Direct-to-consumer order fulfillment can be incredibly complex. It now takes place in multiple regions or countries, and involves multiple tools like an online store on your brand’s website, fulfillment centers or warehouses, and may even involve connecting your inventory to another online retailer like Amazon. It’s a complicated process to get your products from your supplier to the right warehouses and fulfillment centers, then carefully and quickly picked and packed and shipped to arrive at your customer’s door. Direct-to-consumer brands are taking up an increasing share of the market. In 2020, they accounted for $17.75 billion of all eCommerce sales, up 24.3 percent from 2019. And as sales increase, it can be harder to skate by without effective fulfillment planning, inventory forecasting, and a helpful partner to make it all happen.
About Inventory ForecastingIn the world of online retail and direct-to-consumer (DTC) brands, inventory forecasting is a crucial component of the business model. Inventory forecasting is used to determine what a brand’s necessary inventory levels are in the future based on sales projections using current insights and past data. Inventory forecasting can be a useful tool in keeping operational costs low and customers satisfied, but only if there are boundaries in place. These boundaries are:
- Forecast period: The amount of time it takes to establish forecast quantity
- Trend: Surges and declines in consumer demand during a particular time, as used to accurately project future sales
- Base demand: The starting point for a specific inventory forecast as determined by the current demand
Helpful Best Practices for Inventory Management and PlanningInventory management is all about taking a systematic approach to the process of sourcing, storing, and selling inventory. It refers to having the right stock at optimum levels exactly when you need to, and maximizing cost efficiency in doing so. So, what are the best ways to plan and manage your inventory?
- Begin with your own data. The best strategies and insights on what to expect from your brand’s future sales start with using your own data. Large amounts of data used to be cripplingly expensive for smaller retailers, but advances in technologies and available support from third-party logistics (3PL) providers make it easier than ever before to collect and use data to forecast inventory needs.
- Focus on inventory turnover. Inventory turnover is all about calculating how many goods have been sold during a set time. To determine inventory turnover rates, divide the cost of goods sold by the average inventory, then divide this number by 365 to see how many days it takes to turn over inventory. Maximizing inventory turnover means increasing profitability, determining reordering points, reducing the cost paid to store inventory, and in the beauty and health industries, can also limit spoilage of products that sit for too long.
- Do your best to forecast demand with technology. Demand volatility can be a challenge, making demand planning and inventory optimization hard to get right, especially if a brand offers a wide range of products, multiple sales channels, promotional offerings, price changes, and seasonality. Spreadsheets just can’t keep up with these sky-high volumes of data. Automated demand forecasting and intelligent inventory management systems make it simpler.
- Automate your processes. Technology can be an integral part of your fulfillment planning process. Automating all or part of your supply chain—or hiring a 3PL partner to handle the automation— can free up your team while also improving order and inventory accuracy.
- FIFO or LIFO. Perhaps you’ve heard of the inventory management principles, “first-in, first-out,” (FIFO) or “last-in, first-out” (LIFO)? Both are important in the world of keeping your inventory moving efficiently. In the beauty and health industries, products with a shelf life should follow a FIFO approach.
- Kit and bundle to increase order value. By bundling products together into groups, packages, and units, you can increase sale values, keep holding and shipping costs low, offer an exceptional value to clients, and prevent deadstock by selling old or unwanted inventory.
3PL Fulfillment: Planning From Receiving to DeliveryOrder fulfillment is more than just inventory management and planning though. There’s a lot of planning that also goes into getting inventory packaged and shipped—and in some cases, successfully returned—quickly and at a low cost to you as the online retailer. Fulfillment planning includes:
- Inventory storage
- Returns processing and reverse logistics
- Help with last-mile solutions thanks to access to micro-fulfillment centers and other warehousing options, route optimization software, and a robust warehouse management software system to improve workflow and freight optimization, freight optimization, inventory reduction, billing and processing, and more.
- Offer personalized packaging that other partners can’t, to connect with your customers in new and exciting ways.
- Share smart, data-driven solutions for predictive analytics and inventory forecasting and management.
- Use industry connections to negotiate faster, cheaper shipping solutions.
- Manage warehousing so you pay only for the space you need, adjusting with you as your business scales.
- Handle and run your entire fulfillment process so you can focus on core competencies.
- Run kitting and subscription services to build your customer base, increase annual order volume, and nurture ongoing customer relationships.