Third Party Inventory Management: Is it for me?
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There are a million different integrations, apps and extensions you can get that integrate into your Shopify account. In fact, that’s mainly what we talk about. We wanted to focus today on one kind in particular that we see a lot of our larger clients benefitting from: third party inventory management.
I really like Shopify’s definition:
“Inventory management systems (IMS) are integrated software programs designed to track products, inventory, orders, and fulfillment both to and from customers as well as with suppliers.”
“Inventory management”, “order management” and “stock management” are effectively the same term used interchangeably. Often, using a software or service to help you do this, rather than cobbling together a mess of spreadsheets and pen-and-paper notes, helps you make sure you know when you need new supplies, how much product you’re moving and where everything is going. For companies that process a lot of orders, an IMS can help you stay accountable, transparent and on top of your game.
We often get asked what the difference is between an IMS and 3PL (Third Party Logistics). If you'd like to find out, check out this article.
How do I know if I really need one?
If you’re a small or medium business with one brand, who sells mainly domestically and has a pretty streamlined fulfilment process - come back to this post when you’re a bit bigger. You’ll likely be able to track and manage everything you need through Shopify.
For companies that are growing quickly, especially ones that are not just ramping up production but are developing into omni-channel or multi-channel retailers with multiple brands and touchpoints, my guess is that you’re struggling with (at least) one major challenge.
How do I keep track of everything moving in and out of my company, without any pauses or setbacks that affect my customer?
Using an inventory management software is really popular for medium to large and enterprise businesses, who have grown out of their Microsoft Excel phase and need something a bit more robust.
What 3P inventory management can do to help
Manage logistics across multiple warehouses
Now, we need to clarify. For the most part, businesses that are operating on a bit more of a budget and not out of their basement are probably already outsourcing their warehousing and fulfilment process. Unless you’re highly specialized and need to pack everything yourself for the presentation, it’s likely that hiring someone else to pack and ship is more cost-effective than doing it yourself.
But even if you’re outsourcing that step, things can get pretty complex when you need to bring in all of your supplies from different places, produce your products, pack them in multiple combinations and send them to different warehouses - especially if you’re working in multiple countries.
Using an IMS can help you track both the supplies and the shipments. And a good IMS will tell you when the pace of customer orders is changing, meaning you’ll need to create more or fewer purchase orders this month. This is especially important for companies that manage multiple warehouses, so you can see exactly when you’ll need to move product from one to the other without a frantic phone call.
Manage multiple businesses
If you have several branches of your business that share resources like logistics and packaging, but have different branding and products, it can get messy really quickly. While Shopify is great at pulling in information across multiple sales channels (like Amazon and Instagram), you’re more limited when it comes to integrating multiple distinct businesses. Shopify Plus starts getting you in that direction, but even with Plus, you’ll likely need a third party inventory management system to integrate if you operate several companies.
This is especially important for companies that practice kitting, or bundling multiple products, often from multiple warehouses, and selling them as one product.
Multi-channel order alignment
As you expand your sales to come from different channels, like Amazon, Ebay, Instagram, your online store, Facebook and wherever else, you need to make sure that customers are receiving consistently high quality service. An IMS can help you make sure that different sales channels are all working in tandem to streamline your fulfilment process.
Forecasting and optimisation
No, nobody can tell the future. But a good IMS will be able to make estimates and predictions about how much stock you are going to need for the next order, depending on your pace of sales and other factors like change in season. You can also use your IMS to generate purchase orders and smoothly turn forecasts into a well-managed stock flow.
What should I look for in a third party inventory manager?
There are a lot of things you should consider when it comes to inventory management, and what to consider changes depending on the type of business you run. Here are just a couple of considerations, plus a list of features laid side-by-side.
Where are you accessing it from?
When you open up and use your IMS software, is your information being stored on your computer or on the cloud? We recommend cloud-based software because you don’t risk losing your data, and you can access it from anywhere. Say your computer malfunctions - you don’t want any of the rest of your business to suffer.
Who can update information?
Make sure your IMS is usable not only by yourself, but by anyone who manages orders at any stage. Suppliers, third-party logistics companies that fulfil orders, and warehouse managers should all have their own ability to easily update their piece.
How well does it integrate?
Finding a software that fits what you already use is huge. If you’re a Shopify merchant, make sure you are using a service that integrates with all of the data coming from your e-commerce orders. You should also think about how well that software integrates with accounting, taxes, shipping and customer management software that you already use.
And, a little cheat sheet
We’ve done our homework on some of the good IMSs that integrate with Shopify. Take a look.
|
Finale Inventory |
||||
|
Warehouse Management |
Yes |
Yes |
Yes |
Yes |
|
Barcoding |
Yes |
No |
Yes |
Yes |
|
Cost Tracking |
Yes |
Yes |
Yes |
Yes |
|
Inventory Forecasting |
Yes |
No |
Yes |
No |
|
Reorder Management |
Yes |
Yes |
Yes |
Yes |
|
Kitting (Bundling) |
Yes |
No |
Yes |
Yes |
|
Shipping Management |
Yes |
Yes |
Yes |
Yes |
|
Transfer Management |
Yes |
No |
Yes |
Yes |
|
Supplier Management |
Yes |
Yes |
Yes |
Yes |
|
Traceability |
Yes |
No |
Yes |
Yes |
|
Starting Price |
$249/month |
$14/month |
$35/month/user |
$149/month |
Find more inventory management systems and compare them here.
Elkfox is here to help
We can get you managing the ins and outs of your business with an Inventory Management System, or any other system, that works for your business. Seriously. Talk to us about it.