Ordoro Blog

a practical blog for small business ecommerce merchants

Entries Tagged as 'Inventory'

Big or small – Order management at its core

July 28th, 2010 · No Comments · Inventory, Webstore

I stumbled across this article on Intelligent Supply Management, and I realized that all companies – big or small – are dealing with the same problem when it comes to order management.  The way I see it, in order management there is one important action and that is when a customer places an order.  Every action that follows should be tied and tracked with that initial placing of the order.  However, as this article points out,  65% of all companies running sales order management had as many as 11 order management systems.  I agree with the author – double yikes!

Is this true for online retailers too?  Well, I’m not sure if they are using 11 systems, but what I do know is that many online retailers ‘split’ all the actions tied to an order.  First, they receive the order via their shopping cart.  Next , they copy and paste customer information into their shipping web-site (USPS, Fedex, UPS).  Once they get a tracking number, they email their customer.  Also, at some point they’ll adjust their inventory in another system – many use a spreadsheet.  So, even in this short scenario I’m already counting information tied to one order to be in 4 different systems.  Even more concerning is the fact that these systems don’t talk to each other.   Not only is this a recipe for inventory discrepancies, it’s also a nightmare for customer support.  If a customer calls, where would they go first: email? shopping cart?

What to do?  As the article points out, the biggest challenge is finding the right technology and the funding, but it is…

A Solution That Pays for Itself

While there has been some resistance to invest in given the sorry state of the economy for many businesses, it can pay for itself rather quickly, especially a hosted solution. By consolidating and saving time and money, businesses can free up capital for other new technology projects and purchases.

It also makes a difference customer service-wise. The repetitive and low-margin orders can be handled by Web-based channels and companies can place a higher priority on more human interaction into the higher-dollar-value orders.

And , as they say on TV, that’s not all. Increased accuracy of orders, simple tracking, and scaling your processes closer to your customers, tends to create more return business and better customer retention.

In this new customer-driven environment, it is imperative to improve collaboration by creating more visibility with your trading partners at both ends of your supply chain. One of the best ways to do that is by consolidating your order management processes.

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What to do with excess holiday merchandise?

January 15th, 2010 · 1 Comment · Inventory, Sales and Marketing, Webstore

Wall Street Journal discusses different ways to deal with excess holiday merchandise.

  1. Sell via consignment stores – What are consignment stores? These are stores that will hold your inventory for you and sell it at a lower price. They take a percentage of the sales revenue. You still own the inventory and therefore you do not get to cash out until your products are sold. ConsignmentShops.com is a good resource to find such outfits for your excess merchandise.
  2. Sell to liquidators – They will buy your inventory in bulk, but often pay less than the wholesale price. However, you no longer own the inventory and therefore you get out to cash out early on. Depending on your cash needs, liquidation may be a more suitable route for you than the consignment route. Liquidation.com is a good resource to find liquidators for your excess inventory.
  3. Sell via online marketplaces – This can be a great route to get rid of inventory, if you are willing to sell at very low prices. You can list your excess inventory on Craigslist, eBay and Overstock.com
  4. Donate to charity - In most cases, you can claim a good amount of tax write-offs via donations to charity. Talk to your accountant to ensure that you are making the best out of your donations.

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Buy items online, return items to the local store

January 5th, 2010 · No Comments · Inventory, Sales and Marketing, Webstore

An annual survey conducted by Sterling Commerce highlights the increasing demand for an integrated shopping experience across multiple retail channels.

According to the survey results from January 2009 -

  • 57% of ecommerce customers wanted the ability to return items to a store after purchasing them online. (The number was 41% in 2008)
  • 35% wanted the ability to pick up items at a store after ordering online. (The number was 17% in 2008).
  • 33% wanted both call center and store personnel to have a record of what they have purchased from the retailer in the past, regardless of whether it was from the store, online, or via a call center.

Though these results are from a year ago, they highlight the increasing need for an integrated inventory management system for multi-channel e-commerce merchants.

How are multi channel retailers responding to this trend? According to a survey conducted by AMR Research -

  • 34% of retailers offered a buy online, pick up in-store program in 2009
  • 44% expected to implement such a service by the end of 2010

via eMarketer.com

Related Posts:

  1. What is Order Management?

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A new FedEx tool to precisely track shipments

December 11th, 2009 · No Comments · Inventory, Webstore

A couple of weeks ago, FedEx announced SenseAware, a new shipment tracking sensor that allows you to track the exact condition of the shipment using the following information -

  1. Precise temperature readings
  2. Shipment’s exact location (GPS based)
  3. When a shipment is opened or if the contents have been exposed to light
  4. Real-time alerts and analytics between trusted parties regarding the above vital signs of a shipment

FedEx is initially targeting the life-sciences and health-care industry with this device. If it becomes cost effective, may be food industry will also start using it.

An interesting innovation in the shipments industry in any case.

Related Posts:

  1. What is Order Management?

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How to generate $50 million in revenues selling window blinds online?

December 6th, 2009 · 1 Comment · Case Studies, Inventory, Webstore

Here is a revealing interview with the founder of Blinds.com. The webstore was launched in 1996 to sell window blinds online and today earns $50 million in annual revenues.

And all of that with zero debt, and zero inventory. Remarkable!

My key take aways from the 7 page interview are -

  1. “We focus on customer experience while buying from our website. 42% of our customers are repeat and referral customers”.
  2. “We have a lot of content on the website that talks about the product and provides education. I knew, from the buying process, what questions people would ask. I would provide answer to the questions that I knew they were asking”
  3. “I patterned my company after Car Talk, the show on National Public Radio. You had two really smart guys who loved their business but had fun doing it.”
  4. “We have also found that in many cases people did not know what product they wanted, but they knew what results they wanted. Specifically, they wanted to cut the glare in their room, or they had a kid’s room that they wanted to make dark. That led to the ‘I Want To’ section, which is on the left side of the page under other buying options.”
  5. “We have formed partnerships where major retailers outsource the entire department of custom blinds to us. We have done a cart-to-cart integration. You don’t even know it is us. We handle the phones, the customer service, and the fulfillment. We have no inventory because it is all drop shipped from our manufacturers”

Great insights. I believe that most of these ideas can be employed by small online retailers in their early phase of growth.

What can you do today?

Evolve your site into a destination for remarkable content. If they can do it with something as simple as window blinds, you can definitely do it with niche speciality products that many small e-commerce merchants specialize in.

To provide remarkable content, you need to be fully involved with your business, your customers, their needs, and their preferences. You need to get into their minds and answer their questions before they even ask them.

Understanding your customers deeply will also allow you to provide features such as the ‘I Want To’ section mentioned in the interview.

And finally, forming partnerships with existing sales channels is a great way to scale up quickly and efficiently. To form good partnerships, you must -

  1. From the beginning, start building business relationships with your vendors, your customers, and with other sales channels in your space
  2. Establish credibility by boosting sales through organic growth, and prove to the vendors that you can run a successful business

Related Posts:

  1. What is Order Management?

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Save money via good inventory management!

November 22nd, 2009 · No Comments · Inventory

For small businesses, cash indeed is king. If you run out of cash, then you cannot pay your bills, cannot get suppliers to ship you goods, and cannot continue running the business effectively. If you are in the retail business (whether e-commerce, or brick and mortar), an often overlooked, but a very important cash hog is the inventory in your warehouse.

Too much inventory in your warehouse means that you have too much of cash tied up in the warehouse shelves. If you can somehow reduce the amount of inventory in your warehouse, that reduction directly translates into free cash that you can use to run other aspects of your business. And deciding how much to stock for each item is not too hard either. In this article, I will give you 4 easy tips for good inventory management.

Here are 4 questions to ask while deciding how much to stock of each item -

  1. How much does the item cost? (cheaper the item, the more you can stock)
  2. How fast are you selling the item? (faster you are selling, the more you can stock)
  3. How long will it take to replenish from your vendor? (the longer the replenishment lead time, the more you need to stock)
  4. What is the vendor’s minimum order size?

Let us review this list in detail -

If the item is cheap (e.g., pencils that cost $0.50 a piece) then there is no harm in stocking up a large quantity. Particularly if the supplier gives you discounts for ordering large quantities (batches > 1000 units). Even if you have to stock 1000 units, you are tying up only $0.50*1000 = $500.

But what if each unit costs $100 (e.g. jewelry). The more you stock, the more cash you are tying up (e.g. 200 units will cause 200*$100 = $20,000 to be tied up). That is $20,000 out of your revolving credit line (or your credit card credit limit).

However, just because an item is expensive, does not mean you shouldn’t stock it in large quantities. What if you are selling the jewelry item mentioned above at a rate of 10 units a day? So you are carrying only 200/10 = 20 days of inventory. Which may not be a bad deal at all.

For the same item, let us say it takes 30 days for you to receive a new shipment from the vendor, counting from the day you place a purchase order. Now you are in trouble. Even if you place an order today, you will receive the shipment only 30 days from now. But you have only 20 days worth of inventory in stock. So for the last 10 days, you are out of stock, and therefore you are losing 10 days worth of sales.

And finally, you should consider the vendor’s minimum order size. If the vendor requires you to order in batches of 500 units (for the jewelry item mentioned above), now you need to pony up 500*$100 = $50,000 in cash to purchase the inventory. At a rate of 10 units a day, it will take you 500/10 = 50 days to sell the inventory.

I hope these ideas explain the intuition behind deciding inventory levels. In a future article, I will explain how to use the concept of “cost of money” to make financial sense of these intuitive ideas.

Related Posts:

  1. What is Order Management?

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3 things to watch out for while choosing a drop shipper

November 17th, 2009 · 1 Comment · Inventory, Webstore

Over at the Volusion blog, I found this great article describing the advantages of drop shipping.

While I agree with the pros of drop shipping mentioned in the article, in my experience of working with small businesses, drop shipping is not always as rosy as it seems. Here are 3 things to watch out for -

  1. You have to manage the dropship requests with the vendors and ensure that your customers receive the products on time. I have seen cases where the vendors do not ship on time. And when they do, sometimes they ship the incorrect product. This will directly affect your customer satisfaction levels.
  2. As your vendor count increases, the complexity of managing all those vendor relationships also increases.
  3. You no longer have strict control over the look and feel of the package being shipped. While the vendor will use the label provided by you, they may not agree to adhere to other packing requirements.

It is good to be aware of these issues while negotiating the drop ship contracts with your vendors.

Related Posts:

  1. What is Order Management?

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