Inventory is the mainstay of the supply chain mechanisms of any eCommerce setup. It is inventory that flows from the warehouse to the address of the end customer. Hence, it is quite important to figure out how to maintain the perfect balance of inventory at the warehouse end of the eCommerce setup. Any misbalance in the inventory supply chain can be of dire consequences to the eCommerce businesses. If the inventory is too little, you can figure most of the products, even popular ones, going out of stock and hence the consequences are that you lose sales and in turn customers. However, on the other hand, maintaining huge stocks of inventory is not favorable also. Due to too much inventory, you will require more of warehouse space, more transportation costs, more labor and handling costs and this all translates into pumping in excessive money in the eCommerce inventory setup.
However, even if we consider the ideal scenario wherein you have the desirable amount of inventory in your warehouse, still there is a lot of work to be done. It is not also the movement of physical goods from your warehouses say which is located hundreds of miles away from the delivery point, there is another dimension to it as well. It is about managing the vast magnitude of information associated with the goods that are being transported from the warehouse to the end customer and its transit in between these two end points.
Subsequent in this write up, you will come to know about the eight golden steps for managing inventory in the supply chain. These rules cover all the aspects that include the planning and the execution parts and suggests the latest technologies that can be used to put these guidelines in action and some of the points may be quite obvious, however the eCommerce companies may be neglecting them. Here are these eight guidelines.
- Inventory optimization tools
Inventory optimization tools are increasingly gaining popularity as eCommerce companies seek to evaluate their entire supply chain network and rewrite their best inventory policies for each product at each node point in their supply chain. These inventory optimization tools are typically software tools that use data from the ERP systems. These optimization tools take into account demand and supply variability and replenishment parameters to optimize how much inventory to hold in order to guard against that particular variability.
- Using real time analytics
Leading eCommerce companies today are using real time analytics that take a unified data model of demand, supply chain and financial data and evaluate these parameters on various fronts so that you can get concrete results based on top class data inputs. This is done so that eCommerce companies can now perform rapid, interactive scenario planning and simulation with this data to support inventory and other planning decisions. The different aspects that these software consider are that of inventory levels, cost levels and one platform to plan against. Things have advanced so much now the ocean carriers that are shipping the goods are treated as mobile warehouses and are able to allocate inventory even before it gets to the port.
- One size doesn’t fit all
In the complex world of inventory management, there is nothing as one size fits all. Each and every product doesn’t have the same supply and demand variability. One should focus on high volume selling products that make up the 80% of the demand, so that the eCommerce companies maximize sales and profits. They even take the approach of filling their fast moving items at a rate of 99%, then more popular items at 98% and rest of the products at 95% and this is called service level differentiation. The goal of service level differentiation is to maximize resources on the more profitable and in demand products while minimizing the focus on the least profitable items.
- Don’t ignore your suppliers
One should be guarded against the variability of the suppliers is an important process of planning. One has to be wary not only in the terms of timing of the suppliers, but also fill rate. Say you ordered 500 pieces of a hot selling microwave but got only 400 pieces from the suppliers. This can create a problem in your entire inventory control process. Hence, supplier activity should be closely monitored. Hence, parameters like the promised date of supply, actual date of receipt of goods, quantity ordered, quantity received and the condition in which it was received should be closely monitored. On such metrics the reliability of the supply can be determined.
- Keep a track of your essential attributes
During the past few years, tracking product genealogy and traceability are at the very top of the inventory management processes. Nowadays, it is not enough just to track your lot number in a shipping. If you are using subcomponents and subassemblies that you may embed in a particular product, you also need to keep a track of those lot numbers in case your product is returned. The important aspect is how to efficiently capture such kind of attributes without increasing labor or handling costs. In such a scenario, capturing data such as the country of origin (COO), serial numbers and vendor lot number and then automatically sending this data to the next node on the supply chain is the key.
- Use the mobile technology
Mobile technologies and mobile user interfaces are now increasingly becoming the norm of the day for capturing data on your inventory levels. This has become the norm even for the business who don’t see themselves as requiring such a level of sophisticated operations so that they can achieve the desired levels of accuracy in their inventory management. Nowadays, a majority of the sales associates in the warehouse are equipped with mobile devices with gives them real time inventory of the warehouse. By such a tech breakthrough, not only are they able to improve customer service, they are also able to order a replenishment to the warehouse if the levels of any product in demand are low. Due to the mobile devices, inventory managers now have a quick access to accurate information and data so that they can act quickly on their inventory decisions. In such a process, in contrast to the paper based operations, the errors are eliminated and accuracy and speed of the decision making process is significantly improved.
- Plan for your obsolete items
While it is important to focus on your hot selling items as far as inventory management is concerned, but on the other hand you cannot ignore your slower moving merchandise. All the time these items are not used or sold, they keep on incurring recurring costs since they occupy space, utilize labor and other resources and run the risk of becoming obsolete soon. Hence, at any moment in time, a warehouse manager has to decide whether they need such type of products in their warehouse? Hence, by taking care of their SLOB- slow moving and obsolete items, the inventory managers can control the costs of their warehouse and inventory management by putting such items on sale or send them to thrift channels or off price retailers.
- Slotting is important
Slotting is an important activity that most warehouse and inventory managers tend to neglect. By conveniently locating the fastest moving items closer to docks and more accessible locations, one can minimize travel distance and thus reduce the input of labor. This leads to maximizing overall throughput and productivity. In best managed warehouses, slotting is a daily activity and not a quarterly or a yearly activity. If you do slotting on a daily basis, it becomes little quantity of work that can be managed easily as compared to an annual slotting activity that becomes a major task on the agenda. Slotting can also be based on the idea that if two items are selling high as a group, they are to be kept closer so as to minimize the travel time and labor costs.