“Perhaps too much of everything is as bad as too little.”
Those words, written by Pulitzer Prize-winning author, Edna Ferber in her book, “Giant,” ring incredibly true for any seller or warehouse manager who’s ever stood in front of shelves full of stagnant inventory or stared into an empty abyss where products-needed were never to be products-found.
It’s also a key inventory management lesson learned during the pandemic, a time when supply chain disruptions sparked fear in sellers and warehouse operators around the globe–a real fear that stalled or delayed inventory shipments could quickly become no inventory available at all at a time when consumer demand soared.
In fact, in 2022, as a response to these fears, many brands overstocked inventory, pushing almost 60% of third-party logistics (3PL) providers’ warehouses to more than 90% capacity.
Although inventory levels stabilized some in 2023, moving closer to the optimal 80-85% usage level, 33% of 3PLs still reported warehouse operations at greater than 90% capacity.
Why do inventory capacities remain so high? The answer is likely within a key challenge plaguing sellers and warehouse managers alike–a lack of real-time visibility into inventory at all stages, from overcoming stock issues to successful order fulfillment all the way through efficient management of returns and restocks.
Without this critical insight, it's difficult for logistics providers to accurately maintain inventory lists, a task further complicated by expanding warehouse networks and ever-evolving omnichannel sales channels. Sellers and warehouse managers, however, are catching on. They’re looking for tools to provide more clarity, with real-time inventory tracking (85%) a top reason logistics providers are implementing warehouse management systems (WMS), the most adopted technology in Extensiv’s 2023 Third-Party Logistics Warehouse Benchmark Report.
As we move into 2024 and see more operations using WMS, inventory visibility should come more into focus, but it won’t be without challenges–challenges that, if not addressed, can lead to increased carrying costs, order fulfillment inefficiencies, and unhappy consumers.
What will make inventory visibility more challenging in 2024?
A confluence of factors will make inventory visibility challenging in 2024, especially for those who don’t integrate inventory management or warehouse management software into operations.
For example, there is growing political unrest around the globe. At the beginning of the year, the war in the Ukraine wages on, and there seems little confidence that the fighting in Israel/Gaza will subside soon. These issues, and other political unrest, could once again impact an already fragile supply chain that’s still recovering from pandemic impact.
Some other inventory visibility challenges to overcome in 2024:
Too many manual processes and technology apprehension
Artificial intelligence (AI) may have been a buzzword for 2023, but many sellers and logistics services providers are still hesitant to adopt automation and warehouse optimization technologies to improve operational efficiencies while decreasing burden on employees and vendors. As such, a lot of inventory management across the supply chain is still handled by manual processes such as paper manifests and inventory management spreadsheets. These manual processes are not only time-consuming and labor-intensive, but they also increase risk of inventory errors, amplifying vulnerability to shortages or excess inventory. Part of this hesitation is driven by fear of embracing new technologies that have generally been tedious to implement, expensive, difficult to use, and rarely provide a tangible return on investment. This is likely to continue to be an issue in 2024, and the gap will likely be further widened by AI and machine learning (ML) advancements. Early adopters of automation, AI, and internet of things (IoT) technologies will likely outpace competitors in the race to win new business and meet omnichannel business demands.
Integration challenges
On average, logistics providers integrate 2.6 systems with their WMS and enterprise resource planning (ERP) tools, for example, shopping carts, label generators, and order management systems. Historically, this has been a headache for sellers and warehouse managers because many of the systems on the market weren’t designed specifically for inventory and warehouse management, which led to siloed data, no tools for inventory analysis, no inventory audit procedures, no real-time insight into operations, and frustrated users. With new and developing APIs, integrations will likely streamline across platforms over time, but moving into 2024, this may still be a challenge, especially with WMS and ERPs developed by companies outside of ecommerce, retail, and supply chain management industries.
No real-time tracking or inventory visibility
In 2023, nearly 80% of Third-Party Logistics Warehouse Benchmark Report respondents say they’re planning on implementing additional technologies in their warehouses in 2024, where 77% are currently using basic inventory and order volume reporting and analytics tools. Unfortunately, not every inventory management system (IMS) on the market offers real-time visibility across all aspects of inventory and order management. Companies that adopt technologies without this key feature will likely struggle with maintaining accurate inventory levels throughout the year.
Complex SKUs
As sellers market more product types across more sales channels to an expanding consumer base, what was once a simple way to track stock on hand using stock-keeping units (SKUs) is getting increasingly complex. Everything from the size, color, and available product features to configurations and customization options can impact what’s on an SKU. The more attributes a company wants to differentiate for a product–and the more inventory types they have–the more complex SKUs become. As consumer demands continue to evolve in 2024, expect to see a similar trend with SKUs. This will increase challenges for businesses that solely rely on SKUs for demand forecasting and setting reorder points and safety stock levels.
Warehouse locations and limitations
Driven by the speed and convenience of online shopping through large ecommerce platforms like Amazon, consumers now expect all the brands they engage with to make shopping seamless and easy and to deliver products accurately and on time. That’s increased pressure for sellers and warehouse managers to increase efficiencies within their warehouses, transportation, and shipping routes and services. That’s not likely to ease up this year, which may force smaller sellers who manage their own fulfillment strategies to invest in new geographically-dispersed warehouses or to partner with 3PLs to expand their warehousing network. The pressure is on for 3PLs, too, especially as they scale to attract more customers and customer needs flex and scale, too. For 3PLs, the solution this year may be to start looking for other 3PLs to partner with to create fourth-party logistics (4PL) networks.
How to overcome inventory visibility challenges
If you’re not using a WMS or inventory management solution, you may often feel like you’re lost inside a maze of papers and spreadsheets, held down by disparate, inaccurate data that you cannot analyze. Just when you think you might be figuring out which direction to go, more orders come in, and you’re right back at your starting point. If misery loves company, then you’re not alone. But, managing inventory levels and getting comprehensive, real-time inventory visibility doesn’t have to be that complicated. With some best practices in mind, you can overcome these challenges and be well-prepared for success this new year. Here are a few tips:
Use real-time inventory insights
Without real-time visibility into all of your inventory data, you’re navigating your warehouse maze blindly. Instead, inventory management software can serve as your compass, guiding you in the right direction. That way, the next time a customer places an order or asks if something is in stock, you can point them in the right direction. With the right WMS, you can get a big picture and granular view of every item in stock at every location, see what’s been ordered across all of your sales channels, track order fulfillment status and shipping, and have the ability to accurately forecast customer demand, inventory levels, safety stock, and reorder points.
Customize inventory reports
Many WMS tools come out of the box with some reporting capabilities, but what good are those reports if they’re not reporting on real-time data that actually matters to your business? And, it’s even more frustrating if you can’t customize your inventory reports for the audience you need, leaving you to pour over metrics, remove unnecessary data, and spend valuable time correlating what you actually want. Instead, look for a WMS that will enable you to customize reports for what you need, when you need it, as well as access preset reports. Look for a solution with flexible reporting tools to help you transform inventory and warehouse data into actionable insights that align with your business goals.
Use barcode scanners, RFID, and other warehouse automation technologies
If you’re still tracking inventory manually, it’s past time to stop. Instead, adopt automation and optimization technologies like barcode scanners, RFID tags, and other tools like automated picking and packing, label-making, and shipment initiation. Look for a warehouse management tool that will help you optimize your picking routes to remove tedious, manual processes that are error-prone and frustrate your employees. Seek out a WMS that is compatible with the technologies you need to automate warehouse operations.
Ensure integrations with key operational systems and software
Integrations are often a stumbling block for new software adoption, so when you’re vetting potential WMS, ERP, or inventory and order management solutions, look for software that you can be confident will integrate with the core operational systems that keep your business running. Look for a solution with proven integrations across key platforms, everything from shopping carts like Shopify to Amazon, Etsy, and eBay marketplaces. You can also increase efficiencies by automating and streamlining order fulfillment all within a single solution so you can break down traditional silos that have long held your data hostage.
Automate and optimize key inventory management tasks
Just like the warehouse automation that can make your warehouses operate more efficiently, you should also consider optimizing all of your key inventory management tasks, including those generally handled by employees in the office. Look for an inventory management solution with trusted APIs you can use to electronically create new orders right from your online stores or sales platform and that will automatically trigger picking and packing processes when complete. Look for a solution that can also automate purchase orders and manage common shipping tasks such as managing freight and order processing fees. Bonus points for software that can also handle seamless returns processing and generate reports based on key performance indicators (KPIs) that fuel your business. The more capabilities you have to increase inventory optimization, the more streamlined and error-free your processes and efficiencies will be.
Why is inventory visibility important?
Whether you’re an ecommerce seller or warehouse manager, inventory visibility is an important part of ensuring your business’ success. With an inventory management solution, you’ll be empowered to embrace all of the benefits of inventory visibility, such as:
- Improved data-driven decision making
- The ability to identify and prioritize inventory and warehouse challenges
- Resources to build a culture that fosters continuous improvement
- Tools to help you optimize resource allocation
- Increased operational efficiency
- Decreased expenses
- Ability to easily flex and scale with changing customer and market demands
- Risk recognition and mitigation
How sellers and warehouse managers track inventory with Extensiv
While many of the warehouse management systems in the market tackle some inventory visibility challenges, few can help you overcome all of them within a single platform. With the power of Extensiv, warehouse managers and sellers can:
Track inventory accuracy rate
With tools such as barcode scanning and RFID tags, you can use Extensiv to track inventory movement in real-time as it correlates with incoming and outgoing orders. You can also set up real-time alerts so the right people on your team get instant notifications when you're low or out of stock and automatically initiate processes like managing reorder points. Extensiv also takes the headache out of inventory audits beyond just tracking how much of which product you have and where. You can also use it to find patterns with inventory inaccuracies or other issues so you can proactively take corrective measures before they negatively impact your customer experience.
Shorten order cycle times
Consumers want increasingly shorter order cycle times between the time they place an order and when it’s processed and arrives to them. Extensiv shortens this window by automating tasks like picking and packing, optimizing shipping routes, prioritizing tasks to give urgent orders attention, and automating workflows such as order processing, shipping, tracking, and returns.
Understand inventory turnover ratio
Your inventory turnover ratio measures how often you sell products and replenish inventory during a specific timeframe. You can use this information to forecast how long it will take you to sell out your current inventory levels. Extensiv can help you better understand the business impact of this key metric by accurately forecasting demand to ensure you always have accurate stock levels, optimized reorder points, and the right amount of safety stock. Extensiv’s data and analytics can also give you insight into inventory impact on profitability, all the way from what sells fast and when and what is more slow moving. This can help you make better informed warehousing and replenishing decisions.
Monitor SKU performance metrics
As SKUs increase in complexity, you’ll need a tool like Extensiv to help you track SKU performance in real time. With Extensiv, you can analyze sales and stock levels for every SKU, segment and categorize SKUs based on product performance, and use this data to develop plans on how to manage fast- and slow-moving stock, such as seasonal items. Extensiv will give you a clearer picture of your inventory lifecycle so you can better understand why certain products are selling and then integrate relevant data from target markets to make data-driven business decisions.
Start improving your inventory visibility with Extensiv
Extensiv isn’t just another software provider to bring with you while you get lost in that old inventory maze. Think of Extensiv as the GPS that gives you turn-by-turn directions on how to get comprehensive visibility into your inventory so you can optimize reorder points, accurately and quickly fulfill consumer orders, and get valuable insight into critical data that will help guide your business toward success and improve your bottom line.
Ready to start improving your inventory visibility with Extensiv? Request a demo today!
