Month: April 2022

Open a no cost online store

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The last two years have been very profitable for the online selling industry. The pandemic boosted ecommerce and made online shopping an integral part of all our lives. Most businesses finally made their transition online, and a lot of new online businesses were created, too. In fact, US ecommerce sales passed the $1 trillion mark for the first time in 2021. If you’re an entrepreneur, now’s a fantastic time to start an ecommerce store.

This guide will walk you through building your ecommerce business without paying a penny! Let’s jump right in.

Step #1 – Choose an ecommerce website platform

The first thing you should know is that ecommerce websites are significantly different from typical websites. That means you’ll need to put some extra effort into the setup process and opt for a specialized ecommerce website platform. If you already have a WordPress website, we recommend that you install the WooCommerce plugin to make a smooth, seamless transition.

Setting up your WooCommerce-based online store is pretty simple.  You can easily find a step-by-step tutorial on YouTube that will walk you through the entire process. WooCommerce is free to get started and you can run your business for a long time without needing to pay for any plugins or custom development. In just a few hours, you’ll be able to go live.

If you don’t want to use a WordPress-based website, you can go with a dedicated ecommerce website builder like Shopify, which provides you with all the necessary tools you need to build a professional online store. Shopify comes with a 90-day free trial — but you may have to shell out some money for third-party app integrations. Like WordPress, building a Shopify store is fairly simple and you can achieve great results without paying a developer.

Step #2 – Choose a social media tool to market your business

Next, you’ll need to get yourself a dedicated social media management tool for content distribution. A social media presence will help you build your audience and brand, and most platforms are providing new and exciting ways to monetize the attention you get there. A proper social media tool will allow you to save time and automate posting across different social media channels.

To get started, we recommend Hootsuite — which allows you to manage up to 10 channels for free. Hootsuite gives you access to their main features and is the perfect tool for new businesses. It’s easy to use and has tons of free resources — including troubleshooting — in case you face any problems.

While it can be a good practice to customize your marketing communications for each social media platform, there’s no need to worry about that in the beginning of your ecommerce journey.

Step #3 – Select an email marketing platform for high ROI

Email marketing is extremely important for ecommerce sellers. From cart abandonment emails to reactivation and retargeting campaigns, it’s essential to market directly to potential customers. In fact, email marketing delivers an impressive ROI of $42 for every dollar spent! That ROI is much better than any social media or paid marketing method. So, no matter what product you want to sell, or what your personal opinion is of email marketing, the fact is that it’s extremely important to collect as many email addresses as you can.

One great strategy for growing your email list involves offering a freebie or a discount in exchange for an email address. You can also choose to run referral campaigns, which we’ll discuss later in the article. For your email marketing needs, we recommend MailChimp. Not only is it the market leader, but it also has a bunch of free HTML email templates to choose from.

Mailchimp is a “freemium tool” – meaning you won’t have to pay a penny before crossing 2,000 contacts or 10,000 sends per month. It provides great marketing capabilities, an excellent drag-and-drop responsive email builder, and it integrates with your website, too.

Step #4 – Find a CRM tool to manage customer interactions

As your business grows, the challenge of keeping track of all your customers will become more complex. Disorganization will eventually lead to dissatisfied customers. Let’s face it: there’s no way for startup owners to check and respond to every social media comment, direct message, and email. On top of that, customers often reach out on multiple platforms, and keeping track of all the communication can be confusing. That’s exactly why you should be using a CRM tool to help you centralize your customer interactions.

HubSpot is a perfect place to start. It allows you to have a common dashboard to track conversations and automate future interactions. You can use HubSpot’s “free forever” plan to fuel your customer interactions with up to 1,000,000 contacts and no limit on data storage. Although many people find their pricing plans expensive, paying a premium in the future can be a great value add to your efforts. However, you can simply use the free version for now.

HubSpot also publishes a lot of courses on digital marketing and tutorials for getting the most out of the platform. Learning HubSpot is fairly straightforward, and we recommend that you brush up on the basics of your CRM to grow your business and knowledge base.

Step #5 – Get an accounting tool for your online store

Accounting can be a headache. But the worst thing you can do is ignore the need for accounting altogether. Accounting tools help you stay on top of your finances and in compliance, and it’s imperative to have one.

Xero is a great pick for ecommerce sellers. Xero offers you a 30-day free trial which is more than enough to test your ecommerce business idea — and it has very affordable prices if you do decide to continue. Integrating accounting software is a no-brainer for any business owner — so the sooner you take care of this, the better.

Step #6 – Use a payment gateway with a large user base

Now comes the best part: getting paid. You’ll need a payment gateway integration for accepting payments on your ecommerce site. There are more than 100 payment gateway providers, but we recommend you choose from those with the biggest reach in the industry: PayPal or Stripe.

Furthermore, you may also want to integrate your web store with Apple Pay and Amazon Pay, too. This will help increase your compatibility with popular payment methods. As a fledgling business, it’s important to make it as easy as possible for your hard-earned customers to pay you.

Step #7 – Add your referral and rewards software

Referrals and rewards are two of the best strategies you can implement to retain your most valuable customers. Not only do these tactics motivate your customers to return and spend more money — it also makes them feel special and valued.

The way it works is quite simple – existing customers invite new users to your store using referral links. When any new user signs up using an existing customer’s referral link, they both get rewarded. These rewards could be a discount promo code or a free voucher that they can redeem to buy an item of their choice from your store. Rewarding your customers for referrals is a great way to bring in new customers and get the existing ones to shop more frequently from your store.

There are plenty of good solutions available for both, but we would recommend starting with Referral Factory. It has a huge library of ready-to-use templates and comes with a trial period of 15 days. For rewards, you can try Marsello, which is one of the best-rated rewards software there is. Marsello also comes with a 30-day free trial, so you can try both without putting any money down.

You’ll be surprised at how much of a difference having these solutions make. They’ll also help your brand reputation and boost its value in your customers’ eyes.

Step #8 – Choose your inventory and order management software

The last, and perhaps most important step, is finding an inventory and order management software solution. If you want to be successful in ecommerce, this is absolutely essential. This software will automate your backend processes and allow you to seamlessly scale your business. When you manage inventory by hand, mistakes are almost inevitable. It’s important to avoid overordering, understocking, and losing track of inventory.

These are the kinds of mistakes that put your business in jeopardy. Frustrating customers ultimately costs you orders. On top of that, it’s important to keep customers updated on shipping status, order time, and operations. When done manually, all of these tasks add up to an unsustainable workload.

That’s where all-in-one solutions like Cin7 come in handy. You’ll be able to seamlessly manage your inventory, process your orders, facilitate your shipping, and more. The ability to automate workflows, integrate with hundreds of platforms, and access cutting-edge analytics is integral to your ecommerce store.

Step #9 – Get started!

Now it’s your turn to put what you’ve learned here to the test. You have most of the tools you’ll need to be successful in building your ecommerce store — with zero investment!

If you have any questions about the exciting journey you’re about to take, feel free to get in touch with the experts at Cin7. They’re more than happy to help you as you make your way towards ecommerce success.

Pure Commerce share four secrets that helped their clients achieve record growth in tough market conditions

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  1. DEAR isn’t just for sorting your inventory or modernizing your business: it helps you keep your approach flexible

  2. You can afford your own, fully-customized, fully-integrated ERP (if it’s DEAR)

  3. Any product business can benefit from DEAR

  4. A great implementation partner will let you outsource the back-office

“We actually started out as a DEAR customer,” says Filipe Nicolau, owner and founder of Pure Commerce. “We were responsible for changing the entire inventory management process for a clothing company and taking the business online — and DEAR was the go-to choice of ERP. We took that knowledge, and started a business around eCommerce inventory management systems and ERPs, and DEAR was a natural fit.”

Pure Commerce is a DEAR implementation partner and digital agency that specialize in solutions for eCommerce businesses. Filipe has been helping businesses both large and small implement DEAR for a long time now, and he’s happy to recommend the software to product businesses of all kinds.

“DEAR is a.) user friendly and b.) well plugged into eCommerce titans like Shopify,” Filipe says. “Compared to competitors, it’s a tenth of the price, and yet it does everything you need it to do.”

No matter how big your company gets, DEAR can scale to meet your needs.

Clients range from blue-chip companies in South Africa that are running giant warehouses and massive eCommerce stores, to mid-market businesses with five or six shops, all the way to people with just one or sometimes no store,” Filipe says. What they all have in common is they need a proper system to function like an ERP and manage inventory for their eCommerce sites.

“Because of DEAR’s price tiers, the smaller businesses can purchase it just as easily as the blue-chip companies. It’s accessible to all our customers. And no matter what we throw at DEAR, it just keeps being able to do it.”

Any product business can benefit from DEAR

The industry you’re in, says Pure Commerce, doesn’t matter too much: so long as your business is moving product, it can benefit from DEAR.

“We’ve got clients in the clothing sector, in manufacturing, in pottery, in health and wellness — all running DEAR.”

The first benefit of DEAR for many customers is simply being able to tell where all their inventory is. But once that’s established, customers find their other requirements or pain points are taken care of as well.

“When we first started, we used DEAR just to run a warehouse — purely ERP, stock management, goods in and goods out. Not even for financials, just to track stock. That was it,” Filipe says. “But with our business expertise and the functionality offered by DEAR, we can create any system a customer requires.”

Customers find DEAR helpful for syncing inventory through to finances, using programs like QuickBooks Online or Xero, and adding inventory capability to eCommerce platforms like Shopify. They use it for manufacturing, retail Point of Sale (POS) and expanding sales channels, making it easy to add a D2C channel to a B2B business, or vice versa.

“DEAR’s B2B portal is, for a lot of our customers, something they find themselves wanting to add, and it’s super easy to implement,” Filipe says.

Pure Commerce tends to stay away from the accounting and bookkeeping side of things. Their job is to make sure the business elements are all connected up, and they make sure their customers are connected with great accounting teams who know how to make inventory systems work well with financial systems of record.

Get an implementation partner that allows you to outsource the back-office

“A lot of our customers come to us saying they don’t know where to start. They’re starting a business from scratch. Well, we’ve done that ourselves! So we give them a full implementation, top to bottom, and in a lot of cases, it’s really saved their bacon. One client was a clothing company — we helped them get online, and they’re now running an online store and just launching their third physical store.”

For these companies, Pure Commerce functions essentially as an outsourced back office.

“We act as their support team for all things, not only eCommerce, but everything related to DEAR, to the operational side of the business. We’re their go-to.”

Pure Commerce have had great successes among their clients, with a number taken from operating entirely using pen-and-paper to DEAR Systems, using a full modern ERP and software app stack.

“We’ve had companies who were in the dark ages. Now they’re walking around with tablets managing production lines and things like that,” Filipe says.

Other success stories include a blue-chip company that started 2019 with barely any online presence and thousands of physical stores — and we all know what happened next. The Covid-19 pandemic hit, the company was forced to close all its stores.

“We had the CEO call and say ‘Listen, you need to save our bacon. We need to be fully online in a minimum of four months,’” Filipe says. “We launched them all online with one DEAR ERP and stock management system. There’s a massive warehouse in Cape Town, five stories high, that’s running all the company’s brands, all on DEAR. DEAR is keeping track of everything and feeding each brand’s website with inventory information.”

The changes Pure Commerce and DEAR have brought have had huge effects on the company. “It’s definitely changed their lives. They’ve never looked back — they’re pumping out products online and they’re growing day by day,” Filipe says.

DEAR offers incredible opportunities for new directions — for both product companies and their advisors

A lot of consulting companies would be thrilled to find themselves in the same position as Pure Commerce. They have a steady business and happy clients, and over the period of turmoil wrought by Covid-19 they’ve found themselves busier than ever. But they’re not stopping there. Their experience with DEAR means they can now branch out in exciting new directions, quite different to what you’d normally expect from a self-described “outsourced back-office.”

“Last year we used DEAR to launch our own Pure Commerce third-party logistics warehouse,” Filipe says. “A lot of clients don’t have warehousing, so we offer the ability to keep their stock in ours. We have our own DEAR account, which plugs into the client’s Shopify sites, and we pull the orders through to the warehouse. We pick, pack and ship on their behalf.”

All this activity is supporting the growth of Pure Commerce’s clients, as well as Pure Commerce itself. In the last three years, they’ve quadrupled their business. “And it’s primarily due to lockdown, to the pandemic. Everyone has realized that they need to be online,” Filipe says.

You can afford your own custom ERP — if it’s DEAR

Pure Commerce says that any product company can benefit from the features DEAR offers, but the features aren’t the only factor that decision-makers weigh up when considering an inventory management system. The price is also hugely important — but here, too, DEAR is beating the competition.

“The value for money you get from DEAR is amazing. You can get a B2B portal, you can run your POS, your sales channels, integrate into Amazon or pretty much anything else, integrate your accounting systems,” Filipe says.

“It’s a cost-effective system, a one-stop shop that gives customers an ERP and that allows Experts to solve pretty much all your customers’ problems with one system. The unique thing about DEAR is it can be for selling anything — from potatoes, to clothing, to pottery. That’s why it appeals to such a wide range of implementation partners and customers.”

About Pure Commerce

Pure Commerce is a DEAR implementation partner and digital agency that specialize in solutions for eCommerce businesses. Here, they explain how product companies can benefit from implementing DEAR — and the right implementation partner.

About Cin7 Experts

Cin7 Experts experienced with DEAR are an essential part of the Cin7 inventory management community. No matter what kind of product business you’re running, where you’re located, or what you’re trying to achieve, there’s a Cin7 Expert on DEAR who can help you achieve your ambition while saving your money and time.

Cin7 study: Inflation fears causing consumers to change purchasing habits

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Global crises and ongoing macroeconomic factors like supply chain disruptions, supply shortages, and the COVID-19 pandemic continue to impact consumers around the world.

With many unknowns still up in the air, fears and tensions are growing among consumers as prices of goods rise and threats of continued inflation loom. Are consumers concerned enough to change spending habits? If so, how will the threat of rising costs impact retailers and product sellers who have been managing challenge after challenge for more than two years?

According to a recent survey from Cin7, consumers are conclusively concerned about inflation, and they’re changing their preferences towards product sellers as a result. Their primary criterion for purchasing goods is now price by a wide margin, with the survey finding that the price of goods (45%) is the most impactful factor when choosing where to buy items, followed by quality of goods (18%), online ordering capabilities (12%), geographic location (9.5%), supporting a local or small business owner (9%) and lastly, speed of delivery (7%).

Consumer concerns and buying behavior

The vast majority of consumers (81%) state that they’re worried about inflation. Only 22% of consumers said they’re not reducing their spending right now, meaning that it’s doubly important for sellers whose products are not considered “essential” to make their value known and do everything in their power to keep demand up even when spending is being reduced.

Consumers consider buying on price in wide margins, at the expense of smaller and local product sellers and are instead gravitating towards big box retailers – with 49% stating they’d make purchases wherever is cheapest and 26% saying they’d purchase in-store from big box retailers. The survey results suggest that consumers don’t have major qualms about shopping at big box stores – and while they are still shopping online, a growing percentage of people would cut back if supply chain issues caused prices to rise.

Convenience and location matter, as 46% of respondents claim they’d purchase from locally-owned businesses if the price of goods were the same at different stores, followed by big box retailers (40%), and online from small businesses (14%). This signals trouble for online sellers as they’ll need to ensure their customers feel it’s just as simple and convenient to shop online from them, even if they can get the same product elsewhere. Otherwise, they risk losing out to local product sellers with brick and mortar presences, as well as big box retailers who have both online and in-store presences.

Buying behavior has already shifted as consumers look to reduce spending. The top two things they’re cutting back on – going out to eat at restaurants (67%) and purchasing non-essential items like clothes and toys (65%) – are not only detrimental to local and small businesses, but also signal challenging times ahead for two industries that have been hit hard during two years of the pandemic.

Adapting to shifting demand

As the price of goods increases globally and supply challenges continue, product sellers need to do everything they can to keep costs down. To do this, sellers must implement cloud-based technology to optimize operations to enable them to focus on better managing inventory and warehouse capabilities to keep up with fluctuating demand, accurately forecast and plan for the future, gain end-to-end visibility and more. This will be critical to fight the supply chain headwinds that are driving costs up and margins down.

Sellers also need to do everything they can to expand their sales channels with the help of integrated inventory and order management technologies – nearshoring product where it makes sense to get items into consumer hands quicker and outsourcing to third-party logistics (3PL) providers to compete with big box retailers who hold a lot of power in terms of addressing the warehouse and labor shortages impacting sellers today.

Find out how Cin7’s inventory and order management solution cuts operational overhead allowing you to price your products competitively. Let a Cin7 consultant show you how workflow automation and ready integrations with over 700 major retailers, online marketplaces, ecommerce sites, and 3PLs reduce costs. Request your free demo here.

Accelerate B2B wholesale selling with built-in EDI

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Electronic Data Interchange (EDI): The electronic exchange of business information using a standardized format; a process which allows one company to send order information to another company electronically rather than by paper or email.

The top 30 retailers in the US, UK and Australia will buy over 2 trillion dollars of products from their suppliers this year. Are you getting your fair share of these purchases? Do you have the EDI technology to be a great supplier to these retailers?

Imagine if Walmart wants to order $100,000 of products from you. Which type of supplier are you? Type 1 or Type 2?

Type 1 suppliers – You’ve adopted a robust inventory and order management system that has a built-in EDI connection direct to Walmart. When Walmart needs to order from you, the purchase order is immediately received electronically by you for fulfillment because the required commercial documents have been coordinated between both parties ahead of time. And, as an added bonus, your inventory system has a seamless, bi-directional integration with your accounting software, so all of the appropriate journal entries are made and your stock count has been updated, all in real time. Supplier type 1 has a fully automated sales workflow designed to sell fast and scale over time.

Or, are you type 2?  The Walmart procurement rep has to manually complete your required form fields by navigating a PDF purchase order template, double check it for accuracy, and email it to you. Then your employee has to email the procurement rep several times to clarify the order details before manually entering the PO information into an Excel spreadsheet, accounting system or inventory tracker without making any mistakes. 4 or 5 days later, the order is ready to be fulfilled. As you may already know, Walmart will stop doing business with Type 2 sellers after their first experience. So, there are very few type 2 sellers left in the world.

Wholesalers and distributors who sell products in bulk to retailers have a vested interest in streamlining the sales process as much as possible by leveraging the latest advances in transactional sales automation.

Electronic Data Interchange (EDI) is the electronic exchange of business information using a standardized format; a process which allows one company to send information to another company electronically rather than by paper or email.

EDI software provides built-in templates that are used to establish unified field formats before transferring data between vendor and retailer systems, making repeat orders a snap.

EDI is an asynchronous data transfer technology that uses a file-based, batch transfer model. The standardization levels for EDIs have matured and been accepted almost universally. Experienced EDI providers maintain these standards and customize them to meet industry-specific requirements.

Adopting an inventory and order management software solution that integrates seamlessly with accounting software like QuickBooks or Xero and that offers a full service, built-in EDI capability with hundreds of major retailers is the key to quickly growing a flourishing wholesale distribution operation.

The benefits of EDI to wholesalers and their retail customers are numerous.

  1. Retailers who can predictably work with distributors that reliably fulfill electronic sales transactions will order more products, more often, engendering loyalty for years to come.
  2. Wholesale sellers that offer electronic order processing and retailers who take advantage of it can both cut staffing costs.
  3. EDI shortens the initial sales transaction, shaving days of admin work off of fulfillment time that may already be delayed due to supply chain disruptions.
  4. Electronic order processing reduces incidents of human error resulting from manual data entry and paper-based record keeping.

Wholesale sellers that choose inventory software with hundreds of pre-built EDI connections see their operating expenses shrink and sales grow exponentially. With the right inventory and order software, wholesale distributors enjoy the following:

  1. Secure, industry-compliant electronic connections that speed sales transactions compared to paper or email-based order processes. The faster a retailer can transact business, the more business they’ll bring you.
  2. Retailers that prefer to do business with you over your competitors who still rely on manual transactions and can’t provide the same simplicity and immediacy that you can with built-in EDI.
  3. Customized and automated workflows that minimize error risk, increase sales volume and lower staffing costs. When ordering is easy, retailers order more often.
  4. Dropping that expensive third party EDI provider. It’s a much better idea to go with a comprehensive inventory management solution that has all the EDI connections you need ready and waiting.
  5. Being directly connected to your third party logistics provider (3PL) warehouse the way you need to be. EDI connections to 3PLs streamline and automate fulfillment workflows and make the ordering process transparent from download to dispatch.
  6. Quick and efficient electronic exchange of other types of required business documentation with retail trading partners. These include invoices, order receipt confirmations, transaction updates, order status notifications and detailed shipping status updates.

Request a demo of Cin7 today to learn even more about the advantages of an inventory and order management system with full service, built-in EDI.

For a deeper and more comprehensive understanding of EDI, check out our extensive EDI resource here.

The next time Walmart, Target, Tesco, Costco, or any large retailer opens the door for you to sell to them, will you be ready?

7 considerations for EDI success

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Technology has drastically improved how we interact with the world. Transportation has evolved from animal carts to fast cars; data transmission has changed from postal letters to instant emails. With the advent of the Internet, the world has turned into a connected village.

In such a connected world, your business needs to be able to share relevant information with stakeholders like suppliers. Thanks to technology, this process can be streamlined using EDI. You can electronically share information about purchase orders, invoices, and status information with your stakeholders using EDI.

In this article, we will discuss what EDI means and what challenges you may face while using EDI for your business. Let’s get started.

What is EDI?

EDI stands for Electronic Data Interchange, and it facilitates the computer-to-computer data transfer between two (or more) parties. In layman’s terms, EDI is similar to a chat messenger that delivers information from your device to your friend’s device.

The parties that exchange information through EDI are EDI trading partners. EDI software allows its users to create templates so that they can standardize documents shared with EDI trading partners.

Suppose you integrate EDI with your ERP (Enterprise Resource Planning) tool or inventory management system (IMS). Once complete, your EDI can automatically fetch the necessary documents from the ERP/IMS database and send it to trading partners as required. This way, you do not have to create documents from scratch.

In the absence of EDI, businesses had to rely on the postal service, faxing, or email all of which had drawbacks. Let us understand EDI better with the help of an example.

John runs an apparel business, and he replenishes the inventory by ordering goods from David – the manufacturer. In the past, his purchase manager would draft a purchase order, print it, and then postal mail to David to reorder stock. The order would be received by David’s sales representative, who would manually enter the items being ordered along with the respective quantity into the system to finalize the sale.

The process seems lengthy and time-consuming, right? With EDI, sending information takes seconds rather than its postal counterpart – which can take days (even weeks!).

John’s purchase manager simply needs to add order information – product specification, quantity – in his EDI software, which will be automatically forwarded to David’s (manufacturer) EDI software. David can easily integrate the EDI tool with his order management system, such that an order can be directly placed when John sends a purchase request through EDI.

(Image credits)

It is evident that EDI can streamline the purchase process which is better than doing it manually. The manual process also has room for many errors; for starters, the sales representative can enter incorrect order quantities into the system.

EDI not only saves your processing time, but it also helps in boosting the accuracy as it minimizes human error.

EDI also brings labor cost savings, as you do not need to incur the charges of printing the order details and the cost of postal handling/faxing/email the documents. Even the recipient does not need to endure the hassle of sorting and storing the physical copies for the record.

Common EDI challenges

Now that we are clear about the use and benefits of EDI let us also discuss the challenges faced while implementing EDI.

#1 Compatibility with trading partners

Deciding to implement an EDI system involves revamping your database. This challenge can multiply if you choose to create and administer the EDI in-house. Even after successful implementation from your end, the challenges do not end.

As EDI facilitates the transactions between trading partners in real-time, it is essential that your EDI system successfully synchronizes with their system for accurate data transfer.

Another hurdle could be that some of your suppliers may not be so keen to implement an EDI due to a lack of knowledge and hesitation about data sharing.

Apart from the stakeholders, it is also essential to train your internal staff to work with the EDI system. You do not want your purchase manager to order 1,000 items instead of 100 accidentally! The repercussions of mistakes can be huge, and thus it makes sense to fully acquaint your employees with the relevant features of the EDI.

As the stakes are high, it is advisable to consult an EDI expert rather than trying to figure things out on your own.

#2 Standardized formatting

The complexity of EDI integration can be challenging when your trading partners customize the formatting guidelines to cater to their unique needs. For instance, the invoicing transaction code is referred to as EDI 810.

Some invoice fields are common across all trading partners. However, the partner may likely add some additional EDI segments specific to their business.

In such scenarios, compatibility can be an issue that can lead to transaction errors. Here the experience and support of EDI providers become crucial as they are experienced with handling such issues.

While doing B2G (Business-to-government) transactions, your EDI should be compliant with the document formats legislated by the government. For example, Since 2020, the majority of European governments have been mandated to accept invoices electronically. Even the federal German public bodies have stopped accepting unstructured invoices – PDFs, printed documents – and only accept e-invoices.

As your business expands, it is essential to comply with government standards to avoid penalties. The standards can be region-specific – like the VDA format in the German automobile industry – or industry-wide.

These are some widely adopted standards in the EDI industry:

  • UN/EDIFACT (Electronic Data Interchange for Administration) was devised by the United Nations in 1987. It created standards for the syntax and structure of the messages to ensure that EDI is compatible with multi-industry transactions.
  • GS1 is essentially a subset of EDIFACT, and it is widely used to standardize product data. It uses GS1 identification numbers to help identify each product, location, and trading partner. The GS1 identification numbers are usually in barcode format, which can be scanned to add the physical products into the database, and movement can be tracked.

You must also ensure that your EDI can accommodate various transmission protocols such as FTP, HTTP, SFTP, and AS2. AS2 (Applicability Statement 2) has gained popularity in the retail and consumer goods industry since its adoption by Walmart. AS2 is used to transmit EDI messages quickly, safely, and cheaply!

#3 Security considerations

Despite its wide adoption across various industries, some partners may still be concerned about implementing EDI due to the nature of information sharing.

These concerns may arise from various factors such as lack of trust and risk of information leak due to security breaches. International laws can further add to the challenges by introducing legal frameworks and data protection rules.

You must ensure that the information is shared via encrypted transfer protocols. It is best to discuss your security measures with your partners, to ensure that everyone is on the same page and comfortable with your business practices.

It should be noted that the sensitivity of the information varies, like your order data may not be as sensitive as the invoices (which can contain vital billing information). You need to take extra precautions while dealing with highly sensitive data – as with healthcare customers, for example.

A value-added network (VAN) is a hosted private network that is used to offer connectivity between EDI trading partners. It acts as the gateway to sharing documents between parties – in other words; it is like a digital postal service. You need to check the security certifications of your VAN network, like ISO 27001 accreditation.

#4 Rising EDI cost

EDI helps lower your operational costs and optimizes logistics; however, you need to spend to get started. A substantial investment to purchase the necessary infrastructure – hardware and software – for EDI transactions will be required. If you decide to build an in-house EDI, you also need a dedicated IT team for its maintenance.

If your EDI implementation does not go well, it could also tarnish your reputation amongst your trading partners. Your manufacturing vendors may even penalize you for incorrect ordering as it can impact their production lines.

To lower your costs, you can outsource to a cloud-based EDI system provider. In this case, you won’t have to invest in a dedicated set-up and transactions run in the cloud, leading to cost savings.

Additionally, a provider updates the EDI automatically, so it saves you from any hassle when scaling up.

#5 Data errors

According to a study by the University of Tennessee, 60% of B2B transactions are suspended or declined due to some anomaly in the data. This makes it crucial to take necessary steps for data governance, to make the most of your EDI’s potential.

The report further suggests that 16% of the orders placed in a month contain an incorrect price and 20% of orders are for items that are either discontinued or not available in stock. Surprisingly, 8% include a duplicate purchase order.

Such situations can be dealt with by adding EDI rules that monitor transactions for variables like price differences and PO validity. This way, the system can send alerts to your team whenever a discrepancy is found.

There are times when a manufacturer needs to increase the price of a particular product. Needless to say, it is crucial to alert the buyers so that they can alter their order quantity.

For instance, the purchase manager gets a specific budget (say $100) to order a quantity of goods. Presently, the manufacturer sells each unit at $10, so the buyer can avail of ten units ($100 budget / $10).

However, if the manufacturer increases the price from $10 to $20, the purchase manager will need to reduce the quantity from ten units to five units ($100 budget / $20). But if the manufacturer does not promptly inform the buyer about the price change, it could lead to disputes and damage their relationship.

Price changes are inevitable; to solve such issues, businesses use EDI 845 – the price authorization acknowledgment document. Vendors use it to communicate price changes to resellers. EDI 845 is used primarily in the pharmaceutical industry, but manufacturers and distributors also utilize it.

As your business operations scale, so does the volume of your EDI transactions. With greater volume, it can become challenging to avoid errors or spot missing fields. Popular EDI formats such as EDIFACT were not meant for humans to comprehend, and that is why spotting errors can be tricky.

Even if you somehow manage to do that, manual error inspection is time-consuming. Thereby, automating the error detection process can help you save time and increase your profit margins.

#6 Integration with your inventory management system

EDI should be flexible to adapt to your way of doing business instead of the other way around. The technical integration should allow you to use the formats that you prefer or commonly used by your trading partners.

Many businesses already use an ERP (Enterprise Resource Planning) system or inventory management solution to gain insights into their business processes. Look for an EDI that also integrates with your existing system so that you can directly process the EDI orders.

Instead of manually pulling the documents from EDI and then feeding them into your inventory system, you can do this in real-time by integrating them together. This helps you meet increased customer expectations.

#7 Offering transparency

As the complexities of the supply chain rise, the need for transparency between trading partners is more important than ever.

The functionality of EDI has evolved over the years. What started as a means to improve the B2B transaction process has now evolved into a tool that provides better inventory management.

You can adopt some EDI transactions that provide inventory information to boost transparency. EDI 846 can provide information about inventory levels, and EDI 214 offers buyers shipping status notifications.

With the right system, you can share alerts and notifications with your trading partners. Offering transparency ensures that information is not siloed and helps everyone to be on the same page.

Wrapping up

We live in a period where the supply chain is constantly getting disrupted by various factors – be it pandemics or political factors. During such a period, investing in technology that can help optimize your supply chain – such as EDI – seems an obvious choice.

Implementing EDI can be beneficial as it streamlines your B2B transactions and provides much-needed transparency. Choosing the right EDI that integrates with your ERP can do wonders for your organization.

Vetting the best EDI is also vital as it contains sensitive information that can affect your business’s overall profitability.

To learn more about Cin7’s built-in EDI capabilities, request a demo.

Posted in EDI

How to avoid costly SKU proliferation

Posted on | by chrisqureshi | Leave a Comment on How to avoid costly SKU proliferation

Imagine the demand for one of your products is through the roof. In response, you purchase more of that product with several variations. Your goal is to capitalize on the popularity of the product by giving your customers choices like color, style, and size.

That describes SKU proliferation. It is the process of adding products or variations of products to your inventory. Each of those variants receives its own unique SKU.

SKU proliferation impacts almost every aspect of your business. In this article, we will describe the pitfalls of SKU proliferation and its implications on your business as well as how to manage it effectively.

A SKU is a unique number assigned to a specific product

SKU stands for stock keeping unit. It is an alphanumeric code assigned to a product that helps easily track and manage inventory. SKUs differ from UPCs and GTINs. SKUs are individual to the business and are used to make purchasing decisions to improve profitability. UPC is a Universal Product Code used primarily in North America and GTINs are Global Trade Item Numbers used throughout the rest of the world and every product has its own distinct code number. Competing businesses that carry the same product will have the same UPC/GTIN but a different SKU.

Here’s how it works. A clothing company might have several variants of the same item including size, material, and color. Each variant is assigned a unique SKU. For example, a medium-sized blue t-shirt can be assigned the following SKU: BLUTEEMEDCF26.

SKUs enable businesses to display similar items to customers based on common features. This is where upselling and cross selling shines – it’s that suggestion just before checkout that reads “frequently bought together” or “you might also like.”

SKU proliferation and its causes

As trends fluctuate and competitors enter the marketplace, businesses strive to keep up with customer demands. SKU proliferation is the process of adding more products (SKUs) to your inventory to meet those needs. SKU proliferation can be considered a byproduct of multichannel selling – customers are used to having multiple choices at their fingertips.

Before we discuss the problems associated with SKU proliferation, let’s explore why businesses encounter this problem in the first place.

1. Technology upgrades

Technology has changed the way we do business. Multichannel selling has forced wholesalers and retailers to carry more inventory in an effort to provide a seamless shopping experience. Without proper sales forecasting, businesses overstock to meet anticipated sales through multiple channels.

2. Faster delivery preferences

Imagine how quickly you would be out of business if every time you sold a product you had to wait for the product to reach your store before sending it to your customer? To accommodate delivery demands, more and more businesses are stashing inventory to dispatch if and when an order is placed.

3. Poor inventory management

Inefficient inventory management leads to a stockpile of unwanted or obsolete inventory, each with individual SKUs.

Problems created by SKU proliferation

As the variety of products (SKUs) increases, so does the complexity of running your business. SKU proliferation disrupts the logistical process, forces rigorous inventory control, and increases costs.

Here are just a few of the larger problems created by having too much inventory.

1. Increase in storage costs

Storage costs are directly correlated to the amount of inventory a business has. The more inventory you keep, the higher your storage costs will be. In addition to the costs of the actual space, anticipate rising costs in utilities, insurance, and staff to manage storage.

2. Difficulties in fulfilling orders

As inventory increases, it can become more challenging to fulfill orders accurately and in a timely manner. Having too much inventory can be confusing, leading to errors caused by similar SKUs or incorrectly assigned SKUs. As a consequence, the wrong product might be shipped, increasing costs and hassles associated with returns and a potentially negative reflection on your brand.

3. Inefficient cash flow

Securing more inventory comes at the expense of something else. Funds allocated towards inventory can decrease cash flow when your business needs it most. According to a US Bank study, 82% of business failures result from poor cash flow management.

4. Increase in order fulfillment times

Having too much inventory slows down the fulfillment process. Overstuffed warehouses create time-consuming efforts to find products and package orders. This is on top of errors that might be caused by too many SKUs.

SKU rationalization is the remedy to SKU proliferation. It is a method of reducing the overall number of SKUs by identifying obsolete or poor-performing inventory. Just keeping your best sellers cuts storage and management costs and improves profitability.

SKU management for businesses

As your business grows, SKU proliferation may seem inevitable. But it doesn’t have to ruin your business. Using SKU rationalization, you can identify those products that are actually making you money and return or “fire-sale” the rest.

Effective SKU management not only saves money but also time. Decreasing inventory will allow you to easily find and package online orders and replace items on the sales floor.

It might seem like SKU proliferation is a good thing. After all, it’s a strategy to ramp up sales while the buying is hot. The catch is its impact on business logistics. Proactively monitoring your SKU base allows you to implement corrective measures to effectively scale your business. It is part of an inventory management solution that enables you to forecast sales and keep up with trends without busting at the seams.

Cin7 was built with modern businesses in mind. Its inventory and order management software offers a cloud-based solution that integrates all your sales channels into a single platform. Cin7 facilitates advanced automation processes creating seamless transactions centered around a positive customer experience.

Ditch the spreadsheets and stop manual data entry. Conquer new markets with Cin7’s inventory and order management system.

Book your Demo now.




FIFO vs. LIFO – Reporting compliant inventory valuations

Posted on | by chrisqureshi | Leave a Comment on FIFO vs. LIFO – Reporting compliant inventory valuations

In retail and wholesale sales, solid profits result from inventory that is closely managed. In this blog, we will discuss inventory valuation and accounting principles. We will cover why it is so important to value your inventory, different methods for inventory valuation, and how you should choose your inventory valuation method based on your business.

What is inventory, and how is it valued?

Generally speaking, inventory are goods that can be classified into 3 stages:

  • Raw materials
  • Items that are in production
  • Goods that are ready for sale

Based on your business needs, internal accounting staff may need to assign value to inventory and classify it as a company asset since inventory can turn into cash in the near future. In order to accurately value your company, all your company’s assets may need to be assessed.

When to classify inventory as an asset

There are two methods of determining income and expenses for accounting purposes: cash accounting and accrual accounting.

According to the Internal Revenue Service (IRS) if your business is holding inventory, then you are required to use the accrual method of accounting.

In accrual accounting, a transaction is recorded when it is earned, which is triggered by generating an invoice or receiving a bill. This is why it is essential to track your inventory along every phase of the business cycle.

However, the 2017 US Tax Cuts and Jobs Act states that “if your business has gross receipts of less than $25M, you can treat your inventory as “non-incidental material and supplies.” In layman’s terms, this means that the items in your inventory need not be valued and considered as assets of the company as they are bought for resale. In this case, you can use the cash method of accounting.

Inventory valuation method

At the beginning and end of the fiscal year, inventory valuation is a must. For valuation purposes, you must:

  • Apply Generally Accepted Accounting Principles (GAAP)
  • Clearly reflect your income
  • Maintain consistency from year to year

Since inventory moves among different stages in your organization, it’s challenging to track all the costs of individual items. GAAP provides businesses with helpful guidelines to properly evaluate their inventory.

Different methods of inventory valuation

A company can choose from various methods to determine its inventory costs suggested by GAAP. GAAP refers to a standard set of accounting principles that have been issued by the Financial Accounting Standards Board (FASB). GAAP suggests that businesses use one of two different inventory accounting methods – first-in-first-out (FIFO) or last-in-first-out (LIFO).

FIFO

FIFO stands for first-in-first-out. It is a method of inventory management and valuation in which goods produced or acquired first are sold, used, or disposed of first. In other words, goods are sold in the order they were received and subsequent shipments of the same item go to the back of the line.

For reporting purposes, FIFO assumes that assets with the oldest costs are included in the income statement’s cost of goods sold (COGS). So, if you sell a product, the cost of goods sold by using the FIFO method is the value of the oldest inventory. FIFO is one of the most popular in inventory valuation methods.

Using the FIFO method has some significant advantages:

  • It is more realistic because most businesses ship older stock first to avoid depreciation of value or spoilage.
  • FIFO increases the value of your purchased inventory and company net worth in times of inflation. As a result, you apply a higher asset value.
  • Your operational reports are always accurate. As you are selling the oldest items first, your balance sheet will always show the actual cost price of the inventory.

LIFO

LIFO stands for last-in-first-out. It is a method of inventory management and valuation in which goods produced or acquired most recently are recorded as sold first. In other words, goods that were just received are accounted for ahead of stored backstock of the same item. The cost of the newest products is the first to be accounted for as the cost of goods sold (COGS), whereas the lower price of older goods are counted in inventory.

Some accountants in the US often advise using the LIFO method for your inventory accounting when you have stock with frequently changing costs. Using LIFO as a preferred method for such scenarios helps match the latest cost of inventory with the sales revenue of the current period. This can be a more straightforward approach for initial inventory valuation as well as for tax filing purposes.

Unlike FIFO, LIFO has some disadvantages:

  • LIFO brings taxable income down when your cost price rises, but your profit will turn out significantly lower.
  • If, in the near future, you plan to expand your business, not all countries allow a LIFO valuation.
  • LIFO is not realistic for companies that sell perishable goods. Leaving the oldest inventory sitting idle could risk spoilage, leading to losses.

Example of FIFO

Let’s understand how FIFO is used to calculate Cost of Goods Sold (COGS).

EVENT FIFO
Buys an Item $100
Buys the same item after inflation $150
Sells an item for $175 -$100
Reported profit $75

In the FIFO method, when calculating profit, its initial/oldest purchasing cost is subtracted from its selling price to calculate the reported profit.

Example of LIFO

The same example used earlier can be used to show the LIFO method for calculating the cost of goods sold (COGS).

EVENT LIFO
Buys an Item $100
Buys the same item after inflation $150
Sells an item for $175 -$150
Reported profit $25

In the LIFO method, when calculating profit, the most recent purchasing cost is subtracted from its selling price to calculate the reported profit. As you can see, using the LIFO method for inventory valuation and accounting lowers your return profit.

Differences between FIFO and LIFO

FIFO or LIFO are the methods that companies use to assess their inventory and calculate profit. The amount of profit a company generates affects their income taxes.

The differences between FIFO and LIFO are shown below.

Restrictions
Comparison parameter FIFO LIFO
Meaning The first-in-first-out or the FIFO method assumes that the oldest products in a company’s inventory are sold first. The last-in-first-out or the LIFO method assumes that the last item of inventory purchased is the first one sold.
No restrictions by GAAP or IFRS IFRS forbids LIFO method
Recording keeping In the FIFO method, the number of journal entries decrease In the LIFO method, the number of journal entries increases
Impact of inflation Decreases the COGS and increases the net profit Increases the COGS and decreases the net profit
Preference Higher Lower

Which method is better?

We can say with certainty that the higher the cost of inventory, the lower the profit and the tax rate. The lower the cost of inventory, the higher the profit and the tax rate.

To know which method is best suited for your business, you need to look at the way your inventory costs are changing.

  • If your inventory cost is increasing or is likely to increase in the near future, LIFO can be better. Because the cost of goods is higher, you will benefit from the lower taxes.
  • If you feel that inventory cost could be decreasing in the near future, FIFO is the best option.
  • If your preference is to accurately assess your inventory cost, FIFO is the better option. This is because FIFO operates on the assumption that the older and less costly items are usually sold first.

GAAP/IFRS regulations for FIFO and LIFO

Generally Accepted Accounting Principles, sets the standards for accounting procedures in the United States. Under GAAP, both FIFO and LIFO are allowed.

However, International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Body (IASB) does not permit use of the LIFO method.

Outside of the US, most other countries follow the rules laid down by the International Accounting Standards Board (IASB). This is the reason why most US based companies use the LIFO method for local financial statements and switch to the FIFO method for their overseas operations.

If you ever decide that it would be ideal for your business to switch from the LIFO method to the FIFO method, you need to file a FORM 970 with the IRS. You are allowed to go back to LIFO only if the IRS gives specific permission. 

Closing comments

In a nutshell, we have learned about inventory valuation and its importance in business to accurately determine the total value of all your assets and liabilities. While we have seen both FIFO and LIFO methods of inventory valuation, one thing is clear. No method is a foolproof solution for your business. Both methods have their pros and cons. As such, you should choose the method that best suits your business. If you are a firm that operates internationally, FIFO is the best method outside the US because the LIFO method doesn’t meet compliance requirements in most countries.

Cin7 was built with modern businesses in mind and only supports the FIFO method. Cin7’s inventory and order management software offers a cloud-based solution that integrates all your sales channels into a single platform. Cin7 provides advanced automation processes to create seamless transactions centered around a positive customer experience.

Ditch the spreadsheets and stop manual data entry. Reach new markets with Cin7’s inventory and order management system. Check out our product overview video here.