We have a giant underneath! He lies amidst the complexities of our eCommerce selling business and will wake up if we make questionable decisions on inventory management to gulp a large chunk of our revenue. This is not a fable; global analytic firms have figures reflecting true insights on how industries and businesses are making significant losses due to inventory mismanagement.
Running your Amazon ‘selling business’ is laden with numerous challenges both micro and macro, where inventory management holds a formidable task to deal with. Veterans and Rookies are bound to make mistakes in seller space.
How can we deal with poor inventory management?
Contemplate these familiar yet critical factors affecting your inventory management!
- Overstocking
- Stocking-out
- Buying the wrong products
- Competitor promotions
- Customer behavioral patterns
- Fickle weather conditions
- Pricing, Listing, and description errors
Let this moto be our agenda– “Observe, Assimilate and Resolve!”
Once you sink in with the list, we can delve into solutions. Our objective is to learn and be able to make
- inventory demand predictions,
- foresee consumer preferences, and
- effectively tackle competitor patterns.
Once we identify the problems, we must collect essential data on our ‘ selling business’. We need to depend on analytic tools for the purpose. Overstocking, stock depletion, supply chain management, full-price sell-through, and markdowns are the vital metrics that we must analyze while formulating inventory decisions.
1. Overstocking out of laxity
If somehow, we committed a market prediction error and landed in a stale inventory scenario, we must be aware of the incurring cost and the remedies associated with it. If you have subscribed to Fulfilled by Amazon (FBA), you are still going to pay the warehousing charges no matter how bad your inventory blockage is. And if your products stay there for more than 180 days, Amazon will charge you more for the storage costs. If you are taking care of your logistics, like the Fulfilled by Merchant (FBM) program, the costs still incur. Slow-moving inventories inflict your capital for storing charges. Major of all is Amazon’s Inventory Performance Index (IPI) score. IPI takes 12 weeks of your inventory flow to determine a performance score. If we have a poor IPI score Amazon will hike storage charges and limits our inventory space.
How to flush out slow-moving Inventory?
We might hold excess inventory when seasonal demands surge or as a backup, but when we misconstrue the market due to poor forecasting, our products come to a standstill. We don’t want to end up ditching our surplus merchandise. So, we must push the piled-up slowpokes out of our inventory to the market. If our products have less longevity, we must mobilize urgently.
How can we mobilize our surplus inventory?
Charge with a reduced-price campaign or a flash sale for a short time. Make bundle deals and promote them. Bundles offer great value to both customers and sellers. Launch promotions for the surplus stock. Get your content curated and SEO optimized to get maximum visibility for your offers. Marketing via multiple channels will draw traffic to our Amazon page, especially social media marketing. Collect historical, seasonal, and localized sales data to sharpen our supply-demand forecast, this way we could avoid future crunches. Make use of Amazon’s dashboard for metrics. We have a slew of third-party automaton tools which leverage real-time data and give relevant metrics for our inventory.
2. The “Out of Stock” or “Please wait indefinitely till your patience runout” Plaque
Stocking out is destructive to our selling business. The online marketplace is super convenient for the consumers to swipe for the next merchant if we have the “Out of Stock” board placed on our product. They won’t wait till we refill.
How to deal with running out of inventory?
Benchmarking with Sales Velocity
Have an eye on the stock-out beacon on your Amazon dashboard. Be aware of the sales period and nature of consumer behavior. Take the number for sales for a standard period. This will give sales velocity of products. Velocity figures will give us time to restock our inventory.
Unprepared holidays are over!
Watch the calendar. Holidays, seasonal offerings, and periodic sales festivals observe fluctuations in the demand graph. Observe and forecast inventory supply based on the seasonal spikes. The holiday frenzy is a global phenomenon where sellers compete for the projected yearly figures. Throw out obsolete methods of forecasting and use monitoring tools to get inventory depletion and stock-outs way before the downfall.
How to apply a transient seal to “running out inventory”?
Hamper the sales velocity if our product is running out of stock. Calculate the time to restock. If we only have 1000 left for this month, place the selling cap at 700. Use the remaining products to act as buffer till we refill the stock. Pull the marketing campaigns and adverts associated with the product to slow down the sell rate. If products are highly sought after, prices can be raised and adjusted for a short period.
3. Clearing the dubiety in Supply Chain Management
The supply chain is the heart of our seller business. It should be ceaseless, time-bounded, and faultless. Product life cycle, safety, quality, and pledged delivery timings are intertwined with our logistics supplier. But we can’t make any direct interventions to our supply management but can influence their service behavior with a friendly affiliation.
What If the supplier goes wrong?
This is like unpredicted weather. Anything could go wrong. Mishaps in manufacturing and transportation, and sudden socio-economic shifts could trigger calamitous events, that would eventually cascade to our selling business. Preparedness is the answer, and it should be based on mutual understanding. Supplier–buyer bond is crucial while tackling the logistic crisis.
Amazon FBA has its reputation, but we should be aware of the whole supply chain process. If you are relying on third-party suppliers always keep the connection.
The necessity of Supply Chain Review
We have to keep a tab on our suppliers and should devise a review policy for our supply chain management. Knowledge about the production volume, duration, and manufacturing location are crucial pointers to formulate a review strategy for any supply chain renovations.
Understanding the production process will give us the required data to make informative predictions on our inventory and we will be aware of the production time to calculate possible stock availability. Being informed about the nature of raw materials, manufacturing methodologies, and production quality we can choose between suppliers to stock valid products. Any anomalies in the delivery process can be detected if we have the supplier data. Knowing the supplier process will give us realistic projections on production period, conveyance, and stock data. This will help us dodge the wrong demand forecast.
If you are depending on third-party suppliers rather than Amazon FBA, you must conduct a periodic review of your supply chain performance. If ‘Running out of stock’ has to do with the supplier, you should fix it on an urgent basis. ‘Out of Stock’ means a low Inventory Performance Index (IPI) score, probable negative reviews, and an eventually bad reputation. Seller- Supplier alliance rooted in transparency will yield phenomenal figures.
4. Description Disaster and Wrong Pricing of our Inventory
What’s your product?
Trivial it may seem, but if you are sloppy in putting the right product descriptions it will end up in bad traffic. People have to find your products. Incorrect information is the most careless way of losing our revenue, and it will lead to negative reviews, customer repulsion, and narrow credibility. Manual data entry is prone to errors, either switch to centralized tools or maintain a master file for all your product data. Dedicated applications have control options in their dashboards to synchronize your product data. All our products should possess fully accurate descriptions and details. This reflects our professionalism and credibility as a seller, and consumers will sense our trustworthiness. Curating your content with generic keywords is vital in raising the visibility bar for your products. Integrating SEO services to your product content is a recommended approach to accelerating the public reach.
Striking the right price!
The prime factor in our eCommerce selling business is the pricing, which means -the ‘Right Pricing’! Pricing is proportional to market conditions and competitors. Competitors might offer the same products at lower pricing. Also, market conditions may not be favorable for our product to stay in a higher price slab. These circumstances might force us to competitively price our products. The prediction factors that we have discussed before will help us maintain a steady flow with pricing adjustments.
5. How Stinking is your Catalogs?
Poor Cataloging is not a Paper Cut in your Business.
Remember! Catalog management is correlated with your inventory management. Catalogs represent your Inventory and tell how good your selling business is. Sellers always streamline their active and going-to-stale inventory, which means regular revising of their catalogs. Sweeping the dusty corners of your catalogs will give breathing space to new products. Your procurement department should consider visiting your catalogs monthly to keep your inventory afresh. Competitors always pressure us with similar products with lower price thresholds. We at ESS have been helping companies and sellers maintain their catalogs for the past seven years and we know how bad it could be if sellers don’t have an evolving catalog for their business.
6. Are we run by the competitors?
Competitors make us!
Explaining competitor actions needs another blog post. But let’s take one itchy competitor scheme and decipher it.
The trick of Duplicate listings
Suddenly, for no reason, our top-selling product took a nosedive. Most sellers get baffled by this phenomenon; later scrutiny finds out that the sales dropping eventuated from a devious competitor plan.
‘Some’ competitors like to mimic our product listings to divert people away from our merchandise. It won’t be easy to spot these twins if we have a broader list. We can use tools that can compile our listings from Amazon or seek professional listing services to optimize your listings. If we find duplicate listings as phony, fake brand names, or UPCs, we can raise tickets for violating seller integrity. A wider product range implies more duplications. Competitors tend to target high-performing products so that they can exploit the high. Listing services like us always come across a multitude of these shams while running optimization steps.
7. Do we need to do everything manually?
Even if you are using Amazon FBA or Amazon FBM, your inventory will give irritable pop-ups. If you are thinking to contain the troubles with your manual process it would be deeply excruciating and time-consuming. Automation is no new thing. It is giving tremendous traction to sellers across the world, and we believe it’s essential for any business.
Why can’t we use excel?
No harm in using documentation software but investing in automation applications is a different affair. Amazon has its automation platforms built for sellers. Their inventory management software has capabilities to automate stock operations round the clock. Prior warnings and notifications are embedded in the system for seller interventions. Seller dashboard has monitoring and analytic tools that can pull relevant metrics from large and complex data to give valuable insights on invention decisions.
There is a slew of third-party tools for automation and forecasting purposes. Why do we need to invest in analytics? Because it ‘custom-build’ for our seller business. The tenacity of affair lies in the hand of a pure observant. These analytic and automation tools give us the grip to evaluate our inventory and lead us to a healthy forecast so that we won’t land in muddy waters. Looking at raw, staggering data will strain our eyes and brain. Application dashboards show us a clean, comprehensive picture of the messy seller data and the right figures to make our procurement decisions.
Endnote on Inventory Management
Foreseeing pitfalls in inventory management is difficult, but not impossible. There are some external elements like natural calamities, swift changes in customer behavioral patterns, and socio-economic occurrences which has universal repercussions that every seller must face. But for the ordinary state of affairs, we can achieve the selling figures that we wish with unrelenting discipline and planning. We at ESS strive to achieve seller forecasts to be as realistic as a seller can get with the right cataloging and inventory listing.
If you want to make your products online on best marketplaces then, visit our latest blogs which helps you to know about how to sell on Amazon, Flipkart, Limeroad, Pepperfry, Paytm, Voonik, Snapdeal
