Purchase order Management on Magento, Shopify, WooCommerce and Amazon FBA
When retail was offline, once a month or quarter purchasing worked. Customers would walk into the stores and buy whatever is available. eCommerce is exactly the opposite in nature. Customers come to your site expecting a certain item to be available. If they don’t find it, It’s not only the loss of business for you, it’s a reputation that the customer carries about your brand.
Managing purchasing has become extremely critical now. Without an efficient process in place, you cannot grow your brand. Amazon has now set a benchmark for companies to manage their supply chain with utmost priority. While the excess stock is going to kill your working capital account, out of stock upsets the customer like none other.
The main challenge with eCommerce business is the necessity of having the right products available at the right time and in the right quantity.
Let us see how inefficient management of purchase order system can affect your sales, ranking on e-commerce websites and more. Let us see how:
Challenges with Managing Purchase Process for eCommerce on Amazon and Magento / Shopify / WooCommerce powered brand portals –
1. Sales momentum loss due to out of stock on Amazon, eBay etc:
Portals like Amazon favor brands or sellers who have inventory available whenever a customer wants to buy. Like I said above, otherwise, it leaves a bad taste in the mouth for the customer. Hence its very important for eCommerce managers to keep track of products with fast sell-through rate. Obviously equally important is to track products that don’t sell well and end up being dead stock. Without any detailed reporting of fast-moving products, you will always end up ordering at whim.
Tip: Consider using an inventory system that auto-suggests how and when to place orders with vendors. It must take into account previous sell-through rate and be able to predict ahead.
2. Losing rank as a seller:
eCommerce is all about consistently delivering quality items within the given timeframe. A happy customer is a customer for life. Hence if you go out of stock for a few products on Amazon and don’t replenish in time, it will hamper your seller account rating adversely. Not having an idea about when to order particular product results in losing your ranking on marketplace platforms like Amazon, eBay, Flipkart etc. Very simply Amazon pushes such sellers down in the ranking algorithm.
Like the above screenshot shows the Amazon sales rank of a product. There were 6 units sold in the first week, and then there was a sudden drop in the sale. With a drop in the sale, Amazon sales rank also drops slowly. (Source)
Tip: Look out for a PO system which can notify you on reaching reorder point of a particular product. Additionally, the system should be able to calculate the time taken for the delivery to reach your warehouse and factor that in the algorithm.
3. Limited storage for brands in Amazon FBA Warehouses:
FBA provides limited storage for brands and having stocked it up with slow-moving products will result in less space for fast-moving products. That might result in a stock out-situation for your must-have products. Again it will adversely affect your overall business. On top of that Amazon storage fees are usually very high as they only store items that move.
Tip: You may consider having a secondary storage warehouse beside FBA. That way you keep the FBA location available for whatever stock is selling fast. Secondary locations are usually cheaper, hence end up saving quite a bit on the storage costs levied by FBA.
4. Unable to track products en-route delivery:
There are circumstances due to which the delivery might be delayed. This can be either due to national holidays/adverse weather conditions/human error. Tracking that is important and accordingly must take actions to manage inventory at the warehouse.
Tip: Consider using a system which can help you keep a track of your delivery partners or reach out to delivery services to check the issue and keep customers updated with the updates.
5. Not staying updated with the expiry date of perishable products:
Dealing with perishable products is tricky for any business from an inventory management perspective. These short-lived items require express delivery. For example, food items, medication, cosmetics or anything else that has a short expiration date, requires special consideration while ordering inventory and shipping to customers.
You must keep track of the expiry date and use
Tip: There are expiry date trackers wherein you can be notified of the products reaching their shelf life. Consider updating it in the tracker along with the product while inwarding.
6. Failure to track stock levels at Freight Forwarder or any interim storage:
If you are importing goods from China / India or any other country, you must have a view of what stock is lying with the freight forwarder. Otherwise, you end up ordering more. That stock must be tracked and handled on a need basis. Freight forward might be able to also do inspection and QC on your behalf. Hence very important to have detailed inventory management there.
Managing all these and coordinating with various stakeholders is a challenging task and calls for a system that can aid in the process. In this article, I am going to talk about EasyEcom solution for inventory holders, Manufacturers, wholesalers to manage their stocks/PO/GRN’s/Reconciliation.
Read further to know more on how EasyEcom can be helpful with resolving all the challenges involved with Purchase Order Management:
Best Purchase order management system features:
1. Barcode generator for products
Generating Barcode for products is one of the primary things which brands do in-order to track their inventory. EasyEcom helps you in generating barcode and barcode labels, and also stores all the necessary information. This usually helps the product to have a unique identity.
2. Serialize inventory
Inventory serialization helps keep track of individual units using unique serial numbers. Expensive items such as jewelry, mobile phones, laptops etc need more detailed tracking to ensure no inventory shrink.
It is mainly a system generated unique serial number assigned to each item during the inwarding process. EasyEcom platform supports this feature in its enterprise edition.
3. Ability to handle multiple vendors for your product lines
Create, manage and track your vendor list from a single platform. With the help of EasyEcom PO system, handle multiple vendors for the same item along with their pricing structure. This is to make sure you receive your products at the best possible price.
4. Handling multiple currencies and managing purchase from different countries
If you deal in more than one currency and purchase product from suppliers in other countries then, EasyEcom helps you create the purchase order for international suppliers in their currency.
5. Multi-stage, multi-status, multi-party purchase order system
Most companies usually require a staging system to handle purchasing. Purchase plan is usually made by the warehouse team and the finance department approves it. Any system should be able to handle that. In EasyEcom, the approval process can be configured before submitting it to the vendor. After you create a PO successfully, you will be asked to approve the created PO wherein you can check if the right quantity of product is going to the right vendor.
6. QC process at inwarding
Quality Check at
The vendor either refunds the amount of those 10 bottles or send you extra 10 quantities in your next order.
7. Keep a track of products with expiry dates (Perishables)
The concept followed here is FEFO, that is the products with early expiration will be sold first. It is useful for food & pharma companies dealing with the products having a strict shelf life. So to stay stocked up with fresh products in your inventory, EasyEcom helps you keep a track of products nearing their expiry dates. By updating expiry dates during the inwarding process, the system allows you to apply FEFO on these products.
8. Shows suggested quantities to purchase
With not being aware of quantities to purchase for future sale, the inventory forecasting feature with EasyEcom will suggest you the quantities you should purchase based on your past sale.
For e.g. The system will provide you with the suggested quantities to fill your inventory based on the previous monthly average daily sale or previous season sale. In addition to that, the time taken by the vendor for delivery will also be calculated and factored in.
9. Shipment tracking
Tracking incoming shipments is equally important in the procurement process. As the products move out of vendors location, until it reaches the buyer, there are plenty of things that can go wrong. Especially when there is no contact or update provided on delivery, it can create complications for the sales team. EasyEcom tracks the tracking number for the incoming shipment and provides options to update the status as the items move along.
10. Get notified when a product reaches its reorder point
Receive system generated notifications on your personal device once a product reaches its reorder point and stay updated with your inventory in order to avoid losing on sales. Here, the sales teams will be made aware by the alerts based on the reorder points for the given SKUs.
The best part?
EasyEcom has easy integration with Magento/WooCommerce/Shopify/Amazon etc…
An automated system like EasyEcom can help you generate an error-free purchase order in a fraction of time. Evidence?
Consider use case of an existing EasyEcom client who uses Purchase Order management to grow their sales.
Luffy pets, being one of the best stores for providing best care foods and toys for our pets have started using EasyEcom to improve its perishable products sale.
Luffy Pets buys pet products from its multiple vendors spread across different countries. The major challenges which company had come across are,
1. Delay in shipments:
Shipments used to arrive at vendors location later than expected, which could either be due to national holidays or bad weather conditions. Because the vendors were not provided with any tracking number of courier services, Luffy Pets had to answer multiple calls if the package doesn’t get delivered on the expected date.
Solution: EasyEcom provided an option to update AWB number with courier service details in Purchase Order approval form. With this, the Package can be tracked on a timely basis and can be coordinated accordingly through courier service directly.
2. Managing expiry dates for perishable products:
The company deals with perishable products on a daily basis. Fresh food, meat, chemicals, and pharmaceuticals are examples of perishable items that used to get spoil or become unusable after some finite time. They had issues with managing similar products with different expiry dates.
Solution: EasyEcom helped them update the expiry of a product during inwarding process and apply FEFO process on these products at the time of shipments. This helped them save a lot of time and products from getting spoiled.
With the upgrades in technology, let us now see how the Purchase orders were managed when there was no system to work with. How this process was manually taken care of.
Comparison of Purchase Order generation, manual v/s automated:
It is important for you to know that it is never late to get started with an efficient procurement process. If you feel like your business needs control of its expenses and improve its profit, then an automated cloud-based system is a solution for you to keep an active eye on your business growth.
Proven Method to Inventory Forecasting and Accurate Budgeting – By EasyEcom
Let’s have a look at this graph which is a typical supply chain management lifecycle curve. This graph explains the inventory management system cycle for SKU ID 100324. After we consider various factors affecting inventory levels for the SKU across geographical locations, competition, feedback, promotions, Supplier time, etc they reach four critical numbers.
- Maximum Stock Level:
This is the optimum stock level for the particular SKU. In this case it is 100.
- Reorder Point:
At this stock level, a new purchase order is generated. This number is arrived after considering the time taken by the supplier to deliver the goods in the warehouse. Here the reordering point is 42.
- Low Stock Warning Level:
This level is the warning level for the SKU going out of stock. In this case it is 15.
- Restocking Level:
This is the level after the reordered quantity is delivered in the warehouse. In this case, the number is 90.
Now imagine doing this for all the SKUs in your catalogue. In a supply chain, the above graph poses some difficult questions. The biggest dilemma that an organisation faces is related to the inventory levels for its products.
Every merchandiser wonders about these questions:
How much should I order/manufacture?
When I should start the reordering process?
Inventory forecasting is the process adopted to efficiently answer these challenges.
What Is Inventory Forecasting:
Inventory estimation (forecasting) may be defined as a process of predicting inventory in future time periods. More specifically inventory forecasting is a scientific approach of predicting sales during a specified future period based on the proposed marketing plan and a set of uncontrollable and competitive forces.
All this may sound very difficult. But this becomes really straightforward if you implement the right solution. Below I will show you an example of the same.
Factors affecting inventory
There are several internal and external factors affecting sales for an organisation:
- Seasonality of inventory
- Technological failures
- Labour issues
- Supply chain related factors
- Change in government laws
How to use Inventory Forecasting Software To Predict Demand Accurately
Forecasting inventory will ultimately determine the fate of your retail business as it’s a big factor in profitability figures. Any system used, needs to consider purchase or sales made in previous month; previous season or any custom duration depending on the upcoming time period.
To illustrate this better we are going to use the examples of EasyEcom’s Inventory Forecasting software.
EasyEcom software helps to overcome hurdles involved with calculating the sales and planning inventory with ease. It helps you to plan future sales based on your previous history.
Let us look at scenarios where EasyEcom can be helpful:
Inventory Forecasting Scenarios:
Inventory planning based on previous month sale
In order to plan your inventory for next month based on previous month sale, you need to provide the number of days you want to plan the inventory for (in this case, 30 days) along with the range of days you want the inventory planning to be done based on (in this case, previous 30 days).
To be specific with a particular product or vendor, you can further apply a filter based on the brand name, SKU or vendor name.
The system will then provide you with the suggested quantities to fill your inventory with, based on the previous month average daily sale. The suggested quantity also calculates the time taken by the vendor to deliver the products.
Inventory planning based on previous season sale
Similarly, the system will provide you with the suggested quantities to plan on upcoming Christmas holidays, based on the sales made during last Christmas. For this, select the number of days you need to plan for (in this case, 60 for December and January month) and date range based on previous year custom month, December and January.
With that being done, you also have to look after the fresh stocks currently available and are moving out faster. For Christmas season inventory planning, applying few additional factors (for holiday rush) on fresh stocks can help you avoid losing new/existing customers.
Iterative Inventory Forecasting
So, when it comes to forecasting, a lot of uncertainty is involved for any organisation. In order to reduce the adverse effect of these uncertainties, an organization can take an iterative approach towards determining the inventory projected in future.
For example, a subscription-based web business ought to be able to project website views based on its organic search placement, paid advertising, email marketing, and other alliances & promotions. Make a projection of traffic by summing up your sources, then estimate the conversion rates, and that gives you unit sales.
Now as time moves on, we need to make changes in the assumption. For example, if we predicted 10% month over month growth rate by spending $5000 per month on advertising. However, due to budget cuts, the company can only spend $3000. That will cut down the traffic by 40%.
Similarly if suddenly a competition decides to discontinue their services, suddenly the conversion rate might shoot up by 30-40% hence boosting the inventory demand. Generally quarterly or monthly revisions in predicting mechanism are recommended. This depends on the nature of the company products and time required for a feedback cycle to complete for that particular assumption.
Advantages of Inventory Forecasting:
- Happy Customers:
When a customer gets the product without a delay, they tend to trust you more for their needs. This helps in repeat purchases and loyal customer base. Consider a scenario where the customer would require a product on a regular basis which, if not procured on time may affect his business. If he is able to purchase the product and get this delivered on time, he will be a loyal customer for life.
- Reduced Stockouts:
This is one of the most talked about yet common issues among retailers for sales loss reasons. Factors need to continuously optimized to get a better estimate trend. An accurate forecasting method not only ensures lower inventory idle time in warehouse but also less operational cost is required.
- Efficient Production Cycle:
Forecasting involves closely monitoring present inventory to understand future. Responding and adopting to the changes or pattern of consumption by the consumers gives better idea how the future is going to be.
- Lowering Safety Stock:
When your inventory forecasting process is accurate, it increases your reorder capacity and thereby reducing the safety stock level to free up capital. If a business is using a proper forecasting to plan then you don’t need to carry high safety stocks to manage your inventory.
- Reduced Idle Stock:
Obsolete inventory is a big burden on the margin of any business. To reduce the burden, it’s very essential to identify, repurpose or removal of obsolete inventory. It decreases the volume of inventory on hand and subsequently both direct and indirect costs of keeping the obsolete inventory will be reduced. Having a reliable forecasting inventory method will reduce ordering any excess stock and increases net profitability.
- Managing Manpower Better:
When a business suddenly starts to grow, manpower requirement is also increased to handle the operations. So an inventory forecasting report helps the organisation be better prepared for a sudden growth in future inventory with a proper manpower planning in place. For example in the case of subscription business, if the inventory is going to shoot up in few weeks’ time, the recruitment effort have to start immediately in order to be able to fulfil the inventory.
- Better Pricing and Promotion Strategy:
With a better co-ordinated and planned promotion strategy always yields better results. With an integrated distributor-level promotions and related forecasts helps to improve the flow of goods. It also achieves better results in terms of availability and stock fill rates.
- Better Supplier Negotiation:
When you know exactly when and how much you are required to order; the negotiation becomes easier for you. The supplier is also aware of the kind of business he can expect from you and hence gives you a better price. By having a negotiation based on logic and research you are positioning yourself as a credible customer who wants to have a long-term relationship rather than one-off spot buy.
- Plan Sales Strategies:
Forecasting is very helpful with Product Management, Marketing and Product Design planning. Decisions on promotions, pricing and purchasing are made with data derived from inventory forecasting. This has a positive impact on the sales and profit margin.
Benefits of using Inventory Forecasting with software like EasyEcom:
- With inventory aging report, we can identify stale inventory. End of season sales offers can be created for such inventory to free up the working capital
- Plan inventory based on multiple sales channels and offline sale combined together
- Flexibility in planning inventory based on different time frames (sales velocity during holidays vs regular time)
- Receive automated alerts at inventory reorder point
- Ability to accept backorders in case demand goes over the board. New purchase orders can be created for respective vendors for the backorders.
How to Measure Inventory Forecasting:
When you have data available, anything can be measured but to accurately forecast inventory, the focus should be on those data points which are relevant. Before we jump into how to do inventory forecasting, we need to consider few crucial points.
A Forecast Accuracy Metric That Is Objective, Quantitative, And Manageable.
Deciding what to forecast?
Level of aggregation: Individual products or product groups? Weekly, monthly, or quarterly inventory? Units of measurement: units or dollars?
Determine How Often It Should Be Measured
Feedback cycles of each assumption used in forecasting
But one thing the management needs to understand that no matter how sophisticated the forecasting techniques you use, forecasts will never be 100% as it involves factors that are not controlled by you and a lot of uncertainty involved in it.
Techniques Used To Measure:
While forecasting inventory, there will be two sets of products. First is for the products that has stable inventory and has past data available. It can be forecasted more accurately. The second type of products are items that are new, low volume and innovative products. It is very hard to predict an accurate forecast with considerable uncertainty involved. And to make the problem more complex, there are zero historical data and some assumptions have to be made to calculate inventory.
The techniques used can be broadly divided into 4 different categories.
- Trend forecasting:
These are forecasting methods. When a particular type of upward or downward trend for a particular product is involved, this method is used for forecasting. The double exponential smoothing, regression, triple smoothing etc are few techniques popular in this category.
- Graphical forecasting:
When you have data and you convert them into graphical representation, it conveys the pattern visually. Visual representation of data is easier to comprehend. This technique can give you a general trend without getting too much into understanding the data. Previous inventory exploration, trends and patterns help you forecast easily.
- Qualitative forecasting
When historical data is unavailable or irrelevant or are scarce, the forecasting is done based on intuitive or judgmental evaluation. When a new product or a new innovation is launched, this scenario arises. Some typical qualitative techniques are based on personal insight, sales force feedback, panel consensus, market research, visionary forecasting, and the Delphi method.
- Quantitative forecasting
When a historical inventory data is used to project future inventory, it becomes more accurate and relevant. The available data and the other relevant factors are taken into account while forecasting the future inventory in these methods. The popular methods adopted by organisations are the Extrinsic and intrinsic techniques, time series forecasting methods (relying on past data) supplemented by qualitative judgements.
Inventory Forecasting Best Practices:
Keeping few very crucial points in mind while calculating inventory forecasting gives maximum output.
- Get input from various stakeholders. Take input from Sales, Marketing, and Finance.
- Competitors sales data
- POS data
- Amount of obsolete stock
- Frequency of stockouts
- Measure Forecast Accuracy at the SKU, Location, and Customer Planning Level
- Adjustments Based on Feedback of Current Cycle & Focus on exceptions
- Talk with customers
- Review the data for trends
It is always very beneficial to have a great inventory forecasting team who work on a regular interval to understand the trend and derive accurate inventory forecasting method.
It is important to understand what kind of data is more important with respect to forecast accuracy. Is it the external data like competitor sales, POS data, sales team forecast or the internal data like stock-outs, shipments, orders, etc?
Apart from this, it is also important to determine which time buckets are most suitable for forecasting. For example, whether to use monthly time buckets or weekly time buckets for planning. All these factors changes from organisation to organisation.
Nobody can predict 100% accurate inventory forecasting every time. It is very essential to understand this and review the past forecast, learn from the trends and improve the accuracy.