Starting ecommerce: inventory management
So I know that this is not the most exciting subject in the world and probably won’t generate a lot of traffic on google, so why talk about it? Well because this is such an important factor in any online business and the sooner you get it right the quicker you will grow.
In our second episode of our “Starting Ecommerce” series will discuss some of the basics of inventory management and why they are important as you grow your business.
What’s in this episode?
- SKUs what they are & why they’re important
- Product identifiers and item specifics
- Picking locations
- Self-fulfilled vs 3rd party fulfilment
- Stock control
So what is a SKU? SKU stands for Stock Keeping Unit but to me and you, it is a unique ID for that item.
When starting out, I have seen many people use their suppliers code, item barcodes or just something random. At first this doesn’t seem to matter but as you grow on to many different marketplaces, you will need to link all your listings together to one item stock feed.
A SKU should be independent to your company and should make sense to your business.
I have a range of items from Acme Co, they supply me with Card Sleeves in many different designs. From the SKU above I can tell which manufacturer, what category of item it is and then an allocated number for that product. AC-CS-140 (Supplier-Category-Item Number).
If you items have different colours and sizes then you may want to diverse your SKU layout slightly.
Here we have an extra large, red men’s shirt from Acme Co (Supplier-Category-Size-Colour).
However you decide to write your SKUs, there are some good practices to take note of:
- Keep it uniform – keep the SKU structures and lengths the same
- Start with a letter – Spreadsheet software is notorious for removing 0’s and re-formating numbers
- Don’t rely on the SKU for picking – this is what picking locations are for
Product identifiers and item specifics
GTINS, ASINS, EANs, MPNs are just some of the terms you will here as you start selling online. In recent years both product identifiers and item specifics have become such a large part of ecommerce. Though it may seem a little daunting, I have written an explanation of what they are and why they are important.
GTIN – Barcodes
A GTIN is basically a product barcode and can come in a variety of styles, here are some of the popular ones you will come across:
- EAN: European Barcode
- UPC: American Barcode
- ISBN: Barcode for books
There are also some other identifiers that the popular marketplaces use:
- ASIN: Amazon’s own internal product identifier
- MPN or Mfr Part Number: This is the manufacturers part number
Typically when listing new items, you will need to provide a barcode and the MPN.
So what do we mean by item specifics? This the details of the items and can vary depending on what product you are selling. But for example, in clothing you will have:
And much more depending on the actual item you are selling. If you are selling Toys then you have certain specifics such as:
- Recommended age
- Batteries required
Items specifics are not just important for the consumer when reading the details of the item, but they are important in all the major marketplaces internal search engines plus Google Shopping. As we lean more to personal assistance such as Siri, Amazon Alexa and Google Home, item specifics will play an even more important role as people search for the right product from voice command.
When you start out, you may be running your business from a spare room or your garage. You probably know where every item is that you own. But, when you begin to expand, move to a new premises or hire a new person, picking locations allow you to optimise the way you pick orders.
Printing a pick sheet with the location of the items on is a good way to make the most of your time. By collecting all the items at once, rather than going to the same place multiple times through the day will improve you order processing speed.
As you sell more, you will also see trends of popular sellers which you can then use this data to move these products to a location closer to where you pack your products.
Some Top Tips
- Keep picking locations simple
- Move fast moving lines close to packing area
- Print pick lists sorted by Pick Location
One of the main aims, as you grow, is to keep your Pick/Pack cost as low as possible. This is one of the areas of cost that you can have total control of.
Self-fulfilled vs 3rd party fulfilment
So in Ecommerce, you can go down a few routes. You can dispatch your orders from your premises, you can outsource that to a specialist 3rd party company that will hold your stock and ship your items for a charge, you can dropship from your supplier or you can use Amazon’s own fulfilment service called FBA (fulfilment by Amazon).
Self-fulfilled or Merchant fulfilled
Self-fulfilled fulfilment is where you store the products, pick the orders, pack the order and choose which courier they go with.
Pros: You have complete control of the order lifecycle, from the order coming in, to how it’s packed, to the order going out. This include on how efficient you make this process.
Cons: Overheads of having a physical location and the fact that you usually have to order the stock before you sell it.
3rd party fulfilment centres
A 3rd party fulfilment centre is a company that has been set up to dispatch other companies orders. You send them your stock and they take care of the whole warehouse process.
Pros: You don’t need to pick, pack or ship the order. You don’t need to worry about hiring warehouse team or even getting a warehouse.
Cons: They will charge you for storing the products, picking and packing the products and shipping the products. You also have limited control in that process.
Dropshipping is where you list your suppliers products, orders come to you and then you send these orders directly to you supplier who will then ship directly to your customers.
Pros: Only pay for the stock you have sold, no need for large overheads.
Cons: Margins are tighter, competition is higher and you have to trust your supplier with your reputation.
FBA is fulfilment by Amazon, in a nutshell it is a 3rd party fulfilment centre but with added extras.
Pros: If you are selling on Amazon, then your products will be Prime eligible. It has also been known to help you win the buy box on listings.
Cons: Amazon charges for this service and some don’t feel too comfortable having Amazon stock their stock. (Remember Amazon is also a retailer as well as a marketplace.
Extra Bonus Point: Most people still don’t know that you can send your eBay and website orders directly to Amazon, yes that’s right, you can send orders that are not from Amazon to FBA. Read More Here
When you start selling online, you want to make sure that you don’t oversell. It is important to keep up to date with what you have in stock.
Even if you are only selling on one marketplace initially, it is a good idea to get into the practice of keeping your stock updated. Now you may be wondering what is the point as all your stock is live in one place but, can you honestly say that you haven’t given out a free item or there has been a returned item or a damaged product? For one selling channel this may be ok but as you grow and expand to multiple marketplaces and websites stock control will become crucial.
So create yourself a spreadsheet or even look at software to do this with. Make sure you keep your stock records up to date and run regular mini stock takes. These can be broken down into location areas.
Well I hope you have found this episode insightful, it is far from the most exciting part of ecommerce but I have spoken and worked with so many online sellers who did not focus on getting their inventory management ready early on and it cost them.
So if you are a new online seller and have any questions about the above or need advice, please comment below. If you’re an existing online seller and have some advice to give, please also comment below. Good luck with your online business!