Introduction
Selling products across multiple channels can dramatically increase your top-line revenue, but comes at the cost of additional operational overhead and complexity.
Specifically, managing the distribution of inventory between these channels can become difficult, especially if there are requirements such as a dedicated minimum amount of inventory for a specific channel (e.g. wholesale). This can also cause friction between different departments within your organization, such as the sales and operations teams who may have competing priorities.
Posh Peanut, a children’s clothing and accessory merchant, has acutely experienced this challenge while trying to balance their inventory across D2C, Amazon, wholesale, and more.
Problem
When merchants sell their products via multiple channels, they often require a specific allocation of inventory between these channels. This is to account for channel-specific requirements like a guaranteed minimum amount of inventory, and also helps ensure a diversified customer base.
Sometimes merchants will solve this challenge by having multiple ‘virtual’ warehouses within their inventory and warehouse management systems, with each warehouse dedicated to a specific channel. However, this can result in severe complications in everyday processes like cycle counting, receiving supplier shipments, assigning inventory, etc which do not function correctly with a multi-virtual warehouse setup.
For Posh Peanut, the ramifications of not using Universal Inventory were felt particularly by the inventory and warehouse management teams.
Tracking inventory accurately and scheduling replenishments from Overstock to Picking Bins was a huge problem, because of the inability to track inventory accurately at a bin level in the multi-warehouse setup. The impact of this was a ripple effect along the length of the fulfillment process - when bin replenishments fall behind, orders can’t be assigned, Pickers run out of inventory, Packers are delayed, and the productivity of the entire warehouse team suffers.
Additionally, it was effectively impossible to complete an accurate cycle count, because inventory from multiple virtual warehouses was stored together in the same bin location.
“Without Fulfil’s Universal Inventory system, we were stuck using spreadsheets to track inventory and we never had an accurate view of where our inventory actually was.”- Aron Hernandez, General Manager of Distribution Center, Posh Peanut
Solution
To solve this problem, merchants should use a Universal Inventory methodology. As a best practice, it’s recommended to have your virtual warehouse configuration match the physical reality - if you have one physical warehouse location, you should have one virtual warehouse location in your software with separate inventory segments per channel. This concept is known as Universal Inventory.
Universal Inventory consists of a single warehouse with a generalized pool of inventory, with the ability to allocate a certain amount of inventory to each channel. With Fulfil, this process is easy to set up and can be fully automated through the use of intelligent Automation Rules for allocation and replenishment.
“After implementing Universal Inventory it was night and day. Now we have one system handling everything every team has access to the same (accurate) data.”
- Aron Hernandez, General Manager of Distribution Center, Posh Peanut
Prior to implementing Universal Inventory, the Posh Peanut warehouse team was only able to execute bin replenishments for about 80 SKUs per day. Now, with the automation enabled by Universal Inventory, they are able to execute 250 SKUs per day with the same sized team - a >300% improvement!
“Without Universal Inventory, we would have to 3X our warehouse headcount to even hope to keep up.”
- Aron Hernandez, General Manager of Distribution Center, Posh Peanut
Conclusion
Multi-channel operations can be complex, especially when it comes to inventory management. However, with the right software and configuration, managing your inventory independently across different channels can become simple with the use of Universal Inventory.
For more information about how Fulfil can help simplify your multi-channel inventory management, book a demo with our team.
