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5 Smart Ways to Increase the Profitability of Your Business

profitability
Archives, Global Trade Daily, Special Reports

5 Smart Ways to Increase the Profitability of Your Business

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Global competition is fierce. And, for new businesses, it can be intimidating.

From the moment you sit down to write a business plan, you discover that you have a lot to do but little time to accomplish everything when starting a business that aims to do business globally.

Whether your business succeeds or fails comes down to profitability (the amount of money remaining after all business expenses are paid). That’s the only way to build a sustainable business.

Here are five practical tips you can implement today to increase the profitability of your business:

1. Evaluate what isn’t working.

It’s OK to have occasional unproductive days, but most successful businesses figure out what works and what doesn’t – and focus on the things that work for them.

Existing businesses can do this already. If you’re starting a new business, don’t delay this type of assessment until you’ve been in business for several years. Work it into your quarterly strategy.

Apple became successful only after eliminating most products and focused on a few strategic products that formed a foundation for their brand. This important change also helped Apple build a global brand and not just a niche brand popular primarily in the U.S.

Are you and your team spending a considerable effort on daily activities that aren’t contributing to building your brand, sales, and profits? Are those daily activities connected to the goals you’ve set for the business?

It might be fun to spend two hours daily on Facebook or Twitter hunting for customers. Still, the more critical question is whether your prospective customers are looking for your business on those social networks.

How you can start today: Start by listing all of the tasks you do regularly (hourly, daily, weekly, monthly). Do your best to break these tasks into logical areas, such as sales, accounting, marketing, inventory, etc.

Next, consider how long it takes you to do each task and assess whether each task is essential. You’d be surprised how many things we all do during a typical day that add little value to our business. Once you understand the importance of each activity, rank the activities (or logical areas) to understand better where you should be focusing.

Focus on the areas where you bring the most value to your business and find the right people to fill the gaps in areas you don’t.

2. Find time to develop a strategy.

Most successful business owners develop intelligent strategies and execute those strategies. Yet, many confuse decisions and strategy.

Every business owner makes decisions about their business. For example, they decide where to market, how to market, how much money to spend on marketing and sales, what types of products and services to market and sell, etc.

These decisions are important – but they are not a strategy.

These day-to-day decisions are like the moves we make in a game of chess. Knowing how to make a move lets you play the game.

It takes strategy and execution to win, especially on a global scale.

For example, it’s impossible to match supply to customer demand unless you build a strategy and predictive models to evaluate how to better model consumer behavior. Both over and under-supplying hurts profits.

How you can start today: Ensure that you set aside sufficient time every month or quarter to assess and develop a strategy.

When you develop a strategy, you’ll want to focus on your goals (it’s impossible to create a strategy if you don’t understand your goals). Assess your product/service offerings and determine whether you need to expand or reduce the number of products/services you offer. Some questions you might ask about your business:

-What is my current strategy?

-What is happening in my industry or with my competitors?

-What are my growth, sales, and profitability goals?

-What products and services do I currently offer?

-What products and services do I want to offer in the next X months?

-What will I need to do to sell these new products/services?

-How will I compete against X, Y, Z competitors?

3. Market to your existing customer base.

It’s 5 to 25 times cheaper to market to your existing customers than to find new customers.

How you can start today: Look at how your customers are using your products or services. Are they staying with your products/services for a long time or using them for a short time and leaving (this is called “churn”).

A churn rate is the percent of customers who terminate their relationships with your company in a specific period (a month, for example).

Once you establish a baseline churn rate for your business, evaluate why customers are leaving. And then build models that can help predict which customers are more likely to leave or stop using your products or services.

Remember that churn rates may vary in different countries and markets, so assess your churn rate on a market-by-market basis.

Churn rates can offer many interesting insights into your business. For example, a high churn rate could mean that you need to focus on improving your company’s products or services. It can also mean that you’re simply marketing to the wrong customers and using your marketing budget unwisely.

4. Audit your expenses.

Take a close look at your expenses and ask your leads to do the same thing for their teams.

It’s not uncommon for business owners to sign up for services and then stop using them or reduce usage.

Sometimes, a cheaper plan is perfectly sufficient, saving you hundreds of dollars per month in fees.

Other times, you’ll find you no longer need the product you tried using six months ago and then promptly forgot to cancel.

I regularly audit our vendors and find that we can save from hundreds to thousands of dollars every month by reducing specific monthly plans and eliminating other products that we no longer need.

When it comes to outsourcing things like custom graphic design services, for example, don’t assume that you’re getting the best value. Look for pricing sweet spots. Use this cost of design guide to understand better what custom logo design, website design, and other custom design services should cost.

The significant advantage of cutting expenses is that for every dollar you save by eliminating a cost, you gain an extra dollar in profits.

How you can start today: Look at the paid products and services you use and eliminate those you do not need.

Don’t hesitate to negotiate with vendors if you’re paying for certain recurring products every month – many vendors will entertain a discount if the alternative is to lose you as a customer.

Also, take a close look at your employees to be sure they’re correctly trained. It’s not uncommon to have extra expenses because your staff is incorrectly trained and is doing certain things that could be done differently and for less money.

5. Ask your employees for ideas.

Your employees sometimes know your business better than you know it.

Chances are they’ve been talking with customers and have their ideas to cut costs or to increase revenue. But they’ve stayed silent because they’re busy doing the jobs for which you hired them, and nobody asked them for their opinion.

Leverage your team – ask!

We have only one weekly meeting at crowdspring. It’s our “roadmap” meeting, where we discuss and evaluate suggestions from our team. We’ve done this for 13 years, and it’s one of the reasons we continue to innovate and lead the market.

How you can start today: Make sure to acknowledge employees who offer suggestions – even if you ultimately decide not to use those suggestions.

It’s crucial that employees feel you are listening to them – not just asking for ideas. Otherwise, they’ll hesitate to offer suggestions the next time you ask.

And if you implement an employee’s idea, make a big deal out of the fact that they suggested that idea. And importantly – find a way to track all suggestions and what you’re doing with them. A simple spreadsheet or document is sufficient (we use Asana to track ideas we generate internally and Basecamp to discuss those ideas asynchronously).

Ultimately, the only guarantee that you’ll be in business five years from now is for you to build a sustainable business. Start by applying the five tips we shared in this article to your business.

inventory
Archives, Global Logistics, Global Trade Daily

10 Inventory Must Do’s for Small-to-Medium-Sized Manufacturers 

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Cash is king for manufacturers – from the owner down to the machine operators.

If you visit any manufacturer, you will see most have a keen eye on how everything is being used. Machines are generally only running if they are making parts; employees are typically only working if orders are coming in, and scrap is examined carefully to determine “How did this happen? How can we prevent it from happening again? What else can we do with this?”

Even the Best Manufacturing Owners Make Mistakes.

But rarely, do they make the same mistake twice. If you ask them what some of their biggest mistakes have been, they are often tied to how their inventory was managed. Meaning, that was in the past and today they are doing something different.

What is different?

After speaking with many manufacturing owners and many subject matter experts, the “different” is their business is choosing to live and die by the following 10 inventory must-do’s with the help of ERP software.

1.  Clear Out The Inventory Garbage.

What does this mean? It means you must process your
inventory correctly and consistently with no exceptions.

Your inventory processes should be documented and employees trained, retrained, and trained some more; and you should have absolute consistency in your product lines, units of measure, etc. Documenting your process also means knowing explicitly who owns what including inventory master, inventory costing, and inventory quantity. Everyone should know what they are doing, when, why, and the consequences of it being done incorrectly.

And don’t let the fox guard the henhouse. The employee responsible for transaction processing cannot have access to inventory adjustments. A few hours spent training employees will save you money and heartache (and maybe even a lost customer) when you try to make a part with inventory you don’t have. Clear the garbage out of your inventory process, and you will be left with a much better result.

2. Regulate Your Inventory Counts.

Physical inventory or cycle counts should always be performed
on a regular basis and produce accurate numbers.

By implementing regular inventory counts, this allows you to consistently ensure inventory accuracy throughout the year. We’ve found that our customers complete this in one of two ways.

The first being they cycle count daily or weekly, which means they count arts based on usage or dollar amount to verify their inventory is correct. If their numbers are getting adjusted, that means their inventory is off, and they must figure out what inventory transactions are causing the issue.

The second way our customers regulate inventory is by doing physical inventory, which calls for shutting down the shop floor and counting the inventory one weekend a year, sometimes two. To learn more about this, download subject matter expert Brady Steven’s whitepaper titled “How to Achieve Perfect Physical Inventory in 10 Easy Steps.” It is a great, superfast read that is likely to save you thousands of dollars a year.

3. Evaluate Unused Inventory.

Just like clutter in your home, obsolete inventory or low turn
inventory should be evaluated on a regular basis, not just once
a year.

Inventory takes up space and space is money. If something is taking up space and not moving, that is taking away an opportunity for something that you could be selling and bringing in more revenue for your company.

4. Know Your Business’ Trends.

Keeping your inventory labeled is an important step in
controlling your inventory between physical inventories. Be “hip”
with your business.

Reorder, lead time, and order quantity should be reasonably accurate and should be evaluated on a regular basis (and again, this doesn’t mean once a year). You know your business better than anyone and knowing when spikes occur throughout the year allows you to better plan on seasonal changes in your inventory. If your business is seasonal, you may need to adjust your min/ max quantities throughout the year as well. A great way to evaluate this data is to be using Key Performance Indicators for your business.

5. Research Your Vendor’s Competition.

Your vendors win when you get lazy. So it’s okay to pick-up
those pesky sales calls every once in a while.

Listen to the vendor’s sales pitch and what they have to offer as far as pricing and quality rating. You may be surprised by what they have to offer. If you stick with the same vendor year after year, you may not receive the best bang for your buck. Prices slowly and steadily creep up, and your discounts suddenly vanish. Evaluate cost regularly and do not ignore savings on buying items in bulk when appropriate. This can be an opportunity for blanket orders to come into play with your vendors, and you will receive a discount by planning ahead. But remember, this requires you to know your business trends and when those seasonal spikes occur.

6. Automate As Much As Possible.

If job costing is a full-time job, then you probably have
inventory issues.

By automating with our Job Costing Accounting application, you can spend less time worrying about what your finished goods cost and more time on creating a quality product. Good job costing leads to accurate inventory cost and quantity, providing you with an opportunity to automate part or all of this process every year.

7. Record Your Inventory Flow.

You are what you eat.

As inventory is consumed or shipped, it needs to be recorded. Some of our customers manage this process with one person, a team of people, or they let their machinist move the parts. It’s entirely up to you, and you can decide who manages that process based on how skilled your employees are and the type of material.

THE INVENTORY FLOW PROCESS IS AS FOLLOWS:
1. Issue Material to Work Order
2. Bin-to-Bin Transfer
3. PO Receipts
4. WIP (Work in Progress) to Finished Goods
5. Location Transfers

You also have the option of backflushing and Auto WIP should you choose. If you make it to the last step and you have 10 good parts, then 10 parts are WIPed into inventory (finished goods). Spend a few minutes every time and record inventory flow immediately, and you’ll save yourself hours in the long run.

8. Listen To Your Business With ERP.

Hearing is the act of perceiving sound, but listening is something you choose to do. Move beyond “hearing” with your fully-
integrated ERP system with MRP functionality and “listen.”

Manufacturers that are using an ERP system correctly are faster,
smarter, and more profitable than those who don’t. It isn’t a
question; it is truth, and we have 150 case studies to prove it.

Listen to your business by viewing and analyzing the data your ERP system provides to see trends, view roadblocks, and make better business decisions. Utilizing your Business Intelligence application, KPI application, and Dashboards, you can see inventory detail in real-time and allow you to listen to your inventory.

9. Correct Employee Mistakes Immediately.

In manufacturing, loose lips don’t sink ships. They save them.
Employee attitude and participation is the icing on the cake,
and if an employee or machine isn’t doing something correctly,
don’t let the ship sink.

For example, if you see Jane Doe routinely recording inventory, but she always misses a few parts, your inventory counts will continuously be off and you will be spending more money purchasing inventory you don’t need. Speak to a manager or superior and let them know your concerns about the issues you’re witnessing. Speak up and refer to Must Do #1.

Honesty is the best policy when it comes to business, especially with money being involved. By addressing inventory mistakes early on, you reduce the risk of losing money, inventory and production time.

10. Always Ask Questions.

Don’t guess how to do it – ask someone. There are unlimited
resources available to you at Global Shop Solutions.

If you’re a customer connect with your Customer Success Manager, schedule a Virtual Training with a member of our Consulting department, or attend one of our 80+ training events a year. If you’re in the market for ERP software, see the software for yourself. We can connect you to some great customers if you have any questions. Don’t let the fear of asking a “dumb” question keep you from managing your inventory the correct way and making money for your business.

_______________________________________________________________

Adam Grabowski is the Director of Marketing at Global Shop Solutions. He is responsible for translating the company’s business objectives into successful brand, marketing, and communication strategies to drive awareness, revenue, and loyalty.

To learn more about the 10 inventory must do’s for small- to medium-sized manufacturers, call 1.800.364.5958 or visit www.globalshopsolutions.com.

e-commerce
Archives, Global Logistics, Global Trade Daily

8 TRENDS DRIVING E-COMMERCE INNOVATION—AND THE PLAYERS DRIVING THEM

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The world of e-commerce has undergone quite a year. And with everything going on in the world, chances are that growth, innovation, and change are what we can expect this new year as well.

Global growth or no global growth, you do have to stay on top of the latest trends if you want to stay on top in the world of e-commerce–otherwise, you will find yourself at the bottom of the heap. Let’s take a look at eight trends that are set to continue driving innovation in 2021 and beyond.

Mobile Continues to Be on the Rise

Even though mobile search overtook desktop a long time ago, mobile is still on the rise in every sense of the word. Focusing on the experience your users have when accessing your store via their mobile phones is certainly a trend that will not disappear soon.

Elements to focus on include:

-Speed

-Ease of access

-Ease of navigation

-Safety

-Personalization

A good example of the kind of mobile-first website design we are referring to is the LMNT Essential Labs website (drinklmnt.com). It is super-fast, it is responsive, and it has retained that mobile-friendly design on the desktop version as well, providing more cohesion.

Voice Search Is Also Important

By 2025, it is predicted that 75 percent of U.S. homes will have a set of smart speakers. And while voice search is currently still a bit of a dark horse for some users, Alexa, Siri and Amazon Echo are slowly becoming a daily part of many lives.

What you as an e-commerce store owner can do is optimize for voice search, and enable your visitors to execute voice-based search commands and navigation on the website (or at least on its mobile version).

This will be a significant investment, and you may be able to hold off on it for a while. However, if your target market is among the population that is already heavily relying on voice commands, the time is now.

Personalization as the New King of Marketing

Shoppers have always responded better to offers that were tailor-made for them. Think of personalized letters in the snail mail, or calls from sales assistants who have reviewed your loyalty card with a brand and know what kinds of products you like to purchase.

Today, with the rise of AI, e-commerce is heavily relying on data-driven personalization. You can now know more about your visitors and their behavior online than they themselves know about themselves. This leads to a bit of a safety and trust issue, but also provides an incredible shopping experience.

The more you can tailor your ads, offers and other marketing assets to a specific visitor, the better you will fare. Especially since other e-commerce brands are already doing it, and doing it well.

Social Commerce Making an Impact

As modern shoppers are spending more and more time on social media, it was only a matter of time before social media and e-commerce merged into one big happy experience.

Social media platforms are mini search engines themselves, and 55 percent of shoppers are making purchases from a brand’s own social media posts. As plenty of these platforms now allow shopping straight from the post, impulse purchases are on the rise–as are conversion rates.

A brand that has embraced social commerce is Zoma Sleep. This company has enabled their Instagram shop, allowing you to purchase one of their mattresses directly from the image posted on their feed. Never has it been this easy to get something delivered straight to your door.

More Payment Options are Becoming Available

Not too long ago, there was the option of paying for an online purchase via credit card, when PayPal and Stripe were still distrusted as a scam. Today, we have hundreds of ways to pay online, from cryptocurrency to wire transfer.

Customers are expecting different payment options more and more–especially since all the biggest e-commerce names have allowed for them (think Amazon).

If you are insisting on one (or two) ways to pay, you are likely missing out on some serious traffic, and you’ll need to consider adding more options as soon as possible. However, remember that you should first focus on the security of your store, and only then allow new payment options–they will not matter one bit if your data storage is hacked.

Dynamic Pricing is Here to Help

It can be very difficult to keep track of all the fluctuating prices in your niche and industry. After all, in order to remain competitive, you need to be able to adjust your prices when and if needed–and to be able to do that, you need to keep track of the prices of your competition.

Tools like Aura are here to help you out–if you are using Amazon as a marketplace. On the other hand, if you are using Shopify, you can also benefit from a dynamic repricing tool that will automatically keep track of the prices you set and alert you when a change needs to be made (or make the change for you).

The Importance of Order, Purchase and Inventory Management Automation

In the world of e-commerce, automating as much as you can is sometimes what sets you apart from your competition. And while they are busying themselves with the tasks you have automated, you have the time and resources to devote your energies elsewhere.

One of the key processes you should be automating is the management of your orders, purchases and inventory. This can easily be done with a tool like InFlow that will keep an eye on your orders and inventory, alerting you to every important change–while you grow your business.

B2B is Also on the Rise–Again

The B2B e-commerce market is expected to reach $1.1 trillion in 2021. As more of these businesses are moving online, you need to consider how B2B buyers like to be charmed. Working in a B2B environment is different from working in B2C–at least in the world of e-commerce.

What you need to consider is that millennials are becoming the new B2B buyers–so marketing for them is key. You also need to remember that Gen Z is also starting to make their mark on the workplace, and they do need to be treated differently.

Think in terms of simpler solutions, better user experience, more self-serve options and providing all the information they need to make a purchase without them having to contact your sales team.

Trying to stay on top of all of these e-commerce trends might prove to be a challenge. However, if you manage to focus on the ones that pertain to your target audience the most, you’ll be able to greet the coming year well-prepared.

_________________________________________________________________

Karl Kangur is the CEO of Result Compass, a marketing agency specializing in SEO, social media advertising and lead generation, with offices in Tallinn, Estonia, Hong Kong and London.

Algorithms
Archives, Global Logistics, Global Trade Daily, Warehousing

WMS Algorithms: What to Optimize and What to Automate at Your Warehouse

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A certain level of productivity must be achieved for a warehouse to be considered efficient and profitable. Therefore, there can be no talk of noticing inefficiencies while inventory is being received, put away and stored: replenishments must be anticipated and calculated as accurately as possible.

So how can those warehouse operations be optimized? We learn that more and more managers are using algorithms. The question is how do these algorithms contribute to warehouse operations and which workflows can they automate? Our Generix Group experts answer your questions with careful observations.

Inefficient Supply Chain Network Set-Up Configuration, the Number One Concern

A recent mission of the DataLab Generix Group at one of its customers’ premises showed that the inefficiencies of the supply chain network set-up configuration were a major factor in the decrease of productivity. It is therefore essential that the picker never finds himself in front of an empty or insufficiently filled space for the order to be completed.

If this happened to be the case, the picker would have to make an urgent replenishment request and wait for a pallet to be delivered from the inventory put aside for emergencies. While the picker can always move on to another order, the process is not optimal.

To avoid this type of situation, we can set replenishment thresholds and anticipate the demand based on calculations made in advance (the day before, for example).

Replenishment thresholds

Replenishment thresholds prevent inventory shortages. A software setting will trigger the replenishment process once a picking location reaches the “replenishment threshold” for a certain product.

Storage location must be taken into account because while it is impossible to place two pallets in a slot sized for one pallet, it may be possible to place one pallet and one layer of cartons in such a slot. Since the dimensions of the locations, pallets and cartons are known and tracked by the system, the calculation is done automatically using simple algorithms that add up the dimensions of the objects with a certain tolerance.

Demand Forecasting

For consumption or demand forecasting, we use a simulation tool, which is also algorithm-based. The tool deduces the total quantity required using historical data, checks the product quantity remaining in the picking location and automatically triggers the replenishment process. The orders that need to be executed the quickest are targeted.

For this simulation, we can use order data entered in the WMS or the forecast data transmitted to the WMS through the ERP. For example, warehouse consumption for the last week of a reference period deemed relevant can be used to take into account the seasonal nature of the business or the fluctuation on its cycles.

Just-in-Time Supply

In just-in-time supply, optimal use of resources must be guaranteed and critical needs must be addressed in real-time. Replenishment must highly targeted effectively addressing most critical needs.

Our tool automates the management of replenishments by letting the system trigger them at the most appropriate time, as and when needed. The system is, of course, based on theoretical data specific to each warehouse and adapts to the inventory management approach used. This functionality takes into account different parameters:

-Modification of the priority by the warehouse worker in charge of receiving and storing inventory

-Comparison of the inventory and minimum picking

-Current priorities

Based on these criteria, the system will recalculate and define a precise timing for the initiation of a replenishment process. To illustrate the depth of this calculation, we can mention variables such as picking time, product changeover time, aisle changeover time, demand forecasting time and even break times!

Compliance with Dated Contracts

You may decide to combine the expiry dates of certain products with their dated contracts. In this case, a configurable safety margin is added to the expiry date thus honoring customer commitment. This is a technique widely used in the retail sector to guarantee a certain shelf life, which is particularly critical for perishable goods.

Order Processing Sequence

We will select orders, or certain elements of an order, and determine the strategy to follow in order to optimize the planning of the work to be done as well as managing the order processing efficiently.

Some of the planning issues that may arise include:

-Target loading time (maximum)

-Carrier

-Delivery round

-Orders consisting of less than n pieces or more than x pieces

-The approval allowing missing parts

-Full pallets and complete packages

The algorithms integrated into a WMS will optimize the use of resources by automatically triggering replenishment, by ensuring compliance with “date contracts” or by managing picking locations.

Generix Group North America provides a series of solutions within our Supply Chain Hub product suite to create efficiencies across an entire supply chain. From Warehouse Management Systems (WMS) and Transportation Management Systems (TMS) to Manufacturing Execution Systems (MES) and more, software platforms can deliver a wide range of benefits that ultimately flow to the warehouse operator’s bottom line. Our solutions are in use around the world and our experience is second-to-none. We invite you to contact us to learn more.

This article originally appeared on GenerixGroup.com. Republished with permission.

food manufacturing
Archives, Global Logistics, Global Trade Daily

Managing Risk in the Food Manufacturing Business

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The food industry is one that the world cannot do without. It often experiences various evolutionary stages that make it difficult for food manufacturers, suppliers, and retailers. There are several risks involved, and managers need to be prepared to combat them when they arise.

Some of the common risks involved in the food business are customer taste changes and compromised quality of ingredients and materials. Contamination and poisoning of ingredients and end products are also problems food manufacturers deal with. Thus, it is vital for food manufacturing businesses to manage risks in non-harmful ways that won’t affect their company and customers.

What Is Risk Management?

According to the Corporate Finance Institute, risk management entails identifying, analyzing, and responding to risk factors that form a business’s life. Effective risk management means finding proactive ways to control future elements that might lead to problems. Companies that imbibe the culture can reduce the possibility of risks and its negative impact.

Most food manufacturing companies are not prepared to manage risks because they have ineffective data management software. At other times, the solutions they have do not support their risk management strategy. It affects how the business can effectively manage and reduce problems, which affects their profits.

How should companies manage risk to reduce disruptions and improve running costs and profits? Let’s find out.

How To Effectively Manage Risk in the Food Manufacturing Business

A business that desires to manage risk in the food manufacturing industry effectively must do the following:

Manage the Supply Chain

The food industry has a history of being adversely affected by its supply chain conditions. A drought, too much rainfall, or sudden pest infestation can affect a supplier and interrupt business operations. While these circumstances may seem beyond anyone’s control, there are ways to handle them.

One of the best ways is to have business interruption insurance. The policy protects a company while giving them time to sort out their supply chain problem. This way, the business doesn’t shut down entirely or resort to lesser options in a bid to remain in production.

Inspect Equipment for Risks

The food industry is nothing without its equipment. If a piece of equipment fails, it could potentially cost you an average of $25 per minute of downtime. Thus, it’s evident that the benefits of having a piece of functioning machinery far outweigh the risk of not owning one.

To prevent situations where the company bleeds funds, train employees to clean and sort out faulty equipment. Ensure they clean and replace damaged parts with suitable components. Beyond the preceding, carry out regular maintenance using a professional, and invest in backup equipment.

It would also help to have more than one machinery for a particular task, for increased efficiency. Automating equipment reduces the need for human intervention, thereby limiting operating problems. The only downside is that it requires highly skilled personnel to run.

Insure Spoilage and Containment

Anyone who ever visited https://nancyloo.net/ knows how vital it is to eat the right and uncontaminated food. As mentioned earlier, food spoilage and contamination are two of the most common risks manufacturers face. It could be from a problem with the supply chain or storage equipment failure.

It’s worse if any of the tainted food left the company facility, and there’s a recall. Whatever the case, the best way to mitigate this risk is by having food spoilage insurance. The policy supplies a business with funds to repurchase supplies and covers other spoilage liabilities. Like the classic case of the moldy yogurt from Chobani, no one is immune to manufacturing risk, so plan.

Have Soundproof Food Safety Plan

A significant risk management factor is food safety and the prevention of outbreaks. Carrying out antimicrobial testing of food products can prevent disastrous situations. Bacteria aren’t just specks; there are specific ways to test them, especially the common ones like Staphylococcus, E. coli, Listeria, and Salmonella.

Get a testing company that tailors its procedure to each pathogen to examine products before shipping them out. Doing this will prevent recalls and the millions of dollars spent settling personal injury and defective product lawsuits.

Invest in the Right Technology

In the 21st century, technology plays a decisive role in the way company’s effectively manage risks. When choosing a tech to help determine high-risk areas, it should be one that is capable of providing market and industry insights on developing trends.

The software must flag inefficiency and detect bottlenecks in the running processes. Other things to watch out for are whether the tech can strengthen the system functionality, track contamination causes in real-time, and improve data accuracy.

If the technology can perform these functions, among others, then it has a greater chance of effectively managing risks. This way, food manufacturers can match opportunities with capabilities, achieve category leadership, and get a holistic view of problems.

Additionally, companies will quickly detect areas of non-compliance and share product data across several platforms and partners. Measuring ROI will be more accessible, and manufacturers can cut high-risk areas and be better managers.

Conclusion

Risk Management starts with prevention and ends with recovery methods for better and more efficient productivity. As a food manufacturer, it is essential to cut down risk factors using the techniques discussed. Be proactive when approaching problems, and always have a backup plan. Lastly, risk management might seem complicated and tedious, but it pays off in the long-run and will keep the business going for a long time.

___________________________________________________________________

Nancy Loo is a professional blogger who has a lot of creativity and likes writing about spiritual development, food and her adventures. She is the author at nancyloo.net blog, where she covers different cooking topics.
transport
Archives, Global Logistics, Trucking

Transport Visibility in B2B: Challenges and Solutions

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The Supply Chain is faced with many and varied challenges such as accelerating flows, trade globalization, cost reduction goals, urban mobility, and multimodality. In this context, transport serves as an essential method of gaining customer loyalty to the company’s image, in both B2B and B2C. To overcome these challenges, companies can no longer go without real-time visibility of their transport operations- but how can they meet this requirement? Reviewing the obstacles and solutions allows for greater end-to-end transport visibility.

 

Visibility: a new challenge for global transport

 

Increased awareness of the importance of B2B visibility

Favored by e-commerce in B2C, the heightened visibility expectations for transportation now extend to B2B as well. According to a study conducted by Generix Group in partnership with the Institute of Commerce1 in February 2020, 31% of French companies see real-time visibility as a key solution to keep the promise made to customers.

 

End-to-end visibility of the logistics chain enables companies to:

-Quickly take note of irregularities;

-Be more agile in addressing them;

-Anticipate problems to encourage decision-making.

Once alerted of a delay or obstacle early enough, professionals can reorganize accordingly and thus limit its impact on their business. This is why companies have heavily invested in appointment-booking tools in recent years.

 

A large disparity in equipment between countries

Regardless of the means of transportation used (road, sea, air), flow visibility is now widespread in the United States. Nearly all U.S. carriers have equipped themselves appropriately in less than two years, in part because they refuse to be subcontractors.

The situation is entirely different in Europe where subcontracting is advanced. The countries of the European Union have therefore invested differently in tracking solutions. If Portugal stands out as an example, information systems are far from being widely integrated in Europe, and vehicle equipment levels are inconsistent. According to a study on transport visibility conducted by Generix Group and the Institute of Commerce in June 20202, only 23% of B2B companies offer traceability services in France.

What solutions ensure transport plan visibility?

 

Aside from WMS (Warehouse Management System) and TMS (Transport Management System), other systems ensuring end-to-end visibility can be used to collect transportation-related information.

 

Advantages of a collaborative platform

Collecting data from different players in the Supply Chain is essential to keeping the customer informed of their order status. If products are stored by the supplier, the distributor must be able to access available inventory levels. On the other hand, orders and delivery times given to customers must be communicated in real time to suppliers. This visibility of stock can be ensured through a collaborative platform.

With the collaborative portal, the supplier can also trace data concerning order preparation and shipment. Through a connection with the service provider and carrier’s logistics solution, the loader tracking platform can be supplied with delivery information. Regardless of the carriers used, the distributor can follow the progress of each order from a single platform. If a problem arises, they can also be alerted to resolve the issue and inform the client as needed.

Benefits of Yard Management

Increased volumes and delivery frequencies can lead to on-site traffic jams and difficulties loading on the docks. In addition to blocking the movement of goods, this hindrance to both human and material resources can have consequences throughout the entire logistics chain.

Moreover, within the global Supply Chain, there are two integral players whose field constraints are totally different: the manufacturer and the carrier. The flow of information from each of these must be synchronized so that transportation is guaranteed on time and production is never slowed or halted.

Yard Management Systems (YMS) optimize costs related to:

-Administrative management of carrier appointments – this involves having extensive working hours and optimal staff availability;

-Shipment organization – respect for the arrival and departure times of carriers, increased operator productivity on the docks, and better management of load processing…

Thanks to an event recording and time-stamping system, Yard Management solutions are now increasingly being used by companies. In particular, they measure the quality of service and the performance of various stakeholders:

-Punctuality, compliance with safety and cleanliness protocol for carriers;

-Emphasis of wait times on shipping site.

Shaken by new challenges, the logistics sector is now looking to improve its transport operations and to better manage the flow of goods, costs and order processing times. In this context, TMS, YMS and collaborative platforms serve as excellent catalysts for change. Want to learn more about these solutions to increase visibility of the logistics chain and transport operations.

___________________________________________________________________

This article originally appeared on GenerixGroup.com. Republished with permission.

automation
Archives, Global Logistics, Global Trade Daily, Software

E-commerce Automation Tools that Help You Scale Faster

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The modern world of business relies heavily on automating all kinds of processes. And while a couple of years ago, automation could give you an edge, today, you need to rely on process automation just to keep up with your competitors. 

Automation tools are everywhere, and when used correctly, some can save your hours in a single day. Freeing up your time and energy, they might allow you to get more creative or simply to invest more time in scaling your business.

To help you scale your e-commerce business faster, we’re looking at seven tools that can automate different tasks, enabling you to focus on growth rather than on the mundane. 

1. Email Marketing Automation Tools

Email marketing is a process built for automation. There are simply so many aspects of it that a tool can take over. 

First, there’s email collection. Then there’s the part where you send out emails at different times, to different people, prompted by different actions. There are follow-ups, and there is the fact that you have to keep track of all of these separate tasks. Throughout the whole process, you need to know what stage of the funnel a lead is in and what stage of the purchasing process a customer is in.

You can rely on MailChimp to automate these processes – it’s an oldie but a goodie, and it can truly take on the task of sending out the right email to the right person. Another good option is Drip, a more modern tool that’s especially loved by B2B businesses. 

2. Inventory Management Tools 

To ensure scalability, an e-commerce business needs to consider its inventory management very carefully. After all, your success in the e-commerce sphere will rely heavily on being able to provide a product as fast as you can. 

A tool will help you stay on top of inventory shortages and prevent over-ordering. It can also help you determine ordering patterns and identify your most popular, your least popular, and your most lucrative products.

3. Social Media Automation Tools 

Along with email marketing, social media marketing is a tactic most e-commerce businesses use. It has the potential for great ROI, and if you use a clever tool to help you out, it doesn’t need to take up too much of your time.

For starters, it can help you schedule your posts, so you don’t have to keep popping online every once in a while. It can also 

-help you identify profiles that compete for the same audience segment,

-allow you to identify influencers you might want to work with, and 

-provide valuable insight into your campaigns. 

Social Pilot is a great tool to use, as it allows you to handle multiple campaigns and multiple platforms. Buffer is also popular, and it gives you suggestions about the best times to post. 

4. Order Fulfillment Tools 

Another major part of running an e-commerce business is order and fulfillment. Whether you are in charge of it yourself or you work with another company that does this for you, you need to keep track of orders, their state of fulfillment, and how this affects your inventory. 

There’s simply no way to do this manually, so a tool naturally comes into the picture. Ship Monk is a great option, but you can also use Zoho Inventory for the purpose. Of course, it might be best to choose the piece of software the company you work with recommends. 

5. Advertising Automation Tools 

If you’re looking to do some paid advertising for your e-commerce business, consider automating this process as well. 

True, you can always hire an agency for the job. But if you want to keep things in-house, and if you want to be able to tinker with the process yourself, there are plenty of tools that can help you out. 

Do bear in mind, however, that some of these tools will require you to understand how advertising works, so you might want to consider getting a helping hand on board.

Sentic does a good job at bid flexibility and can help you with keywords, among other things. Acquisio is also good for managing your budget, and it can help you refine your bids.

6. Accounting and Bookkeeping Tools 

If you’ve been in the e-commerce business for a while, you’ll know just how important it is to have the right accounting software. Trying to keep track of your expenses and invoices manually will very soon become practically impossible. We suggest you don’t even try to do it by hand in the first place. 

There are plenty of accounting and bookkeeping solutions available, and some of them were designed specifically for e-commerce stores. This does not have to be your main criterium, though, and you can just go for some of the largest tools in the industry.

Freshbooks and Quickbooks are by far the two most popular options available, and with good reason. They are secure, easy to use, and they provide integrations with a whole host of other apps. Xero and Gusto are also popular, and you can always ask your accountant for advice on which one to choose. 

7. Workflow Management Automation Tools 

Finally, you will want a tool or two to help you manage your workflow. Anything from a productivity app to a to-do list app will be useful. Additionally, you can rely on mediation and workout apps to help you deal with the stresses of growing your e-commerce empire.

You might also want to look into a digital asset management tool that will help you keep track of everything important about your business through all your videos, images, documents, and files. It can help you save time having to search for something scattered across hard drives and cloud drives.

You should also have a calendar and scheduling app in your arsenal to help you ensure that you never miss an appointment. But more importantly, an app like this will help you truly grasp where your business is and where it’s heading. Try to go for an app that you find easy to use, and preferably one that you can access from all of your devices. 

And finally, there’s Zapier – the automation tool that will keep all of your other tools in check. Zapier will move information from one tool to the other, ensuring you’re not missing a key piece of information just because you’ve failed to look at one of your apps today. 

Final Thoughts 

Take a good look at your e-commerce business and figure out what the bottlenecks are. Where are you spending a lot of time? Can this process be automated? Is there a tool on our list that can help you out? 

You can also consider the tasks that are the most mundane and that you would enjoy getting rid of. If there’s a tool that can ease some of the stress and take some of the load off, you will love using it. 

Not all of these tools will be for you, and you most likely won’t have the budget for all of them. Scale up your automation just like you would your business – and enjoy the benefits of more time on your hands.

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Archives, Global Logistics, Global Trade Daily

The Right Time to Take a Calculated Risk Could Be Right Now

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When it comes to risk-taking in supply chain, transportation and logistics categories, the process often begins by identifying a problem or opportunity. You may be facing a major turnaround and wonder how to address it with a calculated risk, one where you apply current-state knowledge and determine how a change might affect the quality of process and performance.

Despite the ongoing pandemic, the best time to take a calculated risk may be right now.

Ralph Waldo Emerson once said, “Don’t be too timid and squeamish about your actions. All life is an experiment. The more experiments you make the better.”

Let’s examine risk management through the lens of a lean operations consultant. To begin, consider how the “new normal” affected the lean supply chain. Pandemic and disruption of foreign production is driving many manufacturing organizations to take the following steps.

-Explore re-shoring of sourcing for raw materials, product components and finished goods.

-Invest more C-Suite time toward solving issues within the network.

-Bring production closer to the manufacturing base to improve geographical access and mitigate risks associated with an overseas failure.

Meanwhile, lean-focused supply chain experts are charged with examining internal processes and accommodating supply chain shortfalls. Expert perspective is integral to both the continuous improvement of in-house activities and the network adjustments that come with the re-shoring of supply production.

Just as COVID-19 disrupted manufacturing networks, it created new challenges for keeping lean supply chain teams engaged. Workforce reductions and remote operating environments create hurdles for maintaining the close awareness required to identify wasteful activity and efficiency improvement opportunities.

A lean perspective in a pandemic supports supply chain corrections with turnaround timelines that do not need to be limited by social distancing and remote environments. An expert partner can help identify and execute the most effective supply network strategy, freeing up leadership to focus more time and energy on strategically advancing the business.

Critically, that partner enables you to pursue calculated risks that achieve improvement. Here are a few reasons why now may be the perfect time to pursue some of those risks.

New Manufacturing Normal

We are hearing common refrains among manufacturers across diverse industries. As seen in the examples below, the observations are similar regardless of the supply chain network.

-Manufacturing is moving toward re-shoring to reduce supply chain disruption and distance.

-Constant supply chain focus is necessary to eliminate current and future disruptions.

-Supply chain failure is the No. 1 reason a company is having issues in start-up or restart activities.

-Adjusting product mix and production set-up is a struggle.

-Lean training and learning is difficult outside the facility “Gemba,” or “where the truth can be found.”

Some companies furloughed, slowed down, or even cut back their lean teams to reduce costs. This leads to significant organizational impact, often requiring executive attention to resolve emerging network problems. Losing the process visibility provided by these experts can result in costly misalignment across an already stressed network. This loss can challenge future supply chain adjustments.

Inventory Management Problem Solving  

Inventory management drives the biggest questions manufacturers encounter as they reset to serve a new normal. Common inventory problems in our assessments of manufacturers include:

-Too much inventory, not balanced or not accurate.

-Too much of the wrong inventory for the manufacturing product family mix.

-Not enough of the correct inventory to manufacture replacement parts and service clients.

-Parts inventories not adjusted after major equipment repairs.

-Single sourcing from Asia, Europe, etc.

Losing the visibility of a supply chain expert can quickly affect your transportation cost, especially in a volatile environment following a significant disruption.

Broader Effects of Lean Team Reductions

Because of the required temporary resource reduction, we can’t rely on tacit knowledge. Therefore we have to make calculated risks. Organizations that scaled back their lean team as a reaction to COVID-19 report common experiences, such as these collective cost-control repercussions:

-Quick loss of awareness to inbound ocean transportation and ensuing TL freight moves.

-Lack of preparation for spikes in air freight costs for production and parts inventory.

-Increased costs (i.e. detention fees) due to misaligned lead times and production planning.

-Capacity reduction for problem solving.

In the “old normal” environment, lean resources maintained process awareness required to exert continuous improvement. These resources also facilitated ongoing training and a perspective for applicable global practices. Losing access these resources – usually provided on-site – impedes the ability to evolve processes.

Calculated Risk Guidelines

Because of required temporary resource reduction, an organization may not be able to rely on tacit knowledge, so a calculated risk may be required. Here are 12 guidelines that will help you decide whether a risk is worth the reward.

1. Treat people like people. For some managers, there is a risk in engaging people in a conversation. Think about it, people need to talk to people. One shipping manager wanted to accomplish 100 percent on-time complete shipments. By taking a risk — talking to employees — this shipping manager met his goal. He learned the changes needed and achieved “buy in.” Create leadership time with associates to listen objectively. When people feel like they are valued contributors on the team, they become true ambassadors.

2. It’s okay to make decisions without 100% of the information. There is generally a lack of robust, easily obtainable data related to every single order. This includes carrier data, sales data, product costs, fulfillment costs and other metrics. To make this information work and support profitability, data must accumulate and consolidate to track trends, pinpoint winning/losing SKUs and single out areas where a company is exhibiting margin compression and possibly losses. Assembling an internal IT team to build a platform is expensive. It monopolizes employees’ time which could be focused on alternative and more profitable endeavors. A logistics partner can help, but not all partners bring the level of expertise and technology required in today’s evolving business environment.

3. Understand your true fulfillment cost. This is key to the kind of risk you might take. Plan for every part. When COVID-19 emerged and your single-sourced supply was overseas, how did the organization react and why? What was the dual sourcing strategic and tactical plan? When did you last compare the cost of buying in the United States to a foreign vendor? What are the fulfillment costs from SKU inception to customers—warehousing, transportation, packaging, delivery, returns and tracking—until product delivery? Without knowing total fulfillment cost of a U.S. supplier, the true landed cost is just a guess.

4. Strive to make your customers happy. The booming e-commerce marketplace is opening doors to new growth opportunities. To achieve success in these uncertain times, organizations must remain nimble enough to shift a supply chain network and adjust processes to meet fluctuating demand. Shrewd executives who prioritize supply chain performance are positioning their companies to control costs and exceed customer expectations. Post-pandemic planning offers organizations a new opportunity to assess potential risks and plan alternative responses. Proper contingency planning today positions organizations for growth and profitability tomorrow. It allows for establishing and maintaining customer service at the highest levels while controlling costs.

5. Create a plan that considers risk and incorporates this risk management checklist:

-Identify all potential risks.

-Measure frequency and severity of each risk.

-Determine what accepting the risk looks like. Why is this move a benefit?

-Identify and brainstorm solutions to achieve the desired outcome.

-Implement the best scenario.

-Monitor, measure and verbally report on the results that drive change.

If an organization develops a risk culture, it becomes more resilient and adaptable. A risk management approach to planning works in our “new normal.”

6. Take a calculated risk on training. Look at the business as the proverbial lemonade stand. Let’s say the goal is to produce higher throughput. How can this be accomplished? Training will open a team’s eyes to new solutions and applicable case studies. If the struggle is “getting out of the sand box,” consider serious team training. Solve problems together. Learn from each other. Share experiences. People are hungry to do something different and better. Training can show everyone the way.

7. Measure what you want to change and calculate the universal risk. Does the organization have the correct tracking system? Consider a review and update of the order-to-cash business process and begin to identify problems. It’s not always inexpensive to do this. Take a lean journey with a consultant. Recently, a $250,000 consultant’s fee saved a company over $8 million because the consultant worked with management and ameliorated the risk that the company’s team was assigned to solve. Sometimes multi-million-dollar problems can only be solved by a consultant because the corporate team is too close to the problem.

8. Expect some changes to produce no measurable ROI. Does the company have an environment where your employees can speak for the president? Do they know the values your organization cherishes? Why is it a great place to work and a perfect supplier for your customers? Sometimes leadership needs to spend time with employees to communicate the business case of sincerity, understand messaging response and exhibit love for your brand. But it takes a commitment—and time. Start with a good elevator speech.

9. Your controller knows the pain points. While your CFO watches assets, liabilities and cash flows, the controller knows your pain points. To target problem areas fast, start with the CFO for balance sheet items and the controller for day-to-day problems. Involve the controller in meetings that affect the supply chain and welcome new ideas to the team. The insight may identify opportunities otherwise overlooked.

10. Fix the easy “waste” first. Sometimes the simple changes, which come with little risk, can make a big difference. Eliminate these waste areas immediately.

-Reduce the number of people who double-check orders. Ask why?

-End process and systems redundancy of employees repeating the same tasks.

-Send emails on a need-to-know basis and reduce FYI copies.

-Identify work-arounds to change the basic system. Ask why, set a plan and eliminate them!

11. Change the corporate operating discipline. When a company decides to take risk, leaders need to create a system to support a calculated risk. It must be acceptable to take risk. This is the climate and messaging required. Engage an outside consultant to make this happen. Your team may have 50 great ideas to solve a problem. Now the job is to determine which solution has the greatest return for the least risk. A consultant is a neutral party with expertise to separate fact from emotion.

12. Learn from the big guys. There is a reason why lean operations personnel study Toyota, General Motors and Honda production systems. Their systems work! They study the true fulfillment costs for each part and SKU. They learned that dual- and even triple-sourcing is the answer, not a single source. They know U.S. suppliers can be cost-competitive with overseas options. Research how these companies approach risk, improve quality and incentivize employees.

Conclusion

It is paramount to understand that calculated risks produce better results at companies that build a culture that accepts risk. To know where to take a risk, you need to identify where processes and systems are falling down.

It is OK to fail. The smaller the problem scope, the smaller the risk. If you solve many small problems, the cumulative savings add up. Think of this as a compounding mutual fund in which you invest and monitor growth.

Remember that problems are not solved by vice presidents or directors. Problems are solved by the collaborative efforts of a team whose members are receptive to every valued voice.

Schedule a lean supply chain consultation today to begin to establish efficient processes that control cost and improve service. These experts have the knowledge, tools and expertise to help your organization take the risk out of risk-taking.

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3pls, Archives, Global Logistics, Global Trade Daily, Warehousing

3 Pros and Cons of Backorders in Ecommerce

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With the 2020 tumult disrupting global supply chains and increasing consumer reliance on online shopping, there’s a growing interest in ecommerce backorders as a way to safeguard revenue. Uncertain availability means businesses can face listing a product as either unavailable or on backorder. While backorders may seem to be a smart path because it contains potential profits, businesses may also be putting customer lifetime values at risk.

So, let’s look at the pros and cons of three critical areas governing backorders to help ecommerce businesses determine if they’re a smart path forward.

Inventory optimization potential

Backorders give you one way to maximize your revenue and inventory, even when limited space is available. It is often considered when ecommerce stores hit a growth spurt.

The Pro

Relying on backorders can help you sell a product without needing to carry a large stock volume at every moment. Companies can accrue backorders and then fill them once reaching a specific volume, making it easier to run operations in a smaller location. This can be a way to generate revenue while also minimizing rental or building purchase costs. Fulfillment may be slower, but overall expenses are generally lower.

The Con

Using backorder techniques to minimize your inventory on hand – such as setting a threshold of orders before you restock – gives your audience more time to find alternatives and ask for refunds. If the threshold is too high, you run the risk of losing revenue and getting hit with bad customer reviews that may harm future sales opportunities. If the threshold is too low, you can end up buying regularly but making a few customers wait for each cycle, which can cause unnecessary frustration and lower customer lifetime values.

If just-in-time fulfillment is a compelling option for your company, crunch the consumer data you have and run tests. See how long people are willing to wait for your goods, and if you can fill things consistently enough to avoid buyers becoming upset.

The revenue question

Ecommerce backorders also provide companies with a chance to generate ongoing revenue. However, this comes with a risk to operations if you can’t secure it. That depends on a mix of your supply chain speed and customer service capabilities.

The Pro

Backorders allow companies to maintain revenue even when there is a disruption to inventory or restocking. Generating ongoing revenue can keep the lights on during delays, ensuring that you meet all customers’ demands.

The Con

The potential con of backorder revenue is that it is precarious. You can’t really consider it “won” until goods are delivered. If you establish backorders and rely on this revenue but then face a wave of cancellations because of delays, you may end up short and face a rising debt.

Banking on revenue from backorders puts ecommerce companies in a risky position if they are not financially secure based on in-stock products and orders they can currently fill.

Space in your space

Growing ecommerce companies often face crunches for space if they’re not using warehousing and backorder services from a 3PL. When products are in demand but space is limited, some companies feel they need to rely on backorders to protect revenue. This can be beneficial but does come with other risks.

The Pro

Backorders allow ecommerce companies to utilize some of their existing warehouse and floor space best. If you stock a good after an order or only have room for small batches, backorders allow you to accrue sales continually while working in minimal space. Organized businesses can use cross-docking techniques to fill orders rapidly once goods come in, minimizing processing, and other times. When products take up a large amount of space or a warehouse us pulling double duty for other activities, backorders add flexibility to space management.

The Con

On the other hand, backorders can create significant space concerns and constraints if not appropriately managed. A high sales volume followed by many order cancellations can mean companies have too much inventory for their space. If products are perishable or easily damaged, disruptions in backorders can lead to more spoilage or damage, harming revenue potential.

Ecommerce backorders also increase the need for space as companies try to manage fulfillment. Pre-staging orders can be necessary if you have a large volume of orders waiting on a backordered product. However, that requires space for prepared boxes, room for pickers and packers outside of typical areas, and storage for things like tape and filler.

Space constraints will drive backorder considerations. The critical thing to remember is that you’ll still need room to manage fulfillment and backorder support only delays that need at best.

How well do you communicate with customers?

Success with ecommerce backorders depends significantly on your ability to communicate. Not only does a backorder need to be clear on sales pages, but support teams need a consistent way to explain backorders to customers. You’ll need to provide updates proactively and alleviate frustrations to protect payment.

Most ecommerce companies that support backorders see an increase in customer service demands. Hiring additional team members should be part of your revenue consideration. Also, existing customer service needs to have a strong enough reputation that you can withstand any angst that comes from backorders.

Avoiding cancellations, maintaining order volume, and securing positive reviews will depend on how well your service team explains the value of backorders to your customers.

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Jake Rheude is the Vice President of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others. 

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Archives, Global Logistics, Global Trade Daily

Cutting Waste and Best Practices in Managing Perishable Inventory

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How food and beverage companies can use good inventory management and demand forecasting to reduce inventory carrying costs and sell their perishable goods before they expire..

 

The global pandemic exacerbated the need for good perishable inventory management. Afraid that they wouldn’t be able to fulfill orders during the crisis, companies stocked up on their fast-moving products and supplies. Many also switched over to making and/or selling pandemic-related necessities like hand sanitizer, face masks, and gloves.

 

With the world’s supply chains beginning to normalize, it’s time to take stock of the goods sitting in storerooms and warehouses—specifically those items whose shelf life may be coming down to the wire. Critical because these lose their value over time until rendered worthless, perishable inventory management should focus on selling those goods before they expire.

 

Typically associated with food and beverages, the word “perishable” applies to products that have to be consumed within a specific period of time before spoiling. The truth is, perishable inventory also includes flower bouquets that wither and are rendered unsaleable, event tickets that go unsold, or even the hotel room that sits empty overnight.

 

The bag of coffee that expires while sitting on the shelf in a small café, an obsolete piece of equipment that’s sitting on the shelf in a distributor’s warehouse…the list goes on. These and other perishable inventory items can be a significant expense for companies who literally get left holding the bag when the clock runs out.

 

Putting the Right Systems in Place

 

Made up of the tools, strategies, and techniques used to store, track, and replenish inventory, inventory management is critical for any product-oriented business that has money tied up in inventory. It’s especially important for companies that use and/or sell perishable goods that could wind up spoiling before they can be used.

 

To track perishable inventory, companies can use manual, automated, or hybrid inventory management systems focused on accurately matching supply with demand. And while such forecasts naturally become “hazy” in the midst of COVID-19, most times they do help provide a clear picture of what customers will need and what your company should have on the shelves (or, be able to source quickly) when the order comes in.

 

Using alerts that indicate when supply is low on certain products, for example, automated inventory software helps ensure that the goods are in stock when a customer asks for them. Unfortunately, it doesn’t always tell you when you’ve over-ordered something or when you’re in danger of losing product to spoilage.

 

“If the inventory is perishable,” Small Business Chronicle points out, “it has a defined date of usage and business owners need to pay closer attention to inventory demand cycles than non-perishable business owners.”

 

A better approach for perishable products is the single-period inventory, which focuses on ordering only enough goods for one period (e.g., a week, a month, a quarter, etc.). Only when that inventory is sold does the company reassess the potential demand and place another order. “This system will limit the amount of inventory that can spoil, go bad, or be otherwise obsolete,” the publication points out.

 

First-in-first-out or “FIFO” is another inventory management tool that can be used with perishable goods. The approach is straightforward: what arrives first gets sold first. For example, milk containers are stored according to their expiration dates in a refrigerator. The milk cartons with close expiration dates are stored in the front so that they get sold first.

 

“The main aim of this concept of inventory management ensures that the oldest stock is moved out first to guarantee cost-effectiveness and avoid waste,” Complete Controller explains. “The widespread use of this concept makes it ideal for many industries who use it along with other models of stock management.”

 

Minding the Details

 

Regardless of which approach a food and beverage company uses, its perishable inventory management should also incorporate product batch numbers, traceability, recalls, and obsolescence, all of which can be used to ensure the sale of inventory before its expiration date. When integrated with (or included as part of) a warehouse management system (WMS), inventory management systems provide high levels of visibility over stock that’s nearing the end of its useful life. This, in turn, helps food and beverage companies fine-tune their perishable inventory management processes.

 

Accurate demand forecasting is another must-have for food and beverage companies that want to reduce their inventory waste. “Demand forecasting (or sales projections) helps you understand how much of each product you need to have on hand at all times to meet customer demand,” Business News Daily points out. Established companies can base their forecasts on historical sales data, while startups can use assumptions and industry data to come up with these projections.

 

By using accurate sales numbers, putting someone in charge of the perishable inventory tracking processing, and doing regular inventory cycle counts, small businesses can save money on spoilage and unsold products. Warehouse managers who know that the 100 crates of navel oranges that arrived on Friday afternoon either have to be used or sold within the next week can either give the oranges a more prominent place on the retail floor (for a grocery) or offer a promotion for 25% off vanilla-orange smoothies (for a restaurant).

 

Stay Profitable and Keep Scaling

 

With inventory carrying costs comprising a good portion of many business budgets, effectively managing goods that could at some point expire helps keep those costs down while also avoiding excessive waste and spoilage.

 

Plus, inventory management is crucial to prevent loss of items, quickly fulfill customer orders, and know when you need to buy more of a given product. “It contributes directly to profitability,” Business News Daily points out, “and no business can successfully scale without an inventory management process in place.”

 

This article originally appeared on GenerixGroup.com. Republished with permission.