There’s a common script to the story of inventory management systems adoption for growing companies. As the number of orders and SKUs climb, so does complexity and opportunity. Handling that volume as it scales is something that outstrips the abilities of QuickBooks and Fishbowl, and, more to the point, the Excel spreadsheets that the inventory manager or analyst is using to try to make it all work.
The proverbial last straw is the resulting lack of reliable and real-time visibility into the movement of inventory. This prohibits an accurate forecast of demand across the warehouses in which that inventory is stored in and the places where people buy it.
But by adopting the right inventory management system at the right time, that story can play out with great success. For instance, in just a year since implementing NetSuite inventory management functionality, one manufacturing company has been able to handle 50 percent higher volume while only increasing working capital as it relates to inventory by 10 percent.
Automated and efficient inventory management that protects against overstock, projects demand to avoid stock outs and positions the business in the best manner for optimal cash flow is a growth enabler.
Let’s look at how implementing inventory management systems contributed to the growth of businesses across three industries.
After 35 years in business and two generations of ownership, wholesale packaging distributor Bensenville, Ill.-based Action Health made the tough decision to divest of its retail gift supply business and focus on the more lucrative health care packaging space.
Action Health’s strategy involved embracing the new low-margin reality in which health care institutions operate. To do that profitably, it vowed to reduce costs in the supply chain and pass along those savings, and that journey began with effective inventory management. Action Health has seen an 85 percent improvement in inventory accuracy measured by change in the average error rate of cycle counts, which it reduced from around 3.5 percent to 0.5 percent.
Automated inventory management provides a foundation for business-differentiating services, such as same-day-shipping and billing, and allows the business to pass on savings. Efficiencies in inventory management have contributed to a 40 percent gain in revenue per employee and sales growth of 18 percent in its first year of implementation, shattering its historical growth rates of 2 percent per year. Employee productivity has improved by 20 percent.
Angling for the attention and space on the shelves of the world’s largest retailers is often the biggest challenge a small retail distributor faces. For Oakland, Calif.-based e.l.f. Cosmetics, automated, efficient inventory management processes enabled it to compete with much larger brands. As evidence, in just a decade since its founding, the company has flipped its chief revenue stream from online, B2C sales of its cosmetic and skin care products to B2B sales with Walmart, Target and other retailers, including online marketplaces like Amazon.
This wouldn’t have been possible with its existing spreadsheet-based inventory management and a (very) loose integration with legacy ERP software. With a real-time source of inventory and procurement data, the business has streamlined transactions with its China-based manufacturing partner, optimized stock levels and invoicing processes and can ensure on-time delivery across B2B and B2C channels.
When Scott and Meagan Reamer’s Jackson's Honest line of chips launched online in 2012, it quickly gained attention from Natural Grocers and Whole Foods Market. And it quickly became clear to the Boulder, Colo.-based company that running its manufacturing business on QuickBooks Online and with SOS inventory wouldn’t allow it to scale to meet demand, nor provide automation to streamline its operations.
Because it now uses an inventory management system, the business manages three manufacturing facilities, B2B relationships with 4,000 stores, a growing B2C ecommerce business and a charitable subsidiary, all from a single system. With real-time access to stock levels and aggregated KPI data from three manufacturing facilities, the business can easily identify variable costs in raw materials for better forecasting as well as optimize inventory management and further streamline operations, freeing up resources for international and B2C growth.“We recognize (price) volatility more in NetSuite, and can determine if it’s worth it for us to work on longer tail commodity contracts at a price we’re comfortable with,” said David McCormick, VP of Operations at Jackson’s Honest.