What goes into Inventory Management Strategy?

In the previous post, I focused on putting the inventory management (IM) process in the spotlight, highlighting its continuous contribution to a firm’s operations. The function has a great hand in keeping all the inventory status updated, allowing a brand to stay active and grow in the market. With a focus on this growth, when the aggregators happen to successfully take advantage of every opportunity the marketplaces offer, you know you are looking at the outcome of a robust inventory management system. 

The question is what goes into a system as such. 

In a fiercely competitive and booming market, we all will agree that inventory plays a vital role, and one can strongly hold the inventory management team responsible for pushing up both the topline and bottom line. Acknowledging the competition and the criticality of inventory management, many aggregators have begun leveling up their process. They know that smart inventory management can strengthen a brand and make it ready to offer stiff competition in the market. Hence, Ergode and many top-tier aggregators are giving their stock management a strategic spin. This is when the function becomes more than just a process!

When inventory management gets planned, it not only steps beyond the regular listing process but focuses on optimizing every process that comes within. The line managers ideate and hatch strategies to reduce the stocking of redundant inventories, minimize human errors, power up the vendors, track demand and supply, and back the sales process. In totality, they transform the inventory management unit into an asset for the firm.

The Inside Story

Strategizing the road map for inventory management is not a solo performance. It involves other teams such as account managers (to fill in the process with clear views on the marketplace expectations) and vendor managers (to help with deep insight into the availability of products).

Account Managers and Inventory

Being an aggregator with over 120+ marketplaces and managing millions of SKUs, the inventory management team at Ergode works by focusing on elements such as – marketplace selection, vendor management, listing management, inventory control, and competitive advantage. 

Starting from searching for conflicting situations in different marketplaces, my IM team starts marketplace selection with the insight ready to handle any challenge that may come up on the way.

The team takes a lot of effort in selecting each and every marketplace as the sales directly depend on its popularity. Once the inventory managers learn whether a marketplace is domestic or international, they get onto finding answers to questions like:

What is the nationality of the e-commerce shoppers the marketplace has?

How many competitors does the marketplace have?

What product sells best in the marketplace?

Which category sells the most?

How is a target category performing?

What kind of product restrictions does the marketplace have?

If enrolled as a seller, how much markup can we put? 

In case of a product return, will the extra charge (tax, duty) hinder the account?

The responses to these questions decide the way forward. In case the marketplace has an inclination toward electronic products, then there’s no way an aggregator would list its D2C brand dealing with apparel. I have seen many sellers (D2C brands/aggregators) missing out on considering the prominent category of a marketplace and end up slashing the prices too low just to make a sale. 

Listings too, need handling with care. While listing, aggregators generally prioritize the quality of listing as that’s all a customer sees! This included some simple activities such as – optimizing content, publishing product, setting up appealing visuals, and mentioning the correct price and quantity. 

The content quality goes hand in hand with marketplace rules as they decide whether a product should go live or not. Governed by marketplace restrictions aka marketplace capping, a firm relooks at its inventory to sort and filter the products that are apt for the online bazaar. Of course, no organization will like to put up “chef knives” in a marketplace, if the marketplace restricts products with sharp edges. It’s apparent that the product will get banned. The listing optimization and marketplace rules together help a brand tackle the third challenge – over or understock of products.

Once the IM team knows what they are allowed to put up and they optimize their listing as per the marketplace rules, it becomes easier to figure out what products and how many units of the product should be apportioned for that marketplace.

Vendor Managers and Inventory

In e-commerce, vendors play a pivotal role in determining the success of a reseller. Although, when it comes to brand aggregators the vendor’s role gets swapped with that of the manufacturer. However, in both cases, the IM team focus does not change. They stay concerned about the quality, inflow, and delivery timeline of the products.

The vendor relation team of a reseller or an aggregator makes sure that a product supplied gets duly integrated to the system. Apart from getting them onboarded, the integration involves getting the suppliers connected to the IM team and keeping the inventory managers apprised of the onboarded product types and quantity.

The inventory plan starts with those inputs. With the already acquired knowledge of the marketplace rules and the freshly acquired knowledge about product availability, the inventory managers move on to decide which products to list on different marketplace.

While setting up the products, the IM team also takes into account the factors like time of delivery, shipment cost, packaging of the products, and longevity of the products. Whether the control on the factors lies with the IM team or not, the team approaches the product set up with the information. It helps them in two ways: first, they can paint a clear picture on the site with respect to availability and delivery timeline, and second, they can guide the vendors regarding the customer expectations. 

The best outcome I have seen in this context is the synchronized management of product and vendor relations. Knowing a product is in demand on a particular market allows the IM team to preempt the vendors on the number of required units, in a cyclic manner the feedback from the vendor helps the team to make a transparent claim on the marketplaces. As an extension, this also helps the IM team to closely monitor the movement of the stock, foresee any sudden spike or fall in the demand and in turn keep the vendors informed about the changes beforehand.

Conclusion

Coming up with the right inventory process and a strategy for your stagnant stock is no walk in the park. Rather it’s a long and arduous way that involves staying alert with all the changes around! 

It involves a planned process with the information gathered beforehand. From managing vendors to stock, the lifecycle of the inventory management function demands it to stay a step ahead of every trend. 

One of the best ways to understand how this can be done with a panache, is by closely studying the “smart aggregators.” You will notice that they lead the show because they strategically plan their procurement, storage, and shipment. They know who are the competitive vendors dealing with similar SKUs, they are aware of the demand graph of a category, they are knowledgeable about the ranking of products in a marketplace, they can foresee the upcoming trends, and they are always ready with a backup plan. They bring all of these together to lay out a program that not only keeps the customer happy, but also promotes the growth of their brands!

Whatever I shared over the last two posts, I hope you will find something helpful to design your winning inventory management framework. If you have anything more to share or you are doing anything differently, feel free to comment. I am always ready to learn.