The Definitive Guide to Multichannel Inventory Management
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As the eCommerce world grows, the only thing to keep you from drowning under the overwhelming burden of competition is multichannel retail and distribution. Selling your stock on multiple channels is not really a choice anymore – it has more or less become a requirement. And for the most part, this is a great thing because it means that you get a monumentally large number of sales, can build better relationships with your customers, and refine your footprint in the industry.
However, quite unfortunately, it’s not all sunshine and rainbows when it comes to tackling multichannel selling. It is a rather complicated business model that includes many layers, all of which have to be perfected in order to achieve a seamless flow of goods throughout the supply chain. In fact, businesses face a rather daunting challenge when establishing a multichannel sales model, including but not limited to, inventory management.
Managing your inventory as a multichannel business can be hard. But it doesn’t have to be. All you need to establish a robust multichannel inventory management system is a proper understanding, a cohesive structure, some good tools, and of course the patience to go through trial and error.
A lot to take in?
We know – which is why the following sections cover everything that you need to know about multichannel inventory management in digestible chunks. By the end of this guide, you will know not only what multichannel inventory management is, but also why it is important and how you can implement it in your business.
The best place to start our discussion on multichannel inventory management is by understanding what it is.
Multichannel or multisource inventory management is a term used to define the process by which businesses keep track of their inventory from different sales sources and storage locations. Essentially, it is a way of managing your stock in accordance with all the orders you get, and ensuring that each order is compliant with your standards and is delivered on time.
Before we dive further into multichannel inventory management, it will be beneficial to have a look at what are the different channels that form a multichannel sales model. Understanding this aspect will really help us establish why exactly this business model is so complicated and what makes multichannel inventory management the ultimate tool to curb the challenges posed by multichannel selling.
The multichannel sales model often includes marketplaces. Usually, these marketplaces are online platforms such as Amazon, Google Shopping, and AliExpress (this is why multichannel inventory management for Amazon Ebay etc is such a big deal!). These channels are a great way for businesses to expand due to their low-cost, low-risk nature. Businesses that want to present their products to high-intent, large target audiences find marketplaces to be the most advantageous sales channel. Due to the fact that many of these shopping platforms already have high traffic, you don’t have to worry about SEO or marketing – all of that is already done. For this reason, most businesses consider online marketplaces to be the first layer to their multichannel selling strategy, and rightfully so.
Marketplaces are great for startups, and can be used to the best of their potential if you integrate them properly with your inventory. Remember: marketplaces are highly competitive, so you always have to be on your best game. Besides, most of them have strict requirements in terms of fulfilment and customer service, so you have to make sure that your stock handling strategies are well-sorted before you add marketplaces to your multi selling business model.
Unlike marketplaces, a web store is your own, personalised store that you can create using an eCommerce platform such as WooCommerce or Shopify. Web stores, more or less, are the most important channel to include in your eCommerce multichannel strategy. These are often considered to be the backbone of a business, as they allow you to not only build your own brand presence, but also have full ownership of your revenue stream. In this regard, the best thing about owning a web store is that you get to decide the rules. You have the leeway to set your own standards for customer service, which makes things a little less burdensome when in comparison to marketplaces.
However, you must also keep in mind that creating a web store is a bigger investment than some of the other channels you will be including in your multichannel selling. This means that the stakes will also be higher, and you will have to put in a lot of effort to make sure that you get a sufficient ROI. In that regard, managing your store and its inventory on the backend will be even more important for this particular channel.
This channel in eCommerce has only just started gaining traction, so it can be regarded as the “rising star” of multichannel selling. For this, businesses utilise social media to sell their products and make use of the wealth of user data they have gathered from social platforms to drive their sales.
Social selling is easier to achieve, and almost any business can get started with it: sometimes even free of cost. The only drawback of social selling, therefore, is that it is hard to grow. You need to consistently make high quality content to engage your audience. Not only that, but you also have a considerably more personal relationship with your customers, as they have easier access to you. They can simply message you in case anything goes wrong – which means you are directly answerable! This puts a responsibility on you to ensure that the fulfilment process is as seamless as possible, which again takes us back to the importance of inventory management.
Wholesale is another channel that you can add to your multichannel strategy. It too is beneficial in terms of decreasing your marketing spend. Essentially, you will be providing your products to a reseller, who will then use their already established platform to sell your products.
Adding a B2B aspect to your business model means that you are going towards an omnichannel strategy, which further boosts the efficacy of your business operations. Being a wholesale supplier takes some burden off your shoulders, as it is the reseller’s job to properly market the products and get them to the end-user. However, even wholesale can become complicated if you don’t stay on top of things and fail to manage your inventory management.
Looking at each of these business models in turn really shows that despite being incredibly beneficial to your strategy, each comes with challenges that can only be solved with planning and organisation.
At this point, you should be able to at least somewhat appreciate the importance of multichannel listing and inventory management. With that, let’s turn to some other reasons that make multichannel inventory management a must for businesses:
With so many channels involved in your sales model, it really isn’t that hard or unlikely for you to miscalculate the amount of stock you need. In fact, there are a lot of chances for you to make the mistake of overselling your items. This means selling items that you don’t have in stock to begin with, and we all know what that leads to: delays and unhappy customers.
Other times, you may go the completely other way and end up getting more items in stock than you can manage to sell. This complicates things further because the stock takes up precious space, and requires to be looked after. In some cases, you may even have to get rid of it which will of course cost you money!
With the right multichannel inventory management system in place, you don’t have to worry about any of this, which is why its importance cannot be understated. Multichannel inventory sync and management facilitates you with the just the right amount of data you need to make sure that you are stocking up just right.
Since you have to take care of your operations across different channels, it is indubitably important to stay in touch with all your inventory activity at all times. With the right inventory management system in place, you are able to not only see what you have in stock and where, but it also allows you to identify any discrepancies and fix them in time.
Multichannel inventory sync gives you full control over what is happening in your warehouse, which means that you are in a better position to assess the impact your processes have on your sales for each channel. It also helps you gain an accurate view of where you stand as a business, which in turn makes it easier for you to revise your business plan and make better decisions.
It goes without saying that insights are important for the success of any business, especially if you are running it in the eCommerce space. If you fail to make decisions based on actual data, you are setting yourself up for disaster. However, sometimes, it is not easy to extract data. This is especially true when it comes to handling a multichannel inventory, considering how things get complicated with so many channels involved.
However, if you have an efficient inventory management system in place, your processes can generate some very important insights that you can later use to empower your multichannel decisions. For example, you can know when to put on flash sales or when to implement the kitting technique. You can also see what products sell fast at what location, and choose to stock up and sell those particular products in nearby areas only.
A multichannel strategy means that you have more customers. This is obviously a good thing in terms of your revenue, but it also means that you have more people to impress. Afterall, no matter where your customer prefers to buy from you, you must offer them unrivalled customer service, delivery timings, and product quality in order to retain them.
A good inventory management system optimises everything, which means your overall service will be improving anyway. However, it also automates all your processes which puts you in a better place to accommodate your customers in varying scenarios. For example, if the customer wants a certain product and it isn’t in stock, you can guide them on what to do or when to expect the product to be back in stock with the help of robust inventory management! This will enable you to impress customers and be in their good books for a longer period of time.
Did you know that free and fast shipping is the top-most important factor for customers when it comes to eCommerce? This means that regardless of where your customers are shopping from, they expect to get their hands on your products as quickly as possible.
This is where efficient multichannel inventory management helps you. It makes it possible for you to manage your stock across all your warehouses, which means that it is easier to locate inventory closer to customers and deliver products timely, or even before due!
Not only that, but inventory management, especially when paired with warehouse control and labour management, can really optimise the whole supply chain for you. This would mean a smooth, seamless supply chain without any setbacks, and would thus result in faster delivery times and happier customers.
One of the biggest factors behind businesses gravitating towards multichannel selling is that it is a scalability-friendly business model. Ultimately, every business wants to expand: whether it is in terms of the products they offer, their target market, or the size of their operations.
If you have a proper way of managing your inventory in place, growing in any way would not prove to be a challenge. In fact, the right inventory management solutions grow with you so that reaching new heights of success is easier for your business!
Despite the importance of multichannel inventory management, a lot of businesses struggle with it because it is not always easy to achieve. This is mainly because multichannel inventory management can face challenges in the following domains:
The whole point of the multichannel business model is to be able to sell through different marketplaces, eCommerce websites, and retail locations. Although essentially this means that you are accelerating your way through success, it also means that you will be dealing with an overwhelmingly large volume of orders. This means there is considerably more space for things to go wrong; you are more prone to human error, inefficiencies, and oversights – all of which can be pretty hard to deal with.
The multichannel business model also means that there is a variety of distribution options you are choosing from. So, warehouses, retail stores, and 3PLs and the most common ones and usually they all work in connection with each other. That’s exactly where problems arise, since in order to build a cohesive structure from all of these, you need to have a system that ties them together. The absence of such a system can prove to be a hindrance to the supply chain.
oint of the multichannel business model is to be able to sell through different marketplaces, eCommerce websites, and retail locations. Although essentially this means that you are accelerating your way through success, it also means that you will be dealing with an overwhelmingly large volume of orders. This means there is considerably more space for things to go wrong; you are more prone to human error, inefficiencies, and oversights – all of which can be pretty hard to deal with.
When it comes to your commerce stack as a multichannel business, chances are that its quite deep. This means that in order to keep track of all your finances and other important aspects, you have to employ multiple systems. This means other multiple software solutions, or a single solution that can support a large range of integrations. Either way, this raises yet another layer of complications and challenges for multichannel businesses.
As already discussed, multichannel selling means multiple locations, which means a lot of warehouses. This means that there is more for you to manage, especially in terms of your warehouse labour. Ideally, each warehouse operative should receive the same kind of training so that you can maintain a level of consistency with your operations. Not only that, but you need to ensure that each of your warehouses is equipped with technology that makes it easier for your labour to work in a way that is efficient and also compliant with the rest of your work processes. And yes, this is as hard to achieve as it sounds!
Throughout our discussion in the preceding sections, we have stressed upon the fact that it is not multichannel inventory management that is important, but good inventory management. It is only good, thoughtful, and well-planned inventory management that can help you reap the benefits we have talked about, and overcome the above-mentioned challenges.
What does this mean, and how can you achieve good inventory management?
By the help of an inventory management system software, of course!
We’re sure you have many questions – so let’s go through them one by one, together.
This is pretty self-explanatory. The job of an inventory management software is to leverage leading technology solutions to optimise your inventory and warehouses in a way that allows them to become the best assets for your business. All the major benefits of multichannel inventory management that we have discussed above can only be brought to light with the help of an inventory management software.
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The main job of an inventory management system is to properly align your whole organisation. It implements end-to-end automation across all your warehouses so that you can keep an eye on your stock across multiple platforms. It enables you as well as your whole team to understand your inventory activity a lot better, gather important insights, and make data-backed decisions that work to propel your business forward.
To put it across simply, there are many benefits of multichannel inventory management software. Some of them we have discussed already: multichannel inventory management done through the help of a multichannel inventory management software leads to less stockouts, more visibility, more data, and more efficiency.
Now, let’s turn to some other benefits that a multichannel inventory management software can introduce you to:
All in all, a multichannel inventory management software can really simplify the job of maintaining a multichannel sales business for you. It allows you to have a 360 degrees view of all your operations, judge your own performance, and make decisions that actually improve the overall efficiency of your inventory and warehouse.
Albeit the most important part of it, integrating an inventory management software in your inventory management workflow is just one part of optimising it. In actuality, there is a lot more that goes into it. In this section, we discuss what the process should be like in general – which will further help you understand the importance of bringing in an inventory management software to your processes.
With inventory management, it is the goal of every business to handle stock better and create a much better experience for the customer. This means that the two essential components of inventory management are stock levels and customer experience.
In order to get to this goal, inventory management as a whole should be a fully documented process. Back in the day, this was achieved by maintaining spreadsheets upon spreadsheets of records. However, this is not the case anymore. To stay in touch with the changing needs of the world, it is important to get to this goal through better ways, and we will look at those in a bit.
Other than that, a considerable chunk of inventory management, especially when it comes to maintaining a balance between stock handling and customer satisfaction, is dependent on your team. In fact, it wouldn’t be wrong to think of inventory management as a way to empower your workforce in a way that makes it easier for them to navigate the workday and contribute towards your business.
This, at the very basic level, is what you are trying to achieve with inventory management. As it is probably already clear, this is what an inventory management software enables you to do as well.
At a very basic level, inventory management for all businesses should have been like we just talked about. Yet, when it comes to multichannel selling, there are a few things you need to keep in mind.
For the most part, you need to understand that wherever there is multichannel selling engaged, the inventory management is likely to change significantly. In the light of the challenges and complications that arise out of switching to a multi-selling model, it can be very hard to maintain stock behind-the-scenes while keeping your customer happy throughout. This is true for traditional, solo channel businesses as well, but is obviously amplified to a great extent when you are selling across multiple channels.
To better understand this, let’s look at an example involving, say, Business A and Business B. Business A is an exclusively eCommerce brand, which means they are getting all their orders through their webstore. Now, Business A isn’t a small business by any means: they are an international retailer and their operations span oceans! As such, it is understandable that Business A will have some problems when it comes to their fulfilment process – managing warehouses, handling orders, maintaining stock are some examples of possible issues.
Now, let’s look at Business B. Business B is a multichannel business. It has its operations across 15 marketplaces, 2 eCommerce websites, 5 retail locations, and is also planning on branching into social selling. Needless to say, this business is also going to face problems similar to Business B – but on a much larger, much more elevated scale! This is mainly because essentially, each of the channels they are operating across will comprise of an entirely different inventory management process, which will then need to be connected into a single system in order to achieve the goal of handling stock and satisfying customers simultaneously.
The purpose of this illustration is to make you understand that multichannel inventory management is serious business, and in order to ensure that this process actually plays into making your business grow, you will have to optimise it in a way that is compatible with the 21st century standards of business.
We have already touched upon one way to do this: inventory management software.
However, it is better if you view inventory management software as a part of the overall multichannel inventory management strategy.
Planning out a proper multichannel inventory management strategy will enable you to build your inventory management process block by block, and create a robust system for your business to rely on. We have compiled a list of the best practices you need to implement in your strategy – this will help you ensure that your strategy leads to better results.
Skip to this section for more information on how to pick the best multichannel inventory management software for your business.
Have you heard of the 80/20 rule? In the world of eCommerce, the 80/20 rule signifies that 80 percent of your sales are most likely to come from only 20 percent of your products!
The 80/20 rule can be implemented to your inventory management processes as well. You need to look at your inventory, and identify the products that make the bulk of your sales. Knowing which products lead to the most revenue is a great way of handling your inventory. Essentially what you are doing is defining your core and non-core products, which then makes it easier to divide your focus.
Now, this isn’t to say that your non-core products should not be given due attention. It’s just that your core products deserve to be prioritised, and it’s generally a better idea to manage them individually. This way, you can ensure that you never run short on your bestsellers, and can satisfy the customers that are most likely to generate the most revenue for you.
You don’t want to overload on the inventory because that would be too costly in terms of storage, but you also don’t want to run out of stock and lose customers to a competitor. Luckily, this is where forecasting comes in.
Forecasting is the key to success for any business. Since multichannel selling is such a delicate affair, forecasting becomes even more important. Some ways you can execute topnotch inventory management forecasting include:
The first way is to leverage historical sales data and use that for the basis of your forecasting. A trip to the past can be helpful if you are trying to understand how your sales fluctuate during different seasons, and then make your purchasing, storage, and stock decisions in accordance with that understanding.
Multichannel selling means data: lots of data. You have to be very careful with managing it, because it can get to a point where you are genuinely overwhelmed and exhausted dealing with all the numbers, metrics, and figures. This can also lead to you not being able to distinguish between which ones matter the most, and of course, that can be detrimental to your overall productivity.
You can avoid wasting time on useless data and focus on the metrics that are important by setting specific KPIs that you want to take into account above all else. Here are a few KPIs that you will benefit from the most.
This is an important KPI. It looks at the number of times inventory is sold in a period of time. Most businesses look at their turnover within a year to figure out what’s selling more.
Inventory Turnover = Cost of Goods Sold / Average Inventory
This KP will help you ensure that your delivery and fulfilment times are fast enough and that your customers get their products on time. This is essentially a reflection of how well your customer service is.
Customer Order Fill Rate = Fully Shipped Orders / Total Number of Orders
This KPI is essentially a percentage of your selling price/sales revenue that is gross profit.
Gross Margin Percent = (Sales – The Cost of Sales / Sales)
This KPI is a percentage that represents the price you spend on your inventory overhead every year.
Cost of Carrying = Carrying Costs / Overall Cost
As the name suggests, this KPI can help you gauge how long it takes for your business to turn your inventory into sales. Using this particular KPI, you can estimate the time needed before you order your restock.
Average Days to Sell Inventory = (Your Average Inventory/The Cost of Goods Sold) x 365
In order to make the most of your multi-inventory management processes, make sure you are tracking your progress regularly. As the nature of these KPIs tells us, they need a close attention to detail to your operations in order to be effective, so make sure you are doing that. You can even leverage tools such as Google Analytics to make sure you are getting hold of the right analytical details of each of your processes.
You’d be surprised to know how many businesses suffer simply because they fail to prioritise organisation. In fact, many businesses can’t even switch to multichannel selling simply because they lack organisation!
This is exactly why one of the best ways to ensure that you are optimising your inventory management processes in a multichannel-friendly way is to stay organised from start to finish. This will include establishing inventory visibility across stores, warehouses, and vendors. This will also include bringing consistency to seemingly trivial processes such as naming SKUS, categories, variants, and other identifying information.
In general, organisation is a holistic process and will require a consistent effort – but it is also wholly worthwhile and is hence an important part of any multichannel strategy.
Automation of your processes within the warehouse or in terms of inventory activity are important and we know that. However, this does not mean that there is nothing left for you and your warehouse operators to do by hand. For example, it is quite important to conduct regular counts and quality checks by hand. This is especially important when your business is dealing with multiple channels, as there is more space for things to go wrong in multichannel inventory management.
So, physical counts are important! What you do is that you tally up the number of products you have in inventory manually, in person. So, for this process, a person will have to physically go around the inventory and count the stock.
Sounds boring? Well, it can be. But it is significant! It is important for you to stay in touch with your inventory, and despite the hundreds of benefits that automation brings to the table, it is important to make sure you are checking the right boxes with a physical count. However, the good news is that doing these “regularly” doesn’t mean you have to do them everyday. In fact, ideally, these counts will be sufficient enough if you do them once a year. Many businesses do a full count every year.
These are the main tips when it comes to optimising your inventory management processes for a multichannel selling business model. Some other tips and tricks that you can follow are:
The main thing to understand is that despite being a complicated process, there is nothing about multichannel inventory management that makes it impossible to optimise. Equipped with the right knowledge, top-notch technology, and some patience, you can perfect your inventory management techniques and evolve your business. Other than that, remember that no matter how hard the process seems to be, it will truly pay off in the end. Your customers are in the 21st century and quite advanced – they can tell when a business has it all together, and when it is coming apart at the seams behind-the-scenes. The only way to be in their good books is to actually and truly work on your inventory and warehouse management techniques which can genuinely improve your customer service.
Other than that, you must also consider your budget before you make a choice. Make sure you are going for an option you can sustain financially over a long period of time. Given that an inventory management software is actually a good long-term investment, you may want to take a good chunk of money out of your budget in order to prioritise the needs of your business in the long run!
Since a multichannel inventory management software is no small investment, it becomes absolutely necessary for businesses to make a choice that they can stand by in the future as well.
In that regard, always look for the following five features in your multichannel inventory management software:
The truth of the matter is that you simply cannot build a multichannel sales model without eCommerce. We are living in a new reality after the Covid-19 pandemic; a reality where eCommerce is not only the norm, but also contested to be a replacement for traditional brick-and-mortar shopping. In this regard, it is important for you to implement multichannel inventory sync with major eCommerce platforms like eBay and Amazon.
The software of your choice should be able to help you integrate your inventory system with these platforms. This would wholly simplify things for you: you won’t have to put in software separately into different online stores, for example. Your inventory management software will automate this in a way that you will only have to update your information once, and it will be updated across different channels.
Integrations with eCommerce platforms can make multichannel inventory management for Amazon Ebay etc. a lot easier to execute. It also helps you save a lot of time, centralise your sales, and make data analysis considerably easier to achieve.
We’ve already discussed that forecasting makes for an important part of any multichannel inventory management strategy. As such, you need to look for a product that can help you optimise and expand your business by providing you with top-notch analytics and forecasting tools. It should also help you turn this data into comprehensive reports that will make the findings a lot more accessible, and hence easier to rely on.
Some things you can look for in terms of analytics are:
It is no secret that in today’s day and age, it is important for businesses to seek cloud-based solutions, access, and updates due to various reasons. For multichannel business, the most important of these reasons is that you have to manage multiple locations, stores, and warehouses. In order to do all of that in a centralised manner, you need your data to be stored in a cloud server.
Cloud-based solutions can be accessed from anywhere. This gives them a clear advantage over on-premise software options, as these can only be accessed from the physical location of the on-premise software. As long as you have the internet, you can stay in touch with all of your inventory across multiple channels from a single device.
It goes without saying that this makes things convenient for you as a business owner. You can easily manage your stock, sales, and any other information without leaving the comfort of your home! But that’s not all: cloud-based solutions also make it easier for you to delegate tasks, as your warehouse operatives can also tap into the network from their respective locations and access data.
All in all, cloud-based software greatly streamlines your warehousing processes and makes business management a breeze. You, and the rest of your team, can make data-driven decisions in seconds – without having to waste anytime, which is what makes it such a significant feature for multichannel inventory management.
Regardless of how important inventory management is, at the end of the day, it is merely one part of the supply chain. In actuality, there are many other layers that go into optimising your business operations, such as warehousing.
Warehousing is particularly important for your inventory management software, simply because good inventory management is impossible without proper warehouse processes in place. This means there is an inherent link between warehouse management and inventory management, in a way that you can simply not have one without the other!
Therefore, warehouse management should definitely be one of the features your software system offers. You must ensure that deliveries and stock levels are managed accurately when it comes to inventory management, and this can only be done when you have complete control of your warehouse procedures.
Multichannel selling is the key to success in today’s day and age, and as a retail strategy it can really help you develop and expand your business. However, it is also important to keep in mind that it can only be successful with the right amount of care in the area of multichannel inventory management. You have to organise your multichannel inventory – the more high-functioning it is, the better efficiency you can achieve in your other processes.
Luckily, managing multichannel inventory becomes so much easier with the right tools and technology. A multichannel inventory management system, for example, can make it so much easier for you to perfect your inventory management tactics.
Want to see for yourself? Get Canary7 today and watch your multichannel inventory management strategy evolve beyond recognition.