In just a couple of years, the world of ecommerce has evolved beyond recognition. While online sales are undeniably here to stay, margin-crippling shipping delays, lengthening lead times, and rising costs have also become the norm.
In 2021 alone, there were 11,642 supply chain disruptions globally.
For marketplace sellers and high-growth brands, you could say the struggle to get ahead of inventory has never been more real. The good news is, that there have also never been more ways to optimize your supply chain for increased sales and profits.
Today, we’ll get into some of the proven ways ecommerce owners can secure the right inventory at the right time, while bolstering cash flow and protecting the business from unnecessary stockouts and losses.
What we’ll cover
- Inventory and supply chain have never mattered more
- How to optimize your cash flow and supply chain for maximum profit
- Get ahead of inventory with the right funding partner
Is your store stocked and ready for a successful Q4? Grab our latest ebook and get ahead of the holiday inventory crunch.
Inventory and supply chain have never mattered more
There’s nothing like the feeling of waking up to a slew of notifications alerting you to new sales that came in while you were sleeping. But now that you’ve reached that next revenue level, it’s time to aim even higher.
But there’s just one problem.
Your inventory and supply chain is anything but predictable. Late shipments, supplier politics, stockouts. It’s a lot to keep up with.
Then there’s the simple fact that managing your supply chain, well…it’s just not as sexy as other areas of the business.
Thankfully, there are some very real benefits to help sweeten the deal. Here are just some of the perks you stand to gain by boosting your supply ops and cash flow.
Less chaos = more revenue
Supply chain disruptions can and will happen.
As much as we wish it weren’t true, global supply chain chaos is here for the foreseeable future. It’s bound to impact your inventory, sales, and cash availability at some point.
The only way to really manage that fact is to face it head-on.
With adequate working capital, sellers can secure inventory in advance, get ahead of long lead times, and ensure that each stakeholder in your supply chain is equipped to handle the inevitable delays and extra costs thrown its way.
Looking for a flexible funding partner? Find out if you qualify for fair and fast working capital that doesn’t impact your credit score.
Prep your supply chain for the future
As you break the stockout cycle and develop strong internal capital, you can invest in your supply chain as you scale, without needing to incur bad debt.
“Since we get paid every 14 days, our cash was tied up, especially considering the amount we hold in reserve,” says the founding team at the premium online wedding gift store, Deluxy. “It put stress on our cash flow. We’ve also been getting used to the inventory limits and restrictions that Amazon has imposed on sellers.”
Fewer disruptions in the supply chain means fewer stockouts and more sales. With extra capital to invest in your supply chain infrastructure, you’ll be prepared to generate stable revenue long-term.
A business ecosystem that fuels greater growth
For steady sales in your ecommerce business, you need both capital and inventory efficiency. In the current supply chain climate, one simply cannot thrive without the other.
With stronger cash flow, you can negotiate better deals with suppliers and freight forwarders, or even invest in your own storage facilities.
Depending on your vertical and niche, you may want to:
- Increase your inventory quantities
- Invest in a supply chain management system
- Negotiate better terms with suppliers, 3PLs, and freight forwarders
In Deluxy’s case, once the team was able to secure the cash flow it needed, they started working with a 3PL and opened up their own warehouse to reduce shipping fees and storage costs.
No matter what happens next, the brand will be in a great position to keep supply chain costs down, while driving sales forward.
How to optimize your cash flow and supply chain for maximum profit
Now that we’re clear on why the supply chain is so fundamental to growth, let’s get into some of the practical steps you can take to keep your inventory and sales on track.
As you might’ve guessed, step one is all about getting a clear reading on your cash flow.
Check your goals against your cash flow
One of the best things about ecommerce is that there are multiple ways to scale.
Rather than chase all of them at once, make sure you’re clear on your top three to five business goals this year.
Then, break them down into short-term and long-term objectives with action points, deadlines, and costs for each.This information will form the foundation for how you optimize your cash flow and determine which inventory-related tasks you will prioritize along the way.
Here’s what that could look like for the goal of launching a new product:
- Product research completed by 10th March – $1,000.
- Sampling to be completed by 30th April – $3,100.
- Production completed by 20th June – $20,000.
- Shipping completed by 10th August – $5,000.
Don’t forget to budget a little extra in each area to account for unexpected expenses.
Time your supply chain investments
Once you have your business targets in place, it’s time to align your initiatives with your store’s existing working capital.
Review your store’s current capital levels, including:
- Liquid funds in your business accounts
- Projected revenues from marketplace payouts
- Any existing capital reserves
Next, align your cash to the priority projects you have planned, so you can time your investments when liquid cash is high in your store.
For example, say you have an influx of cash in January and February when disbursements from Q4 hit your business account. You can schedule some of your more capital-intensive tasks, such as large stock purchases or key equipment upgrades during this period.
Refine and optimize. Rinse and repeat.
When your inventory and supply chain are fully synced with your cash flow, the result is more revenue. But with things changing as fast as they are, it’s best to think of this as an active strategy — not a one-off play.
Once you’ve clarified your key business and supply chain objectives, you’ll need to regularly check in and gauge what other areas of your business may require additional tweaks.
Here are a few quick checklists for potential areas you may want to continue optimizing as you scale.
Inventory optimization checklist
- Overstocks and deadstock – Avoid negative cash flow through initiatives like sales and promotions. Don’t rule out using liquidators to offload burdensome stock and write off unsellable stock as the last resort.
- Better inventory forecasting technology – Accurately predict stock and adjust quantities according to your store’s actual sales needs.
- Match inventory orders and distribution – Develop agile marketing and advertising strategies to adjust sales pace and avoid stockouts.
- Implement maximum and minimum inventory days – Understand your real inventory needs and plan the right amount of stock at the right time.
Supplier collaboration checklist
- Share the sales and the costs – Ask suppliers for any areas where they might be willing to split the increase of the shipping costs so you can continue to sell the product.
- Secure cost-effective storage solutions – Work with manufacturers with storage facilities to see if they can offer free or discounted storage to help keep your products profitable so you can continue to sell them.
- Focus on better terms on both sides – Keep your supplier relationships strong by continually showing up as a good partner. Even small things like how you pay your suppliers can make a big difference.
- Use surveys, review harvesting, and polls – Understand your customer’s wants and needs, then work with suppliers to deliver.
- Keep optimizing – Work with vendors and suppliers to eliminate unnecessary steps in your shared processes for a consistently profitable supply chain.
Cash efficiency checklist
- Make sure your cost management strategy reflects your brand’s values.
For example, if your goal is to improve customer satisfaction through expedited shipping and returns, it may make sense to invest in a better fulfillment solution and cut costs in other areas that aren’t moving the needle on your business goals.
- Optimize supply chain costs.
For healthy margins, keep a close eye on these three areas:
- Reduce pricing-induced wastage — e.g., unprofitable promotions or marketing campaigns.
- Match your product with customer expectations and competing offerings. Give shoppers a deal they can’t refuse.
- Work with your suppliers and fulfillment house to create a system that helps meet demand while optimizing for cost savings.
Last but not least, aim to stay agile in both your cash flow and your supply chain with a robust supplier and fulfillment network including built-in buffers and backup plans to avoid expensive mistakes.
Get ahead of inventory with the right funding partner
An optimized supply chain and healthy cash flow go together like two peas in a pod, breeding long-term success, high margins, and healthy profits for your growing store.
But keep in mind, it’s a never-ending journey. Stay on top of the latest supply chain trends and dedicate time to learning tactics that will help you align your inventory and cash flow.
As you make strides in your supply chain, unexpected events will inevitably crop up. To stay ready for any twists and turns, you may want to seek out flexible working capital to act as a safety net so you can continue to scale, come rain or shine.
When you’re ready to put the right partner in your corner, SellersFunding can help. Our team is experienced in ecommerce and here to help you hit the next level. Want to learn more? Check out our quick, two-minute demo and find out how we can help you grow your store.