Back when the retail was only offline, monthly or quarterly purchase planning was feasible. Customers would walk into the stores and buy whatever is available. eCommerce is exactly the opposite in nature. Customers visit your website expecting that they will buy the product they want. In case they don’t find it, you not only lose a sales opportunity, but also risk affecting your brand image and potential future sales.
To avoid such situations an effective eCommerce Purchase Order Management is necessary.
Here, we have discussed in-depth eCommerce Purchase Order Management, the main challenges, and how you can overcome them.
What is Purchase Order Management?
Purchase Order Management is an in-house procurement process adopted by businesses to ensure timely availability of inventory at optimal cost.
Why is it important?
In eCommerce, efficient inventory planning and streamlined purchase order management is imperative for long-term success.
Amazon has now set a benchmark for companies to manage their supply chain with utmost priority. While the excess stock is going to kill your working capital account, out-of-stock upsets the customer like none other.
Hence a streamlined Purchase Order Management ensures you don’t run out of stock and have purchased inventory from your suppliers at the optimal cost.
Purchase Order Management Challenges in Amazon and Magento/Shopify powered eCommerce portal
The main challenge with the eCommerce business is the necessity of having the right products available at the right time and in the right quantity.
This is a difficult task for all omnichannel sellers.
Let us see how inefficient management of the purchase order system can affect your sales, ranking on e-commerce websites, and more.
1. Sales momentum loss due to out of stock on Amazon, eBay, etc
eCommerce channels like Amazing favor brands or sellers who have products available whenever a customer wants to buy.
Like I said above, otherwise, it leaves a bad taste in the mouth of the customer. Hence it’s very important for eCommerce managers to keep track of products with a fast sell-through rate.
Equally important is to track products that don’t sell well and end up being dead stock. Without any detailed reporting of fast-moving products, you will always end up ordering at a whim.
How to overcome this problem?
Use an inventory management system that helps you forecast future inventory requirements and auto-suggests inventory items that you should purchase. Your inventory management system must take into account previous sell-through rates and be able to predict pricing accordingly.
2. Losing rank as a seller
To provide users with a positive buying experience and to grow their business, eCommerce portals like Amazon ensure that they give a higher rank to sellers who consistently deliver quality items within the given timeframe.
This means, if you go out of stock for a few products on Amazon and don’t replenish it timely, it will hamper your seller account rating adversely.
Amazon deranks a product if there is a sudden drop in sales.
Let us say there were 6 units of a product sold in the first week. In case, there is a sudden drop in the sales, Amazon algorithm will also drop sales rank also slowly.
Hence, not knowing when to reorder products, can lead to out-of-stock situations, and in turn, reduce your ranking on marketplace platforms like Amazon, eBay, Flipkart etc.
How to overcome this problem?
Look out for a Purchase Order (PO) system that notifies you whenever your products reach the reorder point.
Additionally, the system should be able to factor in the time taken in the product delivery at your warehouse, and should suggest you purchase planning decisions accordingly.
3. Limited storage for brands in Amazon FBA Warehouses
FBA provides limited storage for brands to stock their product. If this space is occupied with slow-moving products, you will be able to store a limited quantity of fast-moving products. This will lead to a stock-out of your fast-moving products and eventually impact your overall business.
On top of that Amazon storage fees are usually very high as they only store items that move.
How to overcome this problem?
Have a secondary storage warehouse beside FBA. That way you keep the FBA location available for whatever stock is selling fast. Secondary locations are usually cheaper, thereby enabling brands to save money incurred in storage costs that are levied by FBA.
4. Unable to track products en-route delivery
Tracking order delivery status is important for all eCommerce sellers. It helps you identify any mishaps in order delivery, and rectify it timely.
This is extremely important since fulfilling customer orders in the shortest duration possible is necessary to survive in the competitive eCommerce space.
Manually keeping a track of order status is a cumbersome task, and can delay order shipments if there is miscommunication between you and your carrier partner.
How to avoid this problem?
Consider using an automated system that can help you keep a track of your delivery partners or reach out to delivery services to rectify any problem.
It will also help you provide customers with live order status.
5. Not staying updated with the expiry date of perishable products
Dealing with perishable products like food products, medicines, cosmetics, etc. is tricky for any business. These short-lived items need to be sold out before they reach their expiry date. These products require special consideration while ordering inventory.
You must keep track of the expiry date and use FEFO (first expiry first out) method to ship out. Any items that are about to expire can be put on special sale. Lastly you must have a liquidation strategy in place for items that are at the end of their shelf life.
Keeping a track of product expiry of each product manually is very time-consuming, and doesn’t guarantee 100 percent accuracy. Hence, can lead to inventory wastage if the product is not sold timely.
How to overcome this problem?
To efficiently manage expiry product inventory you should invest in an Inventory Management Software (IMS) that records products expiry dates once the goods are received at your warehouse. This would help you sell products based on the FEFO model, and avoid inventory wastage.
6. Failure to track stock levels at Freight Forwarder or any interim storage
Purchase planning becomes more complex if your business imports products from foreign countries.
Tracking exact stock level available with the freight forwarder or stock availability at any interim storage is critical to avoid over-ordering. The freight forwarder may also complete product quality checks on your behalf.
Freight forward might be able to also do inspection and QC on your behalf.
Keeping a track of all this manually, and communicating necessary details with your team members is a challenging task.
This can be resolved by using an inventory management system that can track stock movements, record quality check status and enable your purchase and warehouse team to access all information from a single dashboard.
Automated eCommerce Purchase Order Management
You now understand that eCommerce Purchase Order Management challenges can be solved by investing in inventory management software. Here’s a quick comparison between manual Purchase Order Management and automated Purchase Order Management.
EasyEcom Purchase Order Management Features
1. Barcoding Products
Barcoding products can help you easily track inventory items. The system helps you generate barcode and barcode labels. The system also stores all necessary inventory information.
2. Serialize inventory
You can track your products at item-level by serializing your inventory in EasyEcom. This is a common practice followed to keep track of expensive products like jewelry, electronics at item level. Serializing inventory of such product categories will help you keep a track of individual products by assigning them unique serial numbers.
3. Ability to handle multiple suppliers for your product lines
Working with multiple suppliers, negotiating price quotations and tracking order delivery is a difficult task for brands. With EasyEcom’s Inventory Forecasting and Purchase Order Management feature you can ensure that you have optimal stock available at all times.
4. Multi-stage, multi-status, multi-party Purchase Order system
Most companies usually require a staging system to handle purchasing. With EasyEcom you can give access to your Purchase Department or Warehouse Team to create a Purchase Order, and the Finance Team can later approve it.
5. Quality Check process at inwarding
Whenever goods are received at your warehouse, the warehouse team inspects all items to ensure that they meet your quality standard requirements. Manually recording QC and keeping a track of it for multiple product lines is a very time-consuming task. It also leads to an increased chance of human errors and the probability of shipping a QC Fail product to the end-customer.
To combat this, EasyEcom enables sellers to record QC status while inwarding goods.
Once the quality status is recorded, the system ensures that only the products that meet your quality standards are listed across your sales channels.
6. Keeps a track of products with expiry dates
The system applies FEFO logic to ensure that you only sell products that have a long shelf remaining.
7. Shows suggested quantities to Manage Purchase
Many businesses fail to efficiently plan purchase decisions because of lack of accurate and timely inventory information available.
The system suggests you with an item list and their respective quantity based on your previous sales and the quantity already available.
Here is an example to further explain this:
Let us say, you have sold 90 units of a product in the previous month, and currently have 15 units of that product available at your warehouse. If you are planning to purchase inventory for the next month, the system will suggest you to buy 75 units of that product.
8. Get notified when a product reaches its reorder point
To further improve your purchase planning decisions, the system will notify you via mail whenever a product reaches its reorder point. This will help you timely plan your inventory purchase and help you avoid stock-out situations.
It is important for you to know that it is never late to get started with an efficient procurement process. If you feel like your business needs to control its expenses and improve its profit, then an automated cloud-based system like EasyEcom is a solution for you to keep an active eye on your business growth.