Sebastian Bryers, chief technology officer, Ora Organic
For companies selling products with long lead times, that are complex to manufacturer or have limited shelf life, inventory management is a tightrope act. If you have too much merchandise on hand, products sit on shelves past their expiration dates. If you have too little, customers get upset about back-ordered products.
Yet as critical as inventory is, many businesses don’t manage it well. According to a 2017 report from Wasp Barcode Technologies, a staggering 43 percent of small businesses either don’t track their inventory at all or do so using a manual process, such as entering items into a spreadsheet.
Truthfully, it wasn’t long ago that we were struggling to manage our own inventory. In 2016, Ora Organic’s first full year of operation, our organic probiotic hit an unforeseen 50 percent growth rate for the first four months of the year. While it sounds like a great problem to have, it had far-reaching consequences.
Our inventory benchmarks had been built on growth projections that underestimated demand. Making matters worse, the tools we had at our disposal didn’t identify the rapidly accelerating growth. As a result, a number of customers’ subscriptions were delayed, leading to disappointment and, in some cases, cancellation.
In short, we sold out because we couldn’t quickly and accurately assess inventory levels, both at our fulfillment center and at Amazon. It was a costly mistake, but we emerged from the ordeal with an important realization: We needed a system that showed near-real-time inventory levels against projected sales as far as six months in advance.
In any industry, and especially in online retail, inventory management can make or break cash flow. To set up or switch systems for tracking your company’s inventory:
1. Consider your company’s needs.
A company like Walmart, with millions of stock-keeping units and international sales, is going to need a much more robust inventory system than a small firm with a single product. Still, regardless of size, choosing or designing a new system should be a companywide endeavor.
At Ora, we prioritized the requirements of departments that were directly impacted by inventory and sales projections. Our goal was to facilitate fast, accurate purchasing decisions. While the project began with three people producing a minimum viable product, that is, one that would satisfy early adopters, it evolved to include multiple members of our production, marketing, and growth teams. Every corner of our company was affected, so the leaders of each department deserved a say.
2. Mock up your ideal system before buying.
Given the number of inventory management systems available, it’s a good idea to think through your ideal system before you spring for one. Grab a whiteboard or another surface that inspires creativity, and work with your team to design something together. Imagining a system that’s unencumbered by the drawbacks of any one platform will help you prioritize features before you get to the sourcing stage.
For example, our tech team joined forces with the production and growth teams on a Google spreadsheet. More than a year later, we’re still using it to track our inventory. With APIs to our fulfillment partner and Amazon, we’re able to push real-time data to the spreadsheet, and the savings from building out our own platform have so far surpassed the benefits of an off-the-shelf system.
3. Select someone to champion the project, but get broad buy-in.
On most cross-functional projects, the biggest challenge is finding someone with the skills and authority to see it through. Inventory management is no exception. Especially as organizations grow, it becomes harder for an individual or team to get resources from departments that they aren’t a part of. Because solutions created in isolation are prone to limited use and inconsistent reporting, it’s critical to get input from all affected teams.
I developed Ora’s first inventory management system solely with the IT team. Because the production team was receiving purchase orders with little information attached, we sold out of some of our most popular products on two separate occasions. Only once we identified which details were most important to each department were we able to get cross-company buy-in on the system. For example, the production team wanted to see the number of days left in inventory of a given product, but the IT team set up the system to show the daily sales of each product Poor inventory management puts your company’s cash flow, customer experience, and growth potential at risk. You can’t know which products will or won’t become hits, and you can’t know from afar what’s actually in the warehouse. Intuition and ad hoc communication are no substitute for a real-time inventory management system. Choose and implement it collaboratively, and you’ll walk the tightrope without a slip.
Sebastian Bryers is the chief technology officer and head of growth at Ora Organic, a digitally native retailer of organic, plant-based, and sustainable supplements based in San Diego.
Favorite