In this comprehensive guide from Saara.io, learn all about reverse logistics, the process, how to process returns at scale and how to automate reverse logistics for greater success.Continue reading
Crises of great magnitude, be it epidemics or natural disasters, have the potential to upend business as we know it. The ongoing coronavirus pandemic has dealt the most devastating blow to supply chains in the US and Europe in recent years. It also doesn’t help that the earliest hit was taken by China, the country where almost all supply chain processes originate.
Around the globe, companies that are dependent on China for their materials or parts are severely affected. China’s coronavirus crisis has damaged its position as a manufacturing hub for the world. It is likely to remain that way for several months. From iPhones to bridal wear, anything and everything manufactured in China for assemblage or sale around the world is impacted and supply will be erratic or nonexistent in the coming months.
According to Dun and Bradstreet, a commercial data and analytics company, there are around 22 million businesses (90% of all businesses currently active in China) within the coronavirus-struck regions. They estimate that this will impact at least 56,000 companies worldwide.
Since the SARS epidemic hit in 2003, China’s GDP in the world context has steadily grown over fourfold; from 4.31% to 16%. The mortality rate and spread of COVID-19, the disease brought about by the coronavirus, is enormous and catastrophic compared to SARS. The damage to supply chains is similarly huge.
In general, companies always maintain some reserve inventory on hand to tide them through the initial stages of a crisis, to keep about 15-30 days’ worth of supply going. Since the coronavirus hit around the Chinese New Year, a prime shopping period, it is possible that companies that upped those numbers have bought themselves some additional time. But beyond five weeks, a lack of materials or supply would make manufacturing grind to a halt.
How can Automation and Artificial Intelligence help?
Automation and AI can help in getting businesses back up sooner.
When implemented from the beginning and made part of the system, it can help in these critical areas:
1. Estimation of stock:
At times like these, you want to know where your inventory is spread out and how fast you can access it. You want to know where your finished, ready-to-ship goods are, where your raw materials are, parts in transit are, parts held in customs are, whether any stock is on consignment with vendors or dealers and can be recalled.
It definitely helps to use automation to figure out where all of your stock is and how best to move it to the right warehouses and fulfillment centers.
The best way to do this, of course, is to use computer vision to estimate existing stock across your warehouses. This can significantly speed up the process of auditing stock at a time when any delay can cost you mightily.
2. Gauging demand:
You never know when the demand for a particular item you manufacture or supply may skyrocket during a crisis. As a supplier, you need to get the most realistic picture of this demand before you start rallying. This is where data can help. Your demand-planning team can deploy analytical tools to understand demand signals and figure out the corresponding supply. This can further be worked into your revamped sales and operation planning processes.
3. Monitoring global suppliers:
Investing in 24X7 monitoring of global suppliers through AI and natural-language processing gives companies preparation time and “insurance” against rapidly changing circumstances.
Timely alerts to disturbances happening half a world away help companies rapidly triangulate how their supply chains will be affected. They can make predictions about the hours, days, weeks, months to come. This kind of prior knowledge is invaluable and can be leveraged before the situation escalates.
4. Leveraging communication channels:
AI data benefits can extend to direct-to-consumer communication channels and get your market insights. Digging into your databases and sourcing info from your vendors and customers about theirs can help you assess the demand status a few stages downstream. It can also help you reach out to direct customers and get an estimate.
5. Managing risk to reduce the impact of a crisis:
Companies would do well to be acquainted with all tiers of their supply chain. For instance, if a company’s third-tier vendors are in China, they may not always know where they are located, who they are, because they have never directly dealt with them.
On the other hand, they should know the risks of single-sourcing from China (dealing with only one vendor for a cost-benefit or to secure their supply), and always have backups.
When scaling up operations to meet increased demand, it is imperative to provide workers at manufacturing units with adequate PPE (personal protective equipment) too.
That’s not all, though- risk comes also in the form of direct infections and the risk of spreading the virus through a large, enclosed space. At the same time, manually enforcing restrictions doesn’t always work. You can use a tool like Saara’s computer vision tool to help you understand which workers are following the laid procedures and who is flouting them, at scale.
What are you doing to mitigate the crisis?
These are just a few ways of mitigating a crisis that is expected to role the economy for at least a year to come. How are you weathering the storm? Do you have any tips to share with fellow supply chain professionals? Tell us in the comments.
When it comes to inventory management, deadstock belongs in the ninth circle of hell. Because of how much working capital it eats up, deadstock can even be fatal to a growing business.
However, deadstock is retail’s best-kept secret and most apparel retailers assume that they will have about 40% dead stock at the end of every sales cycle. That’s almost half of their entire inventory!
What is Deadstock?
To put it mildly, “Deadstock” is the part of your purchased inventory that Simply Won’t Sell. It is a source of anxiety and dread as it puts a block on your working capital.
Deadstock is a problem that should be nipped in the bud. To do this successfully, you need efficient inventory management from day one.
Stagnant, non-moving inventory puts incredible pressure on the business to stay afloat with limited cash flow. Whether you are a manufacturer or a retailer, it is through fast-moving inventory that you generate your working capital beyond the product or store launch stage. Therefore, you must have a foolproof inventory management system as well as the means to market your product.
But first, you should know your stock management basics.
All purchased stock falls into two categories:
- Cycle stock
- Safety stock.
Cycle stock, as the name suggests, is the “rolling” part of the inventory. You stay on top of sales to estimate how much you need to have on hand between re-orders.
Safety stock is your reserve stock- the stock you hold for times when sales might spike or vendor shipments get delayed.
Both categories have the potential to end up as deadstock. Safety stock more so, as not as much attention is likely to be given to it during stock reconciliation.
Why do so many retailers and manufacturers end up with dead stock?
Well, poor forecasting and demand planning is often the most common reason for ending up with deadstock. Here are a few ways by which that can happen:
1. Over purchasing:
Purchasing mistakes are a direct result of overestimating your demand or not understanding market needs. Sometimes retailers buy a lot of stock towards the tail end of a trend, and it ends up becoming nothing but a problem when the clientele moves on to the next trend.
2. Inefficient inventory management
Many retailers or manufacturers are yet to progress beyond the Excel spreadsheet method, unaware of or unwilling to invest in an automated inventory management system or software. They also tend to hold or move merchandise in silos, with every store having its separate inventory instead of a centralized warehouse.
This results in over-ordering or stock duplication: an SKU gets ordered when a perfectly saleable one is sitting in a store nearby. Moreover, inventory management software is a great thing to have if you plan to take your business online. Multichannel or omnichannel selling can be a competent avenue to unload your dead stock by tapping into new audiences.
3. Inadequate marketing or not capitalizing on trends:
Buying stock is not enough, retailers must get the message out about what is up for grabs among their customers. Moreover, the sales personnel need to be well-trained and well-informed about all aspects of the product, and capable of motivating the customer to buy it.
4. Not having a system for filtering out and returning/replacing substandard merchandise:
Warehouses should have a well-lit, well-demarcated “receiving and sorting” area where they receive goods from the vendor. It should be equipped, and its personnel trained, to sort out defective or poor quality merchandise to be sent back ASAP and replaced. Not doing this as part of a process compromises stock quality over the long run, making it unsaleable.
All of the above add up to a mountain of deadstock that retailers feel pressured to move. This is where deadstock management comes in.
Assuming the deed is done, how do you clear out your deadstock?
If you have a situation on your hands, deadstock management should be taken up on a priority.
Here are 6 things you can do to manage Deadstock.
1.Invest in an automated inventory management system:
Money spent on an efficient, intuitive and streamlined inventory management system is never wasted. It will allow you to pool your stock in a single virtual location, giving you a dashboard view of buyer preferences, and where the deadstock lies. This can give you ideas for how you can reassign it for maximum saleability. The system can also send alerts about critically low stock, or be programmed to auto-generate purchase orders for fast-moving items.
2. Make returns and exchanges a part of your vendor agreement:
Apart from defective products that warrant immediate replacement, it would be helpful to have an agreement with your supplier wherein you can return stock that remains unsold beyond a certain time-point. Alternatively, you can keep certain products in your retail store on a “consignment” basis, wherein you reimburse your vendor only for goods sold, according to a pre-decided margin.
3. Move deadstock around for maximum visibility and saleability:
The data provided by an inventory management system is highly useful in determining the geography/ demographics where certain SKUs are likely to sell. Moving dead stock to these locations maximizes its chances of selling. If you do not have your stores beyond a certain geography, consider rolling the stock into other channels: Online marketplaces, auctions and such.
4. Up your forecasting game:
The better you get at forecasting, using tools and techniques developed for the purpose, the lesser your chances of ending up with more stock than you can sell. Plus, analyzing your purchase orders can help you streamline purchasing, and break out of old buying patterns.
5. Make the customers an offer they can’t bypass:
Clearance sales, free shipping, creating a sense of urgency using countdowns on the website, or flags signaling “low stock” are all effective tactics that tempt the customer to make a purchase.
6. Bundle similar-category products into attractive packages:
You can make “styling bundles” out of non-moving clothing, shoes, and accessories, for instance. Or say, Knife sets and chopping boards. This will add a layer of interest and appeal to the customer as a great bargain to be had.
Automation has taken every industry by storm. Automation means improving efficiency of work done by humans and difficult parts to be done by machines. It aims at increasing the accuracy, quality, and quantity of output along with cost-saving. Inventory Management is one area where there are problems of accuracy, speed and are needed to be solved. It is obvious that in order to thrive in this market scenario inventory managers have to keep updated with the latest innovations.
According to Infoholic research, ‘India Inventory Management Software” market is expected to grow at a CAGR of 14.5% during the forecast period 2017–2023.’
With the entry of leading global retail chains like Walmart and Ikea in the Indian e-commerce industry; there is an urgent need for Indian retail and e-tailing companies to innovate and increase their efficiency.
There has been a constant need for an efficient inventory management system to digitize the supply chain and keep track of all the goods. This led to the sudden boom of inventory management software companies. A lot of warehouses have been focusing on replacing their manual method of monitoring inventory with software.
Let’s take a step into understanding what is inventory and then taking a look at why is it so important to understand its challenges and next look at ways to fix them.
According to Investopedia (a website dedicated to investing and finance education) – “Inventory is the total goods available with a company ready to be sold in the market. They state that there are 3 types of inventory:- raw materials, work-in-progress, and finished goods.”
Now that we understand inventory it’s time to understand its importance.
- To make sure we have enough ready/raw/w.i.p. materials to meet market demands.
- To save costs by placing bulk orders.
- To protect the goods by storing them in a safe and suitable environment.
- To have an entry of all transactions in the company accounts.
- To be ready for any sudden PESTEL (Political, Economic, Social, Technological, Environmental and Legal) changes in the market.
- To save on the delivery charges.
Not only these, but inventories also have their role in obtaining financial assistance by being a substitute as a collateral to get loans from the banks and the market.
By now, we know that an inventory is a list of tangible goods that are needed to ensure the smooth and continuous functioning of any business.
Here is a simple excel sheet of a restaurant’s Inventory management.
We hope the term inventory is clear and so is its importance. We shall now start to understand the challenges faced in inventory management and look at ways to fix these problems.
Inventory constitutes a chief element of working capital so an efficient inventory management system is necessary to run any business efficiently and profitably. The success or failure of businesses depends on how well the inventory is managed. To understand that there are underlying challenge symptoms inventory problems should be identified.
Here are a few symptoms, faced by businesses with weak inventory management:
1. Higher inventory cost
2. Mishandling of goods leading to breakage and loss.
3. Mismatch of inward and outward entries.
4. Breaking of supply chain system because of the unavailability of stored goods.
5. Complaints from customers about delayed delivery, broken goods, wrong shipment, etc.
6. Reduction in Working capital.
These are a few symptoms that a businessman can look out for while running the business. Now we will discuss the challenges and solutions to arrest it. Efficient management and control of inventory not only solves the problem of liquidity but also increases the profitability of any organization.
A recent example of the downfall of an entire industry due to change in PESTAL factors (introduction of RERA) is the Real Estate sector and it has directly hit their inventory. Across India, there are over 12.76 lakh houses lying unsold in India’s top 30 cities and the demand doesn’t seem to increase.
Listed below are 6 common inventory problems along with the solutions:
1. Excess Inventory:
A large volume of inventory means a large amount of working capital stuck and less of the liquidity. 20-40% of working capital is tied up in inventories, if the forecasting is not done properly, while it is important to have adequate stock it is wise to analyze the sales data and market trends with the help of EOQ to order an optimized quantity of stock.
The solution: Inventory Management Software
Practical and easy to use inventory management systems is no longer a herculean task. Apart from managing all your data under one roof, they also offer valuable time-saving automation that can restructure business processes. A highly efficient Inventory Management Software is all you need to streamline all your inventory woes.
2. Error-prone and inaccurate data
Research shows that even a proficient data entry operator will make one error for every 300 characters and this inaccuracy can really add up. If your employees are still using an Excel sheet to record data, this manual work adds up to countless man-hours wasted over re-entering the details into a digitized system and must be stopped right now.
The solution: Automation
Automation will enable each item to be traced and tracked in every step of the transportation and transition process. Automation also helps to utilize the employee’s time for some other work.
In today’s world where automation is changing the way of operations in the industry, automated inventory is an essential factor to save time and money. Use a label-reading tool such as Saara which leverages machine learning to fetch data directly into your system using pictures, so that you don’t have to take extra time out to note down each and every product detail.
3. Hiring the inexperienced
Employees are the biggest intangible asset and inventory is the biggest tangible asset of the company. The relation between both is directly proportional to the profitability of the company. Hiring employees with inadequate experience of inventory management might prove fatal to your companies’ inventory management no matter how good your system is.
The solution: Hire Right People for Right Job
Hire the right people as your company’s money is invested in inventory. Professional inventory managers will do the job easy for you. Explain your goals to them and try to indulge them in every inventory activity.
Train them efficiently in inventory software so that they will perfectly do their job. You will see the change once they get better at their job.
4. Lack of Market Knowledge:
Frequent market research to know the sales trends, customer satisfaction, analyze sales reports, inventory turnover, complete sales targets should be in the DNA of the company. Failing to which the company will be unable to deliver the demands of the market.
The solution: Hire a Market Research Company or set up an RnD Team
If you have the budget to hire a research team who will do market research and forecast the trend so that the inventory can be made ready for the market. If not, there are enough and able Market Research companies who can do the job for you.
5. Auditing System:
Irrespective of using the best-automated inventory management system they may have a few errors such as pilferage, returns or exchanges that are not entered. Therefore, scheduling frequent stock audits is a must for all companies dealing with inventory.
The solution: Scheduled Audits
Make frequent audits for each section on a regular basis, while the automation is pretty close to the actual numbers; scheduled audits coupled with barcode scans are effective enough to keep the inventories in check.
6. Complex Supply Chain
Expansion in product portfolio might lead to an expansion in the supplier list and hence having multiple lead time, unaccountability of stocks
The Solution: Pre decided the lead time
Lead time (the amount of time it takes to fulfill an order) is crucial so pre deciding your vendors’ lead time will significantly help in reducing the chaos and help in anticipating other possible delays because of the roadblock, holidays, etc.
Thus, proper management of inventory is important to maintain the well-being of any organization. The efficient management of inventories will improve the profitability of the organization. To compete in the industry, you need to pay special attention to fixing inventory problems. If you are planning to start now, do some research beforehand so that you don’t end up in the loop of inventory mismanagement. Go with the trends, automation is the key if you want to survive now. It is advised to take help from the experts, as they will help you in inventory management solutions.
Tracking and managing inventory is a crucial aspect for any e-commerce business. With that said, as a business owner, are you wasting your valuable time and resources on under-optimized processes and systems? Are you finding it hard to forecast your inventory needs accurately? Or facing difficulty in tracking inventory across different sales channels? When was the last time you did a delivery on time without any hassle?
How many times it has happened that someone places an order, and when you go about to process it, you find that you are actually out of stock. Ever happened to you? If yes, it means that you follow poor inventory management tactics where you don’t even have access to real-time stock counts. If you continue on this road, where you don’t adapt, you are anticipating your business’ failure.
We live in a day and age where the competition is fierce, and if you want to survive and build your business, you must adapt to the latest trends in your industry. As we talk about the latest, inventory automation has saved business owners from manually processing their inventory.
If you automate inventory, you are saving not only time but reducing the human intervention as well, which ultimately saves a lot of money and ensures that errors remain on the ground.
With that in mind, here are the top reasons why you should invest in automating your inventory management.
What is Inventory Management?
Inventory management is an element of supply chain management, which supervises the flow of materials or goods from the manufactures to the warehouses and from these spaces to the point of sale.
Globally, retailers recorded a staggering $1.75 trillion loss due to mismanaged inventory. Cost reduction is one of the major reasons why inventory management is crucial for business. From the point of view of the customer, efficient inventory management ensures better customer service with low shipping charges and fast delivery. Automation has helped a lot in this aspect.
7 Reasons Why You Need to Automate Inventory Management
1. Automating Inventory Management Saves Time:
A business is always searching for techniques to save time and reduce labour costs. If they automate inventory management, they can eliminate manual and labour-intensive processes. Through barcode scanning, the need for typing in product or box numbers for each item is completely eliminated. That is, once your products are scanned, your inventory is automatically updated whenever a product is sold or purchased. No manual work needed! This saves a lot of time.
2. It Keeps ‘Human Error’ at Bay:
Since the need for maintaining paper documents and spreadsheets is eliminated if you automate inventory management, clerical errors are reduced. Additionally, automated solutions help ascertain accurate operating cost, sales cost, and identify your worst and best-performing items easily. Just by using barcodes, a decrease in administration errors decreased by 41.4% at a medical centre.
3. Automating Ensures Accurate Inventory Level:
If you or your employee writes down every time an item is purchased or sold, the chances of committing errors increase. With automated inventory management, you can be sure about the accurate level of the stock present.
So, if a customer calls and asks if you have certain units of a product available, you just have to look at the screen to know how many units of that product you have in your inventory instead of counting them manually.
4. It allows you to Control the Cost:
Lack of right inventory at the right time can mean excess inventory, backorders, etc. If a product is stored for long in your warehouse or if an order is missed, your costs increase. Automated inventory management helps you to maintain records about which product is doing well and which one is sitting on the shelf. This way, you will not accrue losses from storing the wrong products for a longer period or miss out on orders of out-of-stock items.
5. Automating Inventory Management Improves the Quality of Delivery:
Almost 81% of customers experience the ‘out-of-stock’ condition in the last twelve months, which resulted in lost sales for retailers as well as disappointments for the customers. If you have sufficient stock all the time in your warehouse, you will be able to deliver the products on
time. This will improve your reputation as a business. For tracking, you must know when a vendor is shipping the inventory as well as when it will arrive.
6. With Automated Inventory, you can Make Easy Forecasting:
Automated inventory management software helps you enhance demand forecasting by evaluating data trends from stocks. So, before ordering new products, you will know how many units of the product you should order to meet the anticipated demand.
7. It allows you to Sync Stocks under Multiple Sales Channels:
If you are active on more than one eCommerce platform, an inventory management software will help you sync the stocks under varying sales channels. Your inventory on each platform will be updated automatically once the sale is made.
[pdf-embedder url=”https://saara.io/wp-content/uploads/2020/01/reasons-why-you-need-to-automate-inventory-management-info-.pdf” title=”Reasons why you need to automate inventory management info”]
Tips for Effective Inventory Management:
- Using barcode scanning – It is one of the most effective and cost-effective ways to maintain inventory using automation. You do not have to manually count the units in your inventory, and through barcode scanning, you can scan your products and your inventory gets updated automatically every time a product is bought or sold.
- Integrating various platforms – If you sell online on several platforms like eBay and Amazon, an automated system will synchronize your inventory across various channels. You just have to link the product on several marketplaces, and as soon as a unit is sold, the stock for that product will update on its own.
- Managing slow-moving items – When you automate inventory, keeping a check on how fast or slow an item is moving becomes easier. The longer an item sits on your shelf, the pricier it gets. So, avoid ordering that item in bulk.
For a business, automated inventory management using software has become extremely necessary. Almost 40% of small businesses do not track their inventory using software even now.
However, if you do not automate inventory management of your business, you may end up compromising on your profits. Without automated inventory management, you are prone to take more time while managing your inventory as well as making more errors while keeping track of all the inventory.