- by eSellerHub
If you’re an online seller then nothing scares you more than fulfillment. So your seller’s account on Amazon is all set and ready to go and you are expecting your first order. In a twist of fate, you end up getting a hundred from the same region when the inventory of the product is scattered over a number of warehouses. You realized you don’t have enough staff in all the warehouses to fulfill the orders while the product listing on Amazon says next day delivery. Even if your employees do the night shift; packaging won’t be completed by tomorrow afternoon because of inadequate packaging material in a few warehouses, printers to print labels and; of course, staff. Your shipping partner doesn’t do same day delivery. Many customers will cancel a delayed shipment.
You don’t want to ruin your reputation as an Amazon seller. Expectedly, you find a shipping company in your area that does same day deliveries and end up paying the difference in the shipping costs because of mismanagement. This happened a few times in the last quarter and a couple of times this quarter. Your accountant tried to warn you a few times about the escalating costs. However, warnings fell on deaf years because as an Amazon seller, you are under the notion—fulfillment is everything. What about fulfillment cost?
Are you losing money because of hidden fulfillment costs?
Amazon has fixed commission for every category of products. The same goes for all major eCommerce marketplaces. There isn’t anything you can do about it. Nevertheless, you can certainly do a lot to keep fulfillment costs in check. In fact, you were already doing your bit. Running multi-warehouses is a classic method to bring down shipping costs. The method brings the source closer to population concentrations that are generating high-demand together and thus lowers transportation costs.
However, that did not work out for you. In fact, you didn’t realize you’re losing money until the accountant warned you at the end of the quarter after looking at the balance sheets. The bigger problem is it took all the way to your accountant to devise the problem when you have an inventory management software in place. There are two reasons the inventory management software failed to warn you about the falling profits owing to high fulfillment costs: either your staff isn’t competent or lacks training in the inventory management solution or your inventory management software isn’t up for the task and needs a desperate update.
Why you need a custom inventory management software?
An under performing inventory management software is as good as not having one. As I have said many a time; the software solution to manage inventory should be according to your business and not the other way around. It should be vigilant enough to raise an alarm when required but subtle enough to not draw any attention unless an operator asks for. The primary purpose of such a system is to cut down costs by triggering user actions, presenting actionable insights to operators, raise a red flag before a situation goes out of hand and forecast demand for every product you are selling.
Modern inventory management softwares facilitate every aspect of product fulfillment from accepting orders to successful deliveries. It streamlines the process and concentrates all the data in a single place. That is the data from your suppliers, inventory counters, CRM systems, order management systems will be presented in a sequential manner in the console of your inventory management software. The system will process the real-time data to present you analytics, project demand curves, run actionable insights and throw other measures to make your process better.
How eSellerHub’s custom inventory management solutions reduces fulfillment cost?
A comprehensive custom inventory management software should cut your fulfillment costs significantly by streamlining the underlying processes, abandoning redundant processes, presenting smart predictions, bringing automation and giving clear picture what is not working for your business.
1. It keeps shipping costs in check by bringing sources closer to demand
While running various warehouses to store inventory has various benefits; the biggest one is warehouses at multiple locations will bring you closer to customers in more than one population concentration with high demand and reduce transportation costs. However, when you’re dealing with vast warehouses with thousands of products, it is easier said than done. You need a software solution in the form of an inventory management software to address the gap between source and demand. The role of the inventory management software is to narrow this gap and render the fulfillment cost to its lowest point.
For example, a custom inventory management software we developed for a European client optimizes inventory numbers in a warehouse in accordance to demand curves projected by the software system. As a result, none of the client’s warehouses is under or overstocked at any time. The client’s erstwhile inventory management software was routing too much inventory in a single warehouse; which widened the gap further and was escalating inventory costs.
2. It automates various aspects of fulfillment to reduce labor costs
In the US, Europe and most of the developed world, workers get paid on an hourly basis. The minimum wages are getting higher every year with the revival of populist movement. If your inventory management software makes you do too many manual tasks in addition to usual packing, labeling and tagging; then the system doesn’t deserve a place in your warehouse. It raises the amount of man-hours your workers are putting and remuneration you’re paying them.
When a British client came to us; he was on the verge of closing down his online store because of the higher than average labor costs in the UK. She wasn’t making any money to improve her life but paying everyone enough to improve theirs. We insisted on bringing automation in the process by developing a bespoke inventory management software. In a matter of 6 months, we made the process 10% automated from 1% at the start of the project. She could reduce labor costs at her warehouses by 30% and reduce shipment costs by 20% because of predictable workflows. A 50% cut in fulfillment cost was enough to keep her in business for many years to come.
3. It forecasts demand and keep inventory costs in check
Every piece of inventory occupying a space in your warehouse is a potential liability. In typical eCommerce words, the longer the products stays in the warehouse, higher are the costs associated. For you, your operators and supervisors, demand predictions are hard to get by. It’s the job of your inventory management software to predict demand by contemplating present and past data. Whether you will run into a potential inventory crisis or not depends on the ability of the software managing your inventory to draw demand curves. Higher inventory costs will result in higher cost of fulfillment, which no business wants.