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What is Decoupling Inventory? Definition, Methods, Differences and Effect on the Supply Chain in 2025

What is Decoupling Inventory? Definition, Methods, Differences and Effect on the Supply Chain in 2025

Inventory is a basic asset of any business operation, so inventory management becomes an essential task. Inventory management includes more than just arranging the items on shelves, picking them up when an order comes in and delivering it to the customer. It also comes with a lot of uncertainties. These uncertainties are part of operating a business and managing them by taking the appropriate steps is a sign of efficient business skills. Events such as the global pandemic and supply chain disruptions caused due to the war in Ukraine have highlighted many challenges and lack of inventory is one of them. Depending on the nature of a business, there could be a shortage of semiconductors, edible oil, medicines, etc. So to maintain functional production and supply operations, forecasting needs to occur. Decoupling inventory is one part of it and it needs to be implemented to prevent stock-out situations and grinding operations to a halt. What is Decoupling Inventory? Decoupling inventory, also known as decoupling stock, is the process of separating extra inventory within a production process to ensure smoothness in every operation. Buffer inventory is stored in order to prevent one step of production from causing delays in other steps.  Manufacturers need to ensure that if any of the machines involved in production breaks down or slows down production rate at any point, production does not get affected. An Example of Decoupling Inventory For different purposes, the relevant decoupling inventory example can vary depending on the situation. One example for a manufacturing unit is as follows: If a manufacturer makes bread and biscuits that require the use of flour, they must purchase a huge amount of wheat to grind it into flour. For processes such as grinding, backing, kneading and cutting, various machines are put into use. If any of the machines get damaged or stop working due to an issue, the entire production process can get delayed. In order to mitigate this, the manufacturer can use the principle of decoupling inventory to keep extra flour if the grinding machine fails, keep some buffer knead to cut it and shape it for future steps. If the kneading machine fails then there should be another way to knead it, bake it or use the flour to make something else from the items in the product line that the company offers. This is a good decoupling inventory example that other businesses can emulate in order to prevent a delay in multiple other processes, just because one operation isn’t going to plan. [contactus_gynoveda] How Can You Achieve Decoupling Inventory? Most online retailers will keep extra stock to ensure that client orders are fulfilled on time. Many times, the order frequency gets too high. For example, if the monsoon arrives early, umbrella sellers will get more orders and may struggle to fulfill them. If you sell a product on your website and multiple other sales channels that needs to be a handmade item or requires assembly, it will benefit you to learn about how decoupling inventory can help you optimize your processes. Here is a step-by-step guide to completely comprehend how decoupling inventory works: Calculate your sales and production capacity. Determine the current raw material or work-in-progress inventory levels at each decoupling point in your manufacturing line. Analyze previous order data and patterns to forecast demand strategically. Determine the amount of extra raw materials you can keep on hand after demand has been met. Establish a predetermined inventory replenishment strategy based on the average delivery deadlines for each material after you know the quantity of raw materials to have on hand. Maintain accurate inventory records and historical order trends for each SKU and adjust your decoupling inventory purchase orders as needed. Keep in mind that your decoupling inventory replenishment approach will need to be tweaked over time. Decoupling inventory will not only require additional space in your warehouse but also you will have to dedicate resources towards holding and securing it. So the holding cost limit that you have set should not be surpassed. Always keep an eye on your holding expenses and avoid building up too much surplus inventory, especially if your raw materials have expiration dates or are prone to becoming obsolete. Advantages of Decoupling Inventory Maintains Buffer Stock for Repairs and Maintenance Decoupling inventory is particularly advantageous in the event of a facility outage for repairs or machine maintenance. Manufacturers can still fulfill orders on time despite any failure of equipment failure if they have adequate decoupling inventory on hand at every step of production. This enables them to use this inventory as a substitute to bypass the failure and enable normal production speed and efficiency. Provides Protection During Periods of Uncertainty When manufacturers are unable to obtain sufficient raw materials to finish producing a product, the work-in-progress manufacturing line slows or stops completely. Decoupled inventory is stored at each level of the production line to offer protection against any uncertainties that could occur and constructs a resilient failure-proof supply chain. This means that no matter which stage of the manufacturing process a product is in, there should be enough raw materials on hand to continue production without any delays. This is especially useful for companies that make a lot of goods with similar parts or ingredients. Helps to Avoid Stock Outs Decoupling inventory is a strategy for ensuring on-time retail fulfillment, particularly if the items you offer require machinery or assembly to fulfill a customer order. When you sell finished products through dropshipping or direct fulfillment that is done by the manufacturer, you do not have control over the manufacturing process. There are, nevertheless, measures to ensure that demand is met despite production delays. To reduce the risk of inventory shortages, partnering with manufacturers or suppliers can be a good option. However, this isn't the only technique to avoid bottlenecks in your supply chain. You can forecast demand and keep safety stock with you at all times to offset the chances of a shortage in inventory or raw materials. Decoupling Inventory vs Pipeline Inventory Though they have some similarities in terms of advantages, they are not used in the same way. Decoupling inventory and pipeline inventory both aid supply chain efficiency, with the primary purpose of both being to avoid wastage of time and reduced productivity. [table id=30 /] How Does Decoupling Inventory Affect the Supply Chain? Decoupling inventory operates alongside the material flow as well as the informational flow pipelines in the supply chain. Without decoupling points, a supplier error or downtime might have a negative impact on the demand and supply of products. Decoupling, for the most part, works inside the supply chain by emphasizing the prevention of time waste or downtime in relation to productivity. The use of manufacturing automation to streamline the production process is emphasized by these decoupling points. Manufacturing automation includes several features that make production more efficient such as order management, parts tracking, outlined/identified production stages, inventory management, etc. In case of a lack of ability to decouple inventory, production can get lower and then it can affect the following aspects of the supply chain: Impacts Dropshipping Some retailers opt for the manufacturer to fulfill orders to customers directly. In this case, sellers only focus on confirming orders on their website or other selling platforms. If decoupling inventory is not done properly and there are hindrances in the production process, manufacturers may be unable to fulfill orders due to various issues which will result in unhappy customers and negative feedback for the business. Affects the Purchasing of Inventory Many types of small and medium-sized eCommerce sellers purchase a minimum order quantity (MOQ) and economic order quantity (EOQ). If a manufacturer has low amounts of inventory in stock, there are fewer chances for the seller to get enough inventory to fulfill orders in a timely manner. Thus, the seller will have to settle with what the manufacturer has and is quoting, which may be much more expensive than ordering on the basis of MOQ and EOQ. Increases Freight Rate In case there is a stock shortage and sellers have to fulfill multiple orders, they will have to opt to obtain the goods from other warehouses which may be located in other regions, in order to not keep customers waiting. This process can work out to be much more expensive as sellers will have to incur extra freight charges to transport the commodities from those warehouses and can also result in delays as products are not being shipped from a warehouse that is in close proximity to the customer. Hinders Seasonal Sales When there is an uncertainty of inventory due to a lack of decoupling inventory, a seller cannot run flash sales or fulfill demand during a season sale which will ultimately lower the profit and cash flow and remove a seller’s ability to get rid of obsolete or low-demand inventory. Lowers Sales Velocity A higher sales velocity is always beneficial for a seller. They are often ready to compromise on profit margins to focus on selling more products because that is the way to generate high revenue and increase profit margins. However, if there is a shortage of inventory or other issues in the supply chain, sellers are often unable to achieve the desired sales velocity because they do not have the means to do so. 3 Different Methods to Avoid Stockouts Automate Order Placement If you are an eCommerce seller, technology plays a huge role in your business. The Internet of Things(IoT) is one of them. If you apply IoT for not only selling and tracking goods but also for procurement of inventory that you will be selling in the future, you can avoid any errors or miscalculations that could occur if it is done manually. This helps you to generate the data for future orders and optimizes your inventory.  Through the use of technology, multiple facets of the business can be automated such as order placement, inventory management and order fulfillment. This will help increase the speed and accuracy of these processes. Keep Buffer Stock Handy Online retailers can utilize safety stock to determine how much extra inventory they can afford to have on hand in case of an emergency or supply chain failure that could cause a delay in order fulfillment, similar to how decoupling inventory works. The amount of safety stock you'll need is calculated using the following formula: Safety Stock = (Maximum Lead Time x Maximum Daily Usage) – (Average Daily Usage x Average Lead Time) However, keeping too much buffer stock can also lead to obsolescence and further expenses so it is best to calculate this accurately. Use a Warehouse Management System It is possible to strategically estimate future demand by collecting and evaluating precise past supply chain data. Though no forecast is 100% accurate, thanks to the rise and accessibility of digital supply chain technologies, forecasting demand is becoming easier to manage, allowing online retailers to make better judgments about inventory levels. Investing in technology that delivers real-time supply chain analytics and inventory forecasting insights will help you ensure that you have enough inventory throughout your supply chain to fulfill demand. A centralized warehouse management system (WMS) such as the one used in WareIQ's logistics network, collects and records real-time inventory data which helps in inventory planning and management. Conclusion: How Can WareIQ Help in Decoupling Inventory? Inventory Management Solutions provided by WareIQ will help you track inventory in real-time and provide insights to assist you to improve stock availability. Its inventory management apps for eCommerce businesses allow you to create automated reorder point notifications based on prior inventory performance at the SKU level, so you'll know when you're running low on stock. WareIQ is a trusted and tested technology platform that gives you all the inventory details you need and lists all the variations in a single dashboard. Experts control every aspect of inventory management. You get the data and insights you need with WareIQ to gain control over the movement of inventory, lower carrying costs and ensure you always have enough inventory on hand to fulfill demand. Our intelligent method of inventory management ensures balanced inventory in multiple locations according to the order traffic and proximity to customers. Decoupling Inventory: FAQs

June 20, 2022

Stock Audit: Objectives, Importance and 10 Procedures for Inventory Audit in eCommerce for 2025

Stock Audit: Objectives, Importance and 10 Procedures for Inventory Audit in eCommerce for 2025

Inventories contain finished goods for sale in the ordinary course of business, work-in-progress goods, supplies, and goods employed in manufacturing goods and order fulfillment services. Because inventory is critical to any firm, performing an inventory control audit is crucial. The procedure entails determining whether the entity holds the inventory value recorded in the entity's books. While performing stock audits internally or through external auditors, the organization should consider the following considerations. These factors include whether the company's inventory can be physically counted by hand, whether the Inventory is held in the company's warehouse or a third-party facility, and if the audit time is adequate. These considerations will aid in determining the audit method and schedule. What is a Stock Audit? A stock audit, also known as an inventory audit, ensures that the actual products are accessible in your store's warehouse corresponding to the stock registry findings. The Inventory audit procedure entails validating or cross-checking an inventory's financial records with its physical count. External auditors or internal firm employees carry out the stock audit, and the auditors use a variety of audit processes, which we will go over in detail. "The global financial auditing professional services market size was assessed at USD 109.21 billion in 2017," according to Grand View Research. From 2018 to 2025, it is expected to grow at a 7.4% compound annual growth rate." An audit can be divided into two main categories: Internal Audit Internal audits can be carried out in which the team examines the process, assets, and inventories. The company employs an auditor and reports to the CEO or the organization's senior management. When a company wants to prepare for an external audit, it conducts an internal audit. Another situation is when they are unsure about inventory or another issue. External Audit An external audit is a review undertaken by a non-affiliated accountant. This sort of audit is most typically used to get a certification of an entity's financial statements. Confident investors and lenders, as well as all publicly traded companies, demand this certification. Inventory Audit Objectives The main inventory audit objective is to compare and contrast financial inventory records with physical counts. However, because financial records are kept internally, there is a potential that they are wrong due to human mistakes, omission, or purposeful manipulation for personal gain, which is considered fraud. A stock audit ensures that these errors are avoided and that the audit is carried out correctly to present a truthful and fair picture of the organization's inventory situation. Therefore, inventory auditing involves verifying or cross-checking inventory counts and the quality and condition of inventory that is not recorded in financial records. Stock Audit Objectives Verifying Physical Existence As previously stated, the primary goal of a stock audit is to cross-reference financial data with physical counts. While conducting a stock audit, auditors keep an eye on the inventory counting process to verify if it is being done efficiently. They choose a sample of commodities to see whether physical counts correspond to financial records and vice versa. Examining the Operations Accuracy An auditor checks to see if the inventory counting system is accurate, and they do it using a statistical sample approach. Ownership Rights Another goal of the inventory audit is to evaluate whether the firm genuinely owns the inventory it has documented. Evaluation of Realizable Value One of the audit's goals is to see if the inventories are reported in the general ledger at the proper value. In addition, the auditor examines whether or not damaged and low-quality products are documented at a realizable value. Importance of Inventory Audit Inventory is a critical component of any organization, which is why auditing inventory is crucial. Inventory auditing is essential for gathering proof, especially for retail businesses. In addition, it may deal with a massive asset or capital balance. Inspecting Inventory should validate the amount of supply, quality, and condition to see if the stock's worth is accurately represented in financial records and articulations. The following points will help you understand the importance of stock audit- Inventory audits are necessary to compare the actual number of things in stock to accounting records, compensating for variances and allowing for shrinkage so that the ledger represents accurate values. A Stock audit will indicate which physical commodities or products are overstocked or understocked. This will allow you to stock your firm appropriately and effectively, allowing you to optimize earnings. Auditing inventory is required to eliminate wasteful stock investments and maintain correct line balancing in operation. An Inventory audit is required to compare accurate physical counts with company data. Auditing inventory will provide an actual image of what you own compared to the recorded stocks. If this count is done correctly, which will offer you a knowledge of the company's financial health. Inventory balances are frequently misstated, and this has a direct impact on reported profit. An inventory control audit will also uncover any faults with your warehouse practices, whether at the receiving dock or during packaging. This might assist in identifying any possible inefficiencies in the process, such as warehouse disorganization and delayed retrieval techniques. Stock levels that are too high sometimes lead to wasteful overstocking, resulting in poor cash flow and financial loss. A stock audit performed at regular intervals will aid in the resolution of this problem. It also aids in identifying any obsolete product in stock or orders mistakenly delivered to clients, which might result in financial loss and permanent harm to the company's image. [contactus_gynoveda] The Stock Audit Process While there is no one-size-fits-all approach to conducting an audit, there are key stages and activities that are similar to most audits: Demand Forecasting and Stockpiling Running out of stock would be the worst thing that could happen to you during the stock audit. After all, you don't want to put your entire business on pause while the audit is conducted. Of course, this isn't always possible, and some smaller businesses may be able to shut down for a day, but this is a dangerous approach. That is why, prior to auditing, it is critical to dive deeply into the data you have on hand to forecast future demand. Count the Tangible Items Here, there are a variety of techniques and methodologies to consider. For example, you can browse your warehouse's shelves item by item and document everything you see. You may perform a cutoff analysis to make things simpler by putting your entire business on hold during the audit, but this might lead to various concerns. You might instead try a cycle count, which does not need you to count your whole stock at once. You can specify a product type to audit within a specific term with a cycle count. It's less exact than a comprehensive physical count, but it's less disruptive to your business. You can also do a spot check audit, in which you merely evaluate one or two goods to discover any recordkeeping errors. If there are no discrepancies, you may assume that your sources are current and your stock is safe. Double-check your findings While doing everything twice may seem excessive, double-checking in-stock audits are necessary. Human error is a concern here, and the project scope is frequently too large to entrust to a single source. This is why it's critical to double-check your findings. Mix and match your auditing tactics (as long as you can justify it), give UPC tags or QR codes to each item to digitize the process for your future self, and employ a helping hand - there are lots of possibilities here; make sure the final count is as accurate as possible. Compare Between Your Results and The Financial Records It's time to compare your results to your sales records after you've tallied all of your physical merchandise. Any differences or mismatches signify the start of a distinct process of locating the problem's cause. 10 Best Procedures for Stock Audit Some audit processes can be used to accomplish stock audits. Ten of the most popular audit processes are listed below- Count of Physical Inventory The most typical method for conducting an inventory audit is to use a spreadsheet. It entails physically counting all of your inventory items and comparing the results to the numbers in your system. This is simpler for organizations that utilize a just-in-time inventory system or regularly compute their economic order quantity. Counting the Inventory Cycle Cycle counting, like physical counting, is manually counting a number of goods and comparing them to your system. On the other hand, cycle counts are done on a limited number of items regularly. This means you may do more frequent audits of your most valued items and avoid concerns like inventory loss. Analyze ABC Inventory ABC analysis is a method of categorizing goods based on their monetary worth, and this allows you to save and audit the groups that you wish. Analysis of the Cutoff Point You suspend all processes during the physical inventory count using this analysis. This eliminates the possibility of uncontrollable variables causing errors. Analytical Methods In this section, you may compare your inventory turnover ratio, gross margins, or unit costs to past years' statistics, allowing you to detect any unexpected spikes in volatility. Analysis of Overhead An overhead analysis is a thorough examination of all non-material costs. This covers rent, utilities, payroll, and other "invisible" inventory expenses. Analyze the Cost of Finished Items. For manufacturers and producers, this strategy is excellent. To guarantee that financial statements are accurate, all products are accounted for and valued upon completion. Analysis of Freight Costs This research looks at how much you spend on shipping and how long it takes (lead time). It also takes into consideration any losses or damage that occurred during transport. Shipping Invoice Matching This inventory audit is frequently performed at random by auditors. It entails matching the cost of sent goods to the number of items shipped. It ensures that no things are sent out at the incorrect price. Reconciliation of Products You must explore any problems discovered during your inventory count to reconcile items. This will allow you to note any SKU numbers that are prone to mistakes in the future. Stock Auditing Challenges and Solutions Almost every stock auditor must deal with some procedural difficulties at some time. Fortunately, they are usually minor annoyances that you should be aware of rather than significant issues that you should avoid at all costs. So, here are a few of the most prevalent stock audit issues: Stock management Is Time Consuming  It takes time since it necessitates a great deal of attention to detail and personnel. As a result, the best method to avoid this problem is to plan audits and allocate a suitable amount of time for them. The procedure might take anywhere from a few days to a few weeks, depending on the magnitude of your surgery. No Real-Time Inventory View Most of the time, there is no real-time view of your inventory. Thus stock verification must be done regularly. Weekly or monthly auditing sessions may be excessive, but double-checking that the number of your actual things matches your sales record at least twice a year might save you a lot of pain. Procedure Cannot Be Automated Most audit procedures cannot be automated, and many operations must still be completed by hand. However, certain auditing activities may now be performed with the assistance of specialized software. Thus, our first recommendation is to invest in such a system. Aside from that, following the preceding two pieces of advice should reduce the manual labour you must do. Pauses Other Operations Inventory audits frequently disrupt other activities, creating delays in shipments and annoying in general. The most straightforward approach to avoid this is, once again, to plan ahead of time for your auditing and to rely on timely market research to estimate demand. 5 Benefits of Stock Audit in eCommerce Businesses A sound inventory management system may reduce audit frequency, length, and complexity. In addition, eCommerce inventory differs from traditional retail inventory in that sales can occur anywhere on the planet, making it more unpredictable. In today's digital environment, your inventory auditing processes must also be digital. The following are aided by employing technology that maintains inventory counts synchronized in real-time rather than using something static like Excel.  Profit Calculation Inventory audits can assist you in calculating correct earnings since inventory accounting accuracy informs your bottom line. Accounting for variations in inventory value over time as it pertains to production and expenses of goods sold can significantly influence your accounting records. Inventory audits can help reduce inventory shrinkage (when actual inventory levels are lower than accounting reports) and detect expensive, slow-moving items. Budgeting With Precision You can't budget for the next batch of merchandise you need to buy if you don't have an accurate system for keeping track of its value. When you know the precise inventory count you're going through and how much safety stock you should have, stock audits may help you budget better and more correctly. Look For Inefficiencies. Inventory that isn't selling rapidly (or at all), SKUs that are selling out quickly and generating frequent stockouts, inconsistencies with storage or inventory monitoring procedures, and other operational issues can be discovered through audits. By abandoning failing goods, doubling down on what's working, and improving other elements of your supply chain — from manufacturers to warehouse locations — you may enhance your company's financial health. Make The Most of Your Inventory Storage. The total of all expenses associated with carrying inventory, such as storage, labour, insurance, and rent, plus the value of damaged, expired, and out-of-date items, is known as holding costs. The more money you pay, the longer you keep merchandise and the more useless goods you have. Inventory audits can assist you in limiting these variables. Getting Rid of Phantom Inventory It's not beneficial for the business to have phantom inventory. Phantom inventory is inventory that is shown as being available at a storage place but is unavailable when you try to utilize it. It's one of the most common causes of shelf issues. But unfortunately, many businesses overlook this problem because they believe it is minor. On the other hand, asset and inventory audits can help you solve this problem. You may appropriately delete them from your business and business documents using auditing. However, it is impossible for it to exist because of this programme. 4 Ways to Optimize the Internal Audit of Inventory Management Process  Inventory audits address high-risk, high-value areas that firms need to be aware of to enhance the efficiency and efficacy of their inventory audits. Use the best practices listed below for your 2021 audit programme. Recognize Value and Risks of the Warehouse Examine the warehouse's accounting before entering. Spend time learning about the inventory, identifying outliers, and determining where the biggest value and risk are. Look for things that aren't like the rest of the population. Examining reconciliations and roll-forwards for reconciling items might reveal what management is having trouble with and where you should focus your efforts. This data can assist you in optimizing your stock audit so that you can focus more time on high-value products that pose the most danger to your financial statements. Consider Using a Qualitative Methodology. Asking as many questions as possible and not making any assumptions is the most effective method of learning the inventory system. Meet with management and warehouse teams in person or organize a video conference to discover how they receive inventory and process it in the design of record (SAP, Oracle, etc. ), as well as how they process and run reports. Ask specifically whether they are having any problems with the system and what efforts have been made to resolve them. These discussions will put you in a better position to spend your time where management is spending its time and having problems, allowing you to conduct a more successful audit. Look At The Cycle Count Results. Variations in cycle counts might help you figure out what's going on. However, these should not be utilized to determine fundamental causes but as symptoms to consider in conjunction with your other studies to complete the inventory system's picture. Strengthen Your Connections. Recognize that audit customers frequently have a negative impression of auditors. Therefore, make your audit clients allies by stating that the internal audit's purpose is to learn how they conduct their jobs so that improvements may be made to simplify their lives. When audit customers realize that the purpose of internal audit is to assist the organization rather than discover faults, they are more willing to cooperate. Conclusion A stock audit is an essential step for every eCommerce fulfillment services firm since it guarantees that everything operates properly and provides you with a clear picture of your financial situation. While audits by your fulfilment partner are not mandatory, they might be beneficial in the long run, especially if you run an international company with a variety of warehouses worldwide. Many logistics and fulfilment partners provide this service as a courtesy and may conduct inventory checks with minimum impact on your business. You'll be safe against the most common auditing problems in such a situation. Regular, thorough inventory reviews may help you avoid fraud, improve inventory management strategies, and increase income! Choosing WareIQ as your fulfillment platform helps your eCommerce businesses with inventory management, inventory planning, stock auditing & much more. [signup] Frequently Asked Questions

June 18, 2022

What is The Meaning Of Inventory Records? 4 Methods Of Maintaining Accurate Inventory Books In 2025

What is The Meaning Of Inventory Records? 4 Methods Of Maintaining Accurate Inventory Books In 2025

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 is 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 level The quantity of stock that has been sold and reordered The total value of each product The location where the inventory is stored Other 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] Why is Maintaining Accurate Inventory Books Important? Source 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 in 2025 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 For Accurate Inventory Record System in 2025 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 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's core offering is Inventory LogIQ, an AI-driven inventory optimization platform, that helps you take control of your inventory data at geographic and SKU-level to unlock operational agility by enabling you to avoid stock-outs and excess inventory. 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

June 17, 2022

What is Peak Season Shipping? 10 Proven Ways to Prepare eCommerce Stores for Peak Season Shipping in 2025

What is Peak Season Shipping? 10 Proven Ways to Prepare eCommerce Stores for Peak Season Shipping in 2025

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 2025 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 channels Buyers ordering a product from any of the platforms The buyer is informed about the order placement and if there is an additional shipping fee Seller replicating the order with the supply chain network and keeps the vendor in the loop Vendor 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 management Supply chain management Automated order processing RTOs 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 operations Fulfills orders on behalf of you Takes care of multi-channel sales orders  Gives you multiple eCommerce warehouses and intelligent inventory placement Providing technological benefits and monitoring of your business from a single platform Take care of COD orders and settles transactions within a week Ensures 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 order Demand rate – Sold units during a certain period Holding 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 Demand Being Aware of Holding Costs Knowing the Breakeven Point Determining 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)

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 in 2025

Finished Goods Inventory: Definition, Examples, Importance & 3 Easy Steps to Calculate Finish Goods Inventory in 2025

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. Source 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 in 2025 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

June 13, 2022

What is Inventory Days on Hand? Definition, Inventory Days on Hand Formula, Importance & 5 Strategies for Improvement

What is Inventory Days on Hand? Definition, Inventory Days on Hand Formula, Importance & 5 Strategies for Improvement

When you buy or replenish inventory in your warehouse, it doesn't leave immediately. It lies there for a period of time before being shipped or transferred. It is important for a business to refine its inventory management processes so that the duration of inventory lying idle is limited as this can lead to obsolescence or expiry. However, it is also suitable for a business to have inventory on hand in case there is an emergency or urgent requirement. Businesses need to find the sweet spot of having just the right amount of inventory in storage. In this article, we take a look at the meaning of inventory days on hand, how to calculate it using the inventory days on hand formula, its importance, and ways to improve it.  What is Inventory Days on Hand (DOH)? Inventory Days on Hand (DOH) is the number of days that inventory stays in your warehouse or storage space before being sold. It reveals how many days it takes you to sell your average inventory on hand. It is an accounting ratio that indicates the average number of days that different kinds of inventory, including raw materials, work-in-progress goods, and finished goods, spend in your warehouse before turning into sales. It is also called Days Inventory Outstanding (DIO), Days in Inventory, Inventory Period, or the Inventory Days of Supply. Further, it depicts how soon a company can turn its current assets into cash. This metric is extensively used by analysts and business intelligence to gauge the company's liquidity and financial and operational health. Source [contactus_gynoveda] What is the Inventory Days on Hand Formula and How to Calculate it? The inventory Days on Hand formula considers the average inventory value in your warehouse compared to the Cost of Goods Sold (COGS) and the number of days in an accounting period such as a week, month, or year. The below equation comes in handy for calculating the inventory in hand: Inventory Days on Hand = [Average Inventory Value / Cost of Goods Sold] x Number of Days in Accounting Period And if you know the inventory turnover ratio for your business, you can use the below inventory on hand Formula: (Number of Days in Accounting Period) / (Inventory Turnover Ratio) = Inventory Days on Hand Source Example for Explanation Let us take an example of how to calculate inventory days on hand. Mr. Sanjay Dutt owns a business that manages a huge amount of inventories. Let us assume that Mr. Dutt’s company owns an inventory worth Rs. 10,00,000 during the year 2022. The Cost of Goods Sold (COGS) for Sanjay’s company is Rs. 1,00,000 for the same year. Therefore, now if we calculate Inventory Days on Hand, it will be, IDOH= (10,00,000 / 1,00,000) X 365 = 3,650 Days This means that Mr. Sanjay Dutt’s company had an average of 3,650 days of inventory in 2022. Importance of Inventory on Hand (IDOH) The inventory days on hand figure reveals much-desired information about your business. Here's why you need to monitor it regularly: Analysis of Operational Performance Inventory days on hand show how long working capital gets frozen in stock. Once you have that data, you can devise ways to shorten the duration by optimizing procurement and sales processes. A lower DOH value indicates that your business is productively utilizing its inventory. On the other hand, a higher number shows the company's poor investment decisions and inefficient stock utilization. However, a high inventory quantity doesn't always showcase unproductive business practices. For example, you may have a higher DOH value if you store stock for around-the-corner peak season sales or a lockdown-like contingency. Either way, this analysis helps calculate and enhance your business's operational performance. Prevents Stockouts and Overstocking While companies keep adequate stock to shield them from demand fluctuations and variable market dynamics, inadequate inventory management can hurt business operations and revenue. Stockouts or overstocking occurs due to poor demand forecasting or incorrect analysis and reporting. That is when inventory days on hand come to your rescue. DOH clearly tells you how far you are from a stockout or when you need to stop further ordering of inventory. Keeping a tab on it warns you before a crisis unfolds in your warehouse and can help prevent the crisis from occurring. Improves Efficiency Inventory on hand is an indicator of business efficiency. A lower DOH indicates better cash flow and higher productivity. A smoother cash flow also gives you the leverage to pump more capital into the business for expansion, promotion, research and development, and other activities. Attracts Potential Investors DOH helps you gauge the inventory conversion rate of your business. A higher stock conversion or liquidity means that you can frequently replace or refill your merchandise, thus keeping your product offerings refreshed for your customers. It is an indication of an agile and flexible business. This practice tends to lure more customers to your stores and attract larger amounts of attention from potential investors. Similarly, lower liquidity indicates poor business performance. It shows that you cannot sell the stock you buy and cannot replace it with fresh supply on time. Forecasts Storage Costs  Inventory days on hand show how much inventory you need to order and when. It indicates the amount of stock turnover which tells you how frequently you need to replace or replenish the stock of a particular commodity, within a specified time period. It also highlights areas in your inventory management process where there is scope for improvement. Thus, you can use the inventory on hand figure to forecast storage costs for your inventory. Mitigates Operating Costs Where and how long you store your inventory affects your storage and operating costs. The lesser stock you have on hand, the lesser you need to spend on ecommerce warehousing and other operations. Therefore, knowing the storage period of your stock enables you to plan your finances in advance and mitigate expenses to the largest extent possible. Of course, having a competent 3PL partner like WareIQ allows you to leverage a nationwide presence of warehouses closer to customer locations. This type of service helps further reduce cost overheads. Increases Profit Margins Inventory is a current asset and affects a company's cash flow and profit margins. The inventory days on hand ratio shows how much time and money must be invested in a stockpile before they turn into sales. Therefore, better and regular monitoring of the inventory on hand can safeguard you against loss-making decisions related to unwanted stockpiling or a lack of adequate volume. Top 5 Strategies to Improve Inventory Days on Hand in 2023 If you regularly deal with inventory days on hand, you might want to improve it wherever possible. Here's how you can do that: Utilizing Inventory Management Software Your 3PL partner's superior inventory management software can track and trace inventory and keep inventory records actively updated. This software can be coupled with devices such as hand-held scanners that scan merchandise in the warehouse and sends data directly to the system for accounting and record-keeping purposes. In addition, these systems can trigger alerts when some stock needs replenishing, when you have overstocked or when it needs to be replaced with a fresh supply, especially in the case of perishable items. Such robust tech can remove the burden of keeping accurate inventory records and renewing them regularly. Furthermore, they essentially guide you on how to improve your inventory management efficiency. Improving Relationships With Manufacturers Better inventory management by the business causes less hassle for the manufacturers and sellers of products. In addition, accurately telling them when you need to stock up or replace the old inventory strengthens your relationship with them. Logistical pace and associations affect the relationship between sellers and manufacturers. For example, if a retailer needs a small quantity of stock urgently, the supplier can utilize existing stock to deliver it to their doorstep on time. In such a scenario, their relationship will grow and become stronger. If, on the other hand, the logistics speed is slow, the supplier will have to keep extra merchandise, thus increasing their inventory days on hand. Strong alliances with suppliers will push you to keep adequate inventory days on hand, thus improving inventory management and business performance. Providing Markdowns and Bundles You can bundle slow-moving stock in pre-determined groups with further discounts. Products experiencing low sales can be combined with a similar category of other products that have a higher rate of demand. For instance, you can combine poorly selling plates with fast-moving coffee mugs. A markdown on their prices can further attract the attention of customers. Clean-ups, closeouts, or flash sales are common ways to mark down your inventory and push it out to improve the inventory days on hand. Making Use of Unsold Inventory If markdowns don't work for your unsold inventory, there might not be a way out of storing it indefinitely. The stock in your warehouse costs you the storage, maintenance, labour, and other overheads. Hence, it is better to put it to use in whatever way it can. If you cannot sell it, you can always donate it and count it as a CSR initiative, recycle it to make new products, or refurbish it to attract new demand. Even if you cannot sell it, it will be less of a loss if it is involved in another business process rather than just wasting your storage space and the money spent on renting it. Streamlining Operational Processes Unclear and poorly strategized operational processes cause trouble in inventory management. Your warehouse and supply chain operations need to be streamlined to avoid an excess burden on the existing inventory. Ensure seamless communication and a smooth flow of information to avoid logistics chain disruptions. Combined with a skilled workforce to operate the systems and man the merchandise on the ground, this can help to improve your inventory days on hand ratio. How Can a Fulfillment Company like WareIQ Help Improve Inventory Days on Hand? A strong 3PL partner like WareIQ can change the way you manage inventory. We can provide three things you will need the most to monitor your stock effectively: State-of-the-art WMS to assist in inventory management and forecasting inventory days on hand of your current inventory.Advanced technology to record and monitor the inventory days on hand and provide solutions for improving it.Nationwide network of fulfillment centers so you can store inventory near areas of high demand or near shipping and distribution hubs. Most importantly, a trustworthy logistics partner can empower you with all the tools, technology, and knowledge to control your inventory on hand in the most intelligent manner. Inventory Days on Hand: FAQs What is the difference between inventory days on hand and inventory turnover?Inventory days on hand refers to the average time it takes for a retailer to turn its inventory into sales whereas inventory turnover indicates how fast a retailer can sell its inventory. During calculations, DOH is the inverse of inventory turnover. What is considered a normal number of inventory days on hand?The ideal inventory days on hand ratio for an eCommerce business can be between 2 and 4. If it is lower than this, it could indicate weak sales or a decline in the demand for your products. What are high days of inventory mean?This clearly means a low turnover rate with the inventory. What causes increases in inventory days on hand?Inventory days on hand can increase for a multitude of reasons but mainly because of economic, global, and competitive factors that result in a sudden fall in demand and sales levels. Why should you reduce inventory days on hand?1. Lowers warehousing and inventory holding costs 2. Prevents Stockouts3. Reduces Dead Stock4. Speedy Profits5. Improves consumer demand How to calculate the inventory days on hand?While ideal inventory on hand differs depending on the nature, price point, and type of products that a business deals with, it can be found out by dividing the average stock by the cost of goods sold and then multiplying the figure by the number of days in that accounting period. Why do we calculate inventory days?Inventory days in simple is a metric that calculates how long a product is in the warehouse before it is sold. So, if the inventory days percentage is high it indicates that either product is not in demand or it is overly priced or other is that there may be something wrong with the selling and marketing strategy.

June 13, 2022

Stock Discrepancy: Definition, 5 Main Causes and Top 7 Methods to Avoid Inventory Discrepancy in 2025 in eCommerce

Stock Discrepancy: Definition, 5 Main Causes and Top 7 Methods to Avoid Inventory Discrepancy in 2025 in eCommerce

The fast-evolving business trends and technologies bring new challenges to every organization. To mitigate the issues of the end-to-end supply chain and cope with customer expectations, organizations are constantly focusing on reducing the delivery lead time. And one of the essential steps to reduce the lead time is to manage inventories in every form like raw material, semi-finished products, and final products. Experts define inventory as a necessary evil. It is essential to run the business, but it blocks the business capital in the form of materials. Therefore, it is essential to manage accurate inventory. The stock discrepancy is one of the major challenges in inventory management, especially in the eCommerce business. This article will take you through a brief definition of a stock discrepancy, its primary reasons, and the best practices to avoid inventory discrepancy. What is Stock Discrepancy? Stock discrepancy refers to the variety of physical available stock or inventory of items with respect to the current inventory in records or systems. To run a successful business of any size, maintaining accurate stock is vital. But inventory variation is a common scenario in a practical situation. In the case of industries like e-commerce, where you need to deal with a massive number of different SKUs, quick and error-free product transfer, and handling hundreds of last-mile deliveries, the chances of inventory mismatch increases. Minor inventory discrepancies can be managed easily, but major inventory discrepancies can lead to considerable losses to your organization. Therefore, you must have a robust system to check inventories, find loopholes and implement best practices to avoid any untoward situations.  [contactus_gynoveda] 5 Main Causes of Inventory Discrepancy Managing inventory throughout an eCommerce supply chain may sound easy, but it is a complicated task. You need to deal with thousands and lakhs of inward receipts and outward delivery day in and day out. Tracking every material movement, delivering the right product to the right place at the right quantity, and above all, managing inventory accuracy is nothing short of a nightmare. But the task becomes easy if you know the probable causes of inventory discrepancy and how to avoid them. Here are some major causes of Inventory Discrepancy. Inventory shrinkage As the name suggests, when there is a shortage in the actual inventory compared to the stock in the records, it is known as inventory shrinkage. Simply put, it refers to when the physical stock of any item is less than the system stock. There are some probable reasons behind such discrepancies:  Pilferage or Theft: Here are two possibilities: If a person involved in operations may pilferage items. Or, Some outsiders may steal. Administrative errors: There may be a chance of error in the accounting system, which eventually decreases the item's quantity.  Vendor Fraud: Manufacturers/suppliers may have sent you fewer number items than they billed for it. Misplaced inventory There is a place for every material in modern warehouses, and it is described in the inventory management system. Whenever the warehouse team receives an item, it is labelled first and then goes to its exact location. The same activity happens in the case of goods for delivery. In most industries, this activity is done by humans whereas, in some advanced warehouses, automated robots perform the task. Discrepancies in inventory are primarily due to human errors like wrong material receipt or issuance, putting materials in wrong locations or incorrect labeling. Many times, suppliers also send the wrong materials unintentionally. Any of these mistakes can lead to a stock disrepancy. Human error One of the major causes of inventory discrepancy is human error. Apart from using highly advanced e-commerce warehouse management systems, some of the eCommerce end-to-end supply chain is driven by humans. And if your employees are not appropriately trained on how to receive, store, track and manage stocks, inventory discrepancy is unavoidable. An inventory management system can assist people in managing the inventory efficiently, but they are the people who run the system. Firstly, to avoid human errors, you need to make sure that people understand the consequences of inventory variations. Keeping a standard operating procedure in place, displaying visual instructions, regular training, and frequent inventory audits are some of the best practices to avoid such errors. Mismanaged returns Return management does not add value to the business directly, but it has an impact on the balance sheet and revenue of the organization. Reverse logistics is as important as last-mile delivery. Poor return management can generate significant stock discrepancies and damages. As there are several ways to treat the returned materials (restocked, refurbished, bad-quality-disposed, or scrapped), it is important to perform every activity carefully. If a bad-quality material is not stored back in the warehouse, it will create a stock discrepancy. Similarly, if a returned material is coded wrongly and placed in the location, it will show the wrong information in the system. Effective return management not only helps you to avoid inventory discrepancies but also helps you to improve revenue. Glitches in Inventory Management Software Inventory management software must connect with the existing softwares/platforms businesses use in order to scale to accommodate advanced logistics. Choosing from hundreds of inventory management software solutions and understanding a slew of its features that necessitate training and continuous assistance is a difficult task. Choosing a wrong inventory management software can give further rise to stock discrepancy due to incorrect inventory counting, inventory forecasting etc. 7 Methods to Avoid Stock Discrepancy Having a healthy inventory with accuracy is the key to delivering products on time. On the one hand, it improves customer satisfaction, and on the other, you can book more orders due to better visibility of your inventory status. Stock accuracy is beneficial in mitigating supply chain risks by avoiding incorrect customer orders, material shortages, theft, and damages.  Here are some best practices which can help you to avoid stock discrepancy. Double Check During Counting of Stock Physical inventory counting is a common process to identify and avoid inventory discrepancies. In this process, every item is checked physically, and then the stock is matched with the inventory records. Double counting can minimize errors. In case of a large inventory pool, you can use the ABC analysis method to identify high-value items and perform a double check on those items especially.  You can decide the frequency of physical counting on the basis of ABC and FMR strategy, and decide on a quarterly or annually sales velocity audit (for fast-moving items and slow-moving items).  Identify the Location of Stock In a running eCommerce or production environment, the pace of materials movement is very fast, and there is a tendency to keep the same items in different locations. It is also important to check whether similar items are mixed with each other or not. With a slight change in design, the item code changes, but identifying the difference between such items becomes challenging. While performing physical inventory counting, you must check all the locations thoroughly and avoid the mixing of similar materials.  Check the levels of Inwards & Outwards Stock To improve the inventory accuracy of your warehouse, you must ensure a strict inward and outward process. During the inwards process, checking every item along with their vendor invoices can help avoid major inventory mismatches. Often suppliers inadvertently send similar items with different item codes, leading to stock variation. Communicate with Manufacturers Suppliers play a significant role in an efficient inventory management process. You should establish strong communication with your vendors so that any issues, especially inventory variations, can be communicated immediately. If you inform your supplier about any stock discrepancies during the inward process, they can also check at their end and resolve the problem at the moment. Moreover, training the supplier’s staff can also make a big difference and help run your business smoothly. Strong and transparent communication with your vendors not only helps you to manage inventory discrepancies but also helps avoid a stock-out situation or overstocking and reduces the cost of poor quality (COPQ). Opt for an Inventory Management System In this dynamic eCommerce environment, it is inevitable to have a smart inventory management system in place. It can help you to manage the stock levels, indicate the possible errors, and even help you to locate the item quickly. The advanced inventory management software is beneficial in significantly reducing the inventory counting time, which is a huge saving for any eCommerce business. Train Employees To make a big change, it is essential to increase awareness. As the technology in every field changes, new tools and techniques get introduced into the market every day. Adopting new technologies and training people on the fundamentals is essential. Employees need to know the correct method of inventory counting and its benefits and drawbacks for efficient inventory management. Partner with a 3PL Another best practice to avoid inventory variations is partnering with a 3PL like WareIQ. Being an experienced organization, WareIQ knows every nitty-gritty of inventory management and how to prevent stock discrepancies effectively. It offers stringent control and saves your time and money. Through the latest digitized tools, the overall inventory forecasting process is performed quickly and with high levels of transparency. Conclusion Technological advancement has increased buyers' expectations in terms of competitive price, better material quality, and quick delivery. Poor inventory management with many discrepancies can hamper your revenue and result in customer dissatisfaction. Human errors and inefficient systems are the root cause of a stock discrepancy. By implementing best practices, you can eliminate all bottlenecks and establish a healthy inventory system in your organization. Adopting intelligent inventory management software and partnering with an efficient 3PL like WareIQ can help manage your inventory better. We at WareIQ give you full transparency of your inventory with real-time tracking features that make you monitor your product levels & status across our multiple warehouses from anywhere. As we know, return and reverse logistic is the major cause of the stock discrepancy, we provide RTO and logistics insurance to save your time, money, and other resources. If you keep the listed items on your website in our fulfillment centers, then you do not have to worry about inventory management and stock discrepancy. We are solely responsible for any discrepancy. If in case, it comes from your vendor's side, you will be informed immediately. [signup] Stock Discrepancy FAQs

June 11, 2022

What is Direct Fulfillment? How is it Different from Amazon FBA?

What is Direct Fulfillment? How is it Different from Amazon FBA?

eCommerce retailers are constantly striving to offer the best services to their customers at the most competitive rates to out-shine their rivals. There are many important decisions to be made, especially in terms of order fulfillment because that is the most visible aspect to the customer and they get to experience it first hand. There are many different methods of order fulfillment and today we take a look at one of the more unconventional ones - direct fulfillment. Read further to understand what it is, how it works and if it would be the right fit for your business. What is Direct Fulfillment? Direct fulfillment is the process of shipping goods ordered by a customer directly, using the company’s own facilities and resources, and not relying on a 3PL fulfillment company for any aspect of the fulfillment process. Another process is that wholesale sellers make a large number of product purchases, obtained from the producer, after which separation of the goods into distinct categories occurs, in magneto order to sell to retailers. The distributor then sells the products to the end consumers. This is known as Indirect distribution. Fulfillment By Amazon (FBA) is a service provided by Amazon that helps their clients with storage, packaging, shipping guidelines, and other aspects of the B2B fulfillment process. This reduces the burden on sellers. Sellers ship their products to an Amazon fulfillment center, where the products are stored in warehouses, according to their demand, expiry date, etc. The products are then shipped whenever they are needed. When an order is placed, the employees in Amazon are always physically getting ready to prepare, package, and ship the products. [contactus_uth] What are the Benefits of Direct Fulfillment? There are many benefits in the process of direct order fulfillment, especially during the inception of an online retailer, where customers would be fewer and demand would still be on the lower side. A few benefits of direct order fulfillment are Ability to consolidate important information on client purchasing habits. Ability to separate yourself from the competition. First-hand look as to the performance of certain products and client feedback Faster supply of your goods to your customer's Removal of payments and credit to a third-party distributor Direct relationship with your clients Expanded number of ASINs Buy request no needed Unavailable assurance Hassle-free reverse logistics No outbound delivery costs How do I get started with Direct Order Fulfillment? Direct order fulfillment starts with the following steps: The online retailer gets client requests and orders. The company checks stock and by the same token, acknowledges or dismisses the order request. The company initiates the fulfillment of each order from the area allocated by Amazon (commonly a stockroom) and drops the request if they don't have stock in that area. The company satisfies the order request by utilizing the chosen transporter and transport strategy during the arrangement. If you are currently an Amazon vendor 1. If it's not too much trouble, record a help case in your Vendor Portal mentioning the desire to be set up on Drop Ship Central and Direct Fulfillment. If you are not currently an Amazon vendor Train your onboarding contact that you would like the "DF (Direct Fulfillment)" box checked during arrangement on Vendor Central During the Vendor Central arrangement process, you will get a challenge to pursue Drop Ship Central, the administrative entry for dealing with your immediate satisfaction queries. As a component of the guided setup process, you will be asked to (1) pick your conveyance name preference (utilize Amazon's transportation mark as opposed to giving your delivery name); (2) provide your fulfillment warehouse data; (3) provide your hours of operations, occasion, and termination plans; and (4)select a transporter. In around 48 hours, you will get the last guidance to transfer your stock feed data into Drop Ship Central. What are the Advantages and Disadvantages of Direct Order Fulfillment? Advantages Of Direct Fulfillment You can oversee your own branded shipping, stock, and orders. As long as you have the space, can print address names, pick and pack, and stand in line at a mailing station, you can satisfy orders on your behalf. It functions reliably, assuming your clients are nearby, the operations are sensible, and the transportation costs are negligible, particularly when order volumes are relatively low. Rather than most 3PLs, you can store and transport transitory or perishable merchandise, such as blossoms or lithium batteries. You can be located closer to your clients since this choice accompanies more client contact.  Disadvantages Of Direct Fulfillment This strategy requires a lot of staff to oversee customer service and other eCommerce fulfillment processes. This is likely removing diverting your attention away from developing the business. You need to have adequate warehouse space to store items. To ensure quick international shipping, would require a lot of capital and resources than partnering with a 3PL fulfillment company. Human blunders can happen when orders expand in size and complexity, particularly on the off chance that you are not utilizing automation to assist in dealing with your stock. Read our blog about Amazon Seller Fulfilled Prime to get a better understanding of other services Amazon has to offer. What are the Main Points to Keep in Mind while Choosing Direct Fulfillment? Fulfillment companies new to direct order fulfillment and multi-level marketing (MLM) organizations for marketplace fulfillment might battle with one or more of the extraordinary prerequisites needed to successfully serve their customers. Nature of Business Retailers with expanding business operations are best suited to benefit from direct order fulfillment. Such businesses have the monetary means and available manpower to take on the process of fulfilling customer orders on their own, without needing to bank on Amazon’s fulfillment services. Retailers that seek to reduce their order fulfillment and logistics costs can do so by distributing to customers directly and don’t need to pay any fees to a 3PL fulfillment company. Reduced Delays Retailers who rely on Fulfillment by Amazon frequently face challenges relating to inventory receiving times. The receiving process, which would initially take 5 days, can now take upwards of 30 days. This lengthy delay can severely reduce the availability of inventory. By independently taking care of order fulfillment processes, companies can make use of their entire inventory, which would result in an increase in sales. Benefit to small businesses Small businesses generally find Fulfillment by Amazon to be a useful tool and can adopt Amazon’s offerings as their main fulfillment strategy with Direct Fulfillment as a backup. Retailers who make use of Fulfillment by Amazon have access to standardized shipping devoid of any hassles. Amazon takes care of the storage of inventory, packing, and shipping aggregation for all orders that come in. Smaller businesses can also use direct order fulfillment as a backup option to transfer more of their products. Fulfillment by Amazon (FBA) vs Direct Fulfillment: What are the Differences? Given the benefits, it shouldn’t shock anyone that most third-party sellers on Amazon utilize its Fulfillment by Amazon (FBA) service. With FBA, sellers' items automatically qualify for Amazon Prime and Super Saver Shipping. They can likewise exploit Amazon's customer service experience, and this all means acquiring more deals than contending with non-FBA sellers. Notwithstanding, not all that sparkles is gold. Amazon's FBA has its disadvantages as well, and numerous sellers frequently select to deal with this aspect of eCommerce logistics themselves.  If you're a third-party seller deciding on direct order fulfillment, you might need to enlist external assistance to help you in dealing with the logistical portion of your business. Fulfillment, direct or otherwise, has become well known and has progressed as necessities have ascended over the last ten years. Innovation is a major tool in terms of dealing with the entire cycle and monitoring individual shipments as well as the stock in the warehouse. For the vast majority of businesses, the goal is to get to the same level of assurance that Amazon Prime offers in terms of reliability and quality. The differences between direct fulfillment and FBA are listed below: [table id=5 /] Conclusion Direct order fulfillment facilitates your enterprise to manage expenses and mitigates dangers while at the same time enhancing your capacity to serve customers. You get all the recognition for providing professional services but conversely, you also get all the blame if something goes wrong. It is a primary step and doubtlessly, a hard one. If you feel that your business needs to outsource its fulfillment requirements to a 3PL company, WareIQ can definitely be of service. WareIQ, is a full-stack eCommerce fulfillment company for some of the most reputed brands in India. WareIQ offers a full-stack platform for eCommerce companies to enable same-day delivery and next day delivery to customers – an Amazon Prime-like experience but accessible to everyone. Why You Should Choose WareIQ's Fulfillment Centers for FBA Prep Service? Comply with Amazon’s scheduled delivery Prep services ensure proper packaging and preparation which helps to reduce delays in receive time. Taking scheduled appointments in the Amazon Fulfillment Center is a hassle because of the complex checklist of items to be executed. There are chances of missing the time slot leading to stock rejection. Stock preparation needs to follow Amazon guidelines which is a thorough process that WareIQ staff is trained in. WareIQ offers FBA prep services that ensure quality control, streamlining and adherence to Amazon standards whether it comes to fragile item preparation, repackaging thousands of SKUs to simply labelling products correctly with barcodes. WareIQ’s automated order fulfillment system ensures efficient and accurate picking and packing. Save operational costs Keeping track of a lot of different stock keeping units or SKUs that require different prep services can be tricky. You have to ask yourself if your business can afford to have its products returned or be billed a non-compliance fee for failure to meet FBA standards. Outsourcing FBA prep is a cost-effective way to move inventory. With WareIQ’s smart technology, SKUs are mapped across sales channels for efficient fulfillment. Also, with WareIQ you’ll only pay for what you use, which means if you ship only one product in a month, you’ll only pay a pick and pack fee for that one. WareIQ books slot for clients on their behalf and offer bulk shipping with multiple sellers thereby ensuring cost efficiencies. Save space FBA doesn’t just take up mind space, it takes up a whole lot of physical space as well. De-palletizing and repackaging, and storing packing materials such as poly mailers, fragile item wrapping, or labels can take up a lot of space, which most vendors do not have. In this case, a fulfillment center may be a great option. WareIQ has the bandwidth to fulfill 1 to 10,000+ orders each day. Save on resources Think about what you could be doing with the resources it takes to manage FBA prep. Outsourcing to a fulfillment centre can help you focus on growing your core business. [signup] Direct Fulfillment FAQs (Frequently Asked Questions)

June 09, 2022

How to Sell on eBay? 9 Simple Steps to Become an eBay Seller in 2025

How to Sell on eBay? 9 Simple Steps to Become an eBay Seller in 2025

eBay was one of the companies that were born from the internet boom in the 1990s. Since its inception in 1995, it has become a household name in the eCommerce business and currently operates in 32 countries, worldwide. The company was founded in 1995 and is headquartered in San Jose, California.  eBay predated the entry of its closest rival, Amazon, into the Indian eCommerce market by almost a decade, commencing operations in the country in 2005. It has arguably pioneered the rapid growth of the eCommerce industry in the country, with other major players such as Amazon and Flipkart, wanting a share of the action. In this blog, we will take you through how you can sell on eBay, the benefits of using eBay for sale, the challenges associated with it and how WareIQ can help.  Why Should You Choose eBay for Sale? Immediate Recognition While Amazon has garnered more trust from customers in recent years, eBay is no slouch when it comes to trustability and customers’ ability to recognise the brand as an eCommerce giant. If a retailer uses eBay for sale, customers will automatically associate them and their products and services with eBay and all the positives that come with it. This instantly increases the chances of customers buying your products compared to if you were an independent seller because they have faith in eBay’s verification processes and trust that their purchase and order fulfillment experience will be up to the mark. Auction Services One of eBay’s unique features that continues to set it apart from other competitors is the ability for retailers who sell on eBay to conduct auctions. Products that get sold at auctions always end up getting sold for a much higher price than the retail equivalent, simply because the product will always get sold at the highest possible price that people are willing to pay. eBay also gives users the option to set a reserve price, which acts as a safety net to prevent products from getting sold at a severely discounted price compared to what it is actually worth. Promising SEO Capabilities This is another metric where eBay is slightly behind Amazon but still offers prime SEO results, pun not intended. Regardless of what types of products customers are searching for, eBay results are bound to pop up in the top 5 to 10 results, at least. Retailers who only sell on eBay and other eCommerce platforms and who do not operate their own websites can take advantage of the heightened SEO results. Reduced Prices This is one metric where eBay has a clear advantage compared to Amazon. Amazon charges around 15% plus additional fees per sale compared to eBays 10%. This means that retailers who sell on eBay can retain higher profit margins while selling at the same or discounted prices compared to who sell on amazon , flipkart or other eCommerce websites, which can be a huge boon, especially for small to mid-sized businesses. Gigantic Customer Market eBay, while still second to Amazon, has an astounding 183 million active users. This means that retailers who sell on eBay instantly get access to this huge market of potential customers which can instantly result in more demand and sales. However, sellers will have to fend off other competitors who are also seeking to make use of this newfound demand. Retailers will need to adjust their business strategy accordingly but new customers are always a good thing. [contactus_gynoveda] 9 Simple Steps to Start to Sell on eBay in 2025 Creating an Account Open the “My eBay” drop-down menu that is present on all eBay pages and click on “selling”. Type of Account You can either opt for a business account or a personal account. Once that is done, enter the information in the registration form and click on “create account”. You can also sign up with an Apple, Google or Facebook account. Then fill out your contact details and click “Continue”. Registering as an eBay Seller After filling out the contact details, you will be redirected back to “My eBay”. You will have to register as an eBay seller. Click on the “My eBay” menu and click on “selling” as done previously. Listing an Item You will be directed to the Selling Overview page where you need to click on “List an Item” which will redirect you to fill out the “Sell Your Item” form. Naming Your Product Once you enter the name of your product, click on “Get Started”. Adding Product Information Once you enter all the details in the “Sell Your Item” form, click on “Submit”. The listing will then be saved as a draft from where you will be directed back to the Seller Account Registration page where you have to click on “Get Started”. Verify Your Phone Number You will have to fill out your phone number and have it verified by entering an OTP. Changing Account Type You can now change your account type if you want to. It will mostly not be needed. Users can opt between 2 types of accounts to sell on eBay: Personal Account: Choose this if you want to sell on eBay as an individual or if you are connected to a registered business. Business Account: Choose this if you want to sell on eBay as a company (Single-member LLC, Corporation/Multi-member LLC, Partnership) or a sole proprietor. You Can Now Sell on eBay Now that your account has been verified, you can commence selling on eBay. Challenges Faced by Retailers Who Sell on eBay Presence of Additional and Hidden Fees eBay, like other eCommerce selling platforms, cannot abstain from imposing additional and hidden fees on retailers. Retailers are often bombarded with new and varying prices that they have to pay if they want to continue to sell on eBay. Examples include getting charged an insertion fee if you add one listing in 2 different categories and you are also using a free account. These expenses can often have dire consequences for retailers who already have slim profit margins. Restrictions on New Sellers eBay seeks to make the most amount of money it can. Retailers have to remember that it is not a charity service and eBay's bottom line probably matters even more than their own. To ensure that firms are pulling their weight, restrictions such as selling thresholds or minimum income requirements for a specified period of time are often imposed on sellers, with penalties being imposed on sellers who cannot meet them. This will rub salt in the wound for new businesses that are already struggling to get by. Creation of Product Listings Creating listings on eBay can often be a lot harder than it needs to be. For example, if retailers want to upload in bulk, they can upload a CSV file but will have to filter through more than 60 pages of instructions, which can make it unnecessarily complicated for people who are not well-versed with technology. This process can take time and effort, especially if your catalogue is diverse and you have different products with multiple variations. Restrictions on Type of Images eBay imposes restrictions on the type of images that can be used. Images can only be between 500 pixels wide and 1600 pixels wide. Images that are either above or below this threshold will not cut it. Additionally, eBay is very strict when it comes to images used from existing sources and requires crediting the original source, which can then direct the interest of customers away from your page.  Lack of Automation and Integration When retailers opt to sell on eBay and utilise eBay’s 1st-party services, they often limit themselves because there are no options to integrate with other platforms or software solutions. This makes life much harder for businesses that want to sell their products on multiple platforms because they will have to juggle manually updating multiple different pages that have different passwords which can be a cumbersome process. Additionally, there are limited options for automation for basic tasks such as packaging. Suggested Read: Sell on Instagram eBay for Sale: 8 Strategies to Get the Most Out of it Run Promoted Listing Campaigns Promoted listings are a tried and tested way of improving product visibility and eventually, sales. Research shows that promoted listings are viewed 36% more than regular ones. The pricing scheme for these campaigns also limits the amount of risk incurred by a retailer because instead of paying upfront, eBay receives an additional percentage of each sale made. Use Intelligent Keywords Keywords are the words that customers type into search engines when they are looking for a product. Keywords constantly evolve depending on the season, type of products, the platform used, etc. Retailers need to constantly be ahead of the curve and use the appropriate keywords in their product descriptions, page titles and image descriptions so that they can give themselves the best chance of matching with what customers are looking for. Offer Fast and Free Shipping In the current landscape we live in, same-day and next-day shipping have become the norm. Your business needs to offer it to avoid being left behind. Another way to spark interest from customers is to offer free shipping wherever possible. There are many methods to offer free shipping while still retaining a high-profit margin such as including the shipping cost in the price of the product and having minimum cart requirements, among others, so retailers need to analyse their capabilities and offer shipping services accordingly. Try Hiding Negative Reviews  If your listing page is constantly flooded with negative reviews, it could be indicative of a much larger issue. However, if you are a growing business, there are bound to be trials and errors along the way. Retailers who sell on eBay, need to make sure that they address and correct every negative review that they receive so that can be gotten out of the way because they have been solved. They also need to put an honest effort into turning negative reviews into positive ones so that when another customer checks the reviews, the ratio of positive to negative reviews will be higher.  Try to Achieve eBay Top Seller Status If you sell on eBay, you should definitely consider becoming a top-rated seller. This will give you an achievable long term goal and will enable you to optimize all the metrics that will help get you there such as providing an excellent customer experience and selling products that are popular. By becoming a top-rated seller, you would be eligible for various perks such as boosted visibility, a specified amount that gets credited towards promoted listings, discounts on shipping and much more. Have a Fair Return Policy Retailers who use eBay for sale need to frame an appropriate return policy. Since returns expenditures are generally incurred by sellers, they need to have a policy in place that doesn’t put undue pressure on them. Conversely, they also need to keep in mind that a strict, rigid return policy can be a turn off for customers. Retailers need to strike a balance between offering a fair return policy for themselves and their customers. eBay offer a cash-back guarantee relating to orders that are not fulfilled, damaged products and orders that don’t match the description. Excluding these circumstances, retailers are free to choose if they want to offer returns or not. Promote Your Listings on Social Media Social media and eCommerce go hand in hand. The same people that are browsing pages on Facebook and Instagram are also checking for products that they want to buy and spend hours looking for the best deals possible. The logical conclusion is to utilise social media to promote products that you sell on eBay since those users are already well-informed about the internet, how to buy products online and would appreciate extra knowledge about a sale or a product that they may want to buy.  Run Email Marketing Campaigns For retailers who sell on eBay, running email marketing campaigns is a good way of keeping people informed and reminded about your products, promotional offers you are running and information about your brand in general. It is also a good way of gathering data about the tastes and preferences of customers so that it can be used for future marketing campaigns and can yield better results. Conclusion It is a dream for many retailers to sell on eBay due to the vast array of benefits that comes with it. While it is definitely a good idea to register to sell on eBay, we also do not recommend putting all your eggs in just one basket. Due to the adverse growth of the eCommerce industry in the country, it pays dividends to generate as much exposure as possible in order for a retailer to capture the maximum amount of market share that they possibly can. It also depends on factors such as the nature of your business and products, the financial capabilities of your business and the potential customers you are trying to target. If you do decide that selling on eBay is the right decision for your business, you would need to think about the best way to fulfill all those orders. This is where WareIQ can be of assistance. WareIQ is emerging as one of India’s most rapidly expanding 3PL fulfillment companies. We provide every aspect of order fulfillment such as fulfillment centers to store products, picking and packing services, distribution and delivery services and reverse logistics. This, coupled with our superior and advanced tech platform that provides a state of the art Warehouse Management Software, NDR support and an RTO shield that gives you protection from liabilities and return orders, is sure to make your order fulfillment experience world-class. [signup] Sell on eBay: FAQs

June 08, 2022