Provides a centralised platform for tracking inventory and order details Provides a tool to instantly compare prices of multiple shipping aggregators to help retailers choose the cheapest oneHas a document manager that consolidates shipping documents in a searchable format Aramex Source Aramex is a worldwide courier, logistics and shipping provider that is currently based in Dubai, UAE. Founded in 1982, Aramex operates in many countries globally and provides order fulfillment services to eCommerce companies. In addition to this, it also offers marketplace integrations with platforms such as Shopify, Martjack, ShopGo and many others, warehouse and inventory management and many other specialized services such as label stitching and creation of price tags for clothing companies and packaging and kitting services, that can be purchased for an additional price. A few features of Aramex that make it one of the best Shiprocket alternatives are: Offers integrations with multiple platformsOperates in more than 58 countries worldwideProvides customer care to more than 370 locations in IndiaOffers same-day delivery servicesProvides management of facilities ShipKaro Source Since ShipKaro’s inception in 2017, it has offered shipping aggregation services for eCommerce retailers who need efficient order management. Headquartered in Gurgaon, the company also enables businesses to automate and tailor shipping processes according to their desired outcomes. It also provides services such as label printing, bulk upload or orders, customizable delivery timings, and much more. A few features of ShipKaro that make it one of the best Shiprocket alternatives are:  Offers partnerships with more than 14 local and international shipping servicesProvides integrations with multiple eCommerce selling platforms such as eBay and FlipkartEnables users to avail of discounted shipping prices and provides a tool for comparing them to other servicesSyncs order information from multiple order management platforms for seamless order processingOffers detailed tracking of orders Rakuten Source Rakuten is a multinational eCommerce fulfillment company that was founded in Tokyo in 1997 and is also currently headquartered there. Often called the “Amazon of Japan”, the company offers a variety of services including shipping, packaging, kitting, reverse logistics, and much more. It also offers tracking of shipping analytics for firms to be able to analyse and improve shipping practices to increase profit margins and reduce delivery timelines. They also operate a service specifically meant for small and medium-sized businesses known as XParcel. A few features of Rakuten that make it one of the best Shiprocket alternatives are: Provides customized services for eCommerce companiesOffers synchronized marketing solutionsProvides same-day and next-day shipping in the USOperates specialised fulfillment centersProvides kitting and subscription box services Shipyaari Source Shipyaari is an Indian eCommerce logistics service and shipping aggregator that was founded in 2013 and is currently headquartered in Mumbai, Maharashtra. One of its unique features is its ability to handle high-volume orders from large companies. The company offers a choice of multiple shipping partners and eCommerce integrations in addition to providing detailed cash-back guarantee schemes. A few features of ShipKaro that make it one of the best Shiprocket alternatives in India are:  Offers partnerships with 10 courier services that cover more than 25,000 pin codesProvides integrations to eCommerce selling platforms such as WooCommerce, Shopify and MagentoOffers a software solution that takes care of inventory management, order fulfillment and delivery servicesEnables customers to track orders through API integrationsOffers additional facilities such as RTO reduction, data analytics and NDR management ShipMonk Source ShipMonk was founded in 2014 and is currently headquartered in Fort Lauderdale, Florida, United States. With its central focus being on making technology-based eCommerce solutions as accessible as possible, the company also offers services such as pick and pack solutions, packaging facilities, inventory and warehouse management, customer care, and much more. It operates more than 100 virtual stores and also provides dedicated managers to each customer to assist them with the onboarding process. A few features of ShipMonk that make it one of the best Shiprocket alternatives are: Provides an online billing portal for customersAssists in automating warehouse processesConsists of a vast number of customisation & branding optionsOffers tax benefits and reduced pricing for bulk importersDoes not have a setup or inventory receiving fee Fulfillment by Amazon (FBA) Source Amazon is synonymous with eCommerce retail and fulfillment. Its first-party fulfillment services, known as Fulfillment by Amazon (FBA) pioneered the order fulfillment revolution when it was launched in 2006. Amazon uses its status to provide the best facilities it can such as operating a vast number of fulfillment centers worldwide, offering free shipping to customers, picking and packing services, returns management, and much more. It also enables retailers to limit their expenses by providing free warehousing, free order processing, and much more. However, retailers have to keep in mind that it can only be used to fulfill orders that are placed on Amazon and a few other select eCommerce selling platforms. A few features of Fulfillment by Amazon (FBA) that make it one of the best Shiprocket alternatives are: Has no minimum order requirementsTakes care of all customer inquiries, refunds, and returnsCan fulfill orders on select external selling channelsUtilises inventory pooling to group similar products from different retailersOffers free shipping to customers Feature Comparison Table of Competitors of Shiprocket [table id=29 /] Conclusion: Why is WareIQ the Best Shiprocket Alternative in India? The sheer competitiveness due to the number of companies providing 3PL eCommerce fulfillment services is enormous. These companies constantly seek to provide new and improved services at lower prices to differentiate themselves from their competitors. This greatly benefits existing and aspiring eCommerce retailers because they can take their choice of companies that perfectly align with their values and requirements. Although Shiprocket is one of the biggest shipping aggregators in India, there are many areas where it is surpassed by the competition. If you are looking for Shiprocket alternatives, you don’t need to look beyond WareIQ.  WareIQ seeks to differentiate itself through the use of technology by providing innovative solutions to the various eCommerce challenges that retailers face, at the most cost-effective and transparent pricing in the industry. WareIQ is a growing competitor to Shiprocket, like Shiprocket it acts like a shipping aggregator but also provides end-to-end fulfillment services to eCommerce sellers & D2C brands in India, so that businesses can focus only on their core revenue metrics while WareIQ takes care of their entire operations & logistics. The major differentiator from Shiprocket is WareIQ's vertically integrated fulfillment platform that unifies OMS & WMS and syncs inventory in real-time. eCommerce sellers don't have to face the issue of a lag of 12-14 hours for their inventory status to sync from OMS to WMS if they choose WareIQ as their 3PL fulfillment partner. Some of the other important and distinct features of WareIQ include: Nationwide Network of Fulfillment Centers and Dark stores Provides a simple plug & play setup with no minimums requirementsOffers integrations with Amazon Seller Flex, Myntra, Flipkart Assured & other eCommerce selling platformsProvides regional sourcing hubs to reduce first-mile expensesProvides in-house warehouse management Enhanced Inventory Management and Network Planning Offers best-in-class AI models for sales forecasting and thresholds for auto-replenishmentProvides grouping of products based on type (regular, non-regular, seasonal etc.) to improve sales conversions Vertically Integrated Technology Fulfillment Stack Offers integrations with 20+ top selling channels and D2C platformsOffers integrations with hyperlocal, regional, and national courier services, encompassing more than 27,000 pin codesProvides a single unified tech stack for WMS and OMS App Store With Downloadable Applications to Increase Productivity Enables RTO Shield which provides 100% protection RTOsEnhances the post-purchase experience through customised branded trackingProvides notifications on order status to customers through email, SMS, and WhatsappAssists in generating customer feedback  Ultra-Fast Delivery With WareIQ Rush Provides same-day delivery with no distance-based billing or minimum order requirements Increases revenue conversion by up to 30%Provides near-zero RTO%Offers NDR & COD verification via WhatsappReduces Cost per Shipment (CPS) Shiprocket Alternatives: FAQs What is Shiprocket?Shiprocket is a shipping aggregation company that was founded in 2012 and is headquartered in Delhi. Its main offering is providing a choice of multiple shipping companies to retailers, who can choose which one they want to partner with based on their own circumstances.  What is the main goal of 3PL fulfillment companies?The primary objective of 3PL fulfillment companies is to provide a range of eCommerce services including order fulfillment, inventory management, shipping and distribution at more cost-effective prices than their competitors in order to attract customers. What factors should retailers consider before making a decision when choosing a shiprocket alternative?There are multiple factors that retailers should consider before partnering with a 3PL fulfillment company which have been listed below:- Business requirements- Financial capabilities- Services offered by the company- Pricing offered by the company- Reviews from prior customers Why is ultra-fast delivery important?Providing ultra-fast delivery such as same-day and next-day delivery can enable companies to offer a unique selling point (USP) to their customers. Consumers have become accustomed to fast delivery and if a company doesn’t offer it, they could lose out on customers to their competitors. What sets WareIQ apart from Shiprocket & other 3PL companies?WareIQ’s core business is eCommerce fulfillment for enabling same & next day delivery for eCommerce & D2C brands who sell online. It provides end to end fulfillment services with its pan India network of fulfillment centers & dark stores and partnership with all the major shipping/courier through which eCommerce sellers can store inventory closest to their customers in any of WareIQ’s FCs & reach their customers faster through their preferred shipping/last mile delivery partner.WareIQ emphasises the implementation of technology at every step of the fulfillment process. Our custom WMS, app store and integrations with multiple selling platforms enable users to automate and enhance their operations to make them faster and more efficient. WareIQ enhances post purchase experience through its features & solutions like branded tracking, RTO shield, shipping/fast delivery badges, customer feedback etc. which are all accessible by customers in 1 location called WareIQ’s app store.

June 15, 2022

What is Peak Season Shipping? 10 Proven Ways to Prepare eCommerce Stores for Peak Season Shipping in 2022

What is Peak Season Shipping? 10 Proven Ways to Prepare eCommerce Stores for Peak Season Shipping in 2022

Businesses often wait for peak season to expand their operations, launch new products, open new branches, and more. The peak season has a lot of potential to generate sales and revenue. Businesses see it as an opportunity to populate their brand, clear stock, generate leads, and store data.  Peak season sale is a familiar term for everyone who shops online but the people involved in setting it up know that it is a complex task and requires perfection in terms of planning and execution. Initiating the fulfillment process after getting multiple orders during peak season becomes more of a challenge than an opportunity. Learn the ins and outs of peak season shipping including the challenges, opportunities, planning, and factors to be taken care of before a big event. What is Peak Season Shipping? Peak season shipping or peak season fulfillment is the term that refers to fulfilling eCommerce orders during peak season when there are a high number of orders. The time of the year may differ depending on location, season, festival, culture, celebratory events, etc. During peak season shipping, retailers have a large number of orders to fulfill due to growing customer demand during that period. At this time, sales velocity is at its highest. It is a testing time for supply chain efficiency, inventory planning & management, 3PL fulfillment partners, and a seller's skills in order management. Any disruption can result in late delivery, damages, lower revenue margins, bad customer experiences, and ultimately downgrades a seller's ratings. [contactus_lilgoodness] Peak Season Shipping Challenges When you have a high number of orders, you have more chances of making mistakes during peak season shipping so let's look at some challenges that retailers face: Fulfilling Orders at a Fast Pace Fulfillment companies and sellers usually provide same-day and next-day delivery as one of their USPs which is quite a difficult task to achieve when you have high sales velocity. Peak season fulfillment is a trying time for retailers because every department will be struggling to meet its quotas due to the increased demand. On the other hand, customers continue to demand ultra-fast peak season shipping to take full advantage of the season. Lack of Staff During Holidays As the name suggests, seasonal sales occur during special times of the year so a large part of the workforce may want to take leaves which puts extra strain on retailers. This is not just limited to supply-chain staff but also employees that handle picking, packing, inventory management, and other processes. To counter this, a seller can ask their staff to work reduced shifts, provide incentives on orders and give their staff a bonus post-sale, based on their performance. High Expectations From Customers During peak season, customers expect to receive their orders before a specified time period. In India, peak season shipping needs to meet customers' expectations as they often plan ahead and expect to receive their orders before the start of a holiday season or festival. Risk of Product Damage Damage can occur during peak season fulfillment while storing, picking, packing, shipping, delivering, and managing returns. When retailers need to provide peak season shipping for a large number of orders, they cannot provide personalized care to each item because it will take extra time. They are under pressure to provide delivery services at the same pace while having to fulfill a much larger number of orders than any other time of the year, which leads to more careless handling of products and thus, there is more scope for mishaps to occur. Limited Amount of Warehouse Space While providing peak season shipping, you have more items to deliver which means that the sales velocity is high and you need to have an appropriate amount of inventory and enough space in the warehouse to store it. Keeping only a few items in stock can result in product shortages and storing more items than the warehouse capacity allows can result in product damage and deterioration. Incompetent Supply Chain Processes An incompetent supply chain could be your biggest challenge during peak season fulfillment. An order that is not fulfilled properly leads to customer dissatisfaction. If a logistics company does not deliver on time or damages the product in transit, there is a high chance of the customer returning the product and giving negative feedback to your business. The customer may never think of ordering from your business again which could result in other customers not giving it a chance.  10 Proven Ways to Prepare Online Stores for Peak Season in 2022 Plan in Advance To plan ahead of time and prepare online stores for peak season, arrange all of the data, create and implement planned promotions and figure out how you will handle the surge in demand. You can optimize stock levels and make smarter decisions about when and how much to reorder for each SKU by estimating demand. Though inventory forecasting may never be 100% precise, there are things you can do to bring your projections closer to reality such as analysing seasonal historical data, considering upcoming promotions and expected demands, and tracking fast-moving vs. slow-moving products to optimize stock levels. In the case of a stockout, you will have to set up a mechanism that immediately identifies products that have a low level of stock and that are out-of-stock in your store, so both you and your consumers are aware of the current availability of stock. If you have dead stock, you can launch a promotion or a flash eCommerce sale to clear it out and create space for in-demand products. Use Dropshipping & Direct Fulfillment Dropshipping, also known as direct fulfillment, is a business strategy in which online retailers, with the help of their merchants, distribute products directly to customers, without assistance from 3PL fulfillment services. Here, an eCommerce seller does not purchase or store inventory with them. They list it on their websites, generate sales, and take care of peak season shipping directly to the customer from their supplier or supply chain network. The dropshipping fulfillment process involves: eCommerce sellers listing items on their website or other selling channelsBuyers ordering a product from any of the platformsThe buyer is informed about the order placement and if there is an additional shipping feeSeller replicating the order with the supply chain network and keeps the vendor in the loopVendor or fulfillment companies pick & packing the order and ship it directly to the buyer Utilise Technology A simplified tech stack can increase peak season shipping speed while improving order accuracy. It also delivers accurate data in real-time that can be integrated across multiple platforms. Before you begin peak season shipping, add the following technological elements to your supply chain: Warehouse Management System (WMS)Inventory Management Software (IMS)Order managementSupply chain managementAutomated order processingRTOs and Returns management Partner With a Trusted 3PL Provider It's difficult to meet seasonal demand on your own and leasing your own warehouse can be costly and time-consuming. From inventory planning to returns management, working with a 3PL like WareIQ gives you access to premium technology and direct connections with major eCommerce systems. It's never too late to include technology in your supply chain if you want to optimize it before peak season fulfillment. Partnering with a 3PL can make the hectic season a lot easier to handle by providing the following: Ability to focus more on core business operationsFulfills orders on behalf of youTakes care of multi-channel sales orders Gives you multiple eCommerce warehouses and intelligent inventory placementProviding technological benefits and monitoring of your business from a single platformTake care of COD orders and settles transactions within a weekEnsures same-day and next-day delivery Utilize Multiple Shipping Carriers You can increase your peak season shipping flexibility by using different shipping companies. However, collaborating with various shipping carriers can be time-consuming and it may cause you to fall below the minimum shipping threshold required to receive discounted shipping prices. Fortunately, a 3PL like WareIQ can assist you by giving you the choice of a variety of logistics firms like BlueDart, DTDC, DHL, etc. This will allow you to optimize your shipping strategy without having to manage things on your own. WareIQ also negotiates bulk shipping costs so that you can benefit from the savings. Use Multiple Warehouses Across Different Locations If you work with a third-party logistics company, you will be able to distribute inventory across different fulfillment centers, lowering shipping costs and shortening transit times in the process. WareIQ has locations all across the nation. It gains access to data tools and helps you determine which regions are generating the most sales, so you can improve your inventory allocation plan accordingly because every location is driven by the same technology. You can match consumer expectations by using a distributed inventory technique to offer competitive, rapid and economical delivery choices such as same-day or next-day delivery with a minimum spending threshold that exceeds your average order value (AOV). Calculate MOQs and EOQs During peak season shipping, you need to have a good amount of inventory to fulfill the orders of all your buyers. Also, you must take care not to buy more inventory than is necessary to avoid your money being held up. To provide the ideal peak season fulfillment, you need to calculate the number of items you need to keep. There are two major ways to do so: Economic Order Quantity (EOQ) The economic order quantity (EOQ) is a method used to determine the actual inventory quantity to order. It is calculated after taking into account product demand, unit pricing, and holding costs to assist sellers in figuring out the order quantity.  The purpose of EOQ is to help sellers figure out how many products they need to meet demand without overordering and raising their holding costs. A seller must have a good grip on the following to make this method work: Order costs – Cost per merchandise orderDemand rate – Sold units during a certain periodHolding costs – Expense for holding the product The EOQ formula is : EOQ = Square Root of [{ 2 (Order Costs) X (Remand Rate)} / Holding Costs ] Source Minimum Order Quantity (MOQ)  The minimum order quantity (MOQ) is a method used for calculating the amount of inventory a seller should order at any given time. This is for the sellers who wish to be careful with their ordering habits or want to maximize their cash on hand while avoiding excessive inventory storing and spending. There isn’t a set formula to calculate MOQ but a seller can calculate the right MOQ for their business by: Calculating DemandBeing Aware of Holding CostsKnowing the Breakeven PointDetermining MOQ Prioritize Your Peak Freight Shipments Shipments can get delayed during peak season shipping. You need to inform your freight partner about boxes or containers that consist of higher-priority items. Before a shipment is rolled out, the relevant teams will be notified and they can help guarantee that higher-priority boxes or containers will be given extra importance. You can prioritize using a variety of factors such as securing prepaid orders first and then others. If you sell laptops and other peripherals, try to deliver the laptop primarily and other related products after that so that there will be fewer chances of order cancellation, RTOs, and unhealthy feedback. The idea is that your key product should be delivered first. Establish Reverse Logistics By making the returns procedure as simple as possible for the customer, you can enhance brand loyalty and retain customers. A positive returns experience may also inspire your clients to exchange their items, allowing you to avoid losing a transaction. To ensure you are not losing money, make necessary changes to your return policy. Examine which products are getting the most returns, figure out why and make modifications to the products and/or product descriptions to better meet expectations. Also, make sure you have a well-defined return and exchange policy in place that is easy to comprehend and accessible on your online store or product listings page at all times of the year. Opt for Damage & RTO Insurance A recent report from April 21 to April 22 shows that Indian buyers returned 73% of products after buying them online. Damage and returns can be more painful than having few or no sales. Here, the seller pays delivery costs and risks product damage in transit twice and in the end, they do not achieve the sale and no revenue is generated. So these days, online sellers not only have an option of taking insurance on the product but also on RTOs.  In RTO insurance, sellers are paid a specific amount of money if the product gets returned. WareIQ’s RTO Meter shows the RTO requests of individual buyers. If any buyer in the past had not received a product then it would reflect on the RTO Meter. A buyer with high RTOs is not preferred and insurance companies do not cover them in the policy. How Can WareIQ Help You in Peak Season Shipping? Ensuring that every component of your supply chain is synchronized is the best approach to preparing for peak season shipping and satisfying consumer expectations. You can outsource fulfillment to a 3PL expert like WareIQ instead of operating a warehouse, investing in your own fulfillment software, and shipping orders yourself. Leave it to the experts and save time and money to utilize it in the long run. WareIQ does not just provide multiple warehouses and logistics. It is a full-stack eCommerce fulfillment service provider that operates across India. It empowers you to ensure your customers receive same-day or next-day delivery. WareIQ provides warehouse management, inventory planning and management, logistics management, and much more, with full transparency in terms of operations and supplying real-time inventory information. Our custom WMS integrates with leading eCommerce selling channels allowing sellers to have all of their order and shipping data in one place. WareIQ also assists you with your item purchasing list by determining the right quantity and the right time to procure it. [signup] Peak Season Shipping FAQs (Frequently Asked Questions) How do peak seasons affect the supply chain?Demand and supply in the market have a direct impact on supply chains. This is true not only for seasonal items but also for peaks and falls in sales throughout the year, like a rise in sales during holidays and a fall during off-seasons. What are peak season charges?Peak season charges or surcharges are a temporary increase in the base shipment rate that major shipping carriers impose to cover additional operational costs during periods of high demand. The majority of surcharges are in the form of a flat price per package that varies between carriers. What peak season fulfillment facilities does WareIQ provide?When you are busy selling products on multi-channels and managing your eCommerce shop, WareIQ assists you by taking care of order fulfillment, shipping services, sending order confirmation mail/messages, and taking delivery feedback from buyers. It also includes product warehousing, picking and packing as well as reverse logistics. How do holidays affect the supply chain?A chunk of the labour force could be on leave or if your supply chain is on schedule for the holidays, your vendors' supply chains with their manufacturers may be severely disrupted. When Is Peak Season?It generally depends on the location, season, festival, culture, celebratory events, etc. But in general, it happens to start in August and goes till the end of autumn, probably till Thanksgiving. Can a seller outsource to WareIQ during peak shipping season?Yes, a seller can outsource WareIQ during peak shipping season and any other time of the year. It's never too late to get partnered with WareIQ as a fulfillment partner.

June 15, 2022

What is Lead Time in Inventory Management? 8 Important Strategies to Minimise Lead Time

What is Lead Time in Inventory Management? 8 Important Strategies to Minimise Lead Time

Next-day delivery has become a standard expectation among online customers. As a result, consumers' willingness to wait for their orders has decreased dramatically in the last half-decade. You'll lose business if your eCommerce fulfilment procedure takes too long. Reduced lead timings are one of the most effective strategies to decrease your delivery window. Businesses calculate and shorten lead timings to match customer expectations and sustain their market position. It also improves manufacturing efficiency and increases sales income. Extended lead timings can be caused by various issues, including supply, production, and delivery delays, which can impair manufacturing and sales. Many people confuse it with throughput or cycle time, which is the time it takes to complete a procedure or order from start to finish until the product reaches the consumer. A better grasp of lead time, what it entails, and how cutting it may help your company develop. In this article, you'll learn all you need to know about this and how to utilize it to improve order fulfilment. What is Lead Time in Inventory Management? Time taken from when a purchase order is made to when it is received in the warehouse is referred to as lead time in inventory management. The definition of the term lead time, also known as a lead period, on the other hand, varies depending on the situation. It is also used in the following contexts: Customer Lead Time The time it takes for a client's order to be accepted and fulfilled is referred to as the customer lead period. The order fulfilment on the selected delivery date might be either a doorstep delivery or a pickup from an accessible area. Material Lead Time The time it takes to place an order with a supplier and receive the cargo is known as a material lead period. These are often large orders of raw materials needed in the production process or as inventories. So, whereas customer lead time refers to the time it takes for a product to reach its final destination, material lead time is primarily concerned with the production process. Production Lead Time The production lead period is the time it takes to make and send a product to the target destination, assuming the essential raw material is available, and there is no supply or logistical delay. Cumulative Lead Time The total of material and manufacturing lead timings is the cumulative lead period. Overall, it takes from when an order is confirmed to when it is sent, assuming that a raw material order must be placed. The overall lead time in inventory management for creating and delivering items comprises all of these aspects. For eCommerce fulfillment services, the customer lead period is the most crucial satisfaction metric. Customers anticipate quick delivery. Therefore cutting the time between consumer order and delivery will help you improve revenue. Your inventory planning and cash flow are affected by the time it takes to complete each part of your supply chain. For example, assume you wish to reduce client wait times by adhering to lean business management concepts and utilizing just-in-time inventory management. You'll need to lower your material and manufacturer lead times in such a situation. Components Of Lead Time The components of the lead period may be broken down into six categories. These elements are all essential and are given in chronological sequence. The following are the specifics: Preprocessing Time Receiving the request, interpreting it, and then converting it to a purchase order takes time. The word is also known as planning time, which refers to placing an order for a product or item one desires to purchase. Processing Time The time it takes to obtain or generate an order based on a prior request is known as processing time after preprocessing. Waiting Time The time it takes to get essential products or raw materials before the production process begins is called waiting time. Storage Time The time it takes for things to sit in a warehouse waiting to be delivered is called storage time. Transportation Time The time it takes for an object to reach its final destination is known as transportation time. Inspection Time The third component is inspection time, which refers to checking items for defects or flaws before delivering them to clients. [contactus_uth] Importance of Lead Time In Inventory Management Businesses must be able to manage timelines. For example, stock can run out, and customers' orders can't be fulfilled if lead timings aren't controlled properly. When lead periods become unmanageable, a vicious cycle might emerge, with lead times deteriorating as demand rises. This lag between customer orders and manufacturing may result in additional delays, causing the lead period to worsen. As a result, lousy order management may cost a company a lot of money by costing its valued clients and damaging its brand. Mention below are the points which show the importance of lead time in inventory management- Customers expect high-quality items delivered as fast as possible. Therefore a shorter lead period aids in customer satisfaction. Customers prefer to purchase from vendors that bring meals in the shortest amount of time as a result of this.To retain the inventory, the lead period is crucial. For example, suppose a corporation knows how long it will take to manufacture a product. In that case, it may order additional material in advance, reducing the possibilities of a material shortage or surplus in inventory.To attract clients, eCommerce businesses use lead time in inventory management as a USP. This is because customers are increasingly demanding high-quality items as quickly as feasible.A company's lead timings estimate how many items will be made and delivered at a given period. Therefore, they can boost their money creation by improving the pace.The lead period is beneficial in decreasing inventory waste. Instead of holding surplus goods in storage, the management will order merchandise as needed at a particular time. Lead Time Is Central To Inventory Control Regarding inventory management, you can state that lead time is required to keep your inventory running correctly. It's an essential hallmark of a well-functioning inventory management system. This isn't the only reason, though. To have a better understanding of the subject, examine the following factors: To understand why Lead Time is regarded as an essential aspect of Inventory Management, consider the following: Demand Estimation and Forecast You will be able to assess demand straight from the market and predict the product's requirements in a planned manner with lead time. As a result, you will be able to establish high standards without allowing inefficiencies to creep in. Order Management Order fulfilment is one of the most challenging aspects of inventory management. You may control your inventory in warehouses and take it out for distribution on time with the aid of lead time. You can also benefit from the ability to automate orders, reducing time and effort spent manually. Suppliers Management You may cooperate with your suppliers on needs and meetings linked to the supply of goods using lead time. Using this capability, you may contact your suppliers on a timely basis, avoiding any inventory gaps. As a result, the importance of Lead Time for good Inventory Management is evident. Factors Affecting Lead Time Manufacturers must be aware of the elements that influence the lead period. If the lead period is small, you are on the right track, but if it is large, you must document, control, and optimize the process to achieve superior growth and development. The following are the elements that influence lead time: Delayed Shipment  Shipment delays are one of the most typical causes of lead time extensions. However, the cause is unknown owing to weather conditions or other unforeseeable circumstances. However, by accepting many orders that can be handled efficiently, efforts may be taken to lessen shipment delays. For example, due to procedures, delivery and orders were delayed during epidemic periods. It impacted the whole distribution industry, which caused issues in the beginning but was eventually alleviated due to the simplicity of processes. Unnecessary and Protracted Procedure Due to redundant processes needed in assembling raw materials to final goods, lead times can often be extended. As a result, order completion may take longer than usual, reducing production. It is critical to optimize the process so that no needless motions occur. In addition, it will allow you to save time and effectively manage your production. Stockout Situation When a manufacturer runs out of stock, it signifies that the firm cannot produce new products due to a lack of resources. Not only will the scenario harm the loads, but it will also result in disgruntled consumers. The issue might deteriorate, resulting in a loss of revenue, reputation, and clients, which could have long-term consequences for you. Variability in Lead Time Variable aspects connected to delivery, such as communication and coordination, impact lead time. If there are any delays, you should collaborate with your suppliers to guarantee that the manufacturing is completed on time. It can assist you in making your manufacturing process more accessible and efficient. How Lead Time Affects Inventory Control Stockouts are common in companies that keep inventory for use in manufacturing. This happens when the stock on hand runs out without fresh stock arriving. Stockouts typically inconvenience customers because they must wait for orders to be met, while the firm incurs costs since it may be compelled to halt operations. In addition, employees and manufacturing machinery will be idle for a while during stockouts. Still, the firm continues to pay utility expenditures such as power, water, gas and administrative costs. Lead period delays, which vary by supplier, are the most common source of stock shortages. Natural catastrophes, human error, raw material shortages, inadequate inventory management systems, and other issues are all significant causes of lead time delays. A vendor-management inventory tool that automates the stock ordering process can help businesses decrease stockouts. The application saves supplier information for each component, making it simple to order them as they near completion. By making inventory requests early enough to avoid stockouts, automatic ordering shortens lead timings and lowers delivery costs. In addition, the firm can keep a database of backup suppliers for the most crucial components to supply inventories if the primary source is unavailable or out of stock. Impact of Shorter Lead Time The primary logistical objectives are to get the right items to the right place at the right time, in the right amounts, and under the right conditions. The lead period is a temporal factor in the logistics equation that is directly tied to service quality but significantly impacts stock control and demand planning. Let's look at the reasons why having a short lead time is critical to your business: More accurate demand forecasting: Short-term demand forecasting allows for more precision. One of the fundamental rules of thumb in demand management is that the further into the future you plan, the more unpredictability there will be. Shorter delivery periods can alleviate this problem by allowing for more reliable and accurate forecasting.The ability to carry less inventory: a short lead time implies you can fulfil client demand with a lesser inventory level. The fundamental purpose of warehouse management is to bridge the time gap between when a customer puts order and when the supplier delivers the order to the client. The impact of supply delays on inventory policy is linear: the longer the lead time, the more stock is kept on hand, and vice versa.Customers want high-quality service in a short amount of time, with little effort, and at a fair cost. You may provide consumers precisely what they want if you have a shorter lead period, such as quickly responding to changing client demand, completing the specified order quantity in less time, repairing damaged items in less time, and lowering expenses throughout the process.A shorter lead period will save you money and allow you to deliver on schedule. Furthermore, a shorter lead period results in more order fulfilment, which equals more cash flow.You don't need to purchase in bulk if your lead period is minimal since your complete processing procedure is rapid. This keeps your inventory at the proper level, allowing your business to function smoothly without the stress of having too little or too much stock.Last-minute modifications can only be implemented when lead periods are short since you can swiftly update items without delaying the purchase and jeopardizing client happiness. Furthermore, short lead times allow you to adjust to changes in market trends swiftly. All without the risk of losing money. Impact of Longer Lead Time To preserve the effectiveness of their operations, manufacturers and suppliers rely significantly on factory direct and authorized distributors to fulfil orders and satisfy business expectations. When lead period unpredictability becomes a problem for supply chain management, distributors and providers may experience longer lead periods and lower productivity. Some of the more frequent, longer lead period variability issues that wreak havoc on supply chain operations are listed below. Stoppages in the Production Line A long lead period might stop production if engineers don't have the components they need to finish the project. Preventing the production line causes suppliers to fall behind on client demands, resulting in another issue of low supplies. If a market expands and authorized distributors cannot meet demand, original equipment makers will fall behind on their manufacturing demands for clients. To guarantee that planned orders are delivered on time and to the buyer's satisfaction, authorized distributors must use a highly effective in house or third party logistics management system. Stockouts and inventory shortages might result from lead time variability difficulties, prompting you to either find a more dependable parts supplier or place a one-time purchase with an independent distributor. Revenue Generation The more significant the impact on a company's bottom line, the more manufacturing deadlines must be stretched. They could even wind up paying extra money to get parts from an unvetted independent distributor so that manufacturing projects can be completed and client orders can be delivered, bringing in much-needed income. Conversely, if a company cannot fulfil order demands for its clients, lead time variability severely threatens its earnings. How to Calculate Lead Time Lead time (LT) = Order Delivery Date – Order Request Date is the most straightforward fundamental formula. This method, however, allows for a reordering delay in the context of inventory management. Supply Delay (SD) + Reordering Delay = Lead Time (LT) (RD) The time a supplier takes to fulfil a client order after it has been placed is known as supply delay. The period between a completed order and placing the following order is known as the reordering delay. It is also necessary to account for reordering delays. Some vendors may only take orders once or twice a week or once a month. This means shops must plan for this delivery delay to keep a safety supply or buffer stock on hand. While waiting for your supplier to replace your supply, you can satisfy orders using your safety stock. Let's imagine you sell 500 shirts every day on average. Supplier A, on the other hand, only takes orders for shirts every five days. This signifies that your shirt supplier's reordering time is five days. Let's pretend that A delivers shirts to your warehouse in 2 days. This results in a two-day supply delay. In this instance, The lead time is calculated as follows: supply delay (5 days) + reordering delay (2 days) = Seven days. It should be simple to stock up for seven days. But what if you were selling something valuable and uncommon, such as exotic plants or fancy home decor? Such items are likely to be slower-moving than apparel and eatables, with significant supply and reordering delays. This implies you'll have to prepare for their acquisition, stock, and sale months ahead of time. But how can you figure out how much stock you'll need and when you should restock? The answer resides in the reorder point and safety stock. How much of a safety stock should be kept on hand? Safety stock is the amount of inventory you must have on hand in case of a supply or reordering delay. Its calculation accounts for lead time and demand variability (possible demand variations). Customer demand for items might fluctuate owing to various factors such as vacations, weekends, wholesale price fluctuations, special offers, and so on. Besides that, managers must prepare for unpredictably fluctuating demand, such as unexpected shortages, weather disruptions, and so on, because supply and demand are inextricably linked. The formula for safety stock is as follows: (Maximum daily sales*Maximum lead period) – (Average daily sales*Average lead time) = Safety Stock    When is it time to restock? The level of inventory that signals that you need to restock are known as your reorder point. The reorder point calculation influences your choice to replenish as inventory management, and the formula denotes it: (Lead time * Average daily sales) + Safety stock = reorder point It's time to pick up the phone and shop for some goods every time your stock reaches the reorder mark! Your reordering quantity will correspond to the amount of safety stock you have on hand. Additional factors to consider while determining lead time ARO Lead Time The point at which the supplier gets an order is known as the after receipt of the order (ARO). The overall period between ARO and order delivery makes up the lead period. Thus this is the first thing to consider when calculating the lead period. Lead Time in Manufacturing The manufacturing lead period is known as the time it takes for a merchant to place an order and for the product manufacturer to complete it. It comprises the time spent acquiring, manufacturing, and shipping items. 8 Best Strategies to Reduce Lead Time Remove Unreliable Vendors From Your Supply Chain. Do you get late delivery from particular vendors regularly? Keeping them in your supply chain might be more expensive than switching vendors. Even when considering the possible cost of a change, research conducted by NC State University reveals that supplier assessment nearly always has a favourable influence on a company's financial performance. If you decide to switch suppliers to shorten your lead time, ensure you have adequate inventory to carry you through the transition. Additionally, be sure that your new supplier is ready to begin shipping you things straight immediately. Select Vendors Who Are Near Your Warehouse You have access to more sellers than ever in today's global economy. Unfortunately, while searching for the most significant rates worldwide, you may find yourself waiting weeks for things to arrive from another country. This extends your lead period and makes returning broken or undesired items more difficult. Giving attention to local vendors to your warehouse or manufacturing site is one of the simplest lead time reduction methods for suppliers. If a local supplier can't compete on price, consider placing larger (but less regular) orders from foreign vendors and maintaining a more extensive inventory. Share Your Demand Forecasts With Your Suppliers Your orders may differ monthly if you work in a naturally fluctuating business. To keep your suppliers prepared for larger-than-normal purchases, let them know that you foresee an increase in demand as soon as possible. This ensures that they are not only capable of handling a huge order but also capable of doing it as rapidly as feasible. Internalize External Processes Do you manage most of your manufacturing processes in-house, but not all of them? Consider expanding your capabilities so you don't have to outsource the finishing of your items to a third party. This demands a considerable initial expenditure, but the long-term savings make it a financially viable choice in most cases. Furthermore, you'll be laying the groundwork for future expansion, allowing you to expand once your revenues rise quickly. Workflows for Order Processing Can Be Automated Ensure your internal procedures are up to standard after you have your raw materials and are ready to begin manufacturing. Consider: When it comes to consumer purchase orders, how long does it take you to enter them into your system?How long does it take you to get them through production and quality assurance when it comes to engineering change orders?How frequently does the process become stalled due to internal miscommunication?How frequently do orders go missing completely? Your lead times will most certainly deteriorate due to poor performance in any of these areas. However, automated order processing procedures might help you get your final items out the door faster. Complete Many Processes at the Same Time They were not getting past the fact that specific procedures must be finished before others can begin. However, if you can find strategies that many people can execute simultaneously, you can boost productivity and shorten lead times even more. Internal Communications Need to Improve Order processing necessitates the participation of all members of the team. Internally, if you're not cooperating correctly, you might be causing unnecessary delays. Suppose your process has numerous phases requiring input from multiple individuals. You may be wasting time you don't have. This is especially true if you're working with non-trackable paper. Paper-based projects on someone's desk lengthen your lead time and raise the risk of misplaced paperwork. Even though poor communication is a complex problem, manufacturers have numerous alternatives for removing bottlenecks.  Communicate With Your Customers More Effortlessly So while this doesn't help you cut your lead time in half, it does keep your clients informed as they wait for their orders. In addition, in several studies, communication has been proven to be a significant predictor of customer loyalty. Therefore it's a crucial factor to consider. Consider investing in a system that will send out order alerts if you aren't already doing so. (There are dozens of tools that automatically handle notifications, so automation is a significant time-saver here.) However, it's a simple – and relatively straightforward – technique to boost satisfaction and set expectations. Conclusion Staying on top of your business necessitates short lead times. In addition, they assist you in enhancing your cash flow and client satisfaction by allowing you to adapt to shifting market patterns. You may utilize it to optimize and reorganize your supply chain and production process now that you know how to calculate it. While understanding the lead time formula is a fantastic start, you can't keep calculating things by hand all the time. It's all about saving time, remember? Businesses should obtain everything they need to improve their supply chain and manufacturing process, from workflow automation and customized widgets to project planning and resource allocation. Allow WareIQ to Assist You in Reducing The Lead Period. We at WareIQ know how important it is for you to keep your business operating correctly, and we're here to assist you. We've given hundreds of businesses the tools they need to automate their order processing. So what's the result? Less time spent on inefficient back-office operations means more time for sales and product development. You may even cut the lead period by partnering with WareIQ for inventory management and eCommerce fulfilment. [signup] Frequently Asked Questions Is inventory a factor in lead time?Lead times can be influenced by production processes and inventory management. Building all aspects of a finished product on-site may take longer than finishing some items off-site in terms of manufacturing. What impact does lead time have on the supply chain?The influence of lead time on inventory management is depicted in this image. Lower lead times are preferred. However, obtaining shorter lead times from suppliers is difficult. Longer lead times, on the other hand, result in more goods on hand and in transit. Longer lead periods can limit the supply chain's capacity to respond to shifting demand, unpredictability, and uncertainty. What is the connection between inventory management and supply chain management?The supply chain manager will oversee inventory and flow management, taking into consideration any capacity or productivity concerns that arise along the way. The inventory manager will focus on his local inventory and arrange orders with suppliers, taking into consideration lead times and tariffs. What does a lead time look like in real?A lead time is a time it takes for a process to start and finish. For example, depending on numerous factors, the period between placing an order and receiving new automobiles from a certain manufacturer might range from 2 to 6 months. What is the delivery lead time?The number of days between the date the Order is acknowledged by the Supplier and the date the material is sent by the Supplier is referred to as the Delivery Lead Time.

June 15, 2022

Finished Goods Inventory: Definition, Examples, Importance & 3 Easy Steps to Calculate Finish Goods Inventory

Finished Goods Inventory: Definition, Examples, Importance & 3 Easy Steps to Calculate Finish Goods Inventory

All inventory follows a life cycle. It begins as different raw materials being combined together, grows to be work-in-progress, and finally emerges as finished goods. But finished goods are more than just the last stage of the inventory maturation cycle. They are the key component of being able to participate in the selling of products on eCommerce platforms. Let's take a look at examples, calculations, and why they are important. What is Finished Goods Inventory? Finished goods inventory is the number of goods available for a company to be able to sell to customers and fulfill orders. However, finished goods is a relative term, as a seller's finished goods could be the raw material for a manufacturer. Therefore, it could mean the inventory lying with a seller that is ready for dispatch to be sold or stock with the company that is prepared to be sent to a customer. Briefly, finished goods inventory is the stock of a wholly manufactured set of goods. Therefore, it is also called finished product inventory.  Finished Goods Examples  Finished goods are the everyday items surrounding us. Here are some examples of finished goods: You come across all kinds of food and grocery items in a supermarket. These perishables are ready for sale. Similarly, the gadgets or outfits that you adorn are customer-ready in an online or offline electronic store and clothing store. Finished goods examples include every product available for sales such as fruits and vegetables, processed and canned foods, clothing items, electronics, eggs and packaged meats, toys, petrol and gas, vehicles, and everything else that is available for purchase by consumers in a ready-to-use function. [contactus_uth] What is the Finished Goods Inventory Formula and Why is it Important? Once you know what elements are needed to calculate the finished goods inventory, you can understand why it is critical for you. Here's the formula: Finished Goods Inventory Formula Finished Goods Inventory depends on the expenses incurred for manufacturing the complete stock of goods, the cost of goods sold off, and the value of finished goods inventory from the previous period. This duration could be a month, a quarter, or a year. Finished Goods inventory = [Cost of Goods Manufactured – COGS] + Previous Finished Goods Inventory Value There are many reasons why it is a crucial calculation for everyone involved in the supply chain. Importance of Calculating Finished Goods Inventory Verifies Gross Profit For every manufacturer or seller, knowing the value of their inventory helps them to determine their gross revenue and profit margins. In addition, this tally helps in future operational and financial budgeting. You get to establish the expenses on goods manufactured and sold and the value of inventory in your warehouse. Documents the Current Assets Volume Finished goods inventory is counted as current assets in the balance sheet, which means they are short-term assets intended to generate revenue for you within a year. Your production strategy may be based on a 'Build to Order' or 'Build to Stock' plan. But it determines how many assets you hold at a time. To calculate the finished goods inventory level, you need to confirm the number and value of current assets lying with you after all the sales are made. Minimizes Material Wastage The formula helps you understand the finished goods inventory turnover rate. It is the rate at which your finished goods inventory is sold and replenished within a set period of time. When you know the worth of the finished goods remaining versus goods sold by the end of the month, you can ascertain how much inventory was ultimately utilized. Keeping a tab on the finished goods inventory can help you monitor and minimize its wastage. Streamlines Inventory Management  Many factors affect your inventory management decisions such as the economic, fiscal, and geopolitical scenario of the country, annual budgets, and other contingencies like war or natural disturbances, industrial dynamics, and price fluctuations. All these factors affect the finished goods inventory level you need to maintain. The formula helps you ascertain the costs you incur on manufactured and sold goods and how much inventory you need to preserve, from the date of your previous performance. This formula also helps you differentiate between goods that are hot-selling products versus the goods that stay in your warehouse longer. It also enables you to separate high-value goods from others and store them in a more protected space. 3 Easy Steps to Calculate Finished Goods Inventory Step 1: Check Finished Goods Inventory of Prior Years Determine the value of finished goods for the previous period. You reach this figure in the last duration, which could be a month, quarter, or year using the same formula for finished goods as mentioned previously which is: Finished Goods inventory = [Cost of Goods Manufactured – COGS] + Previous Finished Goods Inventory Value Step 2: Subtract the Current COGS From the Cost of Goods Manufactured This step involves the below calculations: Cost of Goods Manufactured (COGM) refers to the money spent on manufacturing every unit of the finished good. For instance, if you made 400 candles worth ₹200 per piece, your COGM would be: 400 x ₹200 = ₹80,000. COGM = [Raw materials used + direct labour employed + all manufacturing overheads + beginning WIP inventory] - the ending WIP inventory. Cost of Goods Sold (COGS): The money spent on manufacturing the products sold is referred to as COGS. So in the above example, if you sold 300 of the 400 candles made, your COGS would be: 300 x ₹200 = ₹60,000. COGS = [Beginning Inventory + Received Inventory] – Ending or Remaining Inventory Now deduct the COGS value from the COGM figure: COGM - COGS Step 3: Add the Prior Finished Goods Inventory Value to the Answer Combine the figure you have reached above with the value of finished goods inventory for the last period. Adding the overall value of assets available gives you the finished goods inventory for the current period. You can procure this data from past inventory records. [COGM – COGS] + Previous Period Finished Goods Inventory The period considered for the calculation must remain consistent throughout to avoid any discrepancies. How Do 3PL Fulfillment Companies like WareIQ Help to Efficiently Manage Finished Goods Inventory? 3PL companies assist businesses at every stage of the supply chain. Inventory management is crucial to your logistical success. An experienced 3PL service provider like WareIQ can help you efficiently manage your finished goods inventory.  Here's how it can be achieved: Real-time Data WareIQ offers advanced real-time data collection and analysis technology throughout the inventory life cycle. This means that you are continuously updated about your inventory levels and whereabouts, across multiple platforms, the moment a change is made. This is necessary to know what inventory is available to you and when. For example, to determine your inventory level, you need to see the number of finished goods ready for sale and the stock already sold and delivered. Real-time updates affect your decision-making and budgeting capabilities and enable you to make faster and more well-informed decisions. Quality Control A promising 3PL partner like WareIQ assures you of quality checks throughout the inventory lifecycle, so you know if and when any product has gone bad or has expired and needs replacing. This prudence comes in handy, especially if you are dealing with perishables. Additionally, the way products are stored in the warehouse, picked and packaged when an order is confirmed and shipped to the customer, meets rigorous quality control standards to ensure that everything is done in the most careful and efficient manner. Automated Systems The superior inventory management software gives you access to essential data like inventory levels, orders, and billing cycles and can integrate with multiple eCommerce platforms. This data helps you trace the previous and current inventory levels and the goods sold. These automated reports can be triggered at pre-set intervals such as daily, weekly or bi-weekly, to be sent via email or directly to your system via API integration. So all the information you need to know about the finished goods inventory is available at your fingertips. Superior tech also guides you on scaling up or reducing the manufacturing dependence on seasonality and demand. Inventory Tracking WareIQ's advanced dashboard triggers punctual updates via texts and emails. Further, it creates your company's branded, fully customizable tracking page. You can track your inventory in any of WareIQ's pan-India warehouses from a single dashboard. So you can keep a tab on all the raw materials from Pune, Guwahati, and Hyderabad that you need in Gurugram in the current week, from a single webpage. Conclusion Finished goods inventory is responsible for bringing in revenue for your eCommerce business. Hence, it must be regularly monitored and tracked. The preparation you need to do this is a simple calculation that ensures you gather data on all the necessary elements. Along with a capable 3PL partner who provides the data collection and analysis on your behalf, you have fewer things to worry about. WareIQ is one of India’s fastest-growing eCommerce logistics companies that uses a centralized technology platform to provide every service that is associated with fulfilling eCommerce requirements. Finished Goods Inventory: FAQs How is finished goods inventory recorded?In the balance sheet, you need to credit finished goods inventory while debiting COGS. This means that the items are transferred from inventory to expenses. When an item is sold, it would be listed as a transaction while the sales revenue account is credited with the sale. Can inventory be classified as finished goods?Inventory is generally classified into 3 categories:1. Raw materials2. Work-in-progress items3. Finished goodsFor accounting purposes, inventory is classified as a current asset because of the firm’s plan to sell it within a year. Why is it necessary to have an optimum level of finished goods inventory?Finished goods inventory assists a company in ascertaining the value of each unit produced of a good based on the raw materials consumed, labour used, and overhead expenses. What types of companies use finished goods inventory?Finished goods inventory can either be used by a manufacturer or supplier who uses raw materials and other components in order to manufacture products. These products are then sold directly to consumers or retailers, who sell them to customers eventually.

June 13, 2022

Inventory Allocation: Definition, Pros and Cons & 4 Factors to Consider While Allocating Inventory

Inventory Allocation: Definition, Pros and Cons & 4 Factors to Consider While Allocating Inventory

Inventory is the key asset of any eCommerce company to be able to transform an order into a delivery. One of the main ways to ensure that this process is carried out efficiently is proper inventory allocation. This enables companies to place the appropriate amount of inventory at every step of the supply chain process, to mitigate shortages and unforeseen circumstances. We will be discussing what inventory allocation is, inventory allocation methods, reasons for companies to employ an inventory allocation strategy and factors to consider when making that decision.  What is Inventory Allocation? The process of strategically optimising and tracking the levels of inventory that an eCommerce company maintains across its entire distribution network (including multiple sales channels and fulfillment centers is called inventory allocation. Let us look at a typical, growing eCommerce company that sells its products across multiple online channels, including Flipkart, Amazon, Shopify (etc.), and needs to allocate its inventory to each channel based on the volume of orders received. To achieve the shortest possible delivery time, the eCommerce firm will use multiple fulfillment centers and warehouses to fulfill orders. Given this scenario, the firm must utilise various inventory allocation methods to fulfill orders based on the optimal mix of products, customer orders, and warehouse locations. An optimised inventory allocation exercise ensures that the correct inventory levels are maintained at each fulfillment location, so customers’ orders are delivered at the earliest possible time. Sudden increases in demand such as during a flash sale, are also built into the calculations. Inventory Allocation Methods Let us look at the two most prominent inventory allocation methods that are used: Manual Inventory Allocation As the name suggests, if an eCommerce firm uses physical spreadsheets, and inventory ledgers and analyses data manually for inventory allocation, it is referred to as manual inventory allocation. Unfortunately, not only is this method time-consuming but it is also prone to miscalculations, errors and other inefficiencies. A primary concern is that when a business grows, the problems multiply rapidly and manual inventory allocation can often compound those problems by creating more mistakes which can have disastrous consequences.‍ Tech-Enabled Inventory Allocation Most modern inventory allocation methods are enabled by eCommerce firms investing in the latest technologies that seamlessly manage and track their inventory and its movement across their entire distribution network. By using electronically-captured data and the deep insights they offer, this method of inventory allocation is done in real-time and maintains high levels of accuracy and efficiency while being easy enough to use. Businesses primarily employ inventory management software that consists of all the above features which help businesses automate their inventory allocation procedures.  Advantages and Disadvantages of Inventory Allocation Advantages of Inventory Allocation Avoids Overstocking The perils of overstocking are many, often with disastrous results which can be especially pronounced for eCommerce startups or small firms. To begin with, overstocking causes overutilisation of warehouse space, clogs up invaluable cash flow and increases carrying costs. Additional problems include high insurance premiums, rent and labour. Problems of expiry dates, damage and pilferage/theft also start cropping up for inventory that stays on the shelves for long periods of time without being shipped out. Inventory allocation helps prevent overstocking by making businesses aware of the optimum amounts of inventory they require. Helps in Order Fulfillment Conversely, very low stock levels cause their share of problems. Firms would run short of inventory and be unable to capitalise on customer demand. Even worse would be the issues of sudden stock-outs, especially when you may have already confirmed customer orders. All this would drive your customers to your most feared result, i.e. you would lose them to competitors who provide more efficient service.  About 3/4th of today’s online customers would be unlikely to return unless their orders are fulfilled within 2-days. Efficient inventory allocation would eliminate such problems by helping firms ascertain the exact amount of inventory they would need. Assists in Understanding Buyer Behaviour A huge benefit of efficient inventory allocation is that it helps to understand the buying behaviour of your customers. By tracking data, clustering them into ACV-cohorts and analysing stock movement across important parameters, firms can learn much about their customers' buying habits and preferences. Ultimately, this enables management to make better business decisions. Disadvantages of Inventory allocation Lack of Proper Usage Poor inventory allocation methods that are not tailored specifically to your business can set you up for failure. Therefore, the goal is to make the correct and informed decisions to be able to efficiently manage and allocate inventory, not just to simply adopt an inventory allocation process to be up to speed with the rest of the industry. Struggles to Adapt Oftentimes, companies are led by pure profitability and only maintain high-profit and high-demand items. If customers decide to change their preference suddenly, you could be left with dead stock. You would be precariously placed since you would not have left enough warehouse space or invested in SKUs for other customers (that offer less profitability). 4 Reasons for eCommerce Companies to Have an Inventory Allocation Strategy We live in an age of information and as you would have heard, knowledge is power. Awareness about your inventory requirements, broken down by locations, nature of products and other factors, the type of SKUs, customer clusters and their preferences, and a deep understanding of buyer behaviour gives you this knowledge. With it, you can improve your decision-making through timely and informed decisions while also forming the bedrock of optimising your supply chain.  Modern eCommerce firms are prone to fluctuating inventory levels which is an underlying result of selling across multiple channels and different locations. Using modern inventory management software and technology enables eCommerce management teams to stay ahead of the curve and maintain close working relationships with their 3PL partners and fulfillment teams. After all, an effective inventory allocation strategy will reduce operating costs, maximise inventory ROI and successfully satisfy customer demand. Let’s look at the 4 key reasons to have an inventory allocation strategy: Prevents Overstocking Firms often adopt the easy way, i.e. to stock more inventory than they expect, just in case they fall short. However, that is often counterproductive to company profitability and cost-efficiency. On the contrary, overstocking drives up inventory carrying costs, requires larger warehousing facilities, requires more labour and higher insurance and creates problems of pilferage and dead-stock – the list is endless.  Optimising your stock levels by following a robust inventory allocation strategy based on comprehensive data analysis, demand trends and SKU movement is the way to go to prevent overstocking. Avoids Overselling A robust order pipeline is an aim for all eCommerce companies. However, it requires significant study and projections based on analysing the correct parameters. Overselling leads to backorders and results in a poor customer experience, delayed shipping, price fluctuations, etc. The correct inventory allocation strategy to prevent overselling is for it to stem from your demand analysis. Therefore, it becomes imperative to maintain data about seasonality, promotions or sudden changes in the ecosystem (e.g. a competitor going bust and their orders suddenly shifting over to you). This prepares firms to stock the correct inventory levels (with requisite safety buffers) based on past trends and future growth projections. Optimises Management of Multiple Channels Modern retailers have adopted an omnichannel strategy to satisfy changing customer preferences and demands. However, along with its advantages, it also needs an efficient omnichannel inventory allocation strategy to tackle stock level oversight, order returns, reorders and stock forecasting problems.   Using inventory management systems that track the demand and supply of stock across an omnichannel network is of great help. Popular eCommerce platforms offer direct, API integrations with your MIS to help you track inventory movement from a centralised dashboard, across multiple platforms, which makes the entire inventory allocation process faster and more efficient. Assists in Scaling Business Operations Extending the point above, it will become impossible to scale if eCommerce firms don’t implement modern tech stacks and processes that enable better decision-making to run the business. However, this can be daunting, given its costs, knowledge requirements and time constraints. Therefore, eCommerce firms can partner with 3PLs (third-party logistics companies) to take care of the rising need for order fulfillment and inventory management. A 3PL brings significant capabilities across an extensive network of fulfillment locations, logistics capabilities and technology – these are must-have features as a firm begins its journey of growing its customer base and expanding its services. 4 Factors to Consider While Using Inventory Allocation You may sell hundreds of SKUs via an omnichannel sales network or use multiple warehouses for order fulfillment. You could be a niche brand selling to a limited number of customers or an eCommerce startup just getting started with limited monthly orders. You may even be a behemoth fulfilling thousands of daily transactions across the globe. Establishing a solid inventory allocation policy is the cornerstone of achieving supply-chain efficiency and successfully servicing your customers, regardless of your status. Let’s look at the key factors to consider during inventory allocation: Demand for Inventory Perhaps, the most important tool for an eCommerce business, especially a growing one, is the demand forecasting function. It creates a ripple effect throughout the organisation whereby you can make well-informed decisions around production, promotion, labour and much more. While it is true that you will unlikely ever achieve 100% accuracy with demand prediction, if you set up the correct procedures and use advanced tools and technology that are available, you should have an accurate enough handle on your sales patterns. Adopting a data-driven methodology will enable firms to make sound inventory allocation decisions and accurately predict the amount of inventory required to be stored across their warehouse locations and how much must be allocated to different sales channels, depending on demand. Strong demand-forecasting techniques also consider promotion-led demand, flash sales, seasonality and other temporary peaks and valleys in demand that will directly impact inventory allocation. Availability of Inventory Evolving customer preferences have meant that delivery times are an increasingly important element for a business to differentiate itself from the competition. Studies show that customers rarely return to an online platform if their order fulfillment experience isn’t satisfactory.  A crucial part of this is achieved by ensuring that the correct mix of inventory and supply is maintained at shipping destinations closest to the customers’ addresses.  Modern inventory tracking software is a useful tool that ensures accuracy and visibility. These highly sophisticated systems allow you to aggregate demand patterns across channels and locations, thereby allowing you to aggregate the appropriate inventory levels that must be maintained at every warehouse location. In turn, this helps in setting reorder levels, organising transportation, hiring labour (both full-time and part-time) and negotiating rates with suppliers, to name a few.  Additional benefits include not having to urgently fulfill orders from warehouses further away from the delivery address due to a stock-out at the nearest one. eCommerce firms typically use automated stock-tracking systems that let them seamlessly connect to vendors, suppliers and other supply-chain stakeholders via a centralised cloud-based system. Therefore, all critical data points like SKUs, channel throughput, inventory availability at fulfillment centers and customer details are available holistically and easily.  Availability of Warehouse Space Another important factor to keep in mind while planning your inventory allocation is the available warehouse space, the cost of renting it and operating costs.  eCommerce firms partner with 3PL firms so that they have access to their vast network and resources of warehouses, on-site teams, transport fleets and modern operating systems. Based on your requirement, storage fees will vary from a fixed fee per pallet, square metres allocated, according to SKU, the transaction (etc.) Simplicity of Order Fulfillment As mentioned earlier, an efficient inventory allocation process shortens order delivery times; it simplifies logistics and saves costs.  To ensure the shortest possible delivery times, you must minimise the shipping zones a parcel needs to travel to reduce last-mile delivery costs and the time taken to deliver it. This is achieved by maintaining sufficient stock levels at all warehouse locations across the entire network of warehouse/fulfillment centers that you operate. For example, suppose you anticipate an uptick in sweaters and warm clothes in northern India just before the onset of winter in November, you should allocate additional inventory there so that they can be delivered faster and with minimal distances travelled. How Can an eCommerce Fulfillment Company Like WareIQ Help With Inventory Allocation? 3PL fulfillment companies like WareIQ can assist clients with inventory allocation by deploying their significant capabilities in the field. Let’s look at some leading ones: Automating Inventory Allocation ‍With its modern automated technology, WareIQ provides its users with a centralised dashboard that gives clients a bird’s-eye view of the entire operation, across all platforms. This provides a detailed and accurate view of inventory movement, including tracking at the SKU level, cluster viewing broken down by sales channels, unit type, storage locations (etc.). This is a critical tool in managing your inventory allocation.  Streamlining Inventory Management Today’s eCommerce firms adopt a multi-channel sales approach – this naturally includes multiple fulfillment centers, on-site teams and various vehicular fleets. This could get tricky and result in disastrous consequences if not handled properly. Challenges like stock fluctuation, intra-network movement, re-order levels, etc., are naturally amplified due to this multi-channel sales network. The levels of automation that today’s 3PLs such as WareIQ can bring, thereby reducing human error and ensuring real-time visibility and communication, which have become a strong tool for clients. Forecasting Sales Patterns 3PLs use highly sophisticated data-analytics systems that can record and mine massive amounts of data every second. This comprehensive data analysis generates deep levels of insight that enable management teams to make more informed and effective business decisions. Detailed reports that provide in-depth information at both the macro and micro levels of client operations and metrics that outline the best practices of sales-based inventory allocation help clients immensely. Channel throughput and efficiency, stock turnover, fast/slow-moving products, etc., are some key data points in determining sales patterns. Advantages of an Elaborate Fulfillment Network Today’s eCommerce firms mostly use an omnichannel sales strategy. With its elaborate and extensive network of fulfillment centers, WareIQ allows clients to leverage the strength and resources of this network in fulfilling their orders. Reduced shipping costs, faster delivery times and inventory-splitting are some of the associated benefits. Conclusion Today’s eCommerce companies operate in a fast-paced, highly competitive and complex eco-system that spans international borders. They deploy an omnichannel sales and distribution network and several fulfillment centers and employ huge teams to manage their inventory. Therefore, firms must use a data-led and technology-enabled inventory allocation system that considers all the numerous variables that affect it to come up with a winning one. WareIQ provides commercially certified solutions, professional services, barcode scanning and technology such as an advanced WMS to assist businesses in better understanding and controlling their assets, inventory management in the supply chain and industrial processes. These solutions are quickly implementable and cost-effective, saving your time, money and effort. We offer extensive knowledge and capabilities in all eCommerce-related requirements, from inventory allocation to order distribution.  Inventory Allocation: FAQs What is the goal of inventory allocation?The main objective of inventory allocation is to ensure that the optimum amount of inventory is available to fulfill orders across every channel. This is done by determining the demand and the amount of inventory needed to fulfill it. Why is it important for businesses to allocate inventory?It is important for businesses to allocate inventory so that they can avoid stock-out or overstock situations and they can efficiently manage storage space and operating costs. What factors can affect inventory allocation?The factors that can effect inventory allocation include:- Inventory demand- Inventory availability- Warehouse space How can WareIQ help with inventory allocation?WareIQ has a custom WMS that can group and organize your inventory in any way that you need, across fulfillment center locations and sales channels. We also assist in demand forecasting to determine how much inventory is needed for each sales channel.

June 13, 2022