Inventory Management Best Practices for Sales Without Inventory

Sales without inventory—now there’s an oxymoron. Many of us who cut our teeth in the retail and catalog Inventory Management Best Practicestrade know that you have to own inventory to make sales. In fact, for many businesses it’s the largest balance sheet asset.

In the late 1990s, dot.com companies with their “virtual inventory” concept tried to change all that. And guess what? These business models and inventory management best practices never really went away. It continues in both large and small businesses of many different types today.

Download: 23 Ways to Improve Inventory Management Processes

There are two scenarios for running a business with little or no inventory. The first is the traditional vendor drop-ship, which requires no inventory. The other is to build a just-in-time inventory model, which entails warehousing certain products, typically those that need to be fulfilled frequently.

Read More >

What's Your Inventory Turnover Ratio?

Often times we meet with multichannel companies that don’t have reporting that accurately reflects the inventory turnover ratio, or they debate how significant this KPI is, and the need to analyze turns. By taking a financial view of inventory turns, companies can manage the inventory asset even better, which in turn leads to stronger profitability. Larger retail and multichannel businesses manage turns tightly in order to remain competitive and drive profit margins. Companies must bear in mind that on the balance sheet, inventory is typically one of the largest assets.

By managing turns, multichannel businesses are able to benefit the overall business in many ways. These include the ability to:

Read More >

How Do Enterprise Resource Planning Systems Help Omni-Channel?

Companies that sell through multiple sales channels; retail, internet, and catalog, will be taxed to perform at the expectations of their customer’s experience with major brands.  The ability of the customer to research a product and order on the web are already here.  But now consider that they can decide based on expediency of need and closeness to a store, where to have it delivered/picked up. With major retailers you can elect to pick it up in the store the same day which is rapidly becoming the norm.  This is true from shopping for electronics, apparel or even auto parts. 

Read More >

Managing Drop Ship Vendors

Industry Question:  We’re  thinking about adopting  drop shipping merchandise direct from our vendors to  our customers. This could reduce  inventory costs, fulfillment space and budget if we can make it work. What issues do we need to resolve?

Read More >

Multichannel Inventory: What You Need to Know

It sounds like a sci-fi trilogy: Past, present, and future merge to provide a single, optimal inventory experience. Multichannel merchants manage inventory seamlessly throughout major business processes and across channels in order to find the perfect balance between customer service and profitability.

Few merchants today would claim to have reached this level of inventory management, as developing such a strategy can be complex. But there are compelling economic reasons to try.

In most multichannel companies, inventory is the largest dollar asset on the balance sheet, which means that how well you plan, forecast, and manage inventory will to a large degree determine your profitability. Inaccurate forecasting ultimately produces backorders, and backorders can result in dissatisfied current customers; they can also turn away potential new customers.

Although the cost of poor inventory management doesn't have a separate line on a company's P&L statement, it can be steep. According to our proprietary studies with dozens of companies, the true cost of a backordered unit of merchandise runs from $7 to $12. For a company processing 200,000 orders a year, with an average of two items per order and a 20% backorder rate, the operations cost to the company could run as high as $480,000. This does not include costs related to prospecting, expediting backorders by inventory control, returns because of late shipments, lost margin, additional air freight, and customer ill will or losing the customer all together.

Faulty planning and forecasting can also produce overstocks that must be liquidated, at a loss of as much as 4%-10% of merchandise margin (between initial purchase margin and maintained margin), depending on the product category.

Direct marketers are well aware that they need to resolve inventory issues across channels. In a recent AMR Research survey of retailers' plans for upgrading their multichannel systems, 22% of the respondents cited Web-enabled inventory management and visibility as a key strategy they will be working on in the next 12 months. The AMR report, “Technology Trends in Inventory for Retailers and CP Manufacturers,” went on to say, “The lack of data consolidation for inventory and order management further illustrates retailers' immature inventory management and order processes.” The report also lists customer loyalty and multichannel customer order fulfillment among the top five concerns of respondents.
 
Read More >

How Do I Develop a Liquidation Strategy for Slow Selling Products?

Problems:

Inventory is the largest single balance sheet asset in most e-commerce businesses, but around 80% of sales are typically generated by about 20% of products—and more than 50% of products often either do not meet, or exceed, their burden in terms of contribution to profit.  Many centers have significant space occupied by slow selling product; you can’t afford to sit on such high dollar inventories whose fully loaded costs include product costs, inbound freight, customs, marketing, fulfillment, inventory carrying costs, and eventual loss of margin through liquidation.  Yet merchants are often reluctant to act quickly on overstocks that sap profits.
 
Read More >

What Are Typical Vendor Compliance Policies that I Should Include?

So you have made a decision to move forward to develop and implement a vendor compliance program. You have an idea of what should be included into the manual to send to your vendors, but your not quite sure that you have all of the right sections.
 
Read More >

What are Typical Vendor Charge Backs?

In developing dozens of vendor compliance manuals, we have seen a wide variety of items, categories, and lists of vendor charge backs. We feel like with a new compliance program, you should include the following, to start with:

Read More >

Where Should Inventory Management Report In Your Organization?

As we do comprehensive inventory management assessments, often the issue surfaces as to where the function should report?  Traditionally, inventory planning, forecasting and management functions have reported to the Merchants.  But products assortments and businesses became more complex and diversified management often asks should it report to Operations or Finance?  The rationale is that the Merchants are often traveling and may not have the time to detail supervise the merchandising and inventory functions.

Read More >

How are you measuring your eCommerce promotions' advertising and breakeven?

Historically, the catalog industry has measured the response rate for various promotions, the advertising cost of the promotion and its breakeven based on demand, product cost etc.  Along comes the eCommerce world and many of the new promotional methods (such as email, affiliate programs, etc.) are apparently not being measured.

At the same time, companies that were traditionally catalog oriented are spending 25% to 35% of sales for catalog advertising costs to create, print and mail catalogs.  On the other hand, while the eCommerce programs are much cheaper, our research shows they are spending 2% to 15% of net sales on eCommerce promotions.

The problem today is that the eCommerce costs are additive, incrementally.  It's not an offset to the catalog costs.  And at the same time businesses have not been able to decrease catalog costs or eliminate the catalog without severely cutting sales.

Tell us how you are measuring your eCommerce promotions in terms of advertising and breakeven...
Read More >
COMMENTS