What are Fulfillment Services for eCommerce? A Detailed Guide in 2022
To understand what fulfillment services are, why it's essential in 2022, and their benefits for your business, we need to first talk about the supply chain issues faced by many eCommerce retailers. Since the pandemic began, we've all been experiencing problems with shipping aggregation and the supply chain. The challenges we have experienced began with pandemic-related restrictions and shutdowns. Without supply chains that can keep up with current demand, vendors have had trouble getting the supplies and goods they needed. This negatively impacts customers, as they waited for their products to be delivered. The delays were worsened by other factors such as weather, lack of warehouses, labour shortages, etc. These factors were compounded when they created a flow that caused delays. This was a trend across eCommerce enterprises and affected all parties involved. Many fulfillment services that deliver goods suffered cash flow issues due to the pandemic. The customer’s impression of your company is determined by how they feel while receiving their order. Successful fulfillment platforms and branded shipping improve customer satisfaction and build a better brand presence. For customer satisfaction, streamlining and optimising your fulfillment services is critical. The online and offline elements of the business should work together to ensure that customers are satisfied with the service they receive, both in-store and through the shipped product. What is eCommerce Fulfillment? eCommerce fulfillment is the process of completing online orders. If someone orders your product via one of your online stores, you must deliver it quickly and at a reasonable price. An eCommerce fulfillment service deals with the process of customer orders, specifically receiving, storing, and shipping. It is also responsible for processing orders and dealing with customer returns. A well-planned and professionally managed eCommerce fulfillment service saves both time and money and is only one of the necessary parts of an extensive eCommerce business. The core feature of successful online retail are well-executed fulfillment services that help you expand your market reach and build customer loyalty by improving your efficiency. [contactus_gynoveda] What are the Steps Involved in the eCommerce Fulfillment Process? Product Receiving The first operation included in fulfillment services is receiving. When your products are delivered to the fulfillment center, they are entered into inventory and placed on shelves where they are ready to be shipped. It is useful to organise these products according to their delivery dates. You can accept and fulfill requests manually. Or, if you switch to using software to do it, you can integrate your cart or marketplace that will automatically look for orders based on the inventory. Inventory Management Proper inventory management means systematically tracking all products so that if and when you run out of goods, they are immediately replenished (know more about stock replenishment). The IMS can store and manage products in your inventory, meaning you won't have to worry about the logistics costs of product handling. Continuous processes such as audit functions should be performed regularly to avoid complications in fulfillment services. Inspect your stock to ensure that items are in good shape, and discard any damaged items. If you're missing an SKU, refer to your inventory or CRM software to track it down. One of the main challenges that retailers face is inventory management because they may not know what their customers want and need. Partnering with a competent fulfillment service provider, being organised, and staying informed about inventory levels can solve this issue. Order Fulfillment An eCommerce business can self-fulfill their orders or hire fulfillment services to do it for them. This includes the following three activities: Picking: It can take days for a company to fill an order. Selecting the product to be fulfilled is the first step in the process. You can pick from a single location or multiple locations across your warehouse if you have different products at each site. To quickly fulfill orders, find reliable staff that can handle the logistics at your warehouse. If your business receives many orders, it will be best to have staff dedicated to this process. The speed increase with this methodology is significant. Faster and hassle-free automation as well as partnering with fulfillment partners can be implemented to improve the pick and order process. Automation can create smaller orders and send them to the consumer in one batch. Packing: Once all the items in an order have been picked up, they must be adequately and attractively packaged. Packaging is an essential aspect of order fulfillment services because it is a physical reflection of your brand presence. Hence, you should concentrate on various packaging plans and choose what works best for your brand image. You should make sure that your packages are labeled and ready to be shipped. In either case, you should use a good packing strategy to ensure the safety of your package. Custom packaging could also be made available. Shipping: Logistics is crucial in order fulfillment services. Having a timely shipping experience can boost the experience of your customers and make any trouble or delays with shipping, less likely. The transport of goods often includes selecting a transport company and fulfillment services. Reverse/Return Logistics Reverse logistics is about tackling all the items that were returned. Rising competition in the market means that return orders are inevitable. Any company must manage this process efficiently. If your fulfillment service processes your items faster, they will quickly process the refunds. This would lead to the items and the refund being completed faster. Many fulfillment service providers allow you to automate your non-delivery report and handle the refund of orders. Since they take responsibility for all rebates, they can also dramatically lower the number of returns you may have to process. What are Some Common Misconceptions About Fulfillment Services? Warehousing and Fulfillment are Interchangeable Terms This statement is false. The terms warehousing and fulfillment are not the same. Warehousing refers to storing products in a particular place until they are ready to be distributed. Fulfillment refers to the entire process of delivering a product to the end customer. A distribution center created by 3PL fulfillment services is traditionally used only for order fulfillment and inventory management. Fulfillment centers, however, also take on order management duties and fulfill orders given by purchasing departments. The Fulfillment Center Should be Closer to the Business Location Shipping can become more expensive if you're shipping to your location (business) rather than your customer's location. You have to pay for the extra cost of having items shipped from the fulfillment center closer to your location. It can be challenging to maintain inventory and storage, as you will have to make compromises on-site. You need to try and have your fulfillment centers located closer to the customers to enable faster delivery. Self-Fulfillment is the Cheapest Way to Fulfill Orders Automation is beneficial if you ship out less than ten orders per day. But if you ship more than 20 to 30 orders each day, we recommend taking a shot at outsourcing your needs to fulfillment services. Training facilities and resources are necessary for a business's success. Without these, it would be hard to innovate and update products quickly. It Will be Much Cheaper if a Fulfillment Center is Located in a Tier-2 or Tier-3 City It can be challenging to maintain inventory and storage, as you will have to make compromises at the location. It might be cheaper in the short run to store your products in a remote, out-of-the-way place and deal with slower shipping, but you need to research the area of your target audience to avoid higher combined shipping costs. Try to have your fulfillment centers closer to the customers to reduce costs. What are the Benefits of eCommerce Fulfillment Services? Focusing on Core Business Outsourcing can free up time spent on mundane tasks. Rather than wasting time taping boxes, invest your time in growing your business. As a business grows, order fulfillment becomes more complex and risky. You can lower your risk of delays by outsourcing the shipping process to a third-party eCommerce fulfillment service. It will give you the time and resources to focus on other tasks like designing your products, marketing them, and selling them. Lowering Shipping Costs You won't benefit from the negotiated shipping rate if you ship orders yourself. Fulfillment services have warehouses all over the country and divide your inventory, so you don't have to pay for distribution in one location. They utilise tools to compare rates with couriers to reduce shipping fees. By partnering with a 3PL eCommerce fulfillment partner, you can get your inventory to the customer's door quicker and cheaper. By shipping from more than one location, you can maintain bulk items closer to customers, which leads to faster delivery. Increasing Shipping Speed Outsourcing fulfillment services will allow you to provide faster delivery. You can place inventory closer to your buyers and have warehouses all over the country for efficiency. Retailers need to be able to ship products quickly to customers and meet demand. An eCommerce fulfillment partner can help you do just that by meeting expectations and competing with big stores. Establishing Fulfillment Infrastructure It can be a nightmare to deal with the storage of orders if you handle them on your own. Storage entails a lot of eCommerce warehousing and operating tasks, which can be solved using asset and inventory management software. To have a fulfilling infrastructure, you need to have people working for you and providing storage and security. All of this comes at a significant monetary investment. When you outsource to a 3PL eCommerce fulfillment service, you will have access to improved storage space and won't be penalised for your usage. If you have fluctuations in sales volume, they have plenty of resources to deploy according to your order demands. WareIQ's Fulfillment Solution Keeping Buyers Up-to-Date Online buyers need consistency and transparency when buying products to trust the company they are purchasing from. If you use fulfillment services or outsource your needs to a third-party eCommerce fulfillment service, you can provide accurate delivery confirmation at the checkout page. They have an experienced workforce, and the capacity to deliver on time. Reducing Operating Costs Moving fulfillment services to an external location can be costly, but businesses often overlook the fact that self-fulfillment also has costs. Inventory storage is a significant expense and will continue to grow as eCommerce retail evolves. Additionally, outsourcing fulfillment services often lead to high rental fees for warehouse space. Outsourcing to third-party eCommerce fulfillment providers can save overhead costs by only paying for necessary items. You are also insulated against seasonal changes in sales volume. Expanding Your Reach You can receive orders from any state or country with an exemplary eCommerce fulfillment service. Organised and efficient fulfillment will help you reach your business goals. It can be intimidating to understand complicated international shipping and customs rules when managing orders on your own. International shipping rates are even more complex because they are governed by different regulations and currencies. As a result, many retailers keep their shipping options local or regional. But outsourcing fulfillment services can help you get your products to more people. Many fulfillment services have the infrastructure for shipping around the world. Accessing Superior Technology With a tech-enabled 3PL eCommerce fulfillment service, you can gain access to periodic inventory reports and crucial metrics that can assist you in making strategic decisions. A 3PL will provide you with real-time access to essential data such as insights on inventory and orders, forecasting, determining zones for distribution, and performance reports. What are the Costs Associated with Fulfillment Services? When calculating the costs of an eCommerce fulfillment service, different models need to be considered. There need to be calculations on the warehousing and fulfillment services and the channels and types of distribution. Self-Fulfillment When it comes to self-fulfilling orders, you need to take out loans due to the excessive use of resources. Staff needs to be trained in picking and packaging, and storage space and shipping services must also be obtained. 3PL Fulfillment 3pl Fulfillment services are a great way to scale your business up. It is a cost-effective solution, as it allows people to avoid all sorts of expenses, including labour costs and other miscellaneous costs. You only need to find a 3PL eCommerce fulfillment service and choose the fees you want to pay. Customers must pick 3PL fulfillment services closer to their location for an optimal experience. Dropshipping Early in a business, you don't have to invest any real money. Instead, your suppliers cover all the manufacturing, storage, and shipping costs with very little administrative or customer interaction. However, as your business grows, it can be hard to scale up if you need to maintain relationships with multiple channels. Fulfillment by Amazon Fulfillment by Amazon is when an Amazon.com seller sends their products directly to Amazon fulfillment centers. It's only for products on Amazon that have Prime status, and it's the most expensive option when selling on Amazon. With Seller-Fulfilled Prime (SFP), Amazon shipping can be outsourced to different sellers who are trustworthy. Sellers can receive their orders within two days with FBA. FBM, which has a lower cost, renders all Fulfillment services through the seller and is responsible for purchasing and maintaining inventory and handling customer service but provides no Amazon packaging. Which Types of Businesses are Best-Suited for eCommerce Fulfillment Services? One way for businesses to sell products more efficiently is by using an eCommerce fulfillment service. It can be beneficial for some industries, such as eCommerce retail. Accessories Fulfillment If you sell accessories, you can rely on more efficient third-party fulfillment services by automatically fulfilling any orders at the time of purchase. Beauty & Makeup Fulfillment You want to make sure that your makeup is shipped carefully so your customers can conveniently pick it up. Make it a point to consider the ease of transmission - even if you're sending a small package. Clothes Fulfillment Delivery of your clothing items is integral to running a successful garment outfit. With discrepancies in sizing, colour, and styles, working with 3PL fulfillment services that competently coordinate order volume is essential. A 3PL eCommerce fulfillment service should also offer the provision of a return, mainly when customers try on their order before purchase. Diet & Supplement Fulfillment The US FDA doesn't regulate dietary supplements, but for a rapidly growing market, it is essential to be able to ship and track inventory. 3PL fulfillment services ensure that this innovative business can expediently deliver products. Electronic Appliances Fulfillment Customers often need customer service when they order items online. Ensure your company offers customer service in addition to quality products and proper storage. Toys Fulfillment Selling toys is unpredictable unless you forecast and plan. Inventory and forecasting tools work better with 3PL fulfillment services with software to manage the process. Pets Accessory Fulfillment Customers are trusting when they purchase pet accessories from a company. They have high expectations for transparency during the purchases of your brand's products. 3PL fulfillment services are necessary to create and fulfill consumer desires. Collectibles Fulfillment eCommerce brands need help storing inventory and fulfilling orders. Etsy and Facebook Marketplace are some companies that cover the growing market for other items people are willing to buy. Home & Kitchen Appliances Fulfillment Kitchen appliances are constantly being developed, with people looking for the following new and innovative products that can be bought on the internet. Luxurious Goods Fulfillment Luxury goods can be vulnerable and fragile, so 3pl fulfillment services take excellent care to ensure your items are finely handled throughout storage and processing. They have virtually no cases of broken or damaged luxury goods. Games Fulfillment If you have an excellent idea for a game, the eCommerce market is the best place to sell it. However, the industry can be competitive, so optimising your retail fulfillment process is one way to stand out. Equipment Gear & Outdoor Fulfillment You need a reliable logistics eCommerce fulfillment service infrastructure to survive in the outdoor equipment and gear eCommerce industry. Cymatic offers a warehouse distribution network with drop gate technology that can help you compete in this saturated market. Healthcare Fulfillment It is critical to have the proper eCommerce fulfillment service when expanding your online store. Without the correct location or team, it isn't easy to fulfill an order on time and manage inventory efficiently. Home and Household Goods Fulfillment eCommerce homeowners and brands can now receive high-quality eCommerce fulfillment service support from 3PL fulfillment services, which have highly skilled fulfillment experts. It will save you time and money as you scale your brand, but it will also help optimise your supply chain. F&B Fulfillment Customers rely on eCommerce businesses to get food and beverages delivered more than ever. Consumers expect food and drinks to be fresh and perishable. Food that is provided by an eCommerce business needs to be stored and supplied carefully. Which are the Right Situations to Switch to eCommerce Fulfillment Services? If you're fulfilling orders for your business and see a significant influx, it's time to reach out about scaling. Use fulfillment services to help ship and process these orders quickly. If you are not using technology to optimise operations, your business will grow inefficiently. To do so, be sure to have an eCommerce fulfillment service that provides software that will suit your needs and the company's growth. Here are some questions to help determine if you should outsource your fulfillment requirements to 3PL fulfillment services. Do You Struggle in Determining How to Plan for Storage and Inventory? If the answer to this question is yes, consider outsourcing your inventory and warehouse management to third-party fulfillment services. Do You Spend Too Much Time Fulfilling Orders? If you can fulfill orders on your own, then there is no need to invest in fulfillment services for your business. However, if you are unable to do that, it may be worth looking into an eCommerce fulfillment service for any excess orders. How Do You Check Your Customer's Shipping Preferences? If you want to store products closer to home, take advantage of fulfillment services How Do You Plan to Grow the Business? If your business is projecting enormous growth, it's time to switch to 3PL fulfillment services. Conclusion: Is it Worth Partnering with an eCommerce Fulfillment Company in 2022? There are many advantages and benefits that come with partnering with 3PL fulfillment services. A few of them are listed below: Improved Time Management Saving time on fulfillment through fulfillment companies can help grow your business. Outsourcing it to a more conveniently located company will ensure timely delivery and better rates for shipping. Cost Benefits Upfront costs of in-house fulfillment come with seasonally shifting overhead expenses that require employing a full-time staff team. Outsourcing gives you more flexible, stable prices and better deals on storage and insurance. Improved Technology Outsourcing fulfillment requirements to an eCommerce fulfillment service can help utilise their existing technology and infrastructure, freeing up your time and money for other uses. Integrating your eCommerce platform with that of fulfillment services is a smart option. Business Growth Outsourcing your fulfillment responsibilities can help you focus on other aspects of the business and provide higher-quality service to customers. Market Reach Choosing an eCommerce fulfillment service can help your business reach global audiences without you having to deal with the logistics. You can focus on what's important for your business, like marketing and sales, knowing that your partner will handle the other tasks. If you are seeking to benefit from all the advantages of partnering with fulfillment services and much more, WareIQ can be of great assistance. Established in 2019, WareIQ, a Y-combinator backed startup, has rapidly grown to be the leading provider of full-stack eCommerce fulfillment services for some of the most reputed brands in India. WareIQ offers a full-stack platform for eCommerce companies to enable same-day delivery and next day delivery to customers – an Amazon Prime-like experience but accessible to everyone. WareIQ has empowered brands to sell more, sell faster & sell everywhere due to: Access to WareIQ’s strong nationwide network of fulfillment centers, micro-fulfillment centers & urban dark stores near their customersAccess to all major national & hyperlocal last-mile couriers at discounted rates for making same/next day deliveries possibleEasy integration across multiple online platforms & marketplaces enhancing multi-channel sellingHorizontal marketplaces: Flipkart, Amazon, etc.Vertical marketplaces: Nykaa, Myntra, etc.D2C platforms: Shopify, Magento marketplace, WooCommerce, etc.Social commerce platforms: BikayiAccess to a superior centralised tech platform for eCommerce operationsML-based prediction engine for efficient warehouse network design & smart inventory placementCentralised platform for core fulfillment & shipping operationsPost-shipping apps for a delightful experience & zero to minimum supply chain leakages (Branded tracking page with smart marketing placements; Trigger-based updates & smart communication platform) WareIQ has customised offerings for merchants experiencing different order volumes as well as having different delivery speed expectations. WareIQ is probably one of the very few fulfillment tech companies in the world that have same-day delivery service for their customers under their product “WareIQ RUSH”. With world-class WMS functionalities, WareIQ handles the entire range of intricate operations in the eCommerce fulfillment process, ranging from Inbound Operations such as scanning and quality check, through 100% accurate Pick and Pack, to Inventory Management across all channels. WareIQ’s next-day delivery and same-day delivery services are helping eCommerce businesses set new standards with respect to setting customer expectations and fulfilling them with high efficacy. At the same time, WareIQ customers realize significant cost savings and wider reach due to better negotiations with shipping partners, strategically placed warehouses, economies of scale and scope in eCommerce warehousing, and data-driven decision-making. WareIQ’s WMS, a centralized tech platform helps to better manage undelivered orders by reducing NDR processing time by 12 hours – a multifunctional NDR dashboard helps to track and take immediate action for undelivered orders in real-time, thereby reducing RTO by up to 10%. Automatic replenishment recommendations and easy purchase order creation capabilities on the WareIQ platform further empower eCommerce companies to leverage all possible ways of increasing their ROI. [signup] Fulfillment Services: FAQs What are the different types of fulfillment?They are as follows:• In-House• Outsourced• Dropshipping• Hybrid What is meant by fulfillment activities?Order fulfillment services refer to the processes taken by a firm between receiving a new order and delivering it to the customer. The process includes warehousing, picking and packing the product, shipping it and notifying the consumer by automated order tracking that the purchase is on its way. What is a 3PL fulfillment service?3PL or Third-party fulfillment is an outsourced fulfillment option in which you hire a fulfillment service company to store items, pick and pack orders and handle logistics on your behalf. What does the fulfillment cost mean?The fulfillment fee or cost is linked with receiving and storing products along with processing orders from handling to shipping and any other activity that order fulfillment encompasses. How to hire WareIQ for eCommerce fulfillment services?You can contact and request a quote here. Does fulfillment drive revenue?Fulfillment is responsible for transporting goods to customers whenever orders are confirmed. Without fulfillment, companies would not be able to generate revenue because customers would not be able to receive their orders. Additionally, efficient fulfillment processes can lead to customer satisfaction, thus creating positive feedback which will ultimately lead to new and repeat customers which will drive up revenue even further.
June 23, 2022
7 Best eCommerce Fulfillment Services for Same Day and Next Day Delivery in 2022
Have you wondered how eCommerce market leaders achieve exemplary growth and customer satisfaction metrics? As the eCommerce boom continues and customer preferences change rapidly, powered by the plethora of options available to end customers, differentiation in offerings will be the key game-changer for eCommerce businesses. This differentiation can be achieved through the selection of the best eCommerce fulfillment services, more specifically, a reliable partner that offers the most recent trends in fulfillment, such as same-day delivery and next day delivery services. Keep reading to better understand how you can select the best eCommerce fulfillment services for your business and how WareIQ can be the best fulfillment partner in your growth journey. What are Fulfillment Services? Fulfillment services are similar to third party (3PL) logistics service providers that take care of preparing an order and shipping it to the end consumer on behalf of the seller and also provide a multitude of related services such as taking complete responsibility for receiving, managing and completing the order. As customer expectations of same day delivery and next day delivery grow at an ever-increasing and unimaginable pace, eCommerce fulfillment services are fast evolving as the preferred choice for eCommerce businesses across the globe. The best eCommerce fulfillment services enable businesses to reliably, accurately and efficiently fulfill their customer orders while minimising capital expenditure. While fulfillment services vary with regard to their exposure to the value chain, they mostly act as a command center for handling the entire order preparation and dispatch process as well as doubling up as a buffer inventory for holding the clients’ products. [contactus_uth] What Does an eCommerce Fulfillment Provider Do? An eCommerce fulfillment service provider takes up a broad span of responsibilities ranging from receiving stock, storing it in warehouses, order processing, shipping and transportation. The success of any eCommerce business largely depends on setting new expectations for customer experiences and fulfilling them effectively. With the eCommerce boom, customers have started expecting same day delivery and next day delivery as a general standard. However, for any eCommerce company, handling so many things single-handedly becomes cumbersome and the team starts losing focus on their core business processes. There is heavy capital investment, manpower hiring and management bandwidth allocation that is involved. Hence, outsourcing these requirements to the best eCommerce fulfillment services has proved to be a simple but very effective way of addressing this issue while riding on the growth engine along with competitors. An eCommerce fulfillment service’s task begins as soon as an order is placed by the customer and continues till the order reaches the doorstep of the customer or is returned due to some unavoidable reason. The best eCommerce fulfillment services give the seller access to a more dynamic eCommerce warehousing space, help negotiate more favourable terms with shippers, prevent stockouts and provide real-time tracking information of the order consignments. What are the Factors to Consider while Choosing the Best eCommerce Fulfillment Services? While selecting the best eCommerce fulfillment services, a number of factors should carefully be considered and it can be a big burden for retailers to determine them. The decision depends both on the business objectives and personal preferences of the decision-maker. Broadly, the following factors must be taken into account while selecting the best eCommerce fulfillment services provider: Spectrum of service offeringsScalabilityFlexibility with respect to same day delivery and next day deliveryCost structure, pricing plans and price transparencyEase of onboardingEfficiency of customer service and reachabilityeCommerce and startup friendlinessIntuitive business intelligence dashboard for real-time monitoringExtent of integration and security Micro eCommerce Fulfillment: The Move to Same Day and Next Day Delivery Same day delivery and next day delivery are rapidly becoming the most preferred delivery models for customers globally. According to some recent survey reports, over 60% of eCommerce shoppers consider delivery speed as a significant factor in their purchase decisions and 80% of shoppers are likely to turn to a competitor brand if they encounter long delivery periods. Let us take a look at the meaning of each: When an item is delivered to a customer within 24 hours of it being ordered, usually on the day on which it was ordered, it is referred to as same day delivery. To accomplish this humongous task, the item must be delivered from the inventory, also called a micro fulfilment center, located as close as possible to the consumption clusters. Next day delivery, on the other hand, means that the customer receives the item at their doorstep on the following day from when it was ordered. It involves bundling multiple orders throughout the day destined for a given region of distribution and making scheduled delivery stops by the shipping partner. However, there are multiple challenges to this micro fulfillment revolution such as heavy capital expenditure on numerous warehousing facilities, investment in robotic product handling, rapid order processing and packing, and lack of transport infrastructure in remote locations. Hence the micro fulfillment model used by eCommerce fulfillment services is fast evolving to provide a more customised experience for eCommerce sellers with same day delivery and next day delivery offerings. 7 Best eCommerce Fulfillment Services Offering Same Day and Next Day Delivery in 2022 We have listed down the 7 best eCommerce fulfillment services that offer same day delivery and next day delivery services, which will boost customer satisfaction, leverage loyalty and increase online sales for eCommerce businesses. WareIQ Source Established in 2019, WareIQ, a Y-combinator backed startup, has rapidly grown to be the leading provider of full-stack eCommerce fulfilment tech solutions for some of the most reputed brands in India. WareIQ offers a full-stack platform for eCommerce companies to enable same day delivery and next day delivery to customers – an Amazon Prime-like experience but accessible to everyone. WareIQ has empowered brands to sell more, sell faster & sell everywhere due to: Access to WareIQ’s strong nationwide network of fulfilment centres & urban darkstores near their customersAccess to all major national & hyperlocal last mile couriers at discounted rates for making same/next day deliveries possibleEasy integration across multiple online platforms & marketplacesHorizontal marketplaces: Flipkart, Amazon etc.Vertical marketplaces: Nykaa, Myntra etc.D2C platforms: Shopify, Magento 2 , WooCommerce etc.Social commerce platforms: BikayiAccess to a superior centralised tech platform for ecommerce operationsML-based prediction engine for efficient warehouse network design & smart inventory placementCentralised platform for core fulfilment & shipping operationsPost-shipping apps for delightful experience & zero to minimum supply chain leakages (Branded tracking page with smart marketing placements; Trigger-based updates & smart communication platform) WareIQ has customised offerings for merchants experiencing different order volumes as well as having different delivery speed expectations. WareIQ is probably one of the very few fulfilment tech companies in the world that have same day delivery offering for their customers under their product “WareIQ RUSH”. With world-class WMS functionalities, WareIQ handles the entire range of intricate operations in the eCommerce fulfillment process, ranging from inbound operations such as scanning and quality checks through 100% accurate pick and pack to inventory management across all channels. WareIQ’s next day delivery and same day delivery services are helping eCommerce businesses set new standards with respect to setting customer expectations and fulfilling them with high efficacy. At the same time, WareIQ customers realise significant cost savings and wider reach due to better negotiations with shipping partners, strategically placed warehouses, economies of scale and scope in warehousing and data-driven decision making. WareIQ’s WMS, a centralised tech platform, is its core offering, with the following functionalities: Shipping Management Integration to all major national couriers and same-day delivery partners through WareIQ's platform with discounted ratesGeneration of bulk shipping labels & invoices in a few clicksOffering a branded tracking page and sending auto-alerts to inform customers of their shipment statusReduction in RTO % (Return to Origin) by automating cases of failed delivery attempts (NDRs) by the shipping partnerPreemption of COD frauds through an integrated AI engine flagging risky orders Orders managementTracking of orders across multiple channels Filtering of orders by statusSearching for specific ordersQuick timeline view of where the order is in the fulfillment process (e.g. when an order is picked, packed, or shipped)Shipping-related information (e.g. weights, dimensions or carrier service) Quick snapshot of any orders that require actionSyncing WareIQ’s out-of-the-box integrations with sales channels to eliminate manual importing of data and triggering all the necessary notifications to the end-customers Inventory managementTracking of inventory levels across multiple locations & sales channels including websites and marketplacesUsing WareIQ platform to distribute inventory to multiple locations optimizing for speed & cost/orderSetting reminders to proactively replenish inventory, bundle products for promotions, make inventory transfer requests and much more Warehouse managementManaging multiple warehouses and offline stores on WareIQ's platform100% inventory accuracy with scan-based operationsAutomated reconciliation tool which helps to keep track of returns and unsettled invoicesIntegrations with all major ERP & Accounting systemsAssured tag on Flipkart without physically dedicating inventory to them The central platform helps to better manage undelivered orders by reducing NDR processing time by 12 hours – a multifunctional NDR dashboard helps to track and take immediate action for undelivered orders in real-time, thereby reducing RTO by up to 10%. Automatic replenishment recommendations and easy purchase order creation capabilities on the WareIQ platform further empower eCommerce companies to leverage all possible ways of increasing their ROI. More than 300 companies such as The Man Company, Future Group, Kama Ayurveda and Wingreens Farms have trusted WareIQ as a reliable partner in their growth journeys. No minimum order quantity requirements make it suitable even for eCommerce firms having low order quantities to take advantage of the latest trends such as same day delivery and next day delivery. The onboarding process is simple, convenient and less time-consuming, while the pricing policy is clear and transparent. WareIQ also undertakes strict safety precautions at its warehouses and complete ownership of operations, thereby minimising the risk exposure of customers. ShipBob Source ShipBob was founded in Chicago in 2014 as a global logistics, technology and eCommerce fulfillment services company that fulfils orders for D2C brands with next day delivery. With a claimed accuracy rate of 99.95% and serving more than 7000 customers worldwide, ShipBob provides end-to-end solutions for eCommerce fulfillment. It offers 2-day shipping at affordable and transparent prices, along with a robust software platform that allows integrations to the eCommerce providers’ own platform with a developer-friendly API. According to independent customer review reports, ShipBob ranks high with respect to: A broad network of warehouses across distant locationsA superb easy-to-use user interfaceThe ease of integration with other platforms However, customers have reported dissatisfaction on the following issues with ShipBob: Difficult to understand pricing plansNot-so-active customer supportNon-availability of refrigeration facilities for perishable productsInflexibility for B2B operations Shipbob also provides predictive analytics to eCommerce customers to better handle stock-outs during peak sales periods. ShipMonk Source Also established in 2014, ShipMonk is based out of Florida and serves medium and small-sized eCommerce companies with comprehensive fulfillment solutions including warehousing, smart inventory management, subscription box fulfillment and campaign fulfillment. ShipMonk’s warehouses are located strategically across the USA and it has plans to establish warehouses in Europe, so as to provide more customised fulfillment, including 2-day delivery and next day delivery to D2C eCommerce brands. ShipMonk is equipped with robust and eco-friendly modern technologies such as locus robots, kardex machines, cubiscans and software that integrates easily with 75+ marketplaces and shopping carts. It offers customised packaging solutions and delivery protection schemes for willing eCommerce companies. ShipMonk allows a convenient pricing model that allows customers to pay on a per-unit basis for 1 to 10,000 fulfilled orders per day. It also enables customers to better understand the returns management process with accurate and real-time data and round-the-clock customer support. ShipMonk has a respectable mindshare among its customers with respect to: Heavy discounts and affordable shipping ratesComplete paperwork and claims settlementZero setup feesZero inventory receiving feesEasy integration with eCommerce platformsAbility to handle international orders and subscription boxes effectively However, Shipmonk’s software is not integrable with eCommerce company websites hosted on Wix. Amazon Source Amazon has been the pioneer in the eCommerce fulfillment space with same day delivery and next day delivery services for Prime members across a long list of cities. To add to customer delight, Amazon has gone to the extent of fulfilling certain eCommerce orders within a few hours of placing the order. Amazon makes it possible through a very carefully placed network of fulfillment centers, comprising of warehouses and phantom godowns, close to the sites of maximum orders, based on their past order data and projections. The same day delivery concept evolved from the 2-day delivery promise that Amazon inherently made to its Prime members. While most eCommerce companies, especially small and medium businesses, admit to having benefited largely from the same day delivery offering of Amazon, the associated costs have been heavy for eCommerce companies having less frequent and uneven rates of orders. Moreover, the same day delivery and next day delivery services of Amazon are available only for registered vendors and sellers of Amazon; external parties selling through other platforms cannot avail of these services, thereby restricting their reach. Deliverr Source Established in 2017 in San Francisco, Deliverr provides superior fulfillment solutions to small eCommerce companies, with a 2-day delivery service. Transparent pricing, badges similar to Amazon Prime and a hassle-free experience stand at the core of Deliverr's services. eCommerce companies can leverage the live data tracking options of Deliverr to predict their future fulfillment performance and even next day delivery for D2C customers located in close proximity of the warehouses. Deliverr ranks high on the following parameters: Online Customer supportEase of onboarding and integrationTransparency in pricingMulti-platform integration for companies The primary disadvantages of Deliverr are: Unavailability of International deliveryTelephonic customer supportNon-adaptability with subscription boxes Rakuten Super Logistics Source Originally established as a 3PL company in 2001, Rakuten Super Logistics has established its strong foothold in the eCommerce fulfillment domain since 2013. A nationwide fulfillment network helps eCommerce companies minimise shipping periods, control costs and increase accuracy in eCommerce order fulfillment. RSL has partnered with some of the leading shipping carriers to handle a diverse range of parcel sizes for eCommerce platforms. While currently offering only next day delivery, it plans to introduce same day delivery services in the very near future to compete with Amazon. Rakuten customers have reported a plethora of advantages including: Dedicated customer support managers, available through phoneTwo-way inventory management and address verificationSpeciality fulfillmentDiscounts with bulk orders The main barrier for smaller eCommerce companies in partnering with Rakuten Super Logistics is its minimum order quantity of 250 monthly orders, although the company plans to shred down this limit in future. The other disadvantage is that eCommerce websites hosted on Wix cannot integrate with the API of RSL directly. Also, Rakuten Super Logistics does not offer a live chat feature and 24*7 customer support. FedEx Source FedEx, formerly Federal Express Corporation, was founded in 1971 as an urgent delivery services company. Over the years, Federal Express has grown and evolved as a multinational eCommerce fulfillment provider, serving diverse sectors such as healthcare, transportation, D2C, B2B and B2C eCommerce fulfillment solutions. Having operations across 200+ countries, FedEx has many large multinational conglomerates among its customer base and continues to innovate supply chain solutions to meet changing customer expectations. Moreover, FedEx offers the convenience of shipping pre-ordered consignments without storing them in a warehouse. However, the main disadvantages are that FedEx does not ship oversized and overweight products and it does not integrate with Amazon - an essential requirement from any eCommerce fulfillment service. Conclusion So, by now, you must have gained a fair understanding of the importance of having a strong fulfillment services partner, which is capable of providing same day and next day delivery services, which will boost the ability of your eCommerce company to become more customer-friendly. There is no standard one-size-fits-all approach for selecting the best eCommerce fulfilment services. So, it is best to trust WareIQ, the fulfillment company that provides you with the right flexibility with respect to order size and pricing. WareIQ has been constantly working on incorporating feedback from customers and strengthening the focal points in the fulfillment chain to provide you with a consistent improvement in customer satisfaction. We help you not only to reduce your logistic costs but also your delivery timelines – this could be the game-changer for your business. [signup] eCommerce Fulfillment Services: FAQs What is an ecommerce fulfillment service?The part of your eCommerce business that involves operations after receiving an order is known as fulfillment. These tasks include picking of a product, packing, shipping and delivering it to the customer's door. What is the difference between eCommerce fulfillment and drop shipping?eCommerce fulfillment is a business model that involves purchasing items in wholesale quantities, selling them online and fulfilling each order in-house. Dropshipping involves retailers selling items where they do not have to keep inventory in stock. As and when customers place orders, the merchants purchase products from suppliers & directly ship to end customers. When should you go ahead with an ecommerce fulfillment service?If you don't want to have to deal with shipping or if you've grown beyond your existing warehousing capabilities to a point where you can't ship items manually anymore, you should opt for a fulfillment service. What is a fulfillment partner?For an ecommerce business, a fulfillment partner (like WareIQ) provides ecommerce fulfillment services such as order processing, warehousing and shipping of orders. Fulfillment partners can help eCommerce businesses save money by getting shipments to customers faster with same day or next day delivery options without having to rent a warehouse, buy equipment, recruit a workforce or manage the day-to-day operations of eCommerce fulfillment. Many eCommerce fulfillment companies not only pick, pack and ship orders but also provide technology and data to help eCommerce businesses make better supply chain decisions. In how many locations does WareIQ have fulfillment centers?WareIQ has a pan-India network of 40+ fulfillment centers in all major metros & 30 other cities that helps you store your inventory closer to your customers for faster delivery and managing returns. Which is the best eCommerce fulfillment service in India?WareIQ has rapidly grown to be the leading provider of full-stack eCommerce fulfillment tech services for some of the most reputed brands in India. WareIQ is amongst the best in the industry as it enables Amazon-like same day and next day delivery to customers. How do eCommerce fulfillment services make money?eCommerce fulfillment services have various pricing plans, subscription models and minimum order requirements that vary between companies. Companies such as WareIQ do not have any minimum order requirements and customers only pay for the facilities they use.
June 22, 2022
Inventory Turnover Ratio: Definition, Importance, Calculations, and 10 Inventory Turnover Optimisation Techniques in 2022
Inventory is the primary asset of a business. A seller purchases the required amount and wishes to sell it as soon as possible. A product may fly off the shelf at any time on its own merit, even though there is no major discount offered on it. In most cases, though, products float somewhere in the middle, necessitating the need for all businesses to keep track of what is in demand and how fast it is selling. Everything from pricing strategy and supplier relationships, to promotions and the product life cycle is influenced by inventory turnover. The inventory turnover ratio measures how well a company manages inbound inventory from suppliers and outbound inventory from warehousing to the rest of the supply chain. Turnover is critical for every business, whether it is a B2B or DTC fulfillment company. A company's inventory turnover rate also relays information about its inventory forecasting, inventory management, and sales and marketing skills. A high inventory turn rate indicates that sales are robust or that inventory is insufficient to support current sales volumes. A low inventory turn rate, on the other hand, suggests low sales, low market demand or an inventory surplus. Knowing which direction the sales winds are blowing will help you achieve an accurate inventory turnover ratio. What Is Inventory Turnover? Inventory turnover refers to the amount of inventory that a company purchases and has sold for a particular time period. A complete inventory turnover rate shows that a company has sold all of the stock it bought, excluding any items lost due to expiry or damage. Inventory turnover is common in successful businesses. However, it varies by industry and product category. Inventory management issues such as shifting client demand, poor supply chain planning and overstocking can all have an impact on the inventory turnover rate. Definition of Inventory Turnover Ratio The inventory turnover ratio is the number of times a company's inventory has been sold and re-stocked in a certain period of time. The method is also used to determine how long it will take to sell the present inventory. The inventory turnover ratio is calculated using a formula that divides the total cost of items sold by the average inventory during the same time period. A higher ratio is preferable to a low ratio since a high ratio indicates robust sales. Effective inventory control, also known as stock control, where the organization has a strong understanding of what it has on hand, is required to determine your turnover ratio. Examples of Inventory Turnover Rate Inventory Turnover Ratio (ITR) = Cost of Goods Sold (COGS) / Average Inventory For example, if your COGS was 100,000 rupees in the last fiscal year and your average value of inventory was 25,000 rupees, your inventory turnover ratio would be 4. Inventory Turnover = number of units sold / average number of units on-hand If you sell 100 units in a year while having an average of 20 units on-hand at any given time during the year, your inventory turnover rate is 5. [contactus_lilgoodness] Why is Inventory Turns Important? Inventory turns or inventory turnover is important for a variety of reasons. A sluggish turnover may imply that there is lower market demand for certain things, allowing sellers to adjust pricing, offer incentives to drain inventory faster or change the mix of goods available for sale in the future. These are all critical decisions for a business to make in order to stay financially healthy and competitive. A company's product mix must be aligned with its client's demand. Fast inventory turns are a signal that a company's purchasing strategy is not syncing up with market demand and that there are delays somewhere in the supply chain or that demand for a specific item is increasing. This data can aid a business in determining whether to raise prices, increase orders, diversify suppliers, sell a product more prominently or purchase additional related inventory. Material requirements planning (MRP) is a related technique for determining inventory needs while balancing supply and demand. How to Calculate Inventory Turnover Ratio? You can figure out how to calculate the inventory turnover ratio by doing two things - determining COGS and average inventory. Let’s assume you already have the figure for your COGS. Average Inventory The estimation of the value (in monetary terms) or number (units) of particular categories of inventory at any given time throughout a set time period is known as average inventory. If you don't know how to calculate average inventory, here's how you can do it: (Inventory at the Start + Inventory at the End) / 2 It is the sum of beginning inventory and ending inventory — from a certain time period — divided by two. Inventory Turnover Ratio Formula The inventory turnover ratio formula is simple if you have your COGS and average inventory. It is as follows: Inventory Turnover Ratio (ITR) = Cost of Goods Sold (COGS) / Average Inventory Alternate Ways to Use the Inventory Turnover Ratio You can use the inventory turnover ratio to analyze how fast an organization is selling its inventory and compare its efficiency in doing so against the industry standards. For most industries, the best inventory turnover ratio falls between 5 and 10. However, the average inventory turnover rate varies from one industry to another, depending on the complexity of the business environment and the nature of its products. Inventory turnover is mainly used to analyze the inventory sales speed of an eCommerce business and compare its efficiency with the industry standards or competitors. There are a few more ways by which inventory turnover ratios are utilized. A few of them are: Trending Turns to Manage ITR Inventory turnover ratios are one of the best approaches to spot market demand-driven patterns as well as outmoded or slow-moving inventory. That way, you will have a head start on deciding whether to scale up or decrease any product line or brand. You'll have far better inventory control and a higher harvest of sales possibilities as a result of this. At the same time, you will be searched and visible on trending platforms which will help your brand attain new customers. SKUs and Segments For strict controls on specific stock levels, inventory turnover is generally measured at the SKU (stock-keeping unit) or segment level. Inventory segmentation is the process of categorizing or segmenting SKUs based on parameters that make sense for your company. Inventory turnover can also be employed at an aggregated level when divergent goods are grouped based on factors such as the geographic location of retail outlets. Using the Pareto Principle The Pareto principle or 80/20 inventory turnover ratio rule suggests that 80% of your company's sales revenues are generated by 20% of the SKUs you carry. The idea specifies selling a few products for low or negligible profit. It will persuade buyers to purchase more and at the same time, enables sellers to store more profitable goods. It is important to understand what stock segment you are dealing with so you can maintain the appropriate amount of goods in hand. What is an Ideal Inventory Turnover Rate? For the eCommerce industry, a lower inventory turnover rate may indicate sluggish sales and dwindling market demand for a product. So generally, the greater ratio number is supposed to be better, as it reflects robust sales most of the time. There are certain exceptions to this theory. Luxury products have a low inventory turnover rate. On the other hand, sometimes a high inventory turnover ratio is self-defeating. In case you order a small amount of inventory but the frequency is high, the inventory turnover rate will increase which means you are not purchasing enough inventory to support the rate of sales. So in that instance, you may not be making as much profit as you could be so you need to check whether gradually increasing pricing stabilizes the ratio while raising unit margins. High Inventory turnover is common in high-volume, low-margin businesses. Low-volume, high-margin sectors, on the other hand, tend to have substantially lower inventory turnover percentages. The ideal inventory turnover ratio is between 5 and 10, implying that goods should be sold and restocked every one to two months. For perishable goods companies like florists and grocers, the recommended ratio will be higher to avoid inventory losses due to the risk of spoilage. Top 10 Techniques of Inventory Turnover Optimization Make the Supply Chain More Efficient To do this, low-cost logistics partners could be the best option. Faster delivery is important but assurance of the delivery of an undamaged product is more important for any seller. If a damaged product is delivered, it will be returned which will not be counted as inventory turnover and will also lead to more expenses. Eliminating inefficiencies in the supply chain will boost your sales, revenues and total margins. Make Changes to Your Pricing Approach Adjust your product pricing to gain higher profit margins on high-demand items and free up capital by getting rid of outdated inventory, commonly known as dead stock or obsolete inventory. If items are proving difficult to sell, consider donating them to charity and receiving a tax deduction or selling them through a secondary channel. Check Your Rank in the Industry Is your inventory turnover rate high or low compared to the rest of your industry? When you notice growing tendencies in your inventory ratios, are there opportunities for you to steer a stronger strategic position on competitive items? By effectively answering these questions and managing your inventory, you can get greater market share and improve your industry rating. Comparing yourself with competitors will enable you to analyse what you are doing right or wrong and you can use some of their best practices to gain an advantage. Improve Your Forecasting Skills Sales figures and inventory reports provide useful concrete data for more precise inventory forecasts. This information can also aid in future sales planning, such as recommending methods to improve your product mix or creatively bundling things to move slower inventory at a better margin. Either way, forecasting inventory is a necessary tool that eCommerce retailers need to employ in order to achieve an optimum inventory turnover ratio. Automate Your Purchase Orders Automation improves efficiency and has the potential to reduce expenses on its own. However, when you combine it with an order management system that allows for easy reordering of popular inventory so that it is constantly available, you gain even more benefits. Consider adopting an inventory system that generates purchase orders automatically to save yourself time and effort. The result will be better control and fewer errors. Use Technology Use the latest technology to optimize inventory turnover. With the help of technology, you can place inventory items strategically such as high-demand items being placed in a more accessible way and bulky items being placed close to cargo bays. Humans are susceptible to making errors that technology simply doesn’t so it will make your overall business operations more efficient. Hire Experts or Train Your Employees An expert inventory planner can save you a lot of time and money by saving taxes, optimizing the storage of your inventory and generally employing the best practices to increase your inventory turnover rate. They can handle every situation whether it is inventory shortage or overstocking and can suggest a better way to free your inventory. These processes can then be followed by your employees to make inventory management more effective. Encourage Sales of Old Stock When you have a huge quantity of old and outdated stock, you need to get rid of it as soon as possible because it not only freezes your capital but also takes up storage space, loses value and defames your brand’s name. If they are sold through a sale, inventory turnover increases rapidly. The brand gets more visibility and increased sales velocity. This enables you to not only prevent a loss due to outdated products but also to generate more revenue from sales that you may not have been expecting. Encourage Your Customers to Pre-Order You can have instant and guaranteed sales of your items if you can convince your clients to preorder and register for certain products. This will enhance your turnover but be sure you have enough inventory to handle the requests you receive. Smart marketing and high-demand products are often required to entice buyers to pre-order, so try creating a specific sales and marketing plan around preorders for popular items and see what happens. This will also help you more accurately forecast the amount of inventory you require in advance. Employ Effective Marketing To improve your inventory turnover rate, you will require a strong marketing plan. You should concentrate on underperforming products and connect with elusive clients. You can achieve your goal of boosting sales and thereby improving your inventory turnover rate by pursuing new markets and utilizing all available marketing channels. In order to attract new clients and keep existing ones engaged, businesses can use social media, SEO, paid advertising, content marketing and email marketing. Inventory Turnover vs Days Sales of Inventory Inventory turnover measures how rapidly the inventory of a company can be sold. Days sales of inventory (DSI) measure the average time it takes for a company to convert its inventory into sales. The inverse of inventory turnover for a given period is DSI, which is calculated as (inventory / COGS) X 365. DSI is the number of days it takes to turn inventory into sales, whereas inventory turnover is the number of times inventory is sold in a year. [table id=31 /] Improving Inventory Turnover with Inventory Management Software Moving average inventory can be used by companies that use the perpetual inventory technique rather than a periodic inventory system to compare mean inventory levels over vast periods of time. To facilitate a more realistic comparison of the performance, moving average inventory adapts pricing to the current market standard. For improving inventory turnover rates, inventory management software has several features that can assist you in modernizing and optimizing your inventory management policies and practices. Such software enables your organization to switch to the constant inventory methods of accounting with a continuous real-time inventory record. Automated point-of-sale systems and company asset management software will immediately reflect changes in inventory by tracking sales, inventory depletion and restocking frequency. It enables you to set a demand formula after gathering data and forecasting upcoming demand. At the same time, you can apply the formula with respect to your inventory and optimize ordering costs. Inventory management software, when used in combination with an ERP system, can assist in optimizing your supply chain, assigning and managing SKUs, automating purchase orders and much more. This will reduce errors, increase efficiency, give you more control, boost customer satisfaction and make your business more profitable overall. How Can WareIQ Help to Manage Your Inventory Turnover Ratio? WareIQ has smart technologies for warehouse management. We check what is your current inventory turnover ratio and suggest the accurate amount of inventory to keep in order to maintain the perfect inventory turnover ratio and prevent any shortages or overstocking situations from occurring. When you have a facility to give you a better customer experience and tackle other lengthy eCommerce processes, your business starts generating more returns. WareIQ resolves most of the problems and takes care of each step after you get an order, from picking and packing to delivering it to the customer and even returns management. Inventory Turnover Ratio: FAQs What factors affect the inventory turnover ratio?Turnover rates often rise during a new product launch and growth phase, peaking as the product approaches maturity. Sales and inventory turnover eventually fall due to market saturation, advancements in existing technology and changing client preferences. What does the inventory turnover ratio tell you?The inventory turnover ratio is a calculation of how frequently inventory is sold over a specific time period. Why is it important to analyze the inventory turnover ratio?The inventory turnover ratio is a productivity metric that determines how successfully a company manages its inventory. Higher rotation rates minimize storage and other holding expenses so achieving a high ratio is important. Should inventory turnover increase or decrease?Companies seek higher inventory turnover ratios in general. When the stock turnover ratio falls below industry requirements, it is necessary to improve it. What does high inventory turnover indicate?If the inventory of a company turnover is high, it reflects that its product is in high demand. It could also reflect that the company ran a successful advertising campaign or a sales promotion that resulted in an increase in sales. In any case, it shows that the business is effectively transferring inventory during normal business operations.
June 22, 2022
Definition, Importance and 5 Step-By-Step Processes of Stock Reconciliation In 2022
It is sometimes likely that the inventory counts in your records and the actual amount of products on your shelves don't always match. This mismatch, while frequent, can have a significant impact on your organization. To avoid stockouts and guarantee that your consumers get what they need when they need it, you need to know how many goods you have in stock and how much stock you need for the future. You can employ stock reconciliation to determine the stock discrepancy between what's in your records and your warehouse and then make modifications to bring your figures into line. This is a critical step in ensuring that inventory is ordered as needed and that things are readily available for sale. In this blog, we will take a detailed look at the meaning of stock reconciliation, its importance, the processes involved in doing and the challenges faced while doing it. What is Stock Reconciliation? Stock reconciliation refers to matching inventory data to real-world inventory items in is stored in your business’s warehouse or fulfillment center. To do so, prepare a stock reconciliation report that accurately displays your current inventory and includes or disposes of stock items from the database. This is an essential step since it aids in the reduction of stock disparities and helps in understanding why they exist in the first place.Inventory reconciliation should be done regularly to guarantee that all inventory is accounted for.An inventory reconciliation report compares the business's written inventory records to the physical goods in storage. If this data doesn’t match, the report can assist in determining the cause of the issue.If you cannot find the cause of the difference, you should update the written inventory records to reflect the actual inventory level and the necessary accounting entries that need to be made. [contactus_gynoveda] Importance of Inventory Reconciliation There can be dire consequences for the business when the records do not match the physical inventory. Even with the best inventory management and control technology, inventory shrinkage to some extent is inevitable. There's no denying that human error and blunders are to blame for part of this shrinkage. The quality of the data recorded and handled in the inventory control system determines the accuracy of the information. Inventory reconciliation allows you to keep track of shrinkage and search for symptoms of greater problems such as dwindling customer demand or employee theft. Performing an inventory reconciliation helps your business to keep inventory organized and is important for the following reasons: It ensures your written records for inventory figures are accurate by aligning these records to those obtained via a physical check.It ensures that all kinds of stock are separately recorded and included in the written records.It helps in tracking your inventory more seamlessly to prevent incidents such as theft and manual errors.It provides a starting point for investigating the differences between inventory-in-hand and inventory purchased from suppliers by identifying the source of these differences through the use of item characteristics.Businesses find it helpful in judging their stock-loss percentage compared to prevalent industry rates. 5 Step-by-Step Processes Involved in Stock Reconciliation Inventory reconciliation is more complicated than just changing the numbers in your books to reflect the amount of inventory in your warehouse. There are a variety of explanations for the discrepancy in the figures and you must figure out what's going on, which can be done in the following ways: Step 1: Make a Note of Your Actual Inventory Count The number of items a business has on hand is known as physical inventory. The number of actual objects on your shelf is the one definitive thing that cannot be disputed.Businesses should arrange a time for qualified management to do physical inventory counts and double-check their data.Check your physical inventory count before browsing through your records. This may be accomplished by devoting a day or two to calculating the number of items in your inventory.This is crucial since it becomes conceivable whether the inventory was originally miscounted or recorded incorrectly. Furthermore, if you're distributing goods between different sites, the physical inventory count may be lower than the figures in your books. Step 2: Perform a Side-by-Side Comparison of Physical Inventory and Inventory Records Compare your real inventory numbers to existing inventory records once you've recorded them. You should double-check that these numbers match the physical location of each item on your shelves.You'll find out whether there are any inconsistencies during this procedure. Several factors might cause a discrepancy between your physical inventory count and your inventory management count, some of which are listed below:Paperwork that has gone missingHuman errorsMathematical miscalculationsUnlisted items Scrap itemsFraud by suppliersItems that belong to a consumer or a supplierItems that have expired and thrown away You have to look into all options to determine the root of the problem, note what's causing the disparity, and make the necessary changes to your processes and records to prevent the same problem from occurring again. Step 3: Analyse Purchases and Sales of Inventory Since the Previous Reconciliation If you've done a stock reconciliation before, go back and check if any inconsistencies were discovered that might explain the discrepancy in figures during the current reconciliation.Compare your inventory reconciliation findings to previous ones. This can help in identifying trends and patterns, as well as the identification of areas that need more research. This is especially useful if any difficulties need to be addressed. Being aware of these problems and issues allows you to concentrate more attentively on those specific items, either averting future difficulties or supporting you in finding the cause of the issue. Step 4: Remove Any Disparities That May Exist It's up to you to decide how much shrinkage is acceptable in your company. It may be more time-consuming and costly to identify the reason for the loss rather than move on if the quantity or value of lost items is low enough to make an exception.If you need to identify the cause of it, start with your systems and personnel.If you're using a contemporary inventory or retail management platform, you may simply update the products in your system to reconcile your records.While this causes an abrupt pause in your inventory statement, it does allow you to build a general ledger that will serve as the formal beginning point for future inventory.Steps in the recording process are frequently overlooked at the warehouse, on the store floor, and while updating it on the inventory management software used by the company.It is a good idea to interview the people who are in charge of each phase to see if there's a reason for the disparity that can be rectified.If you can't figure out what's causing the disparity, consult with your team and identify each metric that could have caused it. Step 5: Repeat the Process of Reconciling Inventory Consistently The advantages are lost if inventory reconciliation is not performed regularly.Regular stock reconciliation improves data accuracy and lowers inventory costs.Inventory reconciliation is only effective if you verify your stock regularly. As a result, you'll get more accurate data over time and can reduce inventory loss, saving you money in the long run.Inventory reconciliations should be done regularly and the frequency should be based on what is best for your company. They can be time-consuming, so factor in any delays, sales halts, and labour expenses. Challenges to Stock Reconciliation Can be Time Consuming Inventory reconciliation is time-consuming for every business, and no matter how frequently you count, you'll have to tolerate certain amounts of unforeseen shrinkage due to factors such as damage, expiry, goods lost in transit, and many others. Frequent stock reconciliation can result in delays in delivering orders to customers and purchasing fresh stock that is needed to fulfill those orders. Disruption in Operations The place where you count your stock should be kept separate. This entails having access to a large warehouse or operational space to prevent the suspension of all inbound and outbound product movement is suspended for long periods of time. However, since it is already a struggle for many retailers to find enough storage space to fit in their existing inventory, this can be a challenge, as they often use third-party warehouses which don’t facilitate large sections that can be separated specifically for counting purposes. Use of Incorrect Weightage Factors The usage of incorrect weightage factors is a widespread issue that causes multiple monetary issues. When dealing internationally, for example, measuring a liquid in litres rather than in gallons or the other way around is often overlooked. This can cause confusion when noting down the dimensions of the product, especially if employees are not well versed in units of measurement and if the company deals in importing or exporting goods to other countries that use different metrics of measurement such as the US and Canada. Difficult to do Without Advanced Software If an order management system isn’t implemented, tracking replacements, refunds, and backorders make stock reconciliation problematic. In today's world, using excel or similar basic spreadsheets introduces unneeded difficulties due to a lack of relevant features that are needed. Even though these solutions have worked quite effectively for a long time, a more comprehensive package is required in the current market. They aren't responsive enough to manage a wide distribution network and other peripheral aspects of the firm. They provide many opportunities for human mistakes and there is no base structure for spreadsheet reconciliation reports. Additionally, if a business stores inventory in multiple warehouses and sell products on different platforms, the only way to manage the movement of inventory accurately is to use inventory management software. Manual Errors and Mismanagement of Inventory Many of the common causes of the disparity between inventory records and physical inventory counts are due to manual errors while entering the data or mismanagement of resources which leads to inventory shrinkage, stockout situations, overstocking, wastage, and much more. These factors have an adverse effect on business operations and are difficult to mitigate unless a major management and staff overhaul is done if the problem occurs frequently because it can be difficult to ensure that every item is being counted and added correctly. Conclusion Managing inventory should be a key priority when a firm starts to grow. Taking the effort to reconcile inventory acts as a quality check for existing stock systems and alerts the management team to any data inconsistencies. Managers may use this information to determine which inventory control systems to adopt to improve functionality and expand their business. The amount of money spent on stock mismanagement is reduced when an effective stock control system is implemented. While every organization's ability to raise selling prices is restricted, focusing on the bottom line is a good strategy. Inventory reconciliation is a valuable tool for reducing losses and streamlining procedures. The key to reducing inventory shrinkage is for all departments to participate in simplifying and optimizing their particular tasks effectively. You'll need to do inventory reconciliations regularly to keep track of your inventory statistics. Inventory checks provide several advantages, including saving money, reducing theft, and ensuring that your consumers get the desired items. If you need assistance with inventory reconciliation, you can check out WareIQ. WareIQ is one of India’s leading eCommerce fulfillment companies that utilize a strong technology infrastructure to provide a range of eCommerce fulfillment solutions, including inventory management and stock reconciliation. We give customers access to our advanced WMS that automatically tracks inventory across multiple fulfillment centers and selling channels, and automates multiple processes of inventory management to increase the speed and cost-effectiveness while reducing errors and issues. Stock Reconciliation: FAQs What is the goal of stock reconciliation?Stock reconciliation seeks to remove any disparities between inventory records and the physical inventory that is present in the warehouse. What is a stock reconciliation report?A stock reconciliation report is a report that summarizes the findings of an inventory reconciliation and the results of it, which enables businesses to identify any disparities and ways to mitigate them. How can inventory discrepancies be prevented?Some of the best ways to prevent inventory discrepancies are:- Check for computation errors- Re-count stock- Check for expired or damaged products- Verify outstanding orders- Employ consistent units of measurement- Check for similar inventory in other locations- Verify that the SKU or product identification numbers are correct How can WareIQ help you with stock reconciliation?WareIQ grants customers access to our custom WMS that is able to track inventory across multiple warehouse locations and online marketplaces and automates multiple processes to ensure that physical errors are mitigated.
June 22, 2022
What is Inventory Carrying Cost? How To Calculate it and Save on Inventory Holding Costs?
Inventory is a non-liquid asset that must be transformed into cash through sales for firms that sell physical goods. A company's profitability is determined by how well it controls this process. Carrying cost is essential to monitor since it accounts for 15-30% of a company's total inventory value. The expenses incurred by a corporation to retain inventory products for a long time before they are used to complete orders are referred to as inventory carrying costs. A firm may limit carrying costs closer to 15% of total inventory and optimize earnings using effective inventory management techniques. However, inventory Carrying costs can approach or surpass 30% of the complete inventory and eat into profitability if inventory control is inadequate. Understanding and measuring your business's carrying costs and implementing optimal inventory control procedures are necessary to achieve the former. What is inventory carrying cost? The sum of all costs involved with keeping inventory or goods in storage or warehouse is known as inventory carrying cost, also inventory holding cost or simply "carrying cost." It covers both hard and soft expenditures, such as your product investment, physical warehouse or storage space, transportation and distribution fees, taxes, insurance, and the employees required to handle the goods. Inventory carrying expenses are a fact of life for everyone who sells a tangible commodity. For example, selling a physical item will need to be retained as inventory at some point before reaching the end customer. Inventory Carrying Costs Explained Inventory carrying costs are an essential metric to use when analyzing whether or not your company is lean. For example, high carrying costs might indicate that your company has more inventory on hand than it needs to meet demand, that you need to change the frequency with which you make orders with manufacturers or distributors, or that you could improve your stock movement. Capital expenses, storage costs, service costs, and inventory risk costs are factors which add up to get inventory carrying costs. Capital expenditures include money spent on things and any interest and fees incurred if the goods were purchased with a loan. Storage expenditures, like a store/warehouse mortgage, might be set or variable, much like labour, utilities, and administrative costs. Service charges include taxes, insurance, and inventory management software, and inventory risk includes shrinkage, depreciation and product obsolescence. Why Do Businesses End Up Spending on Inventory Carrying Costs? Businesses suffer inventory carrying costs as a result of the necessity to have goods on hand because of the following reasons- Anticipation inventory, safety stock, and buffer stock - This is the total amount of merchandise maintained on hand to adjust for supply and demand changes.In-transit inventory. All inventory is in transit from one point in the supply chain to another.Dead Stock- Stock that is no longer available. Stock that has reached the point of expiry, obsolescence, or any other quality or demand decline makes it unusable.Cycled Inventory. Inventory that is maintained on hand to meet regular sales orders. What is a reasonable annual carrying cost for inventory? The average inventory carrying cost is determined by the industry and the company's size. Therefore, the cost of maintaining inventory varies greatly depending on the business. However, we can provide some rough averages. A frequently acknowledged optimal yearly inventory carrying cost, according to a 2018 APICS research, is 15–25 per cent. However, depending on the sector and the organization, annual inventory carrying costs might range from 18 per cent to 75 per cent. [contactus_uth] Why Should You Calculate Inventory Carrying Cost? According to ASCM, more than 65% of businesses do not calculate inventory carrying costs and instead rely on estimations. Inventory holding costs may account for up to a quarter of total inventory expenditures. As a result, they can impact a company's overall financial health. For example, it may have cash flow issues if a company cannot quantify the cost of maintaining goods on hands, such as through an inventory or stock control system. A firm might miss out on a lucrative investment or expansion opportunity because it has too much money locked up in inventory—without its management recognizing how much carrying expenses are holding it back. Calculating inventory costs is also essential for the following reasons: Making A Production Schedule Inventory carrying costs assist your company in rethinking and planning production for the best advantage. For example, if you know how much you spend on inventory storage, you can plan to arrange the manufacturing process and store it appropriately. You can only maintain a certain amount of things in stock that can be created rapidly. Similarly, you might stockpile more of the products that take longer to make. In this manner, the warehouse space is not taken up by everything. At any moment, only essential items with lower inventory carrying costs are held in the warehouse. Accounting Knowing your inventory carrying costs makes you less likely to run into cash flow problems. To guarantee that you know your working capital, you must understand the cash flow. Cash flow analysis can provide information about a company's liquidity. Carrying expenses for inventory are also high costs that many organizations overlook. This is why assessing the expenses is critical: if you know the exact price of retaining inventory, you can take steps to reduce those costs while increasing earnings. It will also guarantee that you can create more accurate financial accounts. Profits Inventory carrying costs allow you to determine the value of each item. Because you know the price of storing inventory and how much you collect when you sell it, this statistic may help you estimate the profitability of each item. Knowing how lucrative your inventory is can help you choose how much inventory to maintain and whether to keep additional stock. It also allows you to consider ways to increase earnings, allowing you to boost profits. Components of Inventory Carrying Costs Many expenses enter the equation of inventory holding costs, and when added together, they amount to a popular way for firms to lose money. Let's have a look at each component inventory holding cost includes- Opportunity Cost One of the essential components of inventory holding costs is the opportunity cost. When you spend more money on inventory than is required, you miss other chances. That money might be spent on things like better marketing to generate more leads and hiring more staff to increase efficiency, among other things. If you believe you are overspending on inventory storage, consider how you may save money. Operational Costs Administrative expenditures, which are included in inventory carrying costs, account for a significant portion of the total. It covers things like equipment depreciation, cleaning, and transportation. When you have a lot of inventory, your administrative costs will likely rise since you'll need more room to keep it all and manage it. However, to make the most of the space provided, you must keep administrative expenditures to a minimum. Capital costs One of the most expensive components of inventory carrying costs is the cost of capital. The interest and product price, as well as any additional charges, are included in the cost of capital. Businesses may reduce capital costs by precisely predicting with the right technology and structuring their purchases for maximum efficiency. To keep expenses down, try to negotiate pricing with your long-term suppliers. Insurance and Taxes When you have more merchandise, your insurance and taxes are more significant. This indicates that it's advisable to maintain a small number of goods on hand to fulfil demand. Therefore, the first approach is to prioritize items constantly in demand and store them in the warehouse, followed by the next most in-demand product. You may save money on insurance and taxes, lowering inventory carrying costs and improving cash flow. Employees' Costs Another expense that is included when determining inventory carrying costs is labour. You'll need workers to organize your items in the warehouse and transport them to various locations according to the specifications. Automation can help you save money on labour by bringing the most important objects closer to your grasp. Additionally, you can ensure the warehouses are designed for high productivity. Problems With Innovation There isn't enough time to think about innovation when you're continuously preoccupied with your inventory. Your clients may be asking for a certain modification, but you won't be able to focus on it if you're just focusing on the inventory you currently have. You may lose valued consumers as a result of this. One approach to guarantee you're concentrating on product innovation is to make sure your stock levels are optimized. Storage Costs It's also important to consider where you store your inventory because products take up precious warehouse space, which you'll have to pay for. The storage technique is particularly important since larger storage boxes and bins take up more room, resulting in higher overall storage expenses. If you have a warehouse, reconsider how you keep your items so that they are easy to find and fit snugly without taking up too much room. Handling Costs Many costs are covered by product handling. For example, the shipping label, product damage, and machinery are all included. When attempting to reduce handling expenses, consider if you really need all of the machinery you now have. You should consider if all of the equipment is required or whether you can get by with only some of it. You may reduce the inventory carrying cost by reducing handling costs. Obsolete Inventory Costs It's possible that your merchandise will become obsolete at some point. That is, when you sell it, it has no value since it is no longer helpful. When this happens, you'll need to get rid of it, which will come at a cost. If you don't want to end yourself in this situation, sell your merchandise while it's still valued. This can be accomplished through discounts or donations, ensuring that inventory does not go to waste. Shrinkage Shrinkage occurs when merchandise is lost after it has been purchased but before it is sent to the consumer. This might happen if there has been a theft or if the merchandise has been damaged in transit. When you have more stock, there is more likely to be shrinkage. You have the option of firing the employees who stole the stock. If inventory shrinkage is caused by damage, make sure the items are handled with care and transported with incorrect packing. Inventory Carrying Cost Formula and Calculation There are two methods for calculating your company's holding expenses. Formula 1 Inventory Carrying Cost = Total Annual Inventory Value divided by 4 Let's imagine a company's inventory is worth $100,000 every year. The carrying cost of inventory is $100,000/4 = $25,000. Retail or gross profit can be used to calculate your ending inventory. This method will provide you with a general approximation of your company's carrying cost. It is preferable to utilize the second calculating approach for a more precise result. Formula 2 Here’s an example of how to use this holding cost formula: Inventory Holding Sum / Total Value of Inventory x 100 = Carrying Cost (percentage) However, you'll need the inventory holding total to use the formula. Calculation of Inventory Carrying Costs There are major four components that makeup carrying cost is the inventory holding sum: Inventory Holding Sum = Capital Costs + Warehousing Costs + Inventory Costs + Opportunity Costs This is the proportion of total inventory value divided by total inventory value multiplied by 100 to get the inventory carrying cost percentage. Let's take a look at how it all fits together using an inventory carrying cost estimate as an example. Let's say the Annual average inventory cost is $1 million. Step 1 Compile a list of inventory holding totals. Costs of capital: $20,000 Costs of warehousing: $120,000 Cost of inventory: $75,000 Opportunity Costs- $25,000 Step 2 Determine the amount of inventory you have on hand. Capital Costs + Warehousing Costs + Inventory Costs + Opportunity Costs = Inventory Holding Sum Inventory Holding Sum = $20,000 + $120,000 + $75,000 + $25,000 inventory on hand is $240,000 Step 3 Calculate Inventory Carrying Costs Inventory Holding Sum / Total Value of Inventory x 100 = Carrying Cost (percentage) Carrying Cost (percentage) = $240,000 divided by $1,000,000 multiplied by 100 Carrying Cost (percentage) = 24% 5 Reasons a Company Holds Inventory It's not easy to get the perfect inventory balance. Many businesses believe that having too many things is preferable to running out and perhaps losing a transaction or damaging a client relationship. Here are a few other reasons why companies keep too much stock on hand, driving up their inventory carrying costs: Safety Stock Stocking only enough stock to meet predicted demand might be dangerous. That's why most businesses keep some safety stock, or excess inventory, on hand to deal with unforeseen circumstances like an increase in demand, a supplier delay, or a broken shipment. It's a good idea to have some safety stock on hand for popular commodities but do so sparingly because too much safety stock will result in needlessly high holding costs. Demands That Are Cyclical or Seasonal Retail inventory management is especially crucial since many businesses—particularly retailers—earn the majority of their yearly income in only a few months. In the months leading up to the winter holidays, and electronics merchant may notice a spike in order volume, but an inflatable pool toy maker may conduct most of its business in the spring and early summer. These businesses may build up big inventory reserves before the busy season begins in order to be prepared for that critical stretch. Inventory Cycles A corporation purchases cycle inventory after making sales estimates. This is the stock necessary to meet predicted demand for particular items; unlike safety stock, it is not intended to cover the unexpected. To keep up with consumer demand and produce sales, any products-based firm needs cycle inventory, also known as working stock. To store the proper quantity of cycle inventory, accurate predictions and cycle counting are essential. Inventory While in Transit Products that have been purchased but not yet received are referred to as in-transit inventory. Lead periods might be many months depending on where a supplier is situated and the type of goods. Thus inventory could remain in transit for a lengthy time. Businesses must account for these commodities in transit when planning future purchases, but because they aren't yet in the warehouse, it's easy to ignore them. This is especially true if you don't have a system in place to track the progress of all purchase orders. Obsolete Inventory Obsolete inventory is sometimes known as "dead inventory." These are things that a business no longer feels it can sell and is generally written off as a loss. Dead inventory may sit in a distribution centre or back room, quietly and steadily increasing inventory carrying costs without the knowledge of executives. 5 Ways Businesses Fail to Lower Carrying Costs There are several main sources of needlessly high holding costs, and any of them might make it difficult for firms to reduce this cost. Look at these potential difficulties if your inventory expenses appear exorbitant and you're not sure why. Using Excel and Old-School Techniques Because of their limited usefulness and lack of automation, spreadsheets soon become obsolete for businesses. Inventory reports generated using Excel spreadsheets, paper records, or other archaic tracking techniques are frequently erroneous and cannot be updated in real-time. And if a company doesn't know what it already has, it's more likely to overspend or buy the incorrect things. Rather than strategy and evidence, decisions are governed by gut instinct or best estimates. Demand Forecasting That Isn't Up To Date High holding costs are frequently caused by poor inventory demand predictions. If a corporation bases its estimates on faulty data, it may anticipate a surge in demand for a certain SKU and stockpile inventory, only to have sales fall significantly short of expectations. It may also make the mistake of assuming that just because a product was a great seller last quarter, it will continue to fly off the shelves for the following two. In either case, the corporation is left with a lot of surplus inventory that takes up precious space and costs money that might be spent elsewhere. Consider the term opportunity cost mentioned above. Failure to Recognize Trends Not only does proper inventory and production planning require correct data, but it also necessitates individuals who can successfully evaluate and understand that data. Employees must be able to see patterns in data and evaluate the implications. For example, if a purchasing manager fails to notice that sales for numerous goods fell off in the final month of the third quarter, he may make a large order for the fourth quarter, resulting in outdated inventory. Leaders must also consider how industry developments or larger economic movements may impact demand for their products. Low Inventory Turnover Ratio and Overstocking The inventory turnover ratio is a crucial indicator that indicates how frequently specific goods are sold and refilled over the course of a year. Purchasing choices are based on this ratio. When an organization has a poor turnover ratio for too many items, it faces high inventory carrying costs and, eventually, outdated inventory. This results in an overcrowded warehouse full of merchandise that is neither moving fast nor as valuable as it previously was. Flawed Inventory Management/Order Fulfillment Processes Those without a thorough inventory management plan, including those who utilize Excel or other old systems, will over-order to protect themselves. It's inescapable without a system that gives real-time visibility down to the SKU level, and shows reorder points based on lead times and current demand. Inefficient eCommerce fulfillment methods, however, can drive up labour expenses, while bad warehouse management system or architecture or storage procedures can drive up storage costs and make it easier to ignore current inventory. As a result, there is outmoded inventory, depreciation, and increased insurance, tax, and administrative expenditures. 10 Ways to Reduce Inventory Carrying Costs Companies may reduce inventory carrying costs in a variety of methods, some of which take little time and effort. The following are some smart ways to save money while keeping things in stock. Keep An Eye Out For Order Minimums. A supplier's minimum order quantity (MOQ) is the smallest order size that they will accept. Lowering the MOQ implies you'll have less stock on hand but will be able to purchase more frequently, lowering your inventory carrying costs. Smaller, more regular orders allow your company to be more flexible when demand changes. Developing strategic partnerships with your main suppliers is the greatest way to lower MOQ. When suppliers perceive that you are serious about building a long-term, mutually beneficial business relationship with them, it is simpler to negotiate cheaper orders. Other options for avoiding minimum order numbers include. If you know another business owner who needs the same stock, you may pool your funds and divide the shares among yourselves. Another option to lower your MOQs is to offer to pay your supplier a little more for less inventory, which might save you money in the long run and lower your inventory costs. Determine Reorder Point. Your inventory will not fall below your safety stock levels if you choose an optimal reorder point. It helps you save money on storage by notifying you when you need to get extra goods from your vendors. You will prevent shortage expenses, which is the danger of losing a client order owing to low inventory levels if you use a reorder point. You'll know when it's time to order additional shipments if you know what your reorder point is. It should be noted that as your company expands, this will get more difficult, as the reorder point for each product variety is different. Knowing your reorder point can assist you in avoiding ordering too much and risking obsolescence, as well as ordering too little and risking stock-outs, lowering your inventory carrying costs Reduce Supplier Lead Time. The lead time is the time it takes from the time an inventory order is placed until the products are delivered by the supplier. In other words, it's time it takes a supplier to complete an order. When supplier lead times are long, you'll need to have additional safety stock on hand in your warehouses to ensure that all of your customers' orders are fulfilled. As a result, you'll have higher holding expenses because you'll need to keep more goods. You may reduce inventory levels and, as a result, inventory costs by shortening supplier lead times. Developing solid ties with your suppliers is the best way to achieve this. Remember to emphasize that if they can minimize the lead time, you'll be placing more orders more frequently, which should benefit you. When it comes to replenishing goods, you may gain additional flexibility by negotiating shorter supplier wait times. The advantage is that it allows you to keep less inventory, which lowers your carrying costs and eliminates the long-term risk of retaining things that may become outdated. You'll need to adjust your order size and frequency to achieve this efficiently. Demand forecasting - the use of previous sales data to produce an estimate of a projected prediction of customer demand – is one approach to do this. It helps you to fulfil demand while reducing holding costs by not carrying too much inventory. Get rid of any merchandise that is no longer in use. Obsolete inventory is a problem that many internet companies face. When you overestimate a product's potential, you risk having a large number of goods that don't sell owing to a lack of client desire. The drawback is that it raises your holding expenses because you're maintaining merchandise that can't be sold and takes up precious warehouse space that might be better utilized. Monitoring the product life cycles of each of your items and making better predictions when purchasing are two ways to mitigate this issue. Get rid of obsolete stock. Obsolete inventory is a problem that many internet companies face. When you overestimate a product's potential, you risk having a large number of goods that don't sell owing to a lack of client desire. The drawback is that it raises your holding expenses because you're maintaining merchandise that can't be sold and takes up precious warehouse space that might be better utilized. Monitoring the product life cycles of each of your items and making better predictions when purchasing are two ways to mitigate this issue and reduce inventory carrying costs. After you've gotten rid of the outmoded stock, you'll want to keep it from resurfacing. You may achieve this by changing your demand forecasting depending on predicted future sales, ensuring that you purchase the right amount of stock. This allows you to significantly lower your inventory carrying costs while also ensuring that you are neither overstocking nor understocking. Improve your warehouse's layout. A structured warehouse allows you to arrange your products more effectively and enhance the general architecture of your facility, which lowers your carrying expenses. A chaotic warehouse, on the other hand, is more likely to have misplaced or damaged inventory, as well as higher travel costs, which is especially true in big warehouses where workers must traverse thousands of square feet for a single product. Putting your high-volume products up front in the staging area is the most efficient way to arrange your warehouse, as it will streamline your pick, pack, and ship process. Determine your fast-moving products by analyzing your inventory flow-through rates (or things that demand regular replenishment). By identifying these factors, you can prioritize putaway (the process of removing products from a receiving shipment and storing them in your warehouse) and choose warehouse sites that bring fast-moving commodities closer to staging areas. You may cut travel time and other related carrying expenses like forklift truck maintenance, labour hours, and more by strategically organizing your warehouse. Implement a Just-in-Time inventory (JIT) system. JIT inventory management refers to having the correct items and materials in the right place at the right time, as well as the proper number of materials to manufacture a product. To put it another way, JIT is a strategy of holding practically minimal inventory in your warehouse and instead ordering what you need as soon as you need it. It's a type of lean manufacturing that reduces inventory costs by ordering things and supplies just when they're needed, rather than weeks or months ahead of time. Furthermore, because you will only be storing a small amount of merchandise, you will not require a huge warehouse, lowering your eCommerce warehousing expenditures. JIT isn't ideal for every retail organization, but it is a tried and true approach to drastically decrease inventory holding expenses. Use consignment inventory. You may use consignment inventory to leave a portion of your inventory with your supplier until it is sold. As a result, your inventory levels are lower, and your inventory costs are reduced. Furthermore, because online sellers who use consignment inventory don't buy it until it's sold, unsold items can be returned. In general, things supplied under the consignment model are seasonal or perishable in nature. When client demand is unclear, it is extremely helpful to online sellers. Furthermore, by carrying the product on consignment, the online merchant assumes a lower financial risk because the commodity is not paid for until it is sold. Utilize Precise Demand Forecasting. Using precise demand forecasting is another approach for lowering your inventory carrying costs. Real-time monitoring of your business helps you know when you're running low on stock and need to purchase more. You may also figure out what your best-selling things are, as well as what your worst-selling items are and what demand patterns are. In other words, using accurate information to estimate demand allows you to buy exactly enough inventory to meet demand throughout the year, lowering your overall inventory costs by avoiding overstocking or understocking your warehouse. Once you've identified your slow-moving merchandise, you can concentrate on what's selling — the trick is to use tools to measure data correctly. Predictive data analysis assists you in forecasting the right quantity of inventory based on prior months' data, allowing you to make better business decisions in the future. You won't order too much and run the risk of running out of stock this way. Furthermore, constantly monitoring sales patterns allows your retail organization to minimize the amount of extra stock it carries, lowering storage and handling expenses. Consider Implementing An Economic Order Quantity System. Ordering a large number of items each month will reduce your order frequency and cost, but it will raise the amount of inventory you have on hand and your carrying expenses. Making modest but regular product orders throughout the month, on the other hand, will reduce your stored inventory and holding expenses while increasing your order frequency and cost. The Economic Order Quantity (EOQ) approach can be used to balance both of these results. The EOQ is the number of units a firm should add to its inventory with each order in order to reduce overall inventory carrying costs. The EOQ method is most commonly used as part of a continuous review inventory system, in which inventory levels are constantly checked, and a predetermined amount is purchased if a product's stock level exceeds a certain reorder threshold. Try To Keep Your inventory From Being Overstocked or Understocked. Overstocking occurs when you purchase more merchandise than you can sell, lowering your profitability. This occurs because you're investing in a stock that you won't be able to recoup through sales. Because you're storing stuff that can't be sold, your holding expenses will rise. By anticipating sales based on previous data, you may limit the risks of overstocking and understocking — and thereby save your holding costs. Based on how successfully your sales went in a prior period (e.g. monthly), you may guarantee that you will keep more precise stock levels in the future. You may also set up automated notifications to notify you when your stock reaches a specific level, letting you know when it's time to restock. An inventory and order management system can help you do this. Inventory Management Software Reduces Inventory Carrying Costs Investing in an inventory management solution is a strong way for organizations to decrease inventory carrying costs. This programme provides a variety of options for optimizing inventory levels and lowering all of the above-mentioned costs. The visibility that an inventory management system provides is invaluable to any goods organization, as it allows buying, operations, and supply chain experts to make more informed decisions. Not only can the solution manage current stock levels, but it can also track the status of any outstanding purchases and client orders. There will be no more "forgetting" about merchandise in a shipping container en route to your facility. This system will also provide standard receiving, putaway, and fulfillment procedures, ensuring that each item can be tracked from the time it reaches your warehouse to the time it is delivered to the consumer. Inventory management software allows businesses to be proactive, allowing them to change purchase orders, sales strategy, warehouse layouts, and other factors to solve issues before they become costly. An inventory management solution's reporting features are also quite useful. For example, a company may see their inventory turn or sales data for a certain product category or SKU at any moment. It can keep track of how much money is lost to depreciation or spent on taxes and insurance over the course of a quarter or year. This information provides decision-makers with the information they need to keep inventory carrying costs under control. A buying manager could look at the sell-through rate for the previous month and decide to cancel a few forthcoming orders, redirecting the funds to a fast shipment for an item that has seen sales treble in the last two weeks. This data also aids finance and operational management in developing more precise estimates. Leaders should be very cautious about the things they maintain in their stores and warehouses, as well as the quantity they keep. In the end, the more strategic an organization's inventory management is, the cheaper its holding costs will be. In the end, avoiding out-of-stock and overstock situations requires ongoing balance. Even with best-in-class forecasting skills, getting inventory planning just right is nearly hard. However, tying an inventory management system to a bigger ERP platform is a vital step in lowering holding inventory costs since it allows for improved forecasting and provides the real-time information that any products-based company requires to make informed inventory choices. Conclusion- Your business and Your Clients Benefit From Lower Carrying Costs. Don't leave your firm in the dark when it comes to the expense of inventory storage. You may detect and reduce inventory inefficiencies and develop benchmarks to guide future business choices by calculating inventory carrying costs on a regular basis. More favourable profit margins and increased cash flow are aided by lower carrying expenses. This money may then be re-invested in your company to help it develop, with the advantages being passed on to your consumers. WareIQ As A Inventory Management System Controlling inventory holding costs is good for your company's financial health and may help you improve a variety of elements. Inventory management becomes easier and more efficient with WareIQ. You may pick from a variety of units of measurement, track production activities, establish reorder levels, monitor product shelf life, and more with WareIQ. It also offers advanced features like job work and the bill of materials that make inventory management a breeze. WareIQ offers a full stack eCommerce fulfillment and inventory management system that simplifies inventory management for small and medium-sized businesses. You may make informed decisions based on intelligent reports that give an overview or a comprehensive, in-depth examination. [signup] Frequently Asked Questions Why is it vital to figure out how much it costs to have goods on hand?Knowing the inventory carrying costs helps your company to identify areas for improvement and maybe modify your processes to increase cash flow. Are inventory holding and inventory carrying costs the same?Yes, inventory carrying costs and holding costs are both computed in the same way and encompass the overall expenses of retaining unsold merchandise. How can I figure out inventory carrying costs?To calculate your inventory holding costs, you'll need to know the cost of your storage solution, the cost of staff pay, the cost of inventory depreciation, and the cost of opportunity expenses. Your holding costs percentage is calculated by dividing the entire cost of these four items by the total value of your annual inventory.
June 22, 2022
What is a Fulfillment Center? Top 10 Benefits of Using Fulfillment Warehouse for eCommerce Businesses in 2022
One of the most prominent challenges facing businesses looking to expand into the eCommerce space is identifying where to store inventory and how to implement a strategy to ensure that incoming orders are located, packed and shipped as soon as possible. While many big MNCs have tons of staff to help on this front, small businesses, oftentimes, do not have that same luxury. This is where a fulfillment center would make life tremendously easier for these companies. What is a Fulfillment Center? A fulfillment center forms a critical part of the supply-chain network and takes care of executing the entire process of order fulfillment, from receiving an order, locating it in the warehouse and processing it, right through to its packing, loading, dispatch and transportation. It acts as a logistical hub, around which goods are transported from the seller to the customer. Fulfillment centers are used by both 1st party fulfillment services such as Amazon FBA and 3rd party fulfillment services, such as WareIQ. A Fulfillment center works efficiently to deliver orders received by online customers within the stipulated time. In doing so, it manages the fulfillment process on behalf of eCommerce firms which is critical for their success. [contactus_lilgoodness] How Does a Fulfillment Center Operate? As mentioned above, a fulfillment center acts as a hub for all logistical activities needed to transport a seller’s goods to their customer – this is referred to as the order fulfillment process. Since numerous factors are involved in fulfilling orders and warehouse management, the minutia is often swept under the carpet and ultimately causes severe problems such as supply-chain bottlenecks.With 3PLs, the inventory is stored in its fulfillment center. Upon receiving an order from a customer, the products are selected, packed and shipped. B2C orders are delivered directly to the customer’s address, while B2B orders (large volumes, mostly) are shipped to large-sized retailers.When a seller outsources its requirements to a 3PL fulfillment company, it can focus on other critical business functions. In contrast, a 3PL handles its inventory and ecommerce logistics, including order-receiving, packing, loading, shipping, negotiating transport rates, reducing fulfillment costs, managing order returns, warehouse management and handling scale efficiently. Top 10 Benefits of Using a Fulfillment Center for eCommerce Businesses Listed below are 10 significant reasons why eCommerce businesses should use a fulfillment center: Ability to Focus on Core Business Although the tasks of order management and shipping are crucial for success, they can be easily outsourced to a 3PL fulfillment center. Not only can clients benefit from the expertise of the 3PL but they now have more time to focus on their core business tasks such as marketing, expanding their product portfolio and refining existing ones, without the burden of having to manage customer orders on their own. Benefit from 3PL Fulfillment Expertise Collaborating with a fulfillment company makes your entire process seamless – they are the experts in the field and outsourcing your inventory storage, packing, loading, dispatch (etc.) helps you gain from their expertise. Logistics and distribution, especially in today’s global markets with complex ecosystems and processes, is a challenging and, often an overwhelming task for any seller. Outsourcing this to 3PL experts that handle these complex processes efficiently on a daily basis, is the correct way to go – your business will gain immensely from their expertise and know-how. Utilize Inventory Outsourcing & Reduce Operating Costs Unless a seller operates a company of some scale, the task of managing an entire warehouse becomes expensive and cumbersome. Outsourcing this task to a fulfillment center is far more efficient. eCommerce firms almost always start small and have limited space e.g. garages, basements etc. Outsourcing your inventory to a fulfillment center helps to reduce operating costs. Online businesses get access to inventory space without any upfront investment in infrastructure. Often, the prudent time to make the shift is also once scale starts kicking in. Benefit From an Increase in Scalability 3PL company and their fulfillment centers are connected with global supply-chain networks and equipped with significant resources to manage scale. With the number of online shoppers only slated to go higher, you benefit from their international expertise and can scale your business globally. With this scale, you can also take advantage of storing your inventory in as many fulfillment centers as you require and can efficiently manage your inventory across all of them using the tools that 3PL companies often provide. Benefit From an Extensive Network of Warehouses 3PLs have an elaborate network of warehouses and fulfillment centers and often follow a hub-n-spoke model. This means they are closely located to your customers. Therefore, the lesser distance your cargo has to travel, the lesser the delivery time and cost. Don’t forget that customers today are bred on super-speed shipping, free shipping and discounted shipping. Access to a larger network of fulfillment centers means that you can strategically store your inventory closer to areas of high demand or near transport hubs for easy shipping. Access to Modern Technology Quite expectedly, 3PL companies that operate fulfillment centers invest big dollars into cutting-edge software systems to improve their efficiency. eCommerce firms benefit from this without the CapEx required or hiring resources to operate it. These advanced software solutions can track and manage inventory across platforms and selling channels, and can automate multiple processes involved in warehouse management to mitigate any errors or miscalculations that could occur. Utilization of Economies-of-Scale Fulfillment warehouses operate on a tremendous scale, manage hundreds of clients and work across multiple shippers and transporters. Therefore, they also benefit from economies of scale and can negotiate discounted rates across their operations including packing materials, assets, warehouse space, software and staffing, not to mention shipping rates, which account for up to 70% of fulfillment costs. Access to Bulk Discounts Since 3PLs operate on a global scale, they benefit from it - bulk delivery discounts, zone-based shipping rates and frequent pickups are just some advantages of scale. Additionally, 3PL firms like WareIQ partner with multiple shipping providers and always suggests the fastest and cheapest options so firms can consistently save money on a massive scale. This provides an incentive for firms to partner with 3PL companies and use all the advantages that come with it. Access to Professional Customer Service While customer services is an important aspect of eCommerce retail, sellers can also take advantage of better customer service when they opt for a 3PL fulfillment center. If sellers face any issues, they are just a call, message or email away from getting them resolved. Additionally, many 3PL companies offer outsourcing facilities for customer support so sellers can transfer this enhanced customer support to their customers which will result in increased satisfaction. Access to Customized Packaging eCommerce customers only experience their product when it arrives at their doorstep and a damaged or messy package isn’t going to cut it. Fulfillment centers offer customized packaging solutions that keep packages attractive and fresh - an important element in building customer satisfaction. Sellers can choose how they want their packaging to look and can highlight their brand rather than sending shipments in a bland box or package. Access to Data Analytics Modern logistics management software used by 3PLs tracks, collects and mines data that is generated across the entire fulfillment process. This results in deep insight for managers who can use this as the bedrock for decision-making, thereby leading to more efficient planning and implementation. These tracking facilities are generally available across multiple fulfillment centers and a variety of selling platforms to keep sellers well informed about their inventory at all times. Fulfillment Centers vs Warehouses: Differences and Myths Busted There are innate differences between the two and the roles each plays in fulfilling customer orders. While a warehouse simply stores inventory, a fulfillment center manages the process of ordering and delivering products to customers on time to ensure customer satisfaction. Sellers stock their inventory in 3PL fulfillment centers, situated across numerous locations. This reduces delivery times and costs. Long-Term vs. Short-Term Storage The main objective of a fulfillment center is to manage the entire process from customers placing orders till the order is successfully delivered whereas a warehouse is a storage location that is just one piece of the entire gamut of operations that a 3PL conducts. Ideally, inventory should not sit in a fulfillment center for more than 30 days since this is long-term storage and attracts higher storage fees. The seller and 3PL must communicate regularly about stock levels, re-order levels, and maintain appropriate levels of inventory based on the frequency of orders and time taken to reach customers so that out-of-stock problems don’t arise. Range of Operations While a warehouse often remains inactive since it is used primarily for stocking inventory, a fulfillment center provides comprehensive solutions and is constantly abuzz with activity, including: Receiving, packing, loading and dispatching ordersReceiving and stocking inventoryPreparing order documentation and shipping labelsKitting products (if required)Processing order returns Comparatively, activity in a warehouse is limited to receipt and dispatch of inventory. Order Pickup Frequency Since a fulfillment center gets out orders immediately on receipt, they work with several shipping companies so that goods are picked up at least once a day and often more. This ensures order delivery within the time windows promised to the customer. Often, the orders have specified delivery times (e.g. same-day, 24-hr, 2-3 days etc.) and an eCommerce fulfillment center will have various cut-off times based on order details. Warehouses, however, schedule less frequent pickups regardless of the delivery speed specified by the customer since this enables them to stay cost-effective. They also use freight companies that adhere to pre-defined pickup windows. This can often cause delays and is also inflexible. Why Do You Need a Fulfillment Center for Your Business in 2022? Speedy Delivery Since a fulfillment company works with several shippers, their shipments are picked up at least once daily, ensuring timely deliveries. Complete Automation Modern fulfillment centers use updated technology throughout the fulfillment process so that their ecommerce clients can track order processing, inventory movement (etc.) in real-time. Improved Scalability While scaling up is the goal of every business, its mismanagement can have disastrous results. Today’s fulfillment centers are modern giants with numerous resources that tackle scale comfortably and professionally. Focus Retention Managers in eCommerce firms must focus on strategic tasks that scale the business and maintain profitability e.g. product management, marketing and customer service. Tasks like order fulfillment and inventory handling can be easily outsourced to 3PLs. Best Tips for Inventory Management Using Fulfillment Centers Modern eco-systems and borderless markets exert inordinate pressure on online resellers. 3PL fulfillment warehouses are masters at optimizing inventory management. Some of the best ways you can use them are suggested below: Reduce Costs via Cross-Docking & Wave-Picking Using cross-docking decreases handling as well as storage time and enables firms to manage warehouse inventory seamlessly. Wave-picking is another method of tackling complex shipping systems. Both reduce carrying costs and shipping costs. Stay Atop Your Supply Chain Several glitches can often disrupt an otherwise smooth supply chain. While events are sometimes unavoidable, understanding your supply chain enables you to stay on top of mishaps that sometimes throw things off-kilter. Re-Modify Your Floor Plan Often overlooked due to their simplicity, efficient floor plans are still a proven strategy to increase efficiency. However, supply and demand are forever fluctuating and floor plans should be adapted according to the situation. Minimize Pilferage Employee monitoring and security measures help minimize pilferage, and the results are often highly beneficial. This enables companies to minimise inventory shrinkage and loss due to such incidents which can have a negative impact on the company. Track Product Success Optimized inventory management means you can track sales of each product. Using this data, firms gain insights into their inventory movement. For example, the bestsellers can be stored in places where it is easier to locate, replenish, and ship out. You can follow a similar method to monitor your top clients and their orders. Similarly, you can identify your laggards and minimize their stock levels or even phase them out entirely. Utilize Inventory Management Systems If you are still using legacy inventory software, you are bound to struggle. The modern, automated software systems of today, with their large data-crunching abilities, cloud connectivity, real-time data processing and insight-generation using AI and ML tools, enable you to manage your inventory quickly and efficiently. Minimize Shrinkage Shrinkage is a fancy term for breakage, damage and theft. Select a fulfillment company that offers a zero-shrinkage policy which means that once the fulfillment center confirms and records your products, all items will be accounted for. In case products go missing or get damaged on their watch, they have a reimbursement policy. Main Challenges with Fulfillment Centers Slow & Free Shipping With eCommerce behemoths like Amazon increasing customer expectations with their same-day delivery and free shipping, all eCommerce companies are expected to match up. If your fulfillment center or even your specific business model is unable to do so, then you risk customer dissatisfaction. Limited Locations If your fulfillment comapny doesn’t have an elaborate network of strategically placed fulfillment centers that minimizes the distance and time taken for deliveries, it will result in extended delivery times. The resulting customer dissatisfaction would be inevitable. Complicated Fulfillment Software While using modern, automated fulfillment software is a great strength of using a fulfillment center, they can often be complex and intimidating for eCommerce companies to deal with. Poor integration will also confuse and the results are potentially disastrous. Damaged Goods & Return Inefficiency For eCommerce firms without physical locations, returned or damaged items are received back at their fulfillment center. But, if your fulfillment center doesn’t efficiently manage the order-return process, the costs are tremendous e.g. irate customers, restocking expenses and inventory losses. Inept Customer Service We live in uber-competitive times and customer satisfaction is the most important metric in building a sustainable eCommerce business. When you use a fulfillment center, they are typically responsible for your customer service. However, if they don’t handle this efficiently by deploying omni-channel options, you risk aggravating customers. Out-of-Stock Costs While this will probably never go away completely, the trick is to minimize it. If not, your customers will discover other options. If your fulfillment partner doesn’t deploy the best practices in inventory management along with you in projecting demand patterns, your stock-out costs could burn a deep hole in your profits. Conclusion: Why it is in a Business's Best Interest to Partner with a Fulfillment Center? Ultimately, the benefits are significant for sellers that partner with a fulfillment center to handle their fulfillment. A 3PL becomes your trusted business ally and supports your business growth. The business can then focus more on refining its product and promoting it rather than worry about inventory management and order fulfillment. One such company that provides fulfillment centers and a host of other products is WareIQ. WareIQ, is the leading provider of full-stack eCommerce order fulfillment services for some of the most reputed brands in India. WareIQ offers a full-stack platform for eCommerce companies to enable same-day delivery and next day delivery to customers – an Amazon Prime-like experience but accessible to everyone. WareIQ is one of the very few fulfillment tech companies in the world that have same-day delivery service for their customers under their product “WareIQ RUSH”. With a superior WMS platform, WareIQ handles the entire range of warehouse operations in the eCommerce fulfillment process, ranging from inbound and outbound logistics such as scanning and quality checks, 100% accurate pick and pack, multi-channel inventory management etc. At the same time, WareIQ customers reduce logistics costs and increase shipping speed due to better negotiations with shipping partners, economies of scale, scope in warehousing, strategically placed warehouses and data-driven decision making. WareIQ’s customers save resources that are typically spent on establishing infrastructure. We offer you the flexibility to store inventory in one of several fulfillment centers as per your business needs. Our team’s expertise in logistics and our extensive warehousing network across India enables greater influence during negotiations, resulting in volume discounts for our clients. [signup] Fulfillment Center FAQs (Frequently Asked Questions) What is a fulfillment center?A fulfillment center is a facility similar to a warehouse, where 3PL fulfillment service providers store, process and ship products owned by online & offline retail businesses. They handle the logistics that are required to complete an order to the end customer's door as well as returns. What is the difference between a warehouse & a fulfillment center?A warehouse’s function is only to store products for a longer duration, whereas a fulfillment center's role is to efficiently meet customer shipping expectations starting from storing inventory, packing, shipping, managing returns etc. Does WareIQ have its own fulfillment center?WareIQ has a pan-India network of 40+ fulfillment centers, micro-fulfillment centers, warehouses & urban dark stores located close to customers. Is a fulfillment center capable of handling all types of products?No. If you're selling perishable goods, you'll need a fulfillment center with a cold storage facility. If you're selling heavy-duty tools or industrial equipment to businesses, you'll need a fulfillment center that can meet safety requirements and offer customized packaging. WareIQ provides both cold storage facility & customised packaging to its customers in the food & beverages categories like Epigamia, lil’goodness and much more & in the pharmaceuticals category like Gynoveda. Is a fulfillment center capable of handling a big volume of orders?Yes. A fulfillment center specializes in just that. Fulfillment centers are massive facilities with automated processes and a large, skilled staff to manage the needs of many eCommerce companies. Can we get real-time updates from fulfillment centers?You certainly can! When eCommerce businesses need to provide customers with real-time updates on the status of their orders, they need the fulfillment center and shipping company to do the same. WareIQ has a branded tracking page of its own where the customers get real time updates via mails, messages, whatsapp etc. Can a fulfillment center provide 1-day and 2-day delivery?A fulfillment center is capable of providing 1-day and 2-day delivery as well as even speedier delivery options, as long as the fulfulfillment companies offer these services. Do fulfillment centers handle inventory management?Yes. Most fulfillment centers, such as the ones offered by WareIQ, use advanced Warehouse Management Software (WMS) to provide inventory management and automates many aspects of warehousing processes.
June 22, 2022
How Can Inventory Shrinkage Impact Your Business? 6 Causes and Ways to Prevent it From Occurring
Inventory plays a major role in the ability of eCommerce retailers to fulfill orders. Without enough inventory in stock, many problems can occur that ultimately lead to a disruption in the order fulfillment process which in turn leads to unhappy and dissatisfied customers. A common occurrence that leads to this is inventory shrinkage. Read further to understand what inventory shrinkage is, how to calculate it, causes, impacts, and preventative measures. What is Inventory Shrinkage? Inventory shrinkage is a common issue that plagues businesses and results in losses in different departments for companies. Inventory shrinkage can lead to a profit drop in your business unless it is addressed properly. Inventory shrinkage refers to inventory that is reported in accounting records but does not exist in the physical inventory. It is essentially the unplanned loss of inventory due to a variety of factors, some of which are listed below: Inventory theft, damage, miscounting, improper units of measure, evaporation, and other difficulties can lead to high inventory shrinkage levels.Supplier fraud can also create inventory shrinkage in retail when a seller pays a supplier for a particular number of products to be supplied but the supplier does not dispatch all of the goods. As a result, the recipient records the entire cost of the products on the invoice but has fewer units in stock; inventory shrinkage is the disparity between the records and the actual stock that the seller has.Shrinkage also causes profit loss. This is especially problematic in retail, as firms typically run with minute margins, have significant turnover, and are required to sell a large number of goods to remain profitable. Losses arising out of shrinkage will result in merchants being unable to repay the cost of that proportion of inventory. This is because there is no inventory to be sold or returned due to inventory shrinkage. [contactus_gynoveda] How to Calculate Inventory Shrinkage? Inventory shrinkage is determined by subtracting the total inventory received after the cycle count from the total financial worth of all inventory for the fiscal year or quarter. Inventory shrinkage is most commonly computed using the inventory shrinkage rate formula. The following are some of the most important factors to consider while calculating the inventory shrinkage rate: Determine how much inventory you have on hand.Physically count the number of items in your inventory.Subtract the total from the sum in your accounting journal.Divide the amount by the value of inventory to arrive at a percentage. The inventory shrinkage formula is as follows: Inventory Shrinkage Rate = (Inventory Shrinkage / Recorded Inventory Count) * 100 To understand it better, consider the following example: Suppose your business has 7000 pieces of a given commodity. During a physical check, you realize that there are only 6200 units. Thus: Inventory Shrinkage = 800 [7000 (Actual Inventory) – 6200 (Physical Count)] Inventory Shrinkage Rate = 11.4% (800(inventory shrinkage) /7000(actual inventory)) *100 Thus, your inventory shrinkage is 11.4% which implies that you have lost 11.4% of your inventory due to shrinkage. 6 Prominent Causes of Inventory Shrinkage in Retail Fulfilment Inventory management is a crucial aspect of running a business. It can have a significant influence on the financial health of a company. Inventory is the means by which a business generates money, which appears as an asset on its financial statements. Inventory shrinkage reduces a company's potential revenue and profit. Shrinkage can also lead to price increases, reduced employee bonuses, and a drop in total sales. The primary causes of Inventory Shrinkage are as follows: Vendor Fraud In organizations with complicated supply chains, inventory is sometimes managed directly by suppliers and vendors which are external parties that are not directly affiliated with the firm. Theft might happen while the items are loaded or unloaded while being transported from the supplier's storage units to the business premises. Deliveries should be monitored and documented each time they enter or depart from the business premises as pilferage can easily occur, especially if the inventory is not being monitored by the business directly. Administrative and Paperwork Errors Even though most firms have switched from paper and spreadsheets to more advanced digital record-keeping, administrative and paperwork mistakes remain one of the biggest causes of shrinkage. Pricing errors, unintentional reorders, missing or extra zeros, and decimal point omissions are all examples of administrative errors that can occur even on digital systems if they are not entered properly initially. Even if the organization relies on automated systems, inventory should be physically tallied and re-counted to reduce mistakes. Damage Anything that causes the inventory to become unsellable and not be in the same condition that it left the manufacturing line is referred to as damage. This covers things like shattered packaging, splits, rips, and water damage, among other things. Often, the inventory can be damaged while in transit. Products also suffer damage when they expire. If any of these incidents occur, sellers are forced to either sell what was once a perfectly serviceable good as a refurbished product or if the damage is severe, there are chances that it needs to be scrapped entirely, which means that the seller has incurred the expense of producing that unit but cannot recover the amount by selling it. Human Error Miscounting, inaccurate measurement units and improper portioning of food, drinks, and other types of inventory are all examples of typical human mistakes that lead to inventory shrinkage. Employees may store items inappropriately by mistake, resulting in waste or harm. This can even occur with advanced inventory management software in place if the person who is entering the numbers makes a mistake. This leads to confusion further down the supply chain and can have an impact on order fulfillment. Waste and Spoilage Although not all of the products that are damaged are discarded, some of them are perishable and once they are expired or spoiled, they can never be recovered. Perishable commodities include health care, food, dairy, medication, and various other categories of inventory. When a product is not sold before its expiration date, it goes to waste. Because you cannot sell expired products, the expense is accounted for as inventory shrinkage and it results in a loss for the business. Theft Employees must not only protect the business from inventory shrinkage but from other dishonest employees that might steal from the company. Employees may steal some of the company stock to make up for issues related to underpayment, lack of appreciation, or undervaluation they believe they are receiving. They may be able to rapidly conceal inventory theft since they are corporate insiders that know the inner workings of every operation. When one item vanishes from a large supply of over a thousand products, the employer is likely unconcerned and the incident goes unnoticed until inventory is counted. Instead, the employer/accountant will believe that the merchandise went missing due to administrative mistakes when packaging or loading products onto a vehicle and will mark it as such. Impacts of Inventory Shrinkage Loss of Money Profit margins are eroded as a result of shrinkage. Whenever an incident of theft, damage, miscounting, or other factors that lead to inventory shrinkage occurs, the business loses out on the opportunity to generate revenue and cash from those items. It also impacts your earnings because you must absorb the price of acquiring the items while making no profit on that item in return. Because retailers rely on thin margins to stay competitive, any event affecting profitability will likely have a negative impact. Loss of Inventory Buying items for your business and having a few of them stolen or damaged is an inexplicable feeling. Companies that lose things owing to inventory shrinkage can never retrieve them. This could occur in multiple ways whether it is employees or delivery personnel stealing unnoticed items, goods being damaged due to human error or while in transit or there is a miscommunication while counting inventory. Every unit of inventory is valuable for a business because it is the means by which they recover their expenditure and if any of it is unaccounted for, the business loses out on that revenue. Miscalculations in Tax and Accounting Missing goods due to shrinkage may result in miscalculations in accounting procedures. Audit and tax issues might arise when accounting books are not aligned, which could have dire financial and legal consequences for the business. Thus, if you have inventory shrinkage issues, be cautious with your accounting books and ensure that they tally. Preventative Measures for Inventory Shrinkage Though inventory shrinkage in retail is a persistent problem, it can be curbed and dealt with in several ways. Irrespective of whether you have a warehouse or your own store, any combination of these measures below may be effective in reducing inventory shrinkage Use Inventory Tracking It is not difficult to track products. Tracking your inventory can help determine whether a piece of merchandise has vanished from the warehouse or the retail floor and due to what reasons. There are several methods for keeping track of your inventory. You can begin by labelling each product with a tagging system. You can follow the movement of any product by using this method, even if you are not physically present.RFIDs are another option that can aid in decreasing shrinkage due to theft. RFID tags are becoming increasingly popular because they allow businesses to track goods as they move about the store and even trigger an alert when they leave the premises. Have Periodic Counts of Inventory A periodic count of inventory can help you keep track of your stocks on a routine basis to save time. Instead of using Excel, which is standalone and not synchronized to anything, it is advisable to employ techniques such as inventory management software, that can maintain inventory counts which are updated in real-time.You might use inventory cycle counts to do this. Inventory cycle counting is a method of having your pickers perform inventory counts on segments of your stock on a regular basis.It is frequently associated with the use of a barcode inventory system.It allows you to keep a more precise stock count at all times. Conduct Audits If you conduct periodic inventory audits, your employees will understand the importance of inventory to the company's profitability and bottom line. Management might perform inventory audits on smaller amounts of merchandise more often, sometimes on a daily basis, to keep personnel on their toes. This form of audit is known as "cycle counting" and is an excellent approach to daily tracking of inventory.You can also use accounting to compare the amount of available stock at your physical location to the amount of stock recorded in your accounting system. This process is known as stocktaking and ensures that the physical inventory count and the accounting records are in sync. This sort of audit does not have a specific time frame. Use Strict Security Measures A robust surveillance program can help reduce inventory shrinkage while also assisting with inventory audits. Try installing and positioning surveillance cameras around all of your stock locations.The theft warning signs will assist you in reducing inventory shrinkage.The most comprehensive security for your inventory stockpiles is CCTV and warning indicators.You will have a complete awareness of what's going on in your shop if you use video monitoring. You may also identify who stole from your business using video recordings, giving authorities a place to start their investigation in case of any theft. Since your employees know that they are being watched and tracked, they will be less inclined to steal if you install video surveillance. Divide Responsibilities If one person has access to receipt recording and processing, they may feel compelled to falsify the reports for their own personal gain. You may avoid this by delegating receipt recording and processing to various staff or at the very least, for quality control purposes.By doing this, you can spread the responsibility as well as the accountability for proper inventory management to minimize inventory shrinkage. Make Employees Aware Employees may be unaware of the consequences of inventory shrinkage in retail. They must understand that a minor mistake or error can have a significant financial impact which may also impact their pockets if the business goes under. Use this as your chance to explain how shrinkage impacts them, both directly and indirectly, such as how it reduces promotions, salaries, and employee profit-sharing, among other things.However, as an employer, you are responsible for providing them with the tools they require to reduce mistakes and carelessness.This entails having simple inventory systems that don't need much technical expertise to learn. You can then provide general training and offer sufficient onboarding for new employees. Partner With a 3PL Third-party or 3PL logistics companies assist eCommerce businesses by storing goods in the various fulfillment centers, picking and packing procedures, and shipping orders. They have the resources to keep your goods safe and secure while allowing you to outsource fulfillment, which may be costly and inefficient to operate in-house.Most 3PLs offer comprehensive information and technology to assist you in keeping track of stock levels and reducing inventory shrinkage.Small and medium-sized businesses often do not have access to such advanced infrastructure so employing can instantly limit errors and reduce inventory shrinkage. Conclusion: How Can 3PL Companies Like WareIQ Minimise Inventory Shrinkage? Inventory shrinkage may be eroding your revenues without your knowledge. It can have several negative consequences for your company and may impact the relationships between your company and suppliers and also between members of your team. Hence, it is essential to prevent inventory shrinkage to the maximum extent possible. To that end, you can utilize the services of 3PLs such as WareIQ, which offer several professional services like inventory management and order tracking, to ensure that you are constantly aware of your stock flow which is especially useful for companies that are expanding and are finding it difficult to manage eCommerce operations on their own. WareIQ is a burgeoning eCommerce platform that uses highly advanced technology to provide solutions to every eCommerce requirement that retailers have. A few of the services we offer include: We can assist in managing your inventory turnover rate and lowering your inventory carrying expenses to save money for your company.We employ various tactics to limit problems such as inventory shrinkage. As a result, if you outsource your fulfillment operations to us, you will be able to minimize your inventory shrinkage and maximize your profits.We offer services such as an RTO Shield, NDR, and an app store to enhance the productivity of your business.We have a state-of-the-art WMS that can keep track of your inventory across multiple platforms and fulfillment centers to prevent inventory shrinkage and can also integrate with multiple eCommerce selling platforms. Inventory Shrinkage: FAQs What is an acceptable inventory shrinkage level?Generally, there should not be any tolerance for inventory shrinkage and it should be limited to below 1% if possible. Who’s responsibility is it to control inventory shrinkage?It is the responsibility of the company and all its employees to work in tandem to stamp out inventory shrinkage as it not only affects the business’s profits but also employees’ salaries and bonuses. What are some examples of inventory shrinkage?Inventory shrinkage could occur through theft, damage, expiry, accounting errors, and many other ways. How can WareIQ’s WMS help prevent inventory shrinkage?By keeping an accurate track of every transaction of inventory, automatically performing periodic inventory counts that can be customized by users, and automating many inventory management tasks, the chances of inventory shrinkage occurring are instantly lowered.
June 21, 2022
Inventory Position: Definition, Importance and 3 Ways To Position Your Inventory In 2022
To be a successful eCommerce company, you need to ensure that your inventory is optimized in every way be it in management, tracking, or storage. Inventory is the key sellable component of your business so it needs to be taken care of. The way inventory is stored and organized can have a huge impact on the speed of fulfilling orders. It is key for businesses to focus on attaining a productive inventory position. We will take a closer look at the meaning of inventory position, its importance, and the methods used to do it. What is Inventory Position? The word inventory position refers to where and how inventory is housed on storage racks, as well as where inventory units are stored throughout the supply chain such as in stores, warehouses, and production lines. When inventory placement is optimized, SLAs for order fulfillment are satisfied while logistics and inventory costs are kept low. Whether it is in-plant, regional, or field warehouses, inventory positioning refers to the strategic placement of distinct commodities in the product line. Because inventory positioning affects facility decisions, it must be taken into account in the logistics plan. eCommerce organizations can enhance warehouse efficiency and fulfillment speed by utilizing the correct inventory placement strategy to know where to put their goods so that orders are delivered on time and without errors. Inventory position in operations management may also be used to determine the overall amount of inventory possessed by a store in the context of inventory accounting. To calculate inventory position, use the following formula: Inventory position = (on-order inventory + on-hand inventory) – backorders The Goal of Inventory Positioning The need for inventory arises for sellers who want to sell and deliver products to customers within the stipulated time. Companies must understand that they need inventory to sell. Businesses cannot request finished products from a manufacturer after a customer has already placed an order. Keeping inventory enables retailers to instantly fulfill orders. So let us understand what is the goal of inventory positioning before venturing into the details of the positioning of the same. [contactus_gynoveda] Importance of Inventory Position in Operations Management Your operational efficiency, operating expenses, and capacity to please consumers are all affected by where and how you store your goods, both in terms of storage and in your supply chain. Physically situating your products to be easy to discover and easily accessible at the warehouse level makes selecting easier, which increases the overall fulfillment speed. It also reduces the chances of current goods being misplaced or forgotten, resulting in less wastage and reduced average inventory holding costs. On a supply chain level, having an inventory position in operations management that reduces lead times allows you to better fulfill consumer demand. You can prevent stockouts that anger clients and instead, enhance their overall experience by making sure that your product is available in the locations and channels you need it to be. Some of the major ways in which Inventory position is important are as follows: Inventory positioning provides safety stocks that are retained to offset any changes in demand and supply, thus preventing stock-outs.Inventory positioning improves customer service standards by supporting the marketing department's function, i.e., if demand is generated, inventory must be available and accessible to meet it.Unit costs are at their lowest when production is done in extended runs with consistent volumes that are provided by inventory positioning.Inventory positioning provides for purchase and transportation economies based on the inference that lot sizes lower purchase and transportation expenses.Inventory positioning helps in hedging against price fluctuations. This aspect reduces the impact of supplier price increases during times of high inflation.Inventory position in operations management mitigates demand and lead time uncertainty. Logistical problems are unpredictable and proper planning should be done to counter it.Proper inventory positioning leads to effective planning against unplanned contingencies that might disrupt operations, such as labour disputes, fires, floods, and other natural disasters. 3 Ways to Position Your Inventory Ensure Easy Reachability of High-Volume Products Having a proper inventory position entails that the products which are utilized the most and are likely to be in demand should be stored in a way that is easily accessible so that they can quickly be identified, picked, packaged, and shipped. This allows firms to speed up order fulfillment for products that have the best chance of being sold. This method can be followed for other products in order of their demand and sales volumes during prior seasons, with the highest selling items kept in a more accessible location and lower selling items stored in more hard-to-reach places, to make the best use of the available storage space. Doing this infers that goods are organized in a specific way and on the rare occasions that lower demand products are ordered, employees will instantly know where they are by aligning the demand of that product with a specific placement in the warehouse. Forecast Demand for Proper Inventory Planning Estimation of demand based on historical patterns or particular events is quite imperative to stock positioning. If an incorrect estimation of upcoming demand occurs, then even with high stock availability, there can be shortages and delays in delivery, which can cause an inadequate customer experience. On the other hand, inaccurate estimation of demand can also cause an inventory surplus, leading to significantly higher storage and operational costs, which can have a negative impact on the profit margins of a business. Many businesses often tend to base their stock replenishment strategy on forecasting done historically, hoping the pattern would repeat. Ideally, it should be taken with a grain of salt as markets are dynamic and forecasting should be done keeping the current factors in mind. Demands go through cyclical trends and various unforeseen events also affect demand so every factor should be thoroughly analyzed in order to achieve the required level of inventory. Store Larger SKUs on Lower Shelves for Easy Accessibility Having your heaviest or least-movable Stock Keeping Units at the top or rear of your warehouse racks makes no sense for various reasons. They should not be placed on shelves where they are difficult to gain access to. The sheer weight of them can also cause the shelves to lose their structural integrity and succumb to the pressure caused by large objects that they were not designed for. Ideally, they should be kept as near to the ground as possible so that getting to them isn't a safety issue or an overtly challenging task. Simultaneously, modify positioning for bulky SKUs based on their popularity. Make sure they're stored in a convenient position if they are frequently ordered. However, the general rule for large items is that they are stored in a convenient location and as close to a transit bay as possible so that they can be dispatched with minimal effort. Conclusion: How Can WareIQ Help to Position Your Inventory? Although inventory position is difficult to perfect, it is crucial to provide a positive customer experience. 3PL companies like WareIQ help a company's warehousing practices and are professionals in safely and securely storing and positioning products in the warehouse. We can coordinate the delivery of your items and inventory to our facilities where our team will store your items and handle all of the technical aspects of managing and organizing them. WareIQ can intelligently suggest the placement of products across our vast network of fulfillment centers, based on areas of high customer demand or proximity to transit facilities. Depending on the product, each SKU will have its own storage location, such as on a shelf, in a container, or on a pallet, based on the demand and nature of the product. Our warehouses are equipped with advanced facilities such as a custom WMS to monitor your inventory, automating warehouse processes such as picking products when an order is confirmed, placing inventory based on the type of product, and much more. The features offered by WareIQ make inventory management and placement a breeze, some of which are mentioned below: Custom WMS that tracks Inventory levels across multiple warehouses in real-time.Automatic reorder point alerts to help you keep track of when you need to restock.Enhanced demand forecasting capabilities to help you determine the appropriate stock you need for each product type.Intelligent inventory placement that suggests which fulfillment center would be the best option to fulfill orders based on customer demand, geographical locations, etc.We offer a range of shipping services and will smartly assign the one that can deliver the order in the shortest amount of time and at the lowest price. Using all these processes can optimize your inventory position and can drastically improve efficiency and cost-effectiveness in all your warehousing and order fulfillment processes. Inventory Position: FAQs How can you determine the position of your inventory?Your inventory can be positioned based on a variety of factors such as the nature of the product, demand, availability, weight, dimensions, and much more. What is the goal of the inventory position? Inventory position is done in order to methodically organize inventory and make the best use of space so that higher-demand inventory can be easily accessed for faster order fulfillment. Is inventory position a part of inventory management?Yes, inventory position is one of the multiple processes that is encompassed by inventory management in order to make the entire process of ordering, storing, counting, and delivering inventory to be as seamless as possible. How can WareIQ help to position your inventory?WareIQ uses an advanced WMS that consists of features that provide data, analytics, and suggestions to efficiently place your inventory in the most strategic way, both in terms of which warehouses they are stored in and their position in that warehouse.
June 21, 2022
What is Stock Replenishment? Importance, Factors That Affect Inventory Replenishment and Best Practices in 2022
Every person involved in eCommerce retail understands how important it is to have the proper amount of merchandise on hand at the right moment. When a business has too much inventory, it runs the danger of items with a short shelf life becoming obsolete or being trapped with unmoving merchandise for an extended period of time. Conversely, when a business has too little inventory, it runs the risk of stock shortages and not being able to fulfill customer orders. Customers may be lost or dissatisfied as a result of either of these situations. In this blog, we will delve into the meaning of stock replenishment, its importance of it, the factors that affect it, the different methods, and the best practices of inventory replenishment. What is Stock Replenishment? The rate at which inventory moves from the manufacturer to the supplier for the activities of storage, picking, packing, and order fulfillment, is referred to as stock replenishment, also called inventory replenishment or replenishment planning. By maintaining efficient order and line-item fill rates, stock replenishment aims to keep inventory moving through the supply chain at an optimum pace. This method prevents inventory overstocking, which can be expensive.The objective of a business should always be to keep goods flowing through the supply chain at a cost that is as low as feasible without compromising the customer experience, with raw materials and finished items reordered at the precise moment to ensure optimal flow.Stock replenishment is the method through which businesses attempt to attain that objective, which is frequently aided by inventory management software that automates inventory replenishment procedures.Managing the rate of stock replenishment has typically been difficult since it previously required manually tracking each item of inventory as it travelled through the supply chain, using spreadsheets. Sophisticated inventory management systems that monitor and update stock movements without the need for user intervention make automated stock replenishment feasible today. This saves time and eliminates the possibility of human errors. How it Works Stock replenishment works in the following way: A team or set of teams will be assembled to supervise the movement of inventory, depending on the structure of the firm. These teams are often made up of warehouse managers and planners who ensure that the firm always has adequate stock to fulfill orders.These groups can be divided into a range of specializations, with some focused-on inventory ordering methods as the firm develops and changes, and others dealing with the short-term goal of tracking inventory counts.When the counts reach the pre-determined re-order mark, the selected team will contact the necessary supply chain parties to restock the products. This happens with both ready-to-sell inventory and raw materials. [contactus_gynoveda] Importance of Inventory Replenishment Businesses need a robust inventory replenishment plan because it may help them avoid costly supply chain issues like inventory stockouts and overstocks. Stockouts not only result in lost revenue but may also have a significant impact on consumer loyalty and trust in a company. They can also compromise your brand security by allowing competing brands to intrude on any available disillusionment of consumers. Helps Prevent Understocking Understocking occurs when a merchant fails to restock inventory at the appropriate moment, resulting in a shortage of items at the time of purchase. It may also result in backorders, which indicates that an order has a set date for when the item will be ready for delivery. Dealing with understocking and backorders can be quite aggravating for your consumers. The easiest strategy to minimize frequent understocking difficulties is to keep safety stock, backup inventory, or emergency inventory on hand at all times. This is also a good idea in case a supply chain issue arises unexpectedly (which was experienced by many merchants during the COVID-19 pandemic). Helps Prevent Overstocking Overstocking occurs when there is a surplus of inventory in relation to the demand for it. Overstocking can have consequences such as increased storage costs, increased operational costs, and the risk of inventory becoming obsolete. Proper replenishment planning can be done to forecast the demand for future time periods and how much supply would be needed to satisfy it. This will enable firms to keep just the right amount of inventory on hand at all times and avoid overstocking situations. Helps Reduce Operational and Logistical Costs Suppose a consumer places a large order with you. If one item is out of stock at the customer's nearest warehouse but is available at another, you'll need to send a split shipment (sending multiple goods from one order in separate shipments, frequently from a different location or at a later date) to complete the customer's order. Sending products from a single purchase in many shipments raises shipping costs, increases packaging waste, and may mislead customers. Based on past data and forecasting techniques, you can estimate demand and determine how much inventory to hold at the SKU level at each warehouse site. This will help you in decreasing the operational and logistical costs involved in shipping from different locations and the need to do it in the first place. 3 Factors That Affect Stock Replenishment Fluctuating Forecasts As all forecasts are based on unverified demand, the figures are certain to change significantly depending on the changing demand of clients. In a different instance, if one of your suppliers went out of business and your organization couldn't get equivalent raw materials in time to keep manufacturing running, prior forecasting could’ve helped you to prepare for the situation and have a backup, but since it is related to an external manufacturer, it may not have shown up in the forecast anyway. Thus, forecasting needs to be done as accurately as possible, covering as many variables as you can in order to offset unpredictable circumstances. Lack of Optimization Warehouse managers and planners frequently disagree over how to best utilize warehouse space. A planner, for example, would want to set aside a certain amount of space for the storage of excess inventory or raw materials. The agreed-upon inventory replenishment strategy cannot be effectively used if the warehouse manager is unable to supply the requested space. This back and forth in different departments can lead to a lack of optimization of multiple processes, which has a direct impact on a company’s ability to replenish planning and manage inventory. Poor End-to-End Visibility When it comes to supply chain efficiency, end-to-end visibility is the name of the game. When you don't supply your manufacturers with reliable, real-time information about your current stock levels, the replenishment process might get delayed. Employing solutions especially built for inventory management and retail execution to encourage better communication between the field and the back office is one strategy to improve overall visibility. Utilizing technology to streamline the process of tracking your data in real-time provides your brand with an invaluable advantage over competitors who are still using generic tools to get things done. 3 Methods of Stock Replenishment Depending on their company strategy, monthly order volume, and nature of items for sale, different eCommerce merchants use various replenishment planning techniques. If your current replenishment plan isn't working, try one of these three successful inventory replenishment approaches: Reorder Point Method To automate activities, most inventory management systems follow replenishment principles.When inventory levels reach the reorder point, replenishment is usually initiated.The reorder point is when stock has to be reordered, taking into consideration current and future demand as well as the time it will take your supplier to give you the new order.There are three stages to manually calculating your reorder point:Calculate the number of days you'll need to meet your lead time requirements.Calculate the number of days in your safety supply.Add your lead time demand and your safety stock to establish your reorder point.You may also use a reorder point calculator to make your life easier. It'll alert you when it's time to order a fresh batch of merchandise. Top-Off Method When you have a lot of fast-moving SKUs in your inventory, the top-off approach is usually the best option.Under this method, inventory levels for a certain product are "topped off" in their corresponding storage facilities during periods of slower demand or downtime, allowing you to have a high inventory turnover rate without running into stockouts situations.During sluggish demand periods, the goods are always replenished at the forward pickup sites, which enhances efficiency during peak periods. Periodic Method Inventory is refilled at regular periods using the periodic inventory replenishment technique. Inventory levels are only evaluated at certain periods or dates, regardless of how low stock levels may have fallen before that. This strategy is primarily employed in warehouses with a lot of storage space.Inventory is refilled at pre-determined periods through the use of the periodic inventory replenishment method. This strategy is perfect for replenishing warehouse inventory. Warehouses can keep products that will last between 3 to 6 months because it has a large storage capacity. As a result, for products held in warehouses, a periodic check/review is adequate and the inventory levels of these items are examined to determine whether they require restocking. There is no need to replenish products if inventory levels are sufficient. Best Practices of Inventory Replenishment There are a few things you should consider doing on a daily basis to ensure that you have the necessary inventory/stock on hand whenever you need it. Follow these best practices to ensure that your organization can always refill its inventory as needed: Evaluate Your Forecasts on a Regular Basis Involve everyone in this discussion, from your planners to your salespeople, warehouse managers, suppliers, long-term clientele, and others. Ask your colleagues to have their own estimates ready before the meeting, and compare them to the factors that influence your company's replenishment plan. In the meeting, devise a reasonable plan to implement if and when your current replenishment technique and prediction are not up to the mark. Accurate forecasting is one of the pillars of strong replenishment planning. Create Stocking Level Techniques that are Successful and Efficient Planning of stocking levels differ based on the size and specialization of the company. Therefore, your plan should be tailored to your business' inventory and supply chain demands. If you are starting afresh with your strategy, make sure that everyone involved, especially your long-term clients and suppliers, is aware of your most stringent goals. After that, you can discuss your stocking-level tactics in terms of hard data. Make the Necessary Technological Changes Your supply chain will be optimized if you have the correct eCommerce software system in place. Installing inventory management software, for example, is a simple approach to gaining real-time visibility into inventory levels across several locations, allowing you to make smarter inventory replenishment decisions. You can simply keep track of inventory control, track inventory trends and avoid frequent stock difficulties by employing inventory automation solutions for inventory optimization. Make Effective Use of Replenishment Data It is not surprising to learn that leveraging data helps you make better, more educated decisions and is one of the most effective strategies to optimize your stock replenishment strategy. Data from your retail outlets' point of sale may be a good predictor of how your replenishment process will go. Each of your accounts is unique and efficiently managing the data from each will assist you in keeping them all filled to the adequate level. Improve End-to-End Visibility Make sure your whole supply chain is aware of your shifting stock levels. Make room in the system for extra information about your fleet's shipment schedules. As you can see, many of the issues in replenishing are centred around lack of communication, ineffective management, and inaccurate forecasting. Keep your numbers flexible and realistic so that your organization never needs to cope with a shortage or surplus of inventory and make sure that every team has access to all the information that they need. Improve Inventory Management Techniques The role of stock replenishment is only one part of the overall inventory management process. It will be difficult to decide when it is time to restock inventory without a suitable inventory management plan in place. Inventory audits on a regular basis, standard warehouse receiving processes and efficient ecommerce warehousing practices may all help you keep track of inventory more efficiently. To avoid large decreases in profit margins, warehouse expenses such as personnel, storage, shrinkage, and depreciation, inventory should be continuously monitored and demand levels should be estimated. Conclusion The stock replenishment process is vital to every company that sells items to clients, whether it is done on a regular basis or on demand. Stock replenishment is more than just a procedure; it may also assist merchants in forecasting demand and supply more accurately by providing a comprehensive view of a company’s worldwide inventory and demand levels. Performance at the SKU/site level is automatically assessed and optimal stock levels may be increased or lowered as needed, allowing for more full-price goods to be sold. Prior to a certain action such as a promotional event, changes in future stock levels can also be forecasted and structurally described. From manufacturing to marketing, stock replenishment has the power to impact every part of an organization. As a result, it's critical to always look for methods to improve your replenishment planning procedures. One way to do this is to partner with a 3PL company like WareIQ. WareIQ is one of India’s fastest expanding eCommerce fulfillment companies. With an emphasis on using advanced technology, WareIQ enables customers to make use of our advanced WMS which can track inventory levels across multiple selling platforms and fulfillment centers and enables the automation of multiple inventory management processes, including stock replenishment. Users can take advantage of features such as automatic low-stock warning alerts, inventory replenishment notifications, and much more. Stock Replenishment: FAQs Why is stock replenishment important?Stock or inventory replenishment is a key component of inventory management because it assists businesses in always storing the right amount of products in order to meet demand levels. This helps companies reduce operational and storage costs and limits wastage. What are important aspects of stock replenishment?Some important aspects of stock replenishment are lead time, order capacity, and replenishment intermissions. What is a replenishment period?The term replenishment period is used to refer to the process of replenishing inventory levels of products that are running low on stock in a warehouse and the frequency with which it is needed. What stock replenishment facilities does WareIQ offer?WareIQ has a custom WMS where users can set replenishment points to trigger automatic replenishment, get low stock warnings for goods, forecast demand using past statistics, and much more.
June 21, 2022
What are the Steps to Start to Sell on Snapdeal & Open a Snapdeal Seller Account in 2022?
Snapdeal was originally pioneered as a daily deals platform in 2010 but has since grown to become an eCommerce marketplace that encompasses various services such as multilingual support, a customizable interface, and the use of advanced technology to enable retailers to sell their products on its platform. Currently based in New Delhi, the company has become a major player in the Indian eCommerce selling space which is reflected by more than 500,000 sellers that utilize it to sell a variety of commodities that span across industries and price ranges, giving customers a variety of options. The majority of the company’s customers are located in smaller towns and villages, rather than conventional metropolitan areas, which has led it to provide coverage to more than 96% of India’s pin codes. In this blog, we will go into detail about why you should sell on Snapdeal, how to become a Snapdeal top seller, the challenges associated with it, and how you can employ WareIQ’s assistance. Why Should You Sell on Snapdeal? Mitigates the Need to Set Up a Store A huge advantage of opting to sell on Snapdeal and most other eCommerce platforms is that the entire retail process from generating interest in a product and converting it to a sale, can be done online without the need of ever setting up a physical store and all the expenses and challenges that are associated with it such as rental costs, interior decorating costs, electricity costs and maintenance costs. This enables retailers to save a ton of money and removes any hassle of needing to run a whole store which makes the entire process more pleasurable and efficient for both the seller and their customers. Provides Access to More Customers When retailers opt to sell on Snapdeal and offer their services digitally, they instantly convert their potential customer base from just their local operational area to the entire country. As more of the country’s population gains access to the internet, they will discover the benefits and conveniences of shopping online instead of commuting to a physical store. In addition, Snapdeal provides services to more than 3000 cities and towns in India which means that retailers can receive orders from the opposite end of the country. This increased customer reachability will have a profound impact on sales and will assist retailers in expanding their operations further. Operates Round the Clock Companies who sell on Snapdeal are not bound by the restraints that a physical store has to abide by and this includes operational timings. Businesses are always in the position of attaining new customers, even when their staff is asleep or on holiday. Whether a customer is browsing through your online listings on their 9 am commute to work or during a 2 am shopping spree because they can’t get any sleep, your business will stay open to welcome their business, which simply cannot be done through a conventional brick-and-mortar store. Mobile shopping from anywhere has changed the shopping scenario in recent times. This helps in converting even the slightest bit of interest into a potential sale. Assists in Running the Business On the Go Due to the digital nature of eCommerce retail, businesses that sell on Snapdeal can take advantage of their staff not needing to be physically present in an office to be productive and keep an eye on ongoing operations, which can be seamlessly done through Snapdeal’s Seller Zone App or Seller Panel. This provides a lot more flexibility by enabling employees to be up to speed on important matters relating to operations, sales or issues faced by customers. This also leads to more time being spent with family or engaging in other personal activities such as physical fitness and being out in nature, which can stimulate personnel to work harder and more efficiently. Diversifies Your Product Range Retailers who put their Snapdeal seller accounts to good use can be reassured by the fact that Snapdeal is taking care of important logistical processes such as confirming orders and tackling delivery issues. This enables companies to put more focus on core business activities such as studying the market, enhancing their business strategy, refining existing products, and developing new ones which will ultimately lead to more satisfied customers resulting in improved customer feedback and higher profit margins. By having the freedom to diversify their product portfolio, businesses can tap into new segments of the market and expand their overall reach. [contactus_uth] 6 Simple Steps to Start to Sell on Snapdeal & Register as Snapdeal Seller in 2022 Creating a Snapdeal Seller Account The first thing you need to do is go to https://sellers.snapdeal.com/ where you can create a Snapdeal Seller Account. You will need the following documents to complete the registration: Owner’s nameCompany’s nameCopy of your PAN cardCanceled cheque from the seller’s payment accountCopy of your Aadhaar cardPhone numberEmail IDBank account informationGST numberAddress proof such as bank statement, electricity bill, passport, etc. Entering Your Business Information You have to enter your business-related information such as your office address, pick-up pin code, digital signature, name of the business, etc. Verifying Your Email and Phone Number You need to verify your registered email and phone number by entering the verification code that will be sent to both. This will be used to notify you about orders, tracking information, and other important notifications. Submitting Your KYC Documents KYC documents such as GSTIN, PAN card, and Aadhar card will be used to verify your ownership or identity of the company. They need to be uploaded to the website. Entering Your Bank Details You need to enter the relevant bank details as this account will be used to credit payments after a sale is made and also for relevant deductions and expenses. Creating a Product Listing Once you are done with the registration process, you can list a product using your Snapdeal Seller Account. You should have an idea of what products you want to sell and which category they belong to. There are 2 ways you can list products to sell on Snapdeal. Manual Product ListingBulk Product Listing You can either click on “Create a Single Listing” to list products individually or you can bulk upload by uploading your content. Once your products are successfully listed, you can start to receive orders. You will get a notification every time an order is placed and you can choose to accept or reject it. You can now begin to sell on Snapdeal and utilise all the benefits that come with it. Challenges Faced by Retailers Who Sell on Snapdeal in 2022 Incurring of Returns Expenses Sales returns are a major challenge for every seller, regardless of the eCommerce platform. However, some handle it better than others. Retailers who sell on Snapdeal have to deal with 2 types of sales returns - courier returns and buyer returns. Courier returns are when the courier company could not deliver the order due to various circumstances and buyer returns are when the buyer returns the product, which could be due to a variety of reasons, many of which aren’t the sellers' fault. Sellers do not incur any expenses for courier returns but for buyer returns, they have to pay for the transport fee for delivery and return as well as the marketing and selling fees. For retailers struggling to maintain their profit margins, this could have dire consequences. Suggested Read: Why should you sell on myntra? Lower Profit Margins Compared to Other Platforms This problem is more pronounced on Snapdeal compared to other eCommerce selling platforms due to the large amounts of local vendors who prefer to use it as opposed to an international platform. This creates severe levels of competition and if businesses do not own a trademark, any and every other company can sell similar products at similar prices. The sheer volume of retailers trying to get into the eCommerce space in India means that by the time operational and logistical expenses and Snapdeals commission are cut, retailers barely have any profit left over. Quality Control Issues Snapdeal is one of the worst offenders in this regard. Retailers who sell on Snapdeal constantly face issues such as incorrect titles that are difficult to change, random transferring of shipping plans to Snapdeal Plus with no option to change it back, and retailers using the images and descriptions of other vendors. Dealing with these issues can cause severe time delays and unnecessary hassles for sellers when they could be focusing on other, more important tasks. Constant Changing of Account Managers A consistent theme of online selling platforms is the assignment of account managers to sellers who will assist them in tackling any issue or doubt that arises. On most other platforms, a fixed account manager is present, which is beneficial because they will have a deep relationship with the seller and will also have knowledge about prior mishaps that may have occurred. However, retailers who sell on Snapdeal can have their account managers suddenly change, without any prior notification. This means that when an existing problem isn’t solved or a new problem arises, there will be a new account manager that has no relationship with the seller or prior knowledge about the case which can lead to severe delays in solving it. Highest Expenses and Commissions Out of all the major eCommerce marketplaces operating in the country, Snapdeal is one of the most expensive. Retailers who sell on Snapdeal constantly have to pay the most expensive shipping fees, which contain many hidden costs and keep fluctuating. Snapdeal’s payable amount to retailers, known as seller net payable, is also one of the lowest and leaves sellers with some of the lowest profit margins of any online selling platform. This combined with the fact that there are many features omitted from the platform means that sellers are getting a much lower value compared to similar services. Suggested Read: Why should you sell on Amazon? Conclusion Snapdeal is one of the emerging eCommerce marketplaces in India. Since it is a homegrown company, it inspires many retailers to sell on Snapdeal, in addition to offering a vast amount of coverage to every part of the country. While the platform does have its benefits and drawbacks, it is still a useful platform to sell on as gives retailers more exposure to customers who do not live in big cities but rather, in smaller towns and cities. Retailers who sell on Snapdeal in conjunction with other platforms are best suited to have the maximum amount of visibility possible. It is always a smart option for sellers to sell on multiple platforms so that they can extend their reach and are not monopolized by a single marketplace. If you need to fulfill orders on Snapdeal or any other eCommerce platform, you can take advantage of WareIQ’s offerings. WareIQ’s custom WMS offers seamless integrations with more than 20 online selling platforms including Snapdeal, Amazon, Flipkart, and much more. This enables retailers to access all their order information across multiple platforms and inventory details across multiple fulfillment centers, to be easily accessed in one centralised virtual location. In addition, we also track important metrics about every order to enable companies to forecast future demand and the amount of inventory that they will need. We also provide fulfillment services for retailers who sell on every platform at faster speeds and discounted rates. Sell on Snapdeal FAQs (Frequently Asked Questions) Are there any fees to sell on Snapdeal?Snapdeal doesn’t charge any fees to register and list products on their website. A commission is charged on every item that is sold. How do sellers get paid on Snapdeal?Payments are transferred to the registered bank account of the seller through NEFT transactions. There are 4 payment cycles per month. The payment cycle can become more frequent based on a seller’s performance. Does Snapdeal operate outside of India?No, Snapdeal currently does not offer services outside of India. Can you integrate a Snapdeal Seller Account with WareIQ’s WMS?Yes, users can integrate a Snapdeal Seller Account with WareIQ’s WMS to take advantage of all the benefits that it entails. What services does WareIQ offer to retailers who sell on Snapdeal?WareIQ offers multiple services to users such as order fulfillment, packaging and shipping at cost-effective rates. Additionally, WareIQ’s WMS offers integrations with most eCommerce marketplaces and can collate data relating to inventory levels and order management from all of them in a single virtual location.
June 20, 2022