For ecommerce businesses today, stock management is a difficult balancing act. To avoid overstocking (which ties up working capital) and stockouts (which can lead to a loss of customer trust and sales), you must be able to maintain the right amount of the right products in the right warehouse and fulfillment center locations at the right time.
Failing to effectively manage your inventory can be costly. Recent research reveals that:
- Overstocking causes retailers globally to lose around $554 billion annually due to high costs for storage and excess inventory.
- Stockouts result in retailers globally missing out on nearly $1.2 trillion in revenue.
The financial health of your ecommerce business depends, to a significant extent, on your ability to deploy your inventory in the most efficient manner possible. But many online retailers discover that as their business expands across different markets, product lines, and sales channels inventory tracking and management becomes increasingly complex and challenging.
Many of these companies look to third-party logistics (3PL) providers to help them with stock management, ecommerce inventory tracking, and other areas of their logistics operations (such as order fulfillment) as well. Working with a 3PL like Amazon Supply Chain Services (ASCS), a complete end-to-end supply chain offering, can enable you to optimize your inventory by engaging its distribution and fulfillment services, giving you the ability to utilize your stock to consistently satisfy customer demand while decreasing inventory holding costs along with other operating costs.
In this guide, we explain how a 3PL can help your ecommerce business master effective stock management techniques, and explore the many benefits of outsourcing your inventory management to an experienced 3PL.
How exactly can a 3PL help you optimize your inventory tracking and stock management? By driving improvements in six key areas:
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1. Inbound logistics
The goal of inbound inventory operations is to receive your products at warehouses or fulfillment centers and get them into a sellable or storage location in those facilities as quickly as possible, and a 3PL has the people, processes, and technologies to do this. With advanced stock management techniques, a 3PL can help you by dramatically reducing “dock to stock” cycle times, ensuring your inventory is positioned in the right locations in their facilities—so that it’s ready immediately when your shoppers order it. -
2. Inventory accuracy
One of the most common challenges that ecommerce businesses face is maintaining an accurate view of inventory levels across their network. Without an advanced inventory stock management system, many organiztions are not able to precisely track the amount of available in stock (and reflect this on their online channels to shoppers). This can lead to:- Missed sales opportunities: When you have available inventory, but your ecommerce channels indicate it’s out-of-stock, you lose a sales opportunity.
- A poor customer experience: When shoppers place orders on inventory that’s actually out of stock, they experience frustration, disappointment, and an often burdensome refund process.
- Utilizing state-of-the-art warehouse inventory tracking technology: A great 3PL provider will have scanners that document your products when they arrive at the facilities, warehouse management systems that give you accurate, real-time visibility over inventory levels, and integrations that seamlessly connect your 3PL’s systems with your ecommerce sales channels, order and inventory tracking systems, and other back-end systems you use. ASCS’ Multichannel Fulfillment (MCF) service has more than 100 integrations that connect businesses with back-end systems, allowing you to monitor and automate fulfillment across multiple channels.
- Implementing efficient processes: An efficient 3PL, like ASCS, will implement regular inventory checks, cycle counts, and rolling audits to catch and correct any errors or discrepancies in your inventory tracking system.
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3. Inventory distribution
Some 3PLs can distribute your inventory across their network of facilities so that your products are as close as possible to your customer base. One of these 3PLs is ASCS, which leverages Amazon’s connected global network with more than 2,000 facilities across 27 countries, including over 200 fulfillment centers. After you send your inventory to Amazon’s fulfillment centers, we use our advanced stock management techniques to automatically and optimally distribute it across our network so your stock is close to your customer base—and within reach of new shoppers across the globe when you’re ready to scale.
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4. Inventory consolidation
A 3PL can help you consolidate your inventory into a single pool that you can utilize to fulfill customer orders across all your channels. For example, with ASCS, you can tap into the same inventory that you use for your Amazon.com orders with Fulfillment by Amazon (FBA) and use it for your orders from other channels like your brand website, other ecommerce marketplaces, and social media platforms. With this pooled inventory approach, you can improve your warehouse inventory tracking and inventory utilization and minimize stockouts. -
5. Inventory utilization
Once an order has been placed on any of your online channels, it’s imperative that you’re able to quickly pick and pack the products and ship them to your customers’ doorsteps, and a 3PL can handle this for you with the utmost speed and efficiency. Some 3PLs, like ASCS, have a team of experts and cutting-edge warehouse robotics and warehouse inventory tracking technologies that can optimize your order processing and get your goods on their way to your customers in no time. As part of Amazon’s global logistics network, this positions you to offer fast, reliable delivery wherever your customer base is located—and expand into new markets with an efficient partner when you’re ready to scale. -
6. Inventory storage
To prevent stockouts and maintain high service levels for customers (especially during peak shopping periods), ecommerce businesses typically store some safety stock (which is also known as buffer inventory). A 3PL can provide long-term or short-term storage for your business, enabling you to keep your products in their warehousing facilities for as long as you need. It’s important to note that 3PLs have different pricing models for storage:- Some 3PLs, like ASCS, charge by cubic feet for storage, while others charge you based on stock keeping unit (SKU), bin, or pallet, or a combination of metrics.
- Some 3PLs, like ASCS, offer a flexible, pay-as-you-go arrangement for storage, while other 3PLs compel you to enter into long-term contractual agreements that stipulate storage and throughput commitments.
While a strong 3PL provider will make your job easier by managing critical steps of the supply chain with ease and efficiency. With sophisticated inventory stock management systems and software in place it can help you drive improvement in critical key performance indicators (KPIs) including:
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Dock-to-stock cycle times
By optimizing your inbound inventory operations, a 3PL can minimize your dock-to-stock cycle times. An efficient 3PL will strive to get your products into a sellable location in their warehouses or fulfillment centers as fast as possible, so that your customers can start placing orders against that inventory and you can convert that stock from a source of costs into a source of revenue. -
Inventory accuracy rate
By using the latest inventory tracking technologies and implementing rigorous processes such as cycle counts and rolling audits, a 3PL can help you boost your inventory accuracy rate, which measures the difference between the amount of stock you have in your records and the actual amount of stock you have in the warehouse. Ideally, you want these two numbers to match up as closely as possible, and a well-run 3PL can help you catch and correct any discrepancies. -
Out-of-stock rates
A 3PL can help you dramatically decrease stockouts by consolidating your inventory into a single pool that you can use across all your channels and then distributing and positioning your products strategically across their network of warehouses and fulfillment centers. When you work with ASCS as your 3PL, you get access to its entire global fulfillment network, which allows you to pool inventory sold on Amazon.com (through FBA) and outside channels (through MCF) in our more than 200 fulfillment centers, so it’s close to your customers—and well positioned to expand your business into new markets. -
Inventory turnover ratio
Every ecommerce business aims to improve their inventory turnover ratio, which measures the number of times your stock is sold or used during a given timeframe, and a 3PL can help you achieve this through greater inventory control and utilization. -
Inventory holding costs
Outsourcing your inventory management to a 3PL can help you cut inventory holding costs (which include all the costs associated with storing unsold inventory) and increase your bottom line. This is because a strong 3PL provider can help you utilize your stock in the most efficient and effective manner. -
Reduce order cycle times
With a 3PL, you can streamline your order processing and reduce your order cycle times (the average amount of time it takes for you to pick, pack, ship, and deliver customer orders). A 3PL will work to ensure your inventory gets out the warehouse door and to your customers’ doorsteps as swiftly as possible. -
Improve customer satisfaction
By improving order cycle times and in-stock availability across all your channels with advanced stock management techniques, a 3PL can help you boost service levels and consistently delight your customers with on-time deliveries. With ASCS as your 3PL provider, you gain access to Amazon’s entire suite of supply-chain services—including transportation, warehousing, and last-mile shipping—so you have the ability to build a supply chain that offers fast, reliable service, and satisfies customers’ growing expectations.
Effective inventory stock management is a critical capability for multichannel ecommerce businesses today. To meet demand and minimize operating costs, you need visibility and control over your inventory and be able to maintain the right stock levels in the right warehouse and fulfillment center locations at the right times.
A strong 3PL provider, like Amazon Supply Chain Services (ASCS), can help you optimize your inventory management and utilize your stock to drive greater customer satisfaction, cost efficiency, and competitive advantage.
