Resources / Multichannel Inventory Management

Chapter 4

Multichannel Inventory Management

Introduction

Operating a multichannel business can bring with it many complexities, not least how you’ll manage inventory levels across all of your sales channels.

Delivering a consistent service to your customers becomes tricky when they are buying and interacting on many channels. Multiple touchpoints like the ones involved with multichannel retail can present more opportunity for delay, human error and bottlenecks – and you risk losing control over your business and your most valuable asset – your inventory.

Taking an order for an item you no longer have available to sell is expensive, both in terms of the potential missed opportunity, and the time and effort it takes to communicate with your customer and avoid any disappointment. But equally, it’s also expensive to carry inventory that isn’t offered for sale across all of your sales channels. Both under and overselling can be major problems for multichannel retailers.

When your inventory is wrong, everything’s wrong. Taking control of your inventory management is the answer; you’ll find 15 best practice tips below to help you to do just that.

15 tips for effective multichannel inventory management in ecommerce

1. Maintain a centralized view of your inventory.

When the orders start to roll in, you need to get the goods into the hands of your customers with the minimum fuss and effort. You cannot possibly streamline your process if you do not know what you’re holding or where it is, thus, a centralized view of your inventory is crucial.

When using this type of system, remember to:

Specify which orders are fulfilled from which warehouse, to simplify your workflows and ensure you provide your customers with great service.

Don’t forget your physical stores. Maximize your opportunity to sell by ensuring store staff have visibility of inventory in the warehouse and vice versa, and keep track of products on the shelf as well as in the warehouse.

When you send inventory out to pop-up shop locations, make sure you move this inventory into a new virtual warehouse, so that you can still track it.

2. Structure your product database for success.

For inventory management software to work properly, and for your reports to make sense, you need good data, which means your systems and sales channels need to have the right data structure.

Keep these points in mind:

  • Maintain a single, unique SKU for each inventory item
  • Build kits and bundles correctly
  • Handle variants such as size and color properly
  • Understand the different units in which you may be buying and selling – perhaps pallets, crates, and cartons

3. Get your whole team on board.

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Inventory management isn’t just for store and warehouse managers. Everyone on your team needs to understand how to keep everything shipshape. If your sales team spots an inconsistency, for example, they need a way to report it. Otherwise, it will cause more problems later, and you may miss out on sales.

To get everyone on board:

Document your processes. Write down the correct processes for receiving products, order fulfillment, dealing with conflicts, handling stockouts, and any other key workflows you have.

Train your team. You could run in-person courses, webinars, or provide a central knowledge base. Don’t assume that everyone understands the processes you’ve written down. Inventory management can be complex, so it’s always worth running through each process with your team to make sure you’ve explained it well and haven’t missed anything. Make sure they fully understand everything from printing shipping labels, to using your chosen inventory management solutions.

4. Listen to your system.

To keep your inventory from getting out of control, it’s crucial that your actions match what your systems tell you:

  • If it says to pick from a certain location, pick from that location. No exceptions. If there’s nothing to pick, set that shipment aside and correct the system first.
  • If your software says you have zero of a product on hand because all of them are allocated to sales, don’t ignore the warning.

When a walk-in customer wants to buy the last of a product that was sold online a few minutes before, don’t sell it again. You might improve their customer experience, but you’ll ruin someone else’s. Instead, suggest an alternative. Being face-to-face puts you in a good negotiating position.

If you do have to bypass the system, make a note and fix the problem as soon as possible.

5. Check your system everyday.

You’ll save a lot of time in the long run if you check your system daily and correct mistakes right after they happen. Try a checklist like this one:

  • See that received products are entered into the system. It helps to maintain a folder for your supplier delivery notes with two sections: ‘received’ and ‘not entered’. Then, at the end of the day, make sure the ‘not entered’ section is empty.
  • Check that shipped orders are recorded. You can double check this by creating a goods out area where you keep all packed orders. If, at the end of the day, this area is empty, there shouldn’t be any open shipments in the system either.
  • Complete any transfers between stores or warehouses. They are as important to manage as goods in and goods out.
  • Process any remaining returns or exchanges. Finalize customer returns taken during the day and make sure the inventory is accounted for.
  • If you have a place for quarantined inventory, reconcile what’s there with your software to make sure you aren’t losing anything.

If the products are suitable for resale, get them back ‘on hand’ as soon as you can.

6. Take note of inventory forecasting best practices.

Most retail businesses overstock. Reducing the amount of products in your warehouse puts more cash in your bank account, but it increases the risk of stockouts. The way to mitigate this risk is to know what is on its way and when.

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7. Place purchase orders with your suppliers.

Purchase orders are your official, written records of purchases, and they are essential for inventory control, forecasting, and reporting. Advanced inventory control systems automate a lot of this, showing you which items need to be reordered and enable you to create new POs with the touch of a button. But if your system doesn’t generate purchase orders automatically, then you should still record each purchase in your system manually.

Either way, this gives you:

  • Written records to prevent mistakes and disagreements
  • Documentation to cross-reference against suppliers’ delivery notes
  • Histories of purchases to help you decide what to buy in the future
  • Notes to inform your team about what’s going

8. Enter received orders promptly.

When a new delivery arrives, record it in your inventory system right away. Even if you don’t plan on adding it to your webstore yet, you should still know what stock you have, and where.

This requires discipline when you’re busy with employees, order management, and incoming deliveries from different suppliers. But if you sell a product before it’s been entered into the system, things are going to get a whole lot messier. Pausing to enter your receipts immediately saves you time and headaches in the long run.

9. Reduce receiving errors with barcodes.

Reduce_receiving_errors_with_barcodes.

To cut back on inventory errors – especially if you have high inventory turnover, lots of sales, or many of your products look alike – barcodes can really help.

All you need is inventory control software that supports them and a barcode scanner. Then, when you receive a delivery from a supplier, you simply print out barcode labels and attach them to each item. Scanning the labels displays the numbers on your screen as if you were typing them on the keyboard. No more typing or transposing numerical errors! Just make sure the barcodes you use in your warehouses are the same as those inputted into your ecommerce platform, or it can get very confusing, very fast.

10. Use weekly cycle counts for an accurate inventory.

No matter how careful you are, there will always be odd errors that creep into your multichannel inventory management system. It’s important to regularly reconcile your real-world inventory with the numbers in your system. Try weekly cycle counts (i.e. stocktakes) in which you spend some time every week checking one or two product categories, preferably those that are stored close to each other for efficiency. Using this continuous cycle counting, aim to cover all product lines at least once every four weeks.

11. Keep track of write-offs and gifts.

Your business may occasionally sponsor events or donate to charities. When you do, purchased products go out the door without sales attached to them. These write-offs need to be managed carefully in your inventory control system in one of two ways:

  1. Create a new customer in the system and add the donated items to a zero-value sale. This method enables you to see the total cost of your donations over time.

  2. Reduce your inventory using the inventory correction process in your system. If you have a more advanced system, you may be able to create correction codes for future reporting on your total donation cost.

Without this kind of tracking, any metrics you monitor will be incorrect, and you may find yourself worrying about missing stock without needing to.

12. Stay on top of returns.

Following a well-defined return and receiving process – and capturing the reasons for returns – is essential to successful inventory management.

Depending on which platforms you sell through, you may need multiple processes in place: for instance, an Amazon FBA order may need different treatment to an Ebay one, which may be different again from your own webstore.

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13. Account for consignment inventory.

If you accept products on consignment – meaning you don’t pay for them until you sell them – from your distributors, then you have an inventory challenge to manage. You don’t own these products, so while you want them to be available to sell on all channels, they shouldn’t appear on your inventory value report.

Depending on the inventory control system you use, the most common way to handle this is to add your consignment inventory to a different “virtual warehouse” in your system. You can then filter reports to include or exclude inventory for that warehouse. And when you’re making inventory available to customers, whether through online marketplaces or physical stores, you include inventory from all your warehouses.

14. Watch out for dropshipping.

Another practice that can make inventory control a challenge is dropshipping, which is when you’re selling products that are shipped directly from your suppliers to your customers. With suppliers who never run out of inventory, this is easy. But with most suppliers, you need a way to track the inventory available to sell.

The best approach is to accept direct inventory feeds from your suppliers’ systems to your system. This may require the use of an API. The feeds update the inventory on your sales channels automatically — so you can sell the products as soon as your suppliers have them on hand, without selling products that are out of stock.

This method isn’t 100 percent reliable — you’ll probably only get an update once a day — but it can be better than setting products up as “non-stock tracked”, so anything can sell at any time. Also, think hard about the cost of not integrating with your suppliers’ systems before spending time and money on an automated process.

15. Stay vigilant with Third Party Logistics companies.

If you use outsourced warehousing, or Third Party Logistics (3PL) companies, for inventory storage and shipping, you need to design your inventory management system carefully.

While 3PL companies have their systems, you still need your own system to integrate with sales channels, accounts, orders, returns, and so on.

In fact, you’ll follow all of the same inventory control best practices you’d follow if you had your own warehouse. When goods are received at the 3PL warehouse, for example, you need to be told that they arrived and were allocated against the correct purchase order with the correct cost prices. Ideally, this can be done through automation. Similarly, when the 3PL company counts inventory and notices a discrepancy, the data and system updates need to be done the same way you’d do them in your own warehouse.

The Top Ten Ecommerce Inventory Management Software Features You Need

1. Multichannel ecommerce inventory management

Inventory tracking – across channels – is critical for ecommerce businesses as it helps ensure you have enough inventory on hand and in the right locations to meet demand.

Your chosen inventory management software should instantly update your inventory levels and product availability across all your ecommerce websites, marketplaces and brick and mortar stores. This is particularly important if you’re making use of 3PL services or FBA.

This ensures you’re providing the best possible customer experience, while reducing the risk of “out of stock” scenarios once something has been purchased.

2. Barcoded inventory

Barcoded inventory keeps your warehouse processes slick, streamlined and speedy. There’s a reason everyone from tiny mom-and-pop stores to Walmart use them.

Your next warehouse or inventory management system should be able to be updated instantly by scanning barcodes when your team receives, ships and transfers products.

What are the key benefits a barcode driven inventory system can bring? Find out now in this expert guide.

3. Multi-location inventory control

Multi-location_inventory_control

If you’re managing multiple warehouse locations or inventory across a number of different channels, you need to know exactly what inventory you have in order to avoid under or overselling. It’s vital to know how much of it is ready to sell and where it is – which is why multi-location inventory management is so powerful.

Whether all your inventory is in separate warehouses, you have specific locations for certain channels (i.e. shop storerooms for in-store sales), or you need to keep track of inventory when on the road at trade shows and pop-up shops, your inventory management system should allow you to do it all and get a single view of your inventory across all online and physical locations.

4. Categories, brands and product type support

Your online business hinges on an easy-to-navigate and complete product structure. It not only helps your customers find the products they want on your website, but also helps your warehouse staff with accurate picking, packing and shipping.

Find an ecommerce inventory system that has this functionality by checking its ability to support categories, brands and product types. Ideally, the system would also provide data-driven sales reporting against these options to give you that deep level of granularity you need for effective business planning.

5. Bundles, kits, assemblies and variants support

Bundles,_kits,_assemblies_and_variants_support

Just like a deep product structure, many online businesses also have a myriad of different variants and product options to control inventory for.

Sizes, colors, materials and any number of other variants you have all need to be accounted for. As do any bundles, kits or assemblies you sell as well. One way to do this is to assign distinct SKUs to bundles.

You should be able to easily group your products together and manage combinations in any way you choose, alongside managing the inventory for each individual component without the need for cumbersome or manual workarounds.

6. Multiple price lists

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Today’s modern ecommerce business has a range of customers and prices to maintain.

You might have a dedicated Shopify store for retail customers, and a separate one for trade and wholesale clients.You could also have different price structures across marketplaces like Amazon and Ebay versus your own website or store, meaning you need to be able to control your pricing and do what makes sense for your business.

And once you’ve setup your flexible pricing, you also need to gain insight into your product margins by managing price list positions and discounts in one place.

7. Stocktakes and cycle counting

Frequent stocktakes are a vital step in achieving an efficient inventory management process – but it can be tricky to find the time to count all inventory in your warehouse.

One way to optimize this is cycle counting. This can help you split your inventory into groups of products that are to be counted. Examples of effective cycle counts include counting your high value items, products within a certain warehouse location or items that have a history of inventory discrepancies due to things like theft, breakages or returns.

Your ecommerce inventory software or warehouse management system should make the stocktake process easier for you by offering you the opportunity to group your inventory into cycle counts.

8. Real-time inventory and financial reporting

Any decent inventory control system will also provide you with the opportunity to report on your best and worst sellers, profit margin by product, as well as which items are running low on inventory based on your preconfigured reorder levels.

But the best-in-class ecommerce inventory management systems will go one step further by offering you the opportunity to speed up your reordering process with automatic purchase orders and complete inventory reporting in real time.

9. Data-driven inventory and demand planning

With scalable ecommerce inventory management software, you’ll gain access to low inventory reports, historic sales data and demand planning tools.

This gives you the power to turn your inventory guesswork into data-driven and actionable insights that provide clarity on what needs to be reordered – at what quantity and when.

10. Bill of materials

Although bill of materials isn’t a requirement for all ecommerce businesses, if you manufacture your own products in any way then you’ll need access to bill of materials or BOM functionality so that you can accurately price your products.

Look for systems that offer this functionality, as well as automated accounting and inventory adjustments related to the items you manufacture and bundle together.

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Further reading

Multi-Channel Inventory Management: How Modern Systems Solve Cross-Channel Challenges

by BigCommerce

Why You Need to Switch Inventory Systems Right Now

by Brightpearl

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