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Your own inventory management is crucial for product-based health and wellness eCommerce companies. So too is looking to wholesale websites and tradeshows to determine the types of products other small business are buying vs what is being discounted.
Some manufacturers will sell their products at wholesale prices directly to the retailer. If you have a particular product you want to sell, contact the manufacturer and ask if they sell directly to dealers. Retailers can sometimes buy in smaller quantities with or without a minimum order. Some even offer free freight on orders over a certain amount.
The overall idea here is to ensure that you always have sufficient stock to fulfill all customer orders as they come in—but not so much that you risk spoilage of your CPG goods.
Let’s take a look at how you can figure out what the ideal stock levels for your company look like.
No matter what product you sell, chances are other companies have been selling something similar for at least some length of time.
Of course, these other retailers receive their products—in part or in full—from wholesalers and mass-manufacturers. These are the parties you want to consider connecting with, as they’ll be able to give you a good idea of:
Even with this ballpark notion of your ideal inventory levels, you still want to start by keeping only the minimum necessary amount of product on hand in your warehouse.
This number is referred to as your Minimum Order Quantity—that is, the smallest amount of product a wholesaler will agree to sell its retail customers.
The reason to start with your wholesaler’s MOQ is this:
If forced to make a choice, experiencing stockouts is definitely preferable to experiencing spoilage. Whereas you can deal with stockouts by ordering more product, spoiled product always equates to lost profits.
You might frustrate your customers if you run out of inventory and have to make them wait a bit longer for their order. But this will also happen if your current inventory spoils and you need to order more.
In other words, while stockouts may negatively impact your business, overstocking and spoilage definitely will.
Moreover, the risk of experiencing stockouts will decrease as time goes on and you get a more accurate idea of your ideal inventory levels. While you’ll still want to stick with your MOQ for the time being, you’ll soon know how often you should be placing reorders.
As is the case in any retail niche, demand for your products will fluctuate over time.
Because of this, knowing your “average” ideal inventory levels really doesn’t tell you all that much: If you just go by this number at all times, you won’t be able to fulfill orders when demand soars above the average.
Instead, what you’ll need to do is dig into the reasons these fluctuations occur:
In looking at context, you’ll have a better idea of how demand for your products may change in the future. What’s more, in understanding why certain trends occur (be them good or bad for business), you’ll be in a better position to navigate these shifts as they come about.
Let’s say you know for certain that demand for your product is increasing. Do you:
To be clear, you don’t want to just sit on your hands and miss out on the massive opportunity that’s presented itself. But, you also don’t want to run your team into the ground trying to meet an increase in demand that you simply don’t have the capacity to handle.
Needless to say, there are a ton of potential risks involved in overtaxing your resources—human or otherwise. Any missteps, accidents, or shortcomings will ultimately lead to major losses for your company.
Your first order of business, then, will be to work on scaling up your operations to the point that meeting higher demand levels is just as routine as fulfilling average order quantities. Not only will this allow you to keep resource usage (and risk) to a minimum, but it will also ensure you’re able to fulfill all of your customers’ orders as expected at all times.