The Startup Guide for Emerging Commerce Brands Part 1: Proper Inventory Management

With the advent of new technologies, there has never been a more opportune time to start and grow a business. But the problem most companies face today is acquiring enough capital to support different areas like inventory management, accounting, and marketing. With equity funding dropping by 16% between 2019 and 2020, smaller business owners and entrepreneurs report a lack of capital as their biggest challenge.  

After speaking with our customers and partners, we've identified universal pain points that entrepreneurs face as they scale their business.

Our comprehensive guide will be useful as you build your consumer brand. We’ve broken down 4 fundamental sections with best practices to enable you to focus on building your brand. This is part 1 of the series.

Inventory Management

Inventory accounts for a large amount of capital spent by most SMBs. We teach you how to optimize your inventory management tech and feature stack, pick the top 3PL providers, and plan for supply chain delays.

The Optimal Inventory Management Stack

Implementing inventory management software is typically recommended for any rapidly growing consumer brand that can no longer manage with spreadsheets. Underestimating inventory at the wrong times can leave you with disgruntled customers while overestimating can drive up costs and tie up working capital.

A good inventory management system allows for you to manage suppliers and orders while also providing a real-time look into your current stock levels at multiple warehouses, if applicable. Ultimately, this improved planning will help you strengthen your gross margins and reduce overhead costs. Let’s dig into the features an ideal inventory management tech stack should offer and the top products on the market for retail and eCommerce startups.

Tools to Consider for Your Inventory Management Tech Stack

• Enterprise resource planning: Enterprise resource planning (ERP) systems automate business processes and centralize data from across the company. Rather than a standalone tool, ERP systems have several modules such as inventory or order management that fulfill a specific business requirement allowing for one source of truth. This enables real-time inventory checks and the ability to forecast future demand better. This is often a tool recommended to put in place first as it frequently encompasses inventory management, demand planning, order management, high-value integrations, and more.
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• Inventory management system: An inventory management system (IMS) is a software platform that allows businesses to automate, organize, and manage incoming and outgoing stock, including analysis of all inventory data. 
  
  Retail benefits: inventory tracking, inventory alerts
  Omnichannel benefits: multi-location management features, curbside pickup
  eCommerce benefits: accurate inventory controls, automated product delivery, accounting integrations

• Warehouse management system: Warehouse management systems (WMS) help manage the operations of a warehouse or distribution center. Combining these systems automates stock locating, labor management, order picking, replenishment, packing, and shipping.
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• Tech-enabled 3PL: Tech-enabled third-party logistics (3PL) companies provide an alternative to off-the-shelf software that consolidates and manages shipping data. When paired with an ERP, a tech-enabled 3PL has streamlined shipping and fulfillment solutions, such as warehousing, specifically for businesses with an online presence. They also have software that integrates data from multiple sources so businesses have a full view of an order’s lifecycle.

Inventory Management Feature Checklist

Compare the features of your inventory management software or the software you’re researching to the list below and make sure they cover these top features for an optimal experience. 

1. Real-time updating of stock levels
2. Real-time demand planning functionality
3. Near- and real-time data and reporting
4. Automated low stock notifications
5. Automated replenishment
6. Advanced data analysis tools
7. Cycle counting
8. Traceability
9. Asset tracking via barcodes or lot number
10. Creation of accurate records

The Top Inventory Management Software Tools

Cin7

This cloud-based inventory and order management solution is popular with those in the consumer brand space and is built with fast-growing businesses in mind. With recent acquisitions of competitors DEAR and Orderhive, Cin7 is sweeping up more of the market.

Top Features: 

• Includes tracking and control features like barcode inventory, incoming stock, and return inventory management
• Offers cost accounting including actual Cost of Goods Sold (COGS), single-click accounting synchronization, and alternative General Ledger mapping
• Provides real-time insights tools and customizable reports library 
• Lets businesses customize inventory fields, take stock via mobile, and automate inventory adjustment
• Gives access to an expert team to help with setup, training, and 24/7 support

Pricing: 

• Small business ($299/mo): For those selling to consumers online
• Business ($539/mo): For B2Bs and wholesale sales
• Advanced ($999/mo): For advanced sellers with consumer and wholesale sales
• Enterprise (pricing available upon request): For large companies with complex businesses

NetSuite

‍NetSuite ERP is a cloud-based software that gives businesses one source of truth for inventory, in real-time, regardless of location or sales channel. Netsuite is often used for more established companies, so be privy to higher costs associated with its product suite. 

Top Features: 

• Gives the ability to predefine fulfillment rules to curb multiple shipments for one single order and excess shipping charges
• Uses demand-based replenishment to dynamically manage item reorder points and maintain preferred stock levels with automatic tasks and alerts 
• Allows for categorization of inventory based on transaction volume and/or value 
• Lets you back- and forward-trace inventory using lot and serial tracing to define fulfillment strategies 
• Offers best practices based on experience gained from tens of thousands of global deployments over two decades

Pricing: 

• Users subscribe to the software for an annual license fee.
• You will have to speak to a NetSuite sales rep to get an estimated price for your business.

DEAR Inventory

‍DEAR, recently acquired by Cin7, offers cloud-based ERP software to effectively manage inventory and gain real-time visibility into stock levels and order statuses, regardless of product volumes. 

Top Features: 

• Integrates with leading market solutions like Amazon, PayPal, Shopify, eBay, and QuickBooks
• Lets you create Product Families with automatically-generated SKU for variations of the same product
• Allows for multi-location management with a Drop Shipment feature for creation of sales orders, with automatically-generated purchase orders for suppliers
• Offers barcode scanning, full integration with POS systems, and stock adjustment
• Tiers and customizes pricing to help businesses attract both high-spending customers and price-conscious ones

Pricing:

• Standard ($325/mo or $3,575/yr): Multi-channel orders, inventory, purchasing, packing, shipping, integrations, and reporting 
• Manufacturing ($525/mo or $5,775/yr): allows for more users, 1 API integration, automations, and an advanced manufacturing module
• Retailing ($475/mo or $5,255/yr): Unlimited locations, registers, and POS users and advanced multi-location inventory

Katana

‍Katana is a modern manufacturing ERP built with DTC companies in mind. It lauds itself as providing complete visibility and control of inventory, sales orders, and more so that SMB operators can manage their business.

Top Features:

• An essential plan perfect for small commerce brands ready to get organized and start expansion
• An intuitive visual interface utilizing workflow automation and smart auto-booking, allowing you to prioritize orders and see in real time the availability of raw materials and finished goods
• Create bills of materials for your products and variants, gain multichannel inventory visibility, and floor-level control
• Quick and seamless integrations with common commerce tools like Shopify, WooCommerce, QuickBooks, and Xero

Pricing:

• Essential ($129/mo or $1188/yr): 1 full-access user, up to 3 warehouses, access to native and Katana API integrations, and support via email or chat
• Pro ($349/mo or $3588/yr): All essential plan features, unlimited warehouse, batch and expiry date tracking, barcode scanning, multicurrency, and more.

Tech-Enabled 3PL for Online Brands

ShipBob is a technology-enabled 3PL that offers simple, fast, and affordable fulfillment to thousands of eCommerce businesses. With deep logistics expertise, integrated technology, built-in data and analytics, best-in-class support, easy-to-understand pricing, and a network of fulfillment centers across the globe (with new locations continuously underway), ShipBob lets you split inventory across our network to reduce shipping costs and transit times.

The fastest growing e-commerce brands understand that world-class fulfillment increases revenue and builds customer loyalty. A 3PL will help you deliver on faster shipping expectations at lower costs, enable you to customize your unboxing at scale, and expand to new territories with less risk and operational complexity. 

- Karley Daudell, Partnerships at ShipBob

ShipHero offers both outsourced fulfillment and end-to-end shipping software. For brands shipping a minimum of 500 DTC orders per month, fulfillment pricing includes order processing, picking the product, packing the order, shipping boxes, and postage with three service levels. With three packages, software pricing begins at $499/mo.

• Essential WMS: beginning at $499/mo
• Standard WMS: beginning at $1,850/mo
• Enterprise WMS: requires quote

Need consulting to find the right 3PL provider?

Second Marathon: Smaller high-growth eCommerce businesses can save costs and time by using this provider to match them with a local 3PL. Second Marathon runs a four-part process to match you with the right 3PL to get the level of service you need:

1. Search Prep: Get to know your brand, your unique needs, challenges, and what you’re looking for in a fulfillment partner
2. 3PL Curation: Mine their vast database to find the right partner 
3. 3PL Outreach: Meet with the best 3PL companies that match your criteria, with a managed end-to-end screening process 
4. Evaluation: Use Second Marathon’s proprietary evaluation tool to choose the best proposal

How to Plan for a Delayed Supply Chain

We are living in a time of incredible supply chain disruption due to increased consumer demand, labor shortages, material shortages, and shipping delays spurred by the global impact of COVID-19. Never before has careful supply chain management been more essential to commerce brands.

With the U.S. inventory-sales ratio near record lows…the problem could get worse if smaller companies are unable to meet their commercial obligations and struggle to stay afloat.

-James Gellert, CEO, RapidRatings quoted in Reuters

Inventory management is vital to the health of your supply chain as you need to balance customer demand with storage space and cash limitations. Investing in and implementing an inventory tech stack that can help manage and improve your supply chain and operations is crucial in today’s fast-paced environment.

Tips and Tricks for a More Reliable Supply Chain

• Build extra time into re-stock and product launch dates to make sure you have enough stock to fulfill all orders and maintain a high on time, in full (OTIF) rate.
• Move stale inventory, focusing promotions on products that tend to move less quickly with buy-early messaging and early access to sales.
• Start production two months ahead of schedule, placing purchase orders much earlier to keep products in stock.
• Place larger POs so you have more inventory on hand and save money on per-unit cost. 
• Prioritize purchase-order flows by front-loading floor-set and peak-season orders to ensure critical inventory is available. 
• Use a 3PL in a different location as a backup, to cut transit times and lower costs.
• Use advanced analytics through some of the tools already mentioned to automate the risk-assessment process and get real-time visibility into inventory levels.
• Be honest with customers. Consumers who receive a well-timed and well-worded note about any inventory shortages or shipping delays are more likely to work with you again.
• Have at least a six-month cash buffer to prepare for inventory delays. 

Having enough cash on hand can be difficult, so Ampla is here to help. We can provide you with the capital to grow with transparent APRs, larger credit limits, and a non-dilutive solution. Contact us today.