Wholesale Inventory Management
Table of Contents
Wholesale inventory management is the process of obtaining, storing, and profiting from B2B goods. It revolves around knowing how much product your company should have in stock, at various price points and locations—as well as projecting those same needs into the days, weeks, and months to come.
The challenges associated with B2B are daunting, but the right online wholesale inventory management can overcome them as long as you know what to look for.
Every wholesaler faces uncertainty. None more than those who use an “old school” approach to inventory management.
Data from our 2018 Global Commerce Survey found that 20% of businesses doing over $5m in revenue overstock their inventory either “frequently” or “always.” On the other side of things, 25% also experience stockouts “frequently” or “always.”
To avoid falling into the same traps, there are a few key metrics you need to keep track of.
Lead time is the period between when you order stock and when that stock arrives at your storage facility.
Regardless of what inventory forecasting software you use, it’s essential that you know your lead time.
It’s also essential to know how much inventory is needed to cover customer demand in the span of time it takes for a new shipment to arrive.
This number is your lead time demand.
Failure to accurately estimate lead time and lead time demand, depending on which way the error fell, can lead to over- or understocking of a given product.
On the other hand, accurately anticipating your various lead times will enable you to get your wholesale shipments moving out just as quickly as they came in. The more streamlined this process, the more business you can take on—and the more revenue you can generate.
Reorder point refers to a designated level of a given stock that, when reached, will trigger an automatic reorder.
The goal of setting a reorder point is to ensure that you always have sufficient inventory of a specific product on hand at any point in time. This will provide a safety net in case of a fluctuation in demand, hold-ups in lead time, or any other unforeseen circumstances that may cause you to run out of stock.
Your reorder point will be different for each of your wholesale products. To calculate your reorder point, first determine your lead time demand, as well as your safety stock definition:
From there, simply add your lead time demand and safety stock to get your optimal reorder point:
Planning reorder points is a crucial part of inventory management. Setting your reorder point to the optimum amount allows you to cut down on excess spending while also ensuring you always have enough inventory in stock to meet your customers’ demands.
QuickBooks Commerce offers a free reorder point calculator to help you keep your inventory stocked and ready for delivery:
Carrying costs refer to the sum of the expenses you incur when holding inventory.
To calculate your carrying costs, you need to know the following costs within your business:
Then, add this data into the following formula:
(C + T + I + W + (S - R1) + (0 - R2))/ Average annual inventory costs
While carrying costs are obviously not avoidable entirely, some key ways to reduce carrying costs include:
While you can’t always predict the future with 100% accuracy, evidence-based forecasts ensure your company keeps moving steadily and smoothly ahead.
The main reason? Large and small alike, B2B customers want the buying process to be online.
Data shows that among wholesale buyers:
In other words, the modern B2B consumer does their homework before making a purchase. And they do it on their own. No longer do wholesale buyers sit back and wait for suppliers to spoon-feed them information; they go out and find it themselves.
Among the many pieces of info they look for, B2B buyers take it upon themselves to:
By providing everything through an online wholesale solution, you place the power leads want in the palm of their hands.
You can also empower your current customers even further by allowing them to complete nearly all of the purchasing process with little assistance on your end. Creating an eCommerce portal for your wholesale customers allows them to …
In giving your customers more control over their experience with your brand, they’ll trust you—and will continue doing business with your company moving forward.
At any given moment, processes, tools, products, and people are constantly in motion—and it’s essential that you have both a big-picture and a granular view of everything as it moves through your supply chain.
Among many other things, this means maintaining visibility of:
By maintaining real-time visibility of the major and minor areas of your inventory-related processes, you’ll be in a position to make immediate changes should the need arise.
None of what we’ve talked about so far will matter if you don’t prioritize fool-proof communication with your teams, customers, and vendors—all the members of your supply chain.
When companies rely on ad hoc methods whose foundations are set and monitored by individuals, errors inevitably follow.
Rather than tie something as complex as wholesale inventory management to a loosely connected web of spreadsheets, purchase orders, emails, phone calls, and more … ground it within a centralized and automatically up-to-date digital system.
Wholesale communication comes down to selecting a platform that not only records and monitors inventory, but allows you to automatically send emails to all involved parties regarding...
Clear lines of automated communication don’t eliminate the human touch. Instead, they save you, first and foremost, from costly errors and then—as you and your team argument that foundation as needed—instill a sense of trust among all involved entities.
From making wholesale pricing strategies work for your business to optimizing your wholesale business with inventory forecasts, this free eBook provides necessary tips and tricks on mastering wholesale and scaling up.
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