Let’s say you’ve claimed to solve your target market’s problems. You’ve launched your eCommerce store, set up an enticing website, and reached the right audience on your social media platforms.
Everything seems to go according to plan, but one thing’s missing—your product’s inventory mismatches the demands. This is what happens when you overlook inventory management in your business.
Retailers lose around $1.75 trillion from mismanaged inventory. Surely, you don’t want your business to be a part of this number. Managing inventory becomes especially more challenging when you have multiple platforms.
Forward-thinking companies know that manual spreadsheet or pen-and-paper inventory management is okay at first but would soon become an arduous task in the long run. How, then, can you properly manage your inventory? First, you need to understand what multichannel inventory management is.
What is multichannel inventory management, and why do you need it?
Multichannel inventory management allows you to organize your products across multiple online or offline channels. It lets you oversee what’s left of your inventory after each purchase and replenishment of stocks.
You’re risking your business for the future inconvenience, losses, and unmet customer demands without proper inventory management. Moreover, competence in inventory management may also help you understand your buyer activity more. Forecasting will be a lot easier when you have complete and thorough data to deal with.
Think about it, when you’ve sold out of stock in your ecommerce platform, yet there are still customers who wish to avail of your products, you’re likely to order more from suppliers. This results in longer lead and delivery times for customers. Chances are, you will be dealing with unhappy customers—a relationship strain that will take longer to repair, or worse, a relationship lost entirely.
Conversely, you may overestimate the demand for your product, causing you to spend more, only to end up with bundles of dead stock. You don’t want that. A good manager prepares the right amount of supplies at the right time.
To up your multichannel inventory management game, keep reading to learn some tips and best practices to follow.
Tips to maximize Multichannel Inventory Management
1. Organize and centralize your stocks
The key to good management is thorough and thoughtful organization. Businesses must establish and keep track of protocols regarding receiving stocks, counting inventory, recording, handling returns, etc.
Another vital part of organizing is centralizing your inventory both physically and digitally. Since you are dealing with multiple channels, the old ways of handling a single platform may not work as efficiently anymore. You need to employ an inventory management program to keep track of inventory counts and prevent you from ordering more stocks than you need.
Listen to your team and let your business intuition guide you as to what it needs. Sure, there are laid-out models from other companies for you to follow. But those things may work for them but not necessarily for you. The goal is to keep your team on the same page, so you never lose track of your inventories.
2. Know your high-value and low-value products
The Pareto principle is a straightforward way to understand your high-value and low-value products. Also known as the 80/20 rule, “20% of your customers represent 80% of your sales”, mentions Dave Lavinsky from Forbes.
Successful brands know which of their stocks drive the highest and lowest frequency of sales. This way, you’ll know which stocks you can afford to let go of and which you need to stock up on to meet loyal customer demands.
3. Upgrade your tech stack and use automation tools
A tech stack is a collection of applications, frameworks, programming languages, and data storage technologies that developers can use to create and run a single application. At the same time, this is an automation tool that will help automate repetitive tasks.
The smarter your systems work, the more efficient and rewarding your process becomes. There’s nothing wrong with employing the help of more advanced tools to reduce human error and save time from tedious and recurring tasks.
4. Conduct regular manual audits
While the previous advice is to automate processes as much as possible, nothing beats inventory management’s human aspect. Conducting regular physical audits at least once a year will ensure the quality of your goods.
Physical auditing means tallying all your products in the warehouse to ensure accuracy in your records and to check for stock quality. You wouldn’t want dead stock lying around and possibly reaching your customers.
Choose a slow time of the year to shut down stores to allot time for this activity. Physical audits may be challenging or almost impossible for dropshipping businesses. This tip is only applicable if you handle your own stocks.
5. Take up forecasting
Balance is critical in inventory management, more so in handling multiple channels. Once you’ve identified your high-value and low-value products, you’ll know which stocks to buy more of and which to lay low with.
This is necessary because ordering too much or too little may be costly and potentially force your customers to buy from your competitors instead. Here are some ways to forecast better.
- Check your previous sales data
With this, you may identify the dips and highs of your stocks to give you reliable predictions for your next order from your supplier.
- Know your lead time
The lead time is between the start of a production process (placing an order) and its conclusion (delivery). It’s necessary to know this so your customers can know when to expect their deliveries, so they know you’re thinking of them and are dedicated to ensuring the delivery of their items.
- Have enough buffer stock
Buffer stock refers to the stock stored in your inventory once the designated number sells out. Think of it as an “emergency stock”.
6. Sync online and offline data
Your data needs to be visible, whether online or offline. Make sure to turn on “offline auto-syncing” in your programs’ settings. Doing so might continue productivity in your teams, even during internet or power interruptions.
Moreover, ensure that your offline and online sales are synced. This way, you’ll have more accurate historical data on your overall sales—which you can use for future forecasting.
7. Determine your key performance indicators (KPIs)
One of the trickiest challenges in inventory management is overwhelming data management. There’s useful data and there’s dirty data. Using KPIs can become a viable solution; however, they also come with regular progress tracking.
Here are some of the inventory management KPIs you may consider watching:
- Inventory Turnover -This measures the number of stocks sold in a specific time frame. Setting this will help you determine the products that sell and those that do not.
- Gross Margin Percent – This is the computed percentage of the gross profit from sales.
- Customer Order Fill Rate – This ensures that the deliveries of your products reach your customers within the promised period.
- Cost of Carrying – This is the annual unit percentage per unit (dollar, peso, etc.) spent on inventory management.
- Days Sales of Inventory – Thisis a financial ratio that shows the average number of days it takes a business to convert its inventory into sales.
Get the most out of your inventory management with these tips and best practices.
The key to managing inventory is good management. Once you know and organize your best products differently, you’ll be on your way to becoming a master of inventory yourself.
Opening your business to new practices might be daunting, but it will make your process more efficient and productive. Furthermore, it helps build and maintain trust with your future loyal customers. It may seem challenging as your team learns to adapt, but it will be worth it in the long run—as you scale bigger and work smarter.