Month: October 2023

4 Downloadable Inventory List Templates [Free]

Posted on | by chrisqureshi | Leave a Comment on 4 Downloadable Inventory List Templates [Free]

No inventory management strategy is one-size-fits-all. Different products require unique specifications — and you must account for all of them in your inventory management process.

With all this variance, inventory management can be extremely time-consuming if you are constantly looking for ways to track changing product information.

The solution? A customizable inventory list template that accounts for all the necessary information you need to record for a product. With an inventory list template, you can easily update your numbers, see all your products in one place, and glean insights from data in your spreadsheet.

As a small business owner, you need a template to account for the nuances of your market, like seasonality, supply chain variance, and more. As a result, it’s important to find a template catered to your specific industry. Below, you can explore and download the following inventory list templates:

  1.  Simple inventory list template
  2. Retail inventory list template 
  3. Manufacturing inventory list template
  4. Wholesale inventory list template

Later on, we’ll explain what all templates should include, how you can create a template for your business, and the benefits of automating your inventory management process.

1. Simple inventory list template

In its simplest form, an inventory list includes basic product information like price, description, and quantity.

Product sellers dealing with only a few products can leverage a simple inventory list but may need to pivot to a more complex template once inventory needs become more involved. Download the template below to get started.

Someone works on a simple inventory list template on a desk

Download spreadsheet

PDF | Excel | Google Sheets

2. Retail inventory list template

Retail inventory management templates can be relatively similar to simple inventory templates, but should track a few more components like:

  • SKU or product code for tracking similar products
  • Manufacturer for tracking different supplier information
  • Days per reorder to track how long reorders take for specific products

Once you sell more products regularly, it’s pivotal to know what your turnaround times look like. Include days per reorder in your primary inventory list so you can reorder in advance and never run out of stock.

A woman works on a retail inventory list template next to a cup of coffee.

Download spreadsheets

PDF | Excel | Google Sheets

3. Manufacturing inventory list template

For manufacturers, tracking inventory presents a separate set of challenges because you have to track four different categories of inventory:

  • Raw materials or assembly parts: Resources used to manufacture goods
  • Work-in-progress (WIP) inventory: Inventory that’s either assembled or sold
  • Finished goods: Products that have gone through the manufacturing process

Accurately tracking manufacturing inventory is particularly important, as miscues can lead to more considerable supply chain repercussions, slower manufacturing lead times, and fractured customer relationships. Manufacturers also track lead time to understand how long it will take to get specific products to customers.

Manufacturers track relatively the same product information as retailers, but batch goods into four different categories, as seen below:

Someone works on a manufacturing list template in a warehouse.

Download spreadsheets

PDF | Excel | Google Sheets 

4. Wholesale inventory list template

Wholesale inventory list templates need to account for the warehouses or large volumes of inventory that wholesalers deal with to accurately keep track of all their products. As a result, wholesale inventory lists additionally track:

    • Bin number: The bin the product is located in
    • Location in the warehouse: Precisely where the bin is located
  • Unit: How the product is tracked (individual unit, box, package, etc.)

Being as specific as possible is key when accounting for location. Our template drills down to the exact row and slot that products are located in.

Someone working on a wholesale inventory list template in a coffee shop

Download spreadsheets

PDF | Excel | Google Sheets 

What is an inventory list template?

Inventory list templates help businesses track and manage stock by providing an organized spreadsheet where all product information can live. While inventory list templates will vary by industry, some universal elements include:

  • Item name
  • Item description
  • Item size
  • Price
  • Quantity in stock
  • Reorder level
  • Reorder time
  • Inventory value

With all this information in one place, it’s easier to quickly see:

  • How much product you have in stock
  • What you need to reorder
  • How long it will take to get more stock
  • Which products perform well and which don’t

How to create an inventory spreadsheet

If you elect to create an inventory spreadsheet yourself, you can do so in a few simple steps. Here’s how:

1. Open a spreadsheet and add your company branding

All you need to create an inventory list template is a spreadsheet. You can create one through Google Sheets or Excel or expedite the process with a template like ours.

Create unity and consistency across verticals by adding your company’s branding to your spreadsheet. This list will serve as your single source of truth, so it’s best to include branding.

2. Add your categories

Next, you add your columns or categories. This will be the information you need to regularly track and update, like available quantity, item description, price, reorder time, etc.

If you’re starting from scratch, using a pre-fixed template is helpful so you know you’re not leaving any columns out.

3. Fill in your product information

Once you create the structure for your spreadsheet, you can then fill it in with current product information. Perform this step slowly and carefully. All product information must be accurate when you’re filling out your spreadsheet.

4. Name and save your file

Once you’ve filled out your spreadsheet with product information, name and save it. Make sure you’re calling it something specific and relevant. You’ll be frequently accessing it, so be sure you’re naming it something you’ll be able to find easily.

5. Update it regularly

The job is far from over after you create your spreadsheet. The next step will be to update it regularly so product information is always up to date and accurate. This means:

  • Updating quantity after products sell
  • Updating quantity after products get back in stock
  • Updating price if you make changes
  • Adding items if you get new stock

This can be a major headache for product sellers, especially if you need to spend time on other projects. Automated inventory management will do this for you and can be a significant timesaver for small businesses looking to ditch spreadsheets.

Benefits of automating your inventory list

The major shortcoming of spreadsheet templates is their inability to grow as your business does. As you gain customers and increase sales, your time spent updating your spreadsheets will also grow — time you should be dedicating more time to growing your business.

Additionally, as business takes off, more processes will enter, and the equation and existing processes will become more complex. You’ll need to think about warehouse management, supply chain optimization, and planning how to scale your business.

With all this on your plate, you won’t have time to manually update a spreadsheet, and your time may be more valuable spent somewhere else. Opting for an automated inventory management software like Cin7 allows you to connect all your processes in a single source of truth designed to grow and scale with your business.

With an automated system, you can:

 

  • Save time: With automation, you won’t have to spend time manually updating your spreadsheets.

 

  • Optimize inventory turnover ratio: A comprehensive solution will set reorder points for you to achieve a good inventory turnover ratio.


  • Provide better demand forecasting: Software solutions include built-in demand planning capabilities so you can always be ahead of the curve.


  • Improve accuracy: When you manually update your inventory, you’re susceptible to human error that can throw your data off track.


Frequently asked questions

Still wondering about how to get started with your inventory list? We’ve got you covered. Here are a few common questions and answers about creating a comprehensive inventory list.

How do I make a simple inventory list?

You can make a simple inventory list by opening a spreadsheet, listing your products and relevant categories about your products, and then filling in those categories with product information.

Once you create this spreadsheet, you’ll update it as product information changes.

How do you make a good inventory spreadsheet?

The best inventory spreadsheets remain consistently updated, track all pertinent categories, and are well-organized.

Additionally, make sure you’re using a platform that your team is comfortable and familiar with. Excel and Google Sheets are effective choices when it comes to building an inventory list.

Can Google Sheets be used for inventory?

You can use Google Sheets for inventory lists the same way you’d use Excel. If your team uses Google Workspace already, using Google Sheets can be an effective way to guarantee all team members have access to the inventory list.

Automate inventory lists with Cin7

Having a spreadsheet for inventory can be effective in the early stages of your business, but it’s not a scalable strategy.

Inventory management can become an overwhelming and complicated task. Instead of editing and updating spreadsheets, explore a system that does all this for you — and more.

Cin7 employs Connected Inventory Performance to help small businesses grow with ease. With an advanced suite of features and an emphasis on automation, Cin7 takes the legwork out of inventory management so you can focus on building your business.

Start a free trial today to learn more

Five Reasons Your Accountant Appreciates You Using an Inventory Management System

Posted on | by chrisqureshi | Leave a Comment on Five Reasons Your Accountant Appreciates You Using an Inventory Management System

Authored by our partner, Accountfully

It’s no secret that accountants love details, especially when it comes to accounting for inventory.  A good accounting team that specializes in inventory management will have a specific process to account for the cost of goods sold and support your cash flow planning.  Knowing the cost of goods sold means better control of your margins as it relates to the product itself, to the additional costs associated with using multiple warehouses, and selling in each unique sales channel.  Your accountant will also need to be able to sync the data across common apps like QuickBooks Online and various online sales platforms like Shopify, Amazon, and Faire.

So what is the best way to  support your accountant’s requirements while also helping your organization to planahead and utilize finite COGS understanding as you scale?

Step one is implementing an inventory management system like Cin7 Core that tracks every cost. This gives business owners (and their accounting team) a clear view of the real cost of a product from component/ingredient to finished good.  Cin7 Core shows quantities available and assists in planning orders to prevent stock outs. All of these are key areas that help you to stay on top of cash flow by planning for big purchases and predicting sales revenue.  Let’s dive into the top five reasons your accountant appreciates your use of an inventory management system.

One:  Supports The Delineation And Segmentation Of Complex Inventory Details

If you manufacture products that use multiple components  to create the finished product – you will benefit from an inventory management system the most.  Being able to outline the details of your inventory and understand the finite details that go into it will provide you with the ability to capitalize on margins and better understand various pieces involved in the management of your product sales.  By knowing the details of each component of your product, you can assess where any cost savings can be applied and better understand when a restock is needed.

Two:  Shows Inventory Assemblies

An inventory assembly lists all of the components that go into creating a finished product.  For Example, a company that makes granola bars will need to define and track all of the ingredients required to produce a finished product granola bar. By tracking ingredients, this granola bar company can better plan out what components will need to be ordered, and in what quantities, to meet demand. Cin7 Core shows this pivotal data and allows you to have the visibility required to understand your inventory assemblies.

Three:  Narrows Down And Shows The Details Of Your COGS

It is a good idea to be meticulous when it comes to inventory accounting because it gives you an accurate representation of what goes into your product’s success.  You need to know your gross profit margin and the cost of goods sold. To accurately calculate these metrics you must be meticulous in your bookkeeping.  The more manual inputs required to drill down into the details, the more chance for error or inaccuracies, not to mention the time spent on this effort.  Using an inventory management system, like Cin7 Core reduces the likelihood of mistakes associated with manual input.

Four:  Accounts for Landed Costs

The definition of “Landed cost” is the total cost of a product on its journey from the factory floor to your buyer’s door. It includes the cost to purchase or manufacture the product itself, shipment costs, insurance fees, customs, duties, and any other charges incurred along the way.  Depending on how long and complex that journey is for your product, the higher the cost and  the potential to affect margins.  Having an accurate and detailed view of your landed cost as part of your overall COGS reporting is invaluable to understanding your true margins and if, perhaps, there is a way to lower these costs.  The first step is to identify them, which is where Cin7 Core puts you ahead of the game.

Five:  Shows You What Is On Hand, At Which Location

When overseeing inventory across multiple locations, it is important to understand the quantities of each product and where they are housed.  If you don’t know how much exists, and where, it makes it harder to manage restocking and shipping.  Cin7’s ability to show your controlling locations means better visibility over when it is time to restock and better shipping efficiencies when supporting orders that are closest to various warehouse locations.  Plus, keeping tabs on your inventory quantities will support cash flow management, by being able to time restocks and plan for big cash outlays.

In Summary

Running an inventory-based company should not be a guessing game.  You and more importantly, your accountant will appreciate the ability to dive in deeper to the details.  The best way to do this efficiently is by implementing the right tools, like Cin7 early, which show the intricacies of your COGS and will sync with your accounting software.  Using an inventory management system, matched with a skilled inventory accounting team will do the heavy lifting for you.  Knowing these details will help you make cost-saving decisions confidently and stay current on opportunities for cost savings and business growth.  Happy accountant, happy business!

21 best inventory management apps for Shopify [2023]

Posted on | by chrisqureshi | Leave a Comment on 21 best inventory management apps for Shopify [2023]

Creating a Shopify store is an excellent first step if you’re a product seller looking to expand your reach and gain new customers. For small businesses and individual product sellers, Shopify allows you to build a customized store in a centralized and easy-to-use dashboard, but what do you do once you start seeing growth from your store?

Many online retailers run into this issue with their Shopify store, so as a result, Shopify integrated with over 300 apps for managing inventory — including Cin7. The best inventory management apps for Shopify allow you to take a hands-off approach to inventory management, so you don’t have to take time away from growing your business to update spreadsheets and product information.

With hundreds of apps available, it can be daunting to determine which is the best for your business. Stay with us as we break down the 21 best inventory management apps for Shopify and their use cases.

The 21 best inventory management apps for Shopify

  1. Cin7
  2. QuickBooks Online
  3. Extensiv Order Manager 
  4. Katana Cloud Inventory
  5. Thrive by Shopventory
  6. ShipBob Fulfillment
  7. Stocky
  8. LitCommerce 
  9. ShipHero Fulfillment
  10. Stock Sync 
  11. Sellbrite
  12. Inventory Planner Forecasting 
  13. Netsuite ERP Connector 
  14. Brightpearl
  15. EasyScan: SKU and Barcode
  16. Back in Stock + Restock Alerts 
  17. Quick Scan
  18. SC Order Tags & Flows
  19. SkuHarmony
  20. SimpleSync
  21. Realtime Stock Sync & Building
Methodology: To create our list, we weighed qualities such as number of features, different pricing plans, and user reviews. We additionally sought to include apps that serve different business types with varying inventory needs.

1. Cin7

Best for: Connecting inventory management with e-commerce 

Cin7 makes selling products through Shopify a breeze. By automating different Shopify processes and simplifying sending orders to warehouses and 3PLs, you can sync inventory across all your sales channels and warehouse locations — removing the need for manual updating.

Cin7’s integration lets you connect your inventory management with your online marketplace, sales channels, stock locations, warehouse management systems, and more. With all these processes centralized into a single source of truth, Cin7 makes it easy to grow, regardless of where and what you sell.

Cin7’s Shopify integration takes the manual effort out of inventory management so you can sell more and grow faster. It does so by:

  • Automatically downloading customer information and orders
  • Updating stock in real-time
  • Batching orders into single transactions
Pros Cons
Automatically updates with latest purchases Not ideal for enterprise organizations
Automatically imports orders into Xero or QBO
Allows you to sell stock from all branches or only specific branches

Price: 

  • Core: Starting at $325/month
  • Omni: Starting at $999/month

2. QuickBooks Online

Best for: Managing cash flow

Like Cin7, QuickBooks Online allows businesses to integrate orders and payouts into your Shopify store. By doing so, the platform eliminates the need to manually keep track of incoming and outgoing stock and sales.

With sales information in one centralized location, QuickBooks gives you full visibility into your profitability, making it easier to visualize your cash flow.

Pros Cons
Automatically updates Steeper learning curve than some competitors
Prioritizes products based on traffic Lacks the functionality of a full Inventory Management Software solution.
Manages payouts across sales channels

Price: Starting at $30/month

3. Extensiv Order Manager

Best for: Managing order fulfillment

Formerly Skubana, Extensiv Order Manager is designed to give users a “central hub” for inventory, sales, fulfillment strategies, and more. Extensiv allows you to automate monotonous inventory tasks so you can dedicate more time to sales and growth.

Additionally, Extensiv’s integration lets you expand other marketplaces while syncing inventory across platforms. However, this suite of features comes at a higher price tag than competitor apps.

Pros Cons
Allows custom order manipulation rules More expensive than competitors
Includes real-time dashboards with analytics

Price: Starting at $1,000/month

The three best inventory management apps for Shopify next to a man in a yellow hard hat holding a tablet.

4. Katana Cloud Inventory

Best for: Connecting manufacturing processes with inventory management

Used largely by manufacturing companies, Katana helps Shopify users avoid stockouts by offering a centralized view of your inventory processes in a single platform.

Katana helps create scalable inventory processes by issuing purchase orders based on material requirements and reorder points. You can also integrate Katana with software like QuickBooks to connect inventory management, sales, and accounting all together.

Pros Cons
Easily manages manufacturing and production planning Costlier than some competitors
Automatically creates work orders from sales Less detailed reporting than competitors

Price: Starting at $129/month

5. Thrive by Shopventory

Best for: Connecting physical and online stores

Thrive can be an effective solution for small businesses looking to connect their brick-and-mortar location with their Shopify store. With Thrive, you can manage inventory at both your online store and physical storefronts. Additionally, Thrive connects with Square, Clover, and Google Shopping, allowing you to reach new customers with your e-commerce store.

Pros Cons
Equipped with reporting by location Doesn’t organize products by SKU
Allows you to connect multiple Shopify accounts Standard version doesn’t include demand forecasting

Price: Starting at $99/month

6. ShipBob Fulfillment

Best for: Expediting shipping processes

For e-commerce brands, ShipBob’s Shopify app allows both DTC and B2B brands to easily pick, pack, and ship orders to customers all over the world.

With the Shopify integration, ShipBob guarantees businesses same-day shipping, a personalized customer experience within the app, and in-house managed B2B/EDI compliance.

Pros  Cons
Real-time order syncing Delays in tracking
Responsive customer service Costlier than competitors

Price: Available upon request

7. Stocky

Best for: Generating reports through stock analytics

Using Stocky can be advantageous for existing Shopify customers because Shopify purchased the app in 2020. Because of this, it comes free with Shopify POS Pro Subscriptions.

Beyond the cost factor, Stocky helps users track and adjust inventory levels and perform automatic inventory counts. You can also get detailed analytics reports showing your products’ performance.

Pros  Cons
In-depth reporting through stock analytics Users report inaccuracy with the forecasting feature
Automatic product recommendations based on profitability Users report inaccuracy with inventory counting

Price: Included with Shopify POS Pro Subscription

8. LitCommerce

Best for: Syncing orders across multiple channels

LitCommerce lets businesses manage over 20 sales channels in a single dashboard, including TikTok Shop, Amazon, Etsy, Google Shopping, eBay, and more. With the app, you can create custom product listings and sync them between Shopify and your desired channels.

While all these channels are available through the platform, the most advanced plan only allows you to use up to seven channels, and the free plan only allows up to two.

Pros  Cons
Listing templates so you can easily create product listings Lacks comprehensive inventory management functionality
Lets you easily edit product listings Only allows two sales channels in the free version

Price: Starts for free

9. ShipHero Fulfillment

Best for: Load-balancing inventory between locations

ShipHero’s Shopify fulfillment app helps e-commerce brands gain pre- and post-shipment visibility into shipments as well as manage inventory across up to eight North American locations.

Beyond that, ShipHero promises a 3.5-day shipping speed and uses product data to make load-balancing decisions for your brand. With an emphasis on strategic order fulfillment, ShipHero’s platform can benefit small businesses looking to grow quickly and reduce waste.

Pros  Cons
Includes a native iOS app Users report long response times from customer service
Connects to USPS, FedEx, and more

Price: Starting at $1,995/month

10. Stock Sync

Best for: Syncing inventory with sales

Stock Sync strives to support companies in managing inventory by syncing inventory levels across sales channels, providing automated inventory updates, and helping product sellers save time overall.

While Stock Sync won’t necessarily create detailed inventory reports, it allows you to easily import and export inventory data to CSV, XLS, Google Sheets, and more. However, you won’t get the detailed insights from your product data that you might get from a more robust solution.

Pros  Cons
Centralized dashboard for performance tracking Less robust reporting capabilities
Automated scheduling for inventory updating

Price: Starts for free

11. Sellbrite

Best for: Branching out to new marketplaces

Sellbrite is another Shopify app for product sellers that allows them to expand their reach to large online marketplaces, like Amazon, eBay, Etsy, and Walmart. With Sellbrite’s Shopify app, users can control their products within the Shopify system but sell them on various other online marketplaces.

Unlike some competitors, Sellbrite gives you access to unlimited channels with its free plan. However, if you use the free plan, you’re limited to 30 orders a month.

Pros  Cons
Automatic syncing across sales channels Users report issues with eBay syncing
Allows you to include inventory from all warehouse locations

Price: Starts for free

12. Inventory Planner Forecasting

Best for: Demand forecasting

Inventory Planner Forecasting allows multichannel sellers insights into forecasting and product analysis so you can make smarter reordering decisions.

Inventory Planner Forecasting helps you accurately meet customer demand and limit excess inventory by syncing sales history with vendor lead time and sales channels. It can be an effective choice for product sellers in industries that experience seasonal demand.

Pros  Cons
Automatically creates reports based on inventory performance Users report slow customer service
Sets automatic reorder alerts

Price: Starting at $249.99/month 

13. NetSuite ERP Connector

Best for: Connecting inventory with finance and accounting

The NetSuite ERP connector is designed for enterprise-level product sellers looking to connect accounting and finance with inventory management and sync product, customer, and inventory capabilities.

By automating order fulfillment and simplifying monotonous accounting and financial tasks, the NetSuite EPR Connector offers a more hands-off approach to inventory management for large organizations with more complex inventory needs.

Pros  Cons
Automatically sends orders to 3PLs, vendors, or warehouses Less effective for SMBs
Manages inventory across multiple warehouses

Price: Starting at $83.25/month

14. Brightpearl

Best for: Connecting warehouse management with inventory

Brightpearl’s Shopify app allows easy order management, accounting, warehouse management, returns, and more in a single platform

With the Shopify integration, Brightpearl allows users to create a personalized storefront with full visibility into the purchasing process. Additionally, the app allows for advanced reporting, demand planning, and insight into other consumer trends.

Pros  Cons
Automated inventory management tasks Users report a less intuitive interface than competitors
Manages product prices in the currency of your specific location

 

Price: Available upon request

15. EasyScan: SKU and Barcode

Best for: Generating reports through barcode scanning

While EasyScan isn’t an end-to-end inventory management software solution like some other apps listed, it’s an effective app for picking and packing orders as well as barcode scanning.

EasyScan lets customers easily scan products, create reports on items scanned, and assign barcodes and SKUs to your products. You can also print custom packing slips and inventory reports, limiting the steps needed to get products out the door.

Pros  Cons
Updates inventory by scanning barcodes or SKUs Less comprehensive than end-to-end inventory management apps
Allows you to create orders by scanning barcodes

Price: Starting at $9.99/month

16. Back in Stock + Restock Alerts

Best for: Notifying customers of restocks

Back in Stock + Restock Alerts allows you to better communicate with customers by sending automated alerts when products are back in stock. Beyond restock notifications, the app allows you to create customized email marketing campaigns and get insights into the most wanted out-of-stock products.

For individual product sellers, Back in Stock + Restock Alerts can help businesses understand product prioritization effectively, but note that it won’t automate reordering for you.

Pros  Cons
Automated conversion tracking Free version lacks email marketing capabilities
Customizable emails and themes

Price: Starts for free  

17. Quick Scan

Best for: Stocktaking

Similar to EasyScan, Quick Scan equips users with a barcode scanner that allows you to create and fulfill orders simply by scanning the product’s barcode. Then, businesses can use that information to make smarter and more informed reordering decisions.

While Quick Scan can uncover helpful product information with a single scan, you’ll still have to manually set reorder levels.

Pros  Cons
Easy to install Less advanced capabilities than some competitor products
Speeds up stocktaking and delivery process

Price: Starting at $5/month 

18. SC Order Tags & Flows

Best for: Managing manufacturing processes

SC Order Tags & Flows works specifically to automate order management tasks, by allowing you to create order tags that automatically trigger specific order management actions, like adding, removing, delaying, or backdating orders.

With SC Order Tags & Flows, you can tailor a personalized dashboard to suit your business needs. You can also connect the app with shipping partners to fully see your order management process.

Pros  Cons
Connect with other automation apps, like Zapier Free version only allows 10 orders per month
Uses backdate tags to gather product and sales data

Price: Starts for free

19. SkuHarmony

Best for: Connecting Square and Shopify

SkuHarmony works specifically for Shopify and Square, so product sellers don’t have to juggle inventory between the two POS systems.

By connecting the two systems, product sellers never have to worry about miscues between the two platforms. When a product sells on Square, it’s automatically marked as sold on Shopify.

Pros  Cons
Remove the necessity to make manual changes on Square and Shopify apps Limited to Square and Shopify
Adjusts inventory in real-time

Price: Starting at $49.99/month

20. SimpleSync

Best for: Managing identical SKUs

Like SkuHarmony, SimpleSync works in a specific niche: managing inventory that shares the same SKU. SimpleSync allows you to sell physically similar products through different product pages while seamlessly tracking your stock.

To use it, you need to create two product pages within your Shopify store, designate them with the same SKU, and then SimpleSync manages the rest automatically. SimpleSync can be especially useful for clothing retailers selling unisex clothing on both men’s and women’s product pages.

Pros  Cons
Allows you to sell identical products through different product pages Struggles to handle larger inventory quantities
Allows you to set stock to product level

Price: Starting at $10/month

21. Realtime Stock Sync & Bundling

Best for: Bundling products into single transactions

Trunk’s Shopify app, Realtime Stock Sync & Bundling, allows companies to visualize their inventory management processes in a centralized platform — connecting sales channels and keeping bundles and SKUs synced in your Shopify store.

Realtime Stock Sync & Bundling works with Etsy, eBay, Amazon, Square POS, QuickBooks, and more. It works particularly well at bundling

Pros  Cons
Equipped with bundling and knitting to track components Lacks the advanced capabilities of some direct competitors
Automatically syncs stock levels

Price: Starting at $35/month

Benefits of using an inventory management app for Shopify

If you’re growing a business on Shopify, it’s important to ensure you have a plan for managing your stock as you grow. Enter inventory management software. With a comprehensive solution, you’ll be able to seamlessly:

A list of three benefits of Shopify inventory management apps next to two men working on a computer

1. Track stock levels

Running out of stock can be a disaster for product sellers. Not only does this mean missing out on sales, but it also creates the opportunity to lose repeat customers if you don’t have their favorite products in stock.

An inventory management software tracks your stock levels in real time. You’ll get alerts when stock levels are low so you can quickly replenish and get back to meeting customer demand.

2. Forecast demand

When you identify and prepare for periods of shifting demand, you can get an edge over competitors with too much or too little inventory. An inventory management software helps you forecast demand so you can adequately prepare by increasing your stock or reordering less to avoid manufacturing waste.

3. Stay on top of cash flow

Managing all of your inventory across multiple sales channels is hard enough. And when business is booming, you’re left to manage your inflow of cash from your Shopify store. By connecting sales, inventory management, and more with accounting software, you can spend less time updating spreadsheets and more time selling products.

How to choose an inventory management app for Shopify

Your budget, company size, and specific inventory needs will likely inform the inventory management app you ultimately choose. However, certain key features often make some inventory management apps stand out from the pack. Some of these include:

  • Automatic updates: Inventory management apps should update your Shopify store automatically when products are dispatched.
  • Integrations: Look for an app that helps you scale your business by integrating with other marketplaces and 3PLs.
  • Order fulfillment: Prioritize apps that automatically route orders directly to your warehouse or 3PL.

Grow your Shopify store with Cin7

Cin7 was named the best inventory management software by Forbes and Investopedia because of our ability to empower smaller product sellers to grow quickly.

Cin7’s comprehensive integration can help you reach new customers, seamlessly manage e-commerce orders, and gain control over your industry — allowing you to grow your Shopify store with ease.

Start a free trial of Cin7 today.

Warehouse layout design best practices

Posted on | by chrisqureshi | Leave a Comment on Warehouse layout design best practices

There’s more to running a warehouse than just piling inventory on shelves. The design of your warehouse can make or break your overall operational efficiency.

Warehouse layouts need to be optimized for clear visibility, smooth transfer of goods, and easy equipment accessibility. And no one design will work for everyone.

Most companies use one of three main warehouse layout styles. These layouts address items like the needs of different industries, the warehouse building size and shape, shipping and receiving volume, and budget.

So, what’s the best way to arrange your warehouse? Let’s dive into the options to help streamline your workflow and make the most of your warehousing space.

Here’s what we’ll cover:

What does warehouse layout mean?

Warehouse layout design factors

3 types of warehouse layouts for workflow

Best practices of warehouse layout design

Final step: Choosing a warehouse management system

Frequently Asked Questions

What does warehouse layout mean?

Warehouse layout refers to both the physical structure of your warehouse and the many components within it. A proper warehouse layout also ensures workers have enough space to operate at maximum capacity, leading to a smoother inventory flow with less wasted time.

Warehouse layout design factors

There are several considerations for optimal warehouse design and workflow. You’ll want to consider all of them before deciding on the best space for your team.

Budget

Building a warehouse from scratch to custom specifications is expensive and time-consuming. While hiring a warehouse design expert to create a layout based on your requirements would be ideal, most companies need to work within a more limited budget.

Make sure to conduct a cost-benefit analysis and see which structures and equipment best fit your budget. You’ll also want to take existing warehouses into account. There might be an available warehouse space already on the market that’s a pretty good fit for your business needs. In many cases, warehouses for lease might already include some warehouse equipment like shelving.

Warehouse space needed

When planning your warehouse layout, how you divide the space determines your warehouse’s capacity and ability to store goods. For example, if you need to include office areas and break rooms, you’ll have less space to store and prepare inventory.

To maximize your warehouse’s storage capacity, make use of vertical space by stacking products. You can form clusters of products by grouping and stacking them together — which leads to quicker sorting later.

Equipment needed

To operate at full capacity, warehouse equipment such as shelving, conveyors, forklifts, lifting and packing tools, pallet racks, and safety equipment are required. Forklifts, in particular, are one of the most important pieces of equipment for warehousing operations, and you need to consider this tool’s cost and the space it needs to operate as you design your warehouse.

In addition to the equipment moving around, you’ll need barriers to protect your inventory and workers. Barrier rails work great when combined with mirrors and bollards. After analyzing your equipment needs, you can evaluate the best-suited warehouse layout and go from there.

Staffing requirements

Understanding staffing requirements can help you estimate how many people you’ll need and shift timings.

It’s important to make sure your warehouse’s layout does not impede the movement and productivity of your employees. The layout should also be designed while keeping the future in mind — you should have enough space so new employees, products, and materials can be added comfortably down the line.

Safety regulations

The safety of your employees is a prime concern. While designing your warehouse layout, ensure compliance with safety guidelines according to your local authorities and government.

This helps prevent both employee injuries and legal actions.

3 types of warehouse layouts for workflow

The three most commonly used warehouse workflow layouts are U-shaped, I-shaped, and L-shaped. Each style has benefits and drawbacks; let’s look at them in detail so you can determine the best possible structure for your needs.

The U-shaped warehouse flow

U-shaped warehouse flows are the most popular due to their simplicity and ease of replication. All the inventory is arranged in a “U” shaped semicircle, the middle portion (the bend of the “U”) is used for storage, and then shipping and receiving are performed at the ends of the “U.”

After receiving orders, products are placed in the staging or reception area to be sorted and then placed at appropriate storage locations. Storage locations are split into two categories:

  • Static Storage is for slow-selling products that are more likely to sit on the shelves for a longer period of time.
  • Dynamic Storage is for products with higher demand and turnover.

The “U” shape helps streamline inventory flow and keeps everything separate. By keeping incoming and outgoing shipments apart, the U shape also helps avoid bottlenecks.

Plus, because shipping and receiving are on the same end of the building, employees can swiftly move products between these two stages, and you may need less loading and unloading gear.

However, some people consider this a downside because the proximity of the entrance and exit can lead to congestion.

The I-shaped warehouse flow

The I-shaped warehouse flow is most often chosen by enterprise businesses that have larger warehouses. The I-shaped design offers a clear “in and out” view of product workflow for these bigger companies producing higher volumes.

In this layout, receiving and unloading are on one end of the warehouse, storage is in the middle, and the shipping area is at the opposite end of the building. The I-shaped design allows for a linear flow from receipt to shipment.

From a bird’s eye view, the flow is similar to an assembly line, which both helps minimize bottlenecks and reduces back-and-forth movement.

The most significant drawbacks of an I-shaped warehouse design are that two sets of loading and unloading equipment are needed, and products must travel the complete length of the warehouse. With products being accessed on both sides of the “I,” you may also need a larger operational space for equipment like forklifts.

The L-shaped warehouse flow

For “L” layouts, the receiving and unloading areas are on one side of the warehouse, and the shipping and picking areas are on an adjacent side, creating a 90-degree angle. The remaining space is then designated for storage purposes.

While “L” shaped warehouse layouts are often used to fit an “L” shaped building, that’s not the only benefit. Like the I-shaped flow, the L-shaped flow also reduces back-and-forth movement. It also separates the receiving and shipping areas on different sides of the warehouse to help prevent traffic congestion.

However, the downside of the L-shape is that it requires considerable space to run your operation smoothly, and you’ll still need two sets of loading and unloading equipment.

Best practices of warehouse layout design

Regardless of your chosen warehouse layout, you’ll need to optimize it to ensure efficient operations. Here are some tips you can implement to make the most of your warehousing strategy.

Warehouse mapping

While finalizing the schematics of your warehouse’s design, you should make sure to get the most accurate measurements possible. You’ll also need to label each area of the facility according to its function. Keep in mind that a 2022 survey found the typical company only used 85.6% of its warehouse space.

Each workflow should be established from entry to exit. Once the workflow is designed, you’ll be able to understand how each function connects. After that, you can define the best work processes and train your employees correctly.

Optimizing picking processes

When you adequately plan your picking and packing workflows, you’ll be able to ship the right products to the right customers. There are several picking methods that you can implement to improve your processes.

  • Batch picking consists of picking similar orders in batches, all at once. This method is faster than picking one order at a time, and it allows you to fulfill similar orders that include the same SKUs.
  • Zone picking is when pickers are assigned specific zones and only pick orders from that area. Zone picking is commonly performed one at a time. If an order needs products that are outside a specific zone, a conveyor belt is often used.
  • Wave picking is helpful for warehouses with more significant volumes of products with many SKUs, and combines batch and zone picking. In this method, the picker has to stay within the zone assigned to them, and they are able to pick multiple orders simultaneously.
  • Discrete picking is often used in small businesses with fewer SKUs. Whenever an order is received, the picker retrieves all items for the order from different zones of the warehouse. This is time-consuming because pickers are only able to process one order at a time.

As always, you should select the picking strategy that best suits your business and your warehouse. Whatever method you choose, you should focus on maintaining high picking accuracy to reduce the risk of returns.

Ideally, it’s best to have picking areas close to storage areas — which can dramatically reduce the time spent to select ordered items. To increase the efficiency of the picking process, you can also install conveyors.

Improving warehouse accessibility

It’s crucial to place all necessary tools and equipment in spots that are easily accessible to your warehouse workers. There also needs to be enough space for equipment and staff to move freely along designated paths. This speeds up the order fulfillment process to deliver more quickly to customers.

Streamlining the shipping process

The shipping area is where final packing and preparation for shipping take place. Ideally, you want to keep this area separate from other spaces to avoid mixups. It should also be laid out so that staff doesn’t backtrack to complete steps in the process.

Keep best-selling products near shipping areas and products that don’t sell as well farther away. This helps minimize travel picking time and can be accomplished most easily with L- and U-shaped layouts.

Testing and collecting feedback

After finalizing your layout and warehouse flow, you should make sure to run tests and confirm that everything flows smoothly. Equipment like forklifts and conveyors should also be tested.

Allow the employees who will be handling the equipment to test it out and take their feedback into account. Since your picking team will constantly move around the warehouse, you should also work with them to optimize routes for faster fulfillment and less confusion.

You can optimize your strategy and determine the best possible configuration and processes based on feedback and test results.

Final step: Choosing a warehouse management system

Once you decide on your warehouse’s layout and flow, it’s time to choose your warehouse management system. You’d be surprised how much smoother your day-to-day operations and order fulfillment can become with the right management system.

A warehouse management system gives you a real-time view of your inventory’s performance and helps you significantly optimize your warehouse. In fact, 77% of organizations consider warehouse automation systems a crucial part of maximizing performance.

If you’re interested in implementing a warehouse automation system for your business, contact the Cin7 experts to learn more about how we can help.

Frequently Asked Questions

What is the most common warehouse layout?

The most common warehouse layout is the U-shaped warehouse. This shape is popular because it is easy to replicate and has a simple setup.

The U-shape also helps avoid bottlenecks by keeping shipping and receiving on opposite sides of the same end of the building while storage is in the middle.

What is the best warehouse shape?

The best warehouse design for your business really depends on a number of factors. Budget, inventory size and type, number of orders, safety requirements, and your warehouse space can all affect which is best for you.

U-shaped warehouses are good general designs that work for a large number of situations. I-shapes are great for large order volumes or the use of conveyor belts. L-shapes help reduce back-and-forth movement, which is helpful for large products and controlling traffic flow.

Connected Inventory Performance: The Evolution of Inventory Management

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Meet Connected Inventory Performance — the evolution of inventory management that utilizes integrations and automation to drive visibility, traceability, and efficiency, so you can spend less time troubleshooting and more time growing your business.

What would you say if you knew you’d triple your Q4 sales and achieve your highest-grossing quarter this year? Did we just hear a cork pop?

But what if we told you your record-breaking quarter would cost you twice as much as your revenue in expenses, supply chain issues, and inventory inefficiency? Statistics show small businesses report more than $160 billion a year worldwide in inventory waste.

While, as a small business, you may not have much control over shipping costs or supplier delays in today’s market, you can address inventory inefficiency. Connected Inventory Performance allows businesses to grow by ditching manual inventory management through connection. Follow along to see how you can evolve your business operations to reduce inventory concerns, enter an autonomous inventory flow state, and increase profitability.

The epidemic of inventory inefficiency

The staggering truth is only 20% of businesses make it past their first year. Growing pains, like inventory inefficiencies, erode the entrepreneurial spirit over time — but that doesn’t need to be the case.

Inventory waste is the inefficiencies felt across the inventory lifecycle that hinders business growth by consuming time, money, and resources. You may not see them daily because they’re a headache to deal with, but you feel them. Your bank account feels them. Your customers feel them.

Inventory and manufacturing waste is commonly caused by:

  • Overproduction from inaccurate demand forecasting
  • Delays in production, fulfillment, and transportation
  • Defective inventory and inventory shrinkage
  • Discrepancies between channels and inventory
  • Inefficient manufacturing processes

So, how can businesses curb inventory waste? Clear, automated inventory insights may be the solution.

What is connected inventory performance?

With 67% of small businesses using spreadsheets for inventory tracking, it’s no surprise that inventory inefficiency is an alarming problem. By transitioning to a connected inventory performance model, businesses can obtain a clear picture of inventory levels to reduce inefficiency and improve flow.

Coined by Cin7, Connected Inventory Performance is an evolved form of inventory management software (IMS) that allows businesses to tailor their inventory experience based on how and where they sell. Gone are the days of managing the management software. Connected Inventory Performance allows you to get your product into more hands and spend less time on nuances.

It’s comprised of five key components:

Whether you need more connection between inventory lifecycle stages or sales channels, you’ll find frictionless inventory flow with connected inventory performance unmatched by any other traditional IMS.

From Chaos to Calm: Rethink Your Approach to Inventory Management
Inventory management software Connected inventory performance
  • Manual overload
  • Cash-flow waste
  • Low visibility
  • Overwhelming amounts of ambiguous data
  • Poor customer experience
  • Fast time-to-value
  • Endless integrations
  • Clear visibility
  • 360° coherence
  • Fast, automated issue resolution
  • Provides one source of truth
  • Increased sales efficiency
  • Flexible

How Cin7 is changing the game

At Cin7, we’re leading the industry with Connected Inventory Performance — a user-friendly, cloud-based inventory management software that gives growing product businesses an automated and real-time view of your entire inventory lifecycle.

Only Cin7 products Core and Omni can support Connected Inventory Performance through integrations with 700+ tools and applications, such as Amazon, Quickbooks, and Shopify. Cin7 also supports requirements like advanced manufacturing, warehouse management, POS, B2B Portal/Online Store,  3PL, and EDI integrations.

You can consolidate, streamline, automate, and scale your inventory operation from one place — to spend less time managing and more time growing the business — by selling in new channels and markets quickly with minimal complexity. With Connected Inventory Performance, you can get your systems fully running within weeks. There’s no need to wait months before you see the value of efficient inventory management.

Cin7 helps product companies cut waste and create flow across the inventory lifecycle, driving connected inventory performance and freeing the business to focus on growth.

Manage Less, Sell More

Connected Inventory Performance is the future of inventory management. Businesses will no longer gloss over the cost of inefficient inventory management processes. But they need visibility to get there and then beyond to the inventory flow state where goods move frictionlessly throughout the inventory lifecycle.

Cue Cin7’s Connected Inventory Performance. Are you ready to see for yourself? Try out a demo today.

What is demand planning?

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Demand planning is one of those things you might not notice until it’s too late. When you don’t work out your expected demand in advance, the results can be devastating.

This is something Nike learned the hard way. Poor demand planning led to supply issues that cost Nike over $100 million in lost sales and dropped its stock price by 20% in just a few months. So what happened?

Basically, a supply chain software glitch created an erroneous demand forecast and led to the company overordering thousands of one type of sneaker and drastically underordering one of its best sellers.

And all of it was preventable with better demand planning.

While demand planning isn’t perfect, it can help ensure your inventory levels remain more consistent and help you save money. Combining that with supply chain management lets you ensure the right parts and products are where they need to be at any given time.

Here’s what we’ll cover:

What is demand planning?

Components of demand planning

Demand planning and supply chain management

Wrapping up

What is demand planning?

Demand planning is using data to predict the demand for specific products so you can set inventory levels and plan for supply needs. In other words, if forecasting predicts that you will need a certain number of a product to meet customer demand, planning is the process you use to know when and how much to order to meet the forecasted demand. It is the actual scheduling and actions taken to meet demand.

Demand planning is done after forecasting. Forecasting looks at the amount of supplies and labor available and ensures that your company doesn’t exceed these limits. This process involves gathering data from the company’s historical sales, consumer buying patterns, and market trends.

It then combines this information with variables like weather conditions, shipping issues, and lead times to get an accurate picture of future needs, like which items your team should order and the amounts.

Demand planning is:

  • Putting in inventory orders for the correct items in the right quantities at the right time to prevent overstocking and stockouts.
  • Making sure there’s enough space in the storage area for them.
  • Ensuring there are enough cardboard boxes in the shipping department to get them out the door.
  • Making sure that every section of the supply chain is ready and can process orders with as little downtime as possible and with the least amount of waste.

When demand planning is done right, the supply chain is humming. Inventory is at optimum levels, and orders can be filled in good time, efficiently, and with the least amount of expenditure.

Demand planning examples

So, theories are great, but what does it look like in the real world? Let’s look at some examples of demand planning in real life.

  • Seasonal demand planning: If you run a seasonal business, like a swimwear business, you probably have most of your sales at specific times of the year. Using demand planning, you can look at previous years’ data to plan your wholesale orders and keep inventory levels adjusted to meet changing demand.

For example, you might need 100,000 more units for May and June, your busiest months of the year. You want to place these orders early enough, so you have the items in time instead of arriving in July when sales are starting to slow again.

Demand planning also helps you plan schedules to interview, hire, and train seasonal staff to be ready for the summer rush. You’ll also need to make sure you have enough shopping bags, shipping materials, and advertising materials.

  • New product launch demand planning: When launching new products, you can use demand planning to analyze expected initial customer demands. You can survey potential customers to try and gauge interest levels in your new product, determine whether your pricing seems acceptable, and figure out how many units you should order based on this feedback. Then production can be planned based on the needed initial stock and the new product lead time to make sure you’ll be able to meet inventory levels starting day one of sales.

Demand planning can also help you plan out your timeline for your pre-launch advertising campaign. For example, if you find out that most people you’ve surveyed have no idea how to use your new product, you might want to spend more time advertising ahead of the launch to educate the market about what your new product can do.

  • Status quo demand planning: You can also use demand planning in your day-to-day operations. By understanding your product lead times, you can reduce backorders by ordering new inventory at the optimal time for just-in-time restocking.

For example, if you regularly sell 500 units a month of a product, you want to have just that much stock, not 400, and not 600 on hand. Demand planning helps you more accurately judge when to order so that your inventory arrives as you need it.

Components of demand planning

Demand planning is a multistep process that involves looking at data from many sources. Let’s break the process down into 10 parts to help you create a more accurate forecast.

Analyzing sales data across multiple channels and locations

Analyzing the sales history across sales channels is a good place to start. You need baseline data to begin forecasting and planning. However, when you’re an omnichannel seller, gathering and analyzing all the sales data can take time and effort. Luckily, with all the great automated options available today, doing this manually is no longer necessary.

Cin7 inventory management software connects your online and offline sales channels, enabling you to access all the sales data at your fingertips. You can view the aggregated sales history of your customers from multiple sales channels on Cin7 Omni’s homepage dashboard in one easy-to-digest set of data.

Using this, you can easily understand the customers’ purchasing behavior, buying patterns, your best-selling products, and identify slow movers. You can also target your customers with relevant products based on their past orders.

Calculating inventory turnover ratio

Your inventory turnover ratio indicates how efficiently your company uses its inventory and your overall business performance. With Cin7’s insight tools and precise inventory and sales data reports, you can accurately measure Cost of Goods Sold (COGS) and inventory turnover ratio.

Knowing and monitoring your normal turnover ratio lets you spot problematic changes and intervene quickly by adjusting outstanding inventory orders if you find any excess inventory or a lag in your sales. You can also create competitive price structures with this data to stand out from the competition, meet existing customers’ demands, and attract new customers.

Independent demand

Independent demand is the demand you have for a finished product — how much of your product customers want. For manufacturers, this means finished pieces, and for retailers, it means the items shipped out to customers. Knowing the quantity needed of the end product is a crucial step in demand planning.

Independent demand can vary greatly by season and economic factors, and can be impacted by changes in fashion or the weather.

Dependent demand

Dependent demand, on the other hand, refers to the demand you have for the components that make up the finished product. For a manufacturer, the planners have to make sure they have all the bits and pieces and raw materials needed. If they don’t have every component ordered, your staff won’t be able to manufacture the right quantities of finished goods to satisfy the independent demand.

Cin7 inventory and production management software is a useful tool for dependent demand planning. It can generate a detailed Bill of Materials (BOM), an itemization of the raw materials needed to assemble particular goods and the quantities needed to fill a particular order.

Cin7 also creates weekly reports on both materials used and progress production, which allows you to check that your demand planning is on target. As a bonus, the cloud software can even instruct the machinery on the shop floor to start up, and it can do this as soon as it detects that stock is at the minimum level you’ve already set.

Monitoring the production process

If you’re a manufacturer, monitoring the raw materials, tracking the finished goods, and streamlining production time is vital for running a successful business and meeting your customers’ demands on time.

You also need to track the quality of your products and processes. To do this, many companies rely on statistical process control (SPC) software. Despite the recent drive in automation, however, many companies still manually enter data in Excel. In fact, so many still use Excel that even Microsoft tries to push users to swap to a different product, even though the one they suggest still requires a lot of manual work.

Instead of relying on outdated technology, automating your inventory and manufacturing processes can save you time and money. Automation helps reduce human error, reduces the need for frequent inventory counting, reduces revenue and manufacturing time lost from missing inventory, and reduces the staffing needed to manage your inventory and manufacturing processes.

Monitoring, tracking, and managing inventory

Strong inventory management that lets you know what you have on hand is integral to knowing what you still need to order.

With Cin7’s inventory management software, you can readily conduct regular stock assessments to ensure your stock is in optimal condition. You can also assign a batch number or serial number to track goods more accurately under your preferred inventory method.

By tracking your inventory carefully, you can minimize the risk of your inventory aging out and sell goods at a greater profit margin. The right inventory at the right levels, location, and condition ensures a smooth supply chain at every stage.

Cin7 also supports product bundling, enabling you to bundle relevant products and sell them at a competitive price. To top it all, you can also rely on Cin7 for managing your returns.

Internal processes demand

Demand planning is part of your Internal processes. It makes sure there’s no hitch in the supply chain on your end. Knowing the demand on your internal processes is also about ensuring you have enough space in the warehouse or storage area to place items for those projected orders as they come in from the suppliers.

When your internal processes are well-defined and working properly, your warehouse can ship to the end consumer without delay. These processes should clearly spell out each stage of the delivery process, so when someone asks, “What’s next?” there’s always a clear next step to take, whether that’s how an item is packaged, where it is stored in the warehouse, or what shipper is used.

On top of knowing your processes, this also means you have things covered in an emergency, like enough spare parts to cope with machine breakdowns and staff to keep everything flowing smoothly.

Managing product portfolios

Demand planning requires businesses to understand their products and lifecycles from introduction to phase-out.

Your product portfolio includes every product your company sells, including details like their market share, how the product is growing, and information on the customers. Your products are often interconnected, and the sale of one product affects the sales of another.

Maintaining a product portfolio is helpful, especially when you add new products to your portfolio, as it helps you understand how the new product impacts the sale of existing products. You want to be careful not to cannibalize another product, make sure each product aligns with your business goals, and have a clear overview of how each product is performing at any given moment.

Analyzing current trends

Besides internal factors, external factors outside of your control, like weather, staff health, and economic events, impact business performance.

Having a dedicated team to monitor external data on current events like recessions or natural disasters and develop contingency plans will help your business adapt to market volatility and prevent possible supply chain disruptions.

A transparent system will help you stay connected with your suppliers and track your goods during uncertain times.

Managing trade promotions

While marketing and promotions may seem unrelated to demand planning, arranging for advertising, discounts, and giveaways is an actionable part of the sales cycle and should be included. Publicity attracts interest and helps sell your products and goods, so it directly affects demand.

While Cin7 is primarily a connected inventory software, it can also help set up discounts, set start and end dates for a particular promotion, and apply those promotions to whichever of your products you choose.

Demand planning and supply chain management

Demand planning has a big impact on supply chain management. We’re only a couple of years post-pandemic, with supply chain disruptions still affecting many countries, a possible recession looming, and drastic changes in demand becoming more and more common.

Strong demand planning helps you manage your supply chain by:

  • Streamlining inventory management.
  • Putting relevant sales strategies in place.
  • Ensuring efficient use of all resources.
  • Encouraging companies to negotiate with suppliers for better deals.

When you manage your demand effectively, you are able to react to both internal and external factors much more quickly. The National Retail Federation forecasts that sales in the US will grow 4-6% in 2023, reaching a total of $5.13 trillion. In order to meet these levels, retailers will need to grow their inventory levels as well, but this growth won’t be linear.

Companies need to carefully track their demand and adjust inventory based on changes in their supply chain as well as customer demand. Using a connected inventory system will help you do this accurately and quickly.

Wrapping up

Having the right amount of inventory in place when it’s needed is at the heart of a well-run business, and it’s why getting demand planning right is so crucial.

Cin7’s inventory software helps maintain flow from one stage of the inventory process to another. The software has features that can make supply chain management hassle-free, and the data it produces can be put towards forecasting and, as a result, better demand planning.

To find out more, schedule a demo with one of our experts today.

Kanban in manufacturing: 9 major benefits [+examples]

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Kanban in manufacturing is an inventory control process used in just in time inventory management. In Kanban, manufacturing teams use visual cues, called Kanban cards, to signal specific actions that keep processes running efficiently.

Think of Kanban in manufacturing like loading a dishwasher. When done correctly, everything fits perfectly and gets cleaned efficiently. And just as you wouldn’t overload a dishwasher or mix up different types of dishes, Kanban prioritizes specific manufacturing tasks so that you can complete them efficiently and effectively.

Originating as a manufacturing process, Kanban now broadly ensures that teams can work together seamlessly towards a common goal. Whether optimizing warehouse management systems or creating centralized supply chain management, Kanban can be instrumental in removing inefficiencies from workflows.

But what exactly is Kanban, and how can you integrate it? In this post, we’ll explore what Kanban is, the benefits of implementing it into your workflows, and a few real-world examples of companies that have leveraged Kanban’s capabilities to create seamless processes — just like a perfectly loaded dishwasher.

What is Kanban?

Kanban describes a method of inventory control companies use to make smarter reordering decisions and track production more easily. The term “Kanban” came into existence almost 50 years ago when Taiichi Ohno, an engineer at Toyota Automotive, developed the first Kanban system to improve manufacturing efficiency.

The four core principles of Kanban are:

  • Visualize work
  • Limit work-in-progress
  • Focus on flow
  • Improve continuously

The idea of Kanban was taken from an unlikely inspiration: a supermarket. Toyota noticed that supermarkets restocked an item according to the store’s supply and not the vendor’s. Supermarkets replenished items only when they were nearly out of stock.

The grocers’ ‘just in time’ inventory method and delivery process sparked an interest in Toyota to adopt a similar approach where inventory matched demand.

How does Kanban work in manufacturing?

Kanban systems in manufacturing communicate the need to replenish stocks or produce an item. When it comes to producing items, Kanban breaks down the process into defined steps to ensure production is done efficiently and without error. The process is defined by the steps below:

 

  • Outlining: Determining the necessary steps in the manufacturing process
  • Developing a pull system: Creating a system where products only get produced when there is customer demand
  • Limit work in progress (WIP) goods: Restricting the number of units that you can produce at a given time to limit manufacturing waste 
  • Monitor performance: Track the success of the production system
  • Continuously improve: Use your success metrics to continuously enhance the production process
A visualization of how the Kanban process works for manufacturing companies.

Types of Kanban systems

Kanban typically breaks down into six main types: production, withdrawal, supplier, emergency, through, and express. Different types of Kanbans serve a specific purpose and help solve various problems in inventory management, like ensuring tasks are completed efficiently and materials aren’t going to waste.

Production Kanban

Production Kanban is the simplest and most widely used method of Kanban — and it applies to almost every industry. This method creates production cards, which illustrate the raw materials and processes necessary to create a product.

Withdrawal Kanban

Withdrawal Kanban ensures that time and labor are used as efficiently as possible. In this method, floor staff use withdrawal cards to signify that a process or task is finished and they are ready for the next one. The card additionally signals that their component is complete and ready to move to the next production stage.

Supplier Kanban

For industries that rely heavily on supplier collaboration, supplier cards allow suppliers greater visibility into the production process and to be part of the larger Kanban system. This streamlines the process by reducing the time it typically takes to make a supplier request.

Emergency Kanban

While Kanban strives to prepare for the unexpected, emergencies are inevitable in an organization. Emergency Kanban cards are reserved for situations where a defective part needs to be quickly replaced to restore the system to its natural flow.

Through Kanban

You will use Through Kanban cards, a combination of production and withdrawal cards, when two different production teams work in tandem in the same setting. Instead of using both a production and withdrawal card to signal a task is complete and another is ready to begin, a through card accomplishes both.

Express Kanban

Express Kanban serves the sole purpose of alerting team members when manufacturers are short of specific items or materials. Using express Kanban ensures manufacturers never experience slowdowns due to raw material—or other item—shortages.

9 major benefits of Kanban in manufacturing

Implementing Kanban into your inventory management techniques can benefit your internal processes and your relationship with customers and suppliers in major ways. Here are nine major upsides to adopting Kanban.

A list of the major benefits of using Kanban for manufacturing alongside a woman working on a production line.

1. Improved quality and accuracy

By outlining processes before they begin, companies can foresee and predict potential roadblocks during production. By identifying these ahead of time, manufacturers can adequately navigate around them to reduce delays and improve overall quality.

2. Enhanced efficiency

A core principle of Kanban is reducing manufacturing waste, which can mean eliminating processes or steps that have no value to the customer. By taking away unnecessary steps, manufacturers can work more efficiently and produce products quickly.

3. Lower lead times

When you cut out the wasteful steps in a process, you can guarantee lower lead times. Kanban allows businesses to get products to customers faster and can therefore lower costs. By examining each step of the production process under a microscope, companies can reduce carrying costs, package quicker, and move products more efficiently.

4. Stronger customer service

Kanban relies on continuous feedback and improvement, which emphasizes customer service and customer feedback. Additionally, Kanban allows you to be on top of processes — meaning you’re always engaging with customers and meeting their needs quickly.

5. Greater visibility

Visibility and transparency are at the heart of the Kanban process, and the system seeks to allow stakeholders to visualize the flow of products and information easily. By adopting a process all team members can easily see how to prioritize tasks — making for more efficient workflows.

6. Optimized inventory levels

Since inventory is not replenished until needed, Kanban reduces the need for additional storage space and prevents cash flow from being tied up in excessive inventory. Kanban enables maintaining accurate inventory levels in real time.

7. Limited overproduction

Kanban is a demand-pull system, meaning it pulls work from the previous stage according to the designated need for production. Kanban adheres to just in time inventory principles, eliminating the need to keep too much safety stock to deal with unexpected delays during the production line.

8. Flexible production

A Kanban inventory control system focuses on current demands to set production capacity appropriately. If there is a sudden surge in demand for a product, Kanban ensures the minimum possibility of excess inventory, giving the production process flexibility in responding to changing demands.

Kanban also provides adaptability to the production line as you can easily switch it to different products depending on the demand.

9. Reduced obsolete inventory

Even if a product or component design needs upgrades, it is incorporated into the final product as soon as possible. No component goes wasted or becomes obsolete inventory.

Additionally, since you’re operating under the just in time inventory technique, you’re less likely to be stuck with excess inventory if demand shifts unexpectedly.

3 challenges to implementing Kanban

In manufacturing, Kanban can be extremely effective in enhancing efficiency and improving processes, but fully adopting it into your inventory management process can be easier said than done. Here’s why:

1. Imbalance with inventory management

Achieving inventory flow involves your processes being balanced, meaning that if you adopt Kanban, it needs to work alongside your inventory management technique. Since Kanban prioritizes limiting waste, it works well with just in time inventory management.

Depending on your inventory management technique, which likely depends on your industry, you’ll need to carefully evaluate if Kanban is feasible for your current inventory processes.

Request a demo of Cin7 to see how Connected Inventory Performance can improve and automate your inventory processes. 

2. Resistance to change

Kanban can be extremely rewarding and significantly benefit an organization, but it can be difficult to encourage team members to adopt Kanban.

When you adopt Kanban, you may be up-ending an established process, so don’t be surprised if you experience resistance from team members.

3. Fluctuating demand

Kanban works well to ensure it accounts for fluctuations in demand, but it can be difficult to implement if demand is regularly shifting. While the system can successfully combat unexpected periods of demand, you may experience challenges implementing it during periods of demand fluctuation.

It can also be difficult to maintain low WIP limits when demand is regularly shifting.

Kanban vs. Scrum

While Kanban and Scrum both work to enhance efficiency and create better products, they have slightly different purposes in workflows.

  • Kanban strives to help manufacturers better visualize processes and improve flow.
  • Scrum provides an iterative method for accomplishing processes more efficiently.

Scrum is an agile method that breaks up work into sprints, or dedicated periods for accomplishing tasks. Kanban and Scrum work well in tandem since they want to achieve the same goal but do so differently. The table below breaks down the major differences between Kanban and Scrum.

A chart detailing the major differences between

Kanban Examples in the real world

Kanban is popular today because it’s a proven system for success. Let’s explore some case studies of companies that leveraged Kanban to see major growth.

Toyota

Toyota adopted Kanban to their existing system to more easily visualize steps in the engineering process. The aim behind Toyota’s adoption of Kanban was to align their inventory levels with actual demand.

In Toyota’s system, a Kanban card was passed every time a bin of materials was emptied. This action signified to the warehouse how much stock needed to be replenished. As a result, Toyota was able to limit excess inventory in the production line and enable smoother communication between teams.

Nike

Nike’s adoption of Kanban stemmed from bad PR after word of poor working conditions in their factories spread. To improve conditions at their factories and mend relationships between staff and management, Nike implemented the pull strategy, which allowed employees to:

  • Work less overtime
  • Reduce late orders
  • Be better prepared for changing demand

Through Kanban, Nike was able to maintain their focus on innovation while simultaneously improving the quality of their working environment.

Importance of Kanban for small businesses

While the companies above are mammoths now, they were up-and-comers when they initiated the Kanban method. Growth-focused small businesses can see major benefits from Kanban, as the method can eliminate setbacks that tend to stunt growth — like losing capital to excess inventory and failing to optimize internal processes.

Small businesses are always looking for continuous improvement, regardless of whether they’ve implemented Kanban. Visualizing your workflows early on is the best way to pinpoint inefficiencies and find solutions.

Frequently asked questions

Still wondering what Kanban can do for you and your organization? Look no further. Here are a few of the most common questions and answers about Kanban in manufacturing.

What are the 4 principles of Kanban?

The four core principles of Kanban are:

  • Visualize the workflow
  • Limit WIP
  • Manage flow
  • Continuously improve

Together, these principles strive to achieve Kanban’s goal of increasing efficiency and reducing waste.

What is Kanban for raw materials?

When it comes to raw materials, Kanban ensures that the company only has the necessary amount of raw materials on hand at a given time — limiting the potential for waste.

In inventory management, this is best described as just in time inventory, or the idea that a company should only produce the necessary inventory to meet current customer demand.

What is Kanban in Agile?

Kanban is a method that exists within the Agile methodology. The Agile methodology broadly refers to a systematic approach to creating efficient processes prioritizing continuous improvement.

What are the 5 elements of Kanban?

David Anderson, a pioneer of the Kanban method, described the five elements of Kanban as:

  • Visual signals
  • Columns
  • WIP limits
  • A commitment point
  • A delivery point

These five elements are all components of Kanban boards and work together to ensure processes go smoothly.

Connecting inventory with Kanban

If you want cleaner dishes, you may have to reevaluate the way you load your dishwasher. Creating the most efficient internal systems is a bonafide path to success when it comes to growing a business — and it starts with how you manage inventory. Kanban works hand in hand with your inventory management technique, as the two processes can limit wasted time and wasted stock.

By automating your processes with comprehensive inventory management software, you’ll gain insights into whether Kanban makes sense for your business and where you can improve your inventory efficiency.

Start a free trial of Cin7 to streamline your processes today.  

What Is Cost of Goods Sold (COGS) + How to Calculate It

Posted on | by chrisqureshi | Leave a Comment on What Is Cost of Goods Sold (COGS) + How to Calculate It

If you’ve been hanging around the accounting department, chances are you’ve heard the term cost of goods sold (COGS) thrown around a few times. But while COGS is  important, it’s also a concept people tend to misunderstand.

Knowing what COGS is will help you better understand all of the costs associated with your product and your profit margins. In this article, we’ll go over this common accounting term, including what it is, and how to calculate yours.

Table of contents:

What is the cost of goods sold?

Why is it important to calculate the cost of COGS?

How to calculate COGS

Example of COGS

COGS – Key business takeaways

Frequently asked questions

Closing remarks

What is the cost of goods sold?

Cost of Goods Sold (COGS) refers to the cost of producing the goods that have been sold by a business. COGS is classified as an expense account on your income statement, representing the amount you have to recover from each sale to break even before bringing in profits.

COGS is only recognized upon the sale of inventory and is reported in the financial period in which those sales occur. For example, let’s say you have a clothing business with $5,000 worth of inventory. If you sell $2,500 worth of that inventory in the second quarter, you would record $2,500 in COGS. The rest would continue to stay in your inventory account.

As you can see in the example, the cost of inventory sold and COGS match. That’s because the value of your inventory stems from the direct costs of the items that make up that inventory, whether you’ve bought the materials to manufacture the items or purchased them for resale.

It also includes additional charges directly related to preparing products ready for sale, like packaging and delivery charges.

So, if we go back to the clothing store example, the $5,000 inventory number doesn’t come from thin air — the total includes the cost of the fabric, labor, packaging materials used, and delivery fees.

However, note that COGS excludes indirect expenses such as sales and marketing, so the costs associated with trying to sell t-shirts or jeans wouldn’t factor into the overall calculation.

Put simply, COGS equals the direct cost related to producing or purchasing products sold. Beyond that, just remember that the value of your inventory on hand is considered an asset until the inventory is sold.

Why is it important to calculate the cost of COGS?

Most businesses are in it to be profitable, and calculating your COGS is an important step to getting in the black. When you know your COGS, you can work to reduce the costs associated with selling, including the cost of your inventory.

COGS informs a business about the direct expenditures incurred in getting products ready for sale. For instance, if you know t-shirt fabric costs $5/yard, the labor to sew the shirts is $15/hour, and an average of $1 is spent on packaging each item, you can accurately price your t-shirts at a point where you can profit off the sale.

In this case, setting the t-shirts at $15 wouldn’t make you any money. Assuming each t-shirt uses two yards of fabric and takes 30 minutes to make, you need to price the t-shirts at $30 or more before you can even see a small profit.

Seriously, calculating COGS can make or break your business. Here are some of the other benefits of calculating COGS:

1. Helps create a pricing strategy

As demonstrated above, you can determine your selling price by knowing the direct costs incurred in producing or procuring products. Once you know these costs, you can figure out how to price your products to also cover your indirect expenses and earn a profit from the sale. But if you don’t know your COGS, you are honestly just guessing.

Overall, knowing COGS helps you determine how much profit margin you can keep on the products you sell.

2. Helps determine the total expenses incurred in selling products

Your profit and loss statement needs to list all your income and expenditures. By calculating the direct costs you have spent acquiring your stock, you can arrive at the total expenses incurred by including indirect expenses like your overhead, sales, and marketing costs.

You also need to know COGS before calculating your Inventory Turnover Ratio, which can help you make more informed decisions regarding your inventory and cut expenses further.

For example, if you calculate your inventory turnover ratio and find it’s pretty low, you’ll know you don’t need to replenish your inventory as often. That, in turn, means you can negotiate better deals with suppliers to further reduce costs.

3. Compare the market value of your product with your competitors

Determining profit margin by only considering direct costs incurred is an incomplete picture. If your prices are higher than your competitors you may make fewer sales.

If your prices are lower than your competitors, you can still incur a loss since your low profit margin might not cover your indirect expenses. COGS helps you to sell your product at a competitive price, grow sales, and, by extension, earn profits.

Now that you know the importance of calculating COGS, let’s learn the formula to calculate COGS.

How to calculate COGS

Here’s the formula to derive COGS:

COGS = Beginning Inventory + Purchases made during the period – Ending Inventory

To calculate the COGS for a reporting period, start with the value of the beginning inventory. If additional inventory was added during the reporting period, be sure to add the value of any new inventory produced or purchased to the value of the existing stock. Now, subtract the value of ending inventory from COGS sold for that reporting period.

Note, that this is a basic  formula and does not take into account items like returns, discounts, obsolete stock, and the inventory valuation method used. It’s still really useful, however, as shown in our breakdown below.

Example of COGS

Let’s assume that company X uses the calendar year to record their inventory. The beginning inventory value was recorded on the 1st of January, and the ending inventory value was recorded on the 31st of December.

The beginning inventory value was $20,000. During the year, the retailer realized that the business would sell more than the inventory received earlier in the year, so additional inventory worth $7,000 was purchased. At the end of the calendar year, the ending inventory value was worth $4,000.

Now, let’s work out the COGS for the entire year by using the following formula:

COGS = Beginning Inventory + Purchases made during the period – Ending inventory

COGS = $20,000. + $7,000 – $4,000.

Therefore, COGS = $23,000.

The COGS equals $23,000, as calculated. Use this formula to help with production, purchasing, and pricing decisions.

Calculating COGS can also help you calculate your profit for a reporting period and help with decisions to ensure that indirect costs are covered.

Suppose your revenue is $75,000 in a reporting period. Knowing the COGS, you can determine your profit will be $75,000 – $23,000 = $52,000.

COGS – Key business takeaways

The COGS formula can be used at an individual product level to help with decision-making before producing, procuring, and selling that product. It can help you make decisions like how much inventory you need to purchase or whether you might need to focus on marketing a slow-selling product, and it’s useful when tax season rolls around, too.

The COGS for a reporting period is the total COGS for all product sales for that reporting period. It is a vital metric included in your financial statements and used to calculate your gross profit for that reporting period.

Gross profit is a profitability measure that shows how well a business can cover its indirect expenses and earn a profit. The value of COGS will always depend on the direct costs of the products sold and the inventory valuation method used by the business.

Frequently asked questions

What is the difference between COGS and expenses?

COGS is a measure of the expenses associated with selling your goods. In particular, the direct expenses like labor, manufacturing, and materials. It does not include indirect expenses like rent or general office materials.

Is the cost of goods sold the same as profit?

No. The name cost of goods sold gives you a hint that COGS covers some of your expenses. However, you can figure out your profit if you know your COGS. To do that, use the following formula:

Revenue – Cost of Goods Sold = Gross Profit.

Remember, COGS tells you how much your items cost to make and sell; profit is how much you keep after these expenses.

Is the cost of goods sold taxable income?

In general, the IRS allows businesses to deduct some COGS-related expenses. For example, the IRS states you can include some business expenses in your COGS, which you subtract from your revenue to arrive at your gross profit (your taxable income).

If you calculate this way, you are not allowed to deduct those expenses a second time as a business expense!

Closing remarks

COGS is a big part of running a profitable business, and your inventory is a big part of COGS. To keep track of it all, you should invest in a cloud-based inventory and order management system like Cin7.

When you add in an inventory management system, you have a much clearer view of how to address any slumps, slow-downs, or sales. Working with Cin7 can help your business hold onto less while making more. Request a demo today.

How to calculate handling fees on your orders

Posted on | by chrisqureshi | Leave a Comment on How to calculate handling fees on your orders

When ordering online, customers have a lot of expectations. They want faster delivery, secure packaging, live order status, and, most importantly, they expect to receive the correct order.

This is even more important now that shipping has become so expensive. According to the United Nations, container freight costs rose five times during the pandemic. While freight has stabilized some, the freight index is still roughly $400 more per container than it was in 2018.

In order to meet customer expectations without going broke, you’ll have to optimize your operations. Shipping fees cover transportation, but what about the cost of packaging items so they don’t break in transit? Or the cost of safely storing and maintaining inventory in your warehouses?

That’s where handling fees come in. In this article, we’ll break down handling fees, show you how to calculate them, and explain why they’re necessary.

Here’s what we’ll cover:

What is a handling fee?

How to calculate handling fees

Shipping costs

Setting shipping and handling fees

Benefits of charging handling fees

Final Thoughts: How to calculate handling fees on your orders

FAQs

What is a handling fee?

A handling fee is an amount you charge a customer in addition to the order subtotal and the shipping fees. These fees cover fulfillment expenses such as:

  • Warehouse storage: While this is a fixed cost, you can help cover some of your storage expenses with your handling fees. After all, it costs money to securely hold your inventory and make sure there is no quality deterioration.
  • Packaging: This includes boxes, tape, and protective material. It also includes other minor details you may add to make the brand stand out, such as branded tissue paper, gift wrap, and even stickers.
  • Labor: The time it takes for your warehouse team to fulfill an order.

Helpful tip: Handling fees are charged once per order, not per each product in the order.

Handling charges may differ depending on whether deliveries are domestic or international.

This is because international orders might have additional expenses such as insurance or extra packaging to preserve the products through a longer journey. USPS provides a good breakdown of how shipping internationally works, from packaging requirements for different countries to the packing sizes accepted, and what items can be shipped.

How to calculate handling fees

Calculating the handling fee is a pretty straightforward process. You just need a few numbers from your warehouse team and some basic math to figure it out.

[(Time in minutes/60) * Hourly labor rate] + Packaging materials = Handling fee

If you choose to recoup your warehouse storage as part of handling fees, set a rate per order and add that to the total in the formula above.

Handling fee calculation example

Let’s look at an example calculation and then break down the details of how it works.  For this example, let’s assume the following numbers.

  • 15 minutes to prepare and package the order.
  • $15 hourly rate for your warehouse worker.
  • $2 in packaging material costs.
  • $2 per order warehouse storage recoup (optional).

Your calculation for the handling fee would be:

[(15/60) * $15] + $2

[.25 * $15] + $2

$3.75 + $2

$5.75 handling fee

Optional warehouse storage recoup:

$5.75 + $2

$7.75 handling fee, including the storage recoup.

Step 1: Determine the average number of minutes it takes to prepare each item for shipping

First, you need to determine the time it takes for your employees to prepare a package for shipping. This includes the time needed to pick up the ordered items from the warehouse shelves and package them.

The more efficiently your warehouse team works, the lower this number will be. Your warehouse layout, inventory management system, number of items in the order, type of item handling required, and the type of packaging needed will also impact how much time it takes to pick and prepare an order for shipment.

Step 2: Divide the result by 60

Once you have determined the time to pull and pack the order, you need to divide that by 60 to convert the time from minutes to hours.

For our example, divide 15 minutes by 60 to get .25 hours.

Step 3: Multiply the result by the employee’s hourly rate

Next, we need to figure out how much that time costs. If you have one employee picking and packaging an order from start to finish, you can use that employee’s hourly rate. However, if orders are worked on by multiple people, you can take an average hourly rate for your warehouse team. For our example, we’re using $15 as the hourly labor cost.

Multiply that hourly rate by the time in hours to get your labor costs for picking and packing the order. In our example, that is $15 * .25 for a total of $3.75 in labor costs.

Step 4: Add packaging costs

Labor cost isn’t the only cost that needs to be considered. It’s a good idea to recoup your packaging materials cost as well. For small items, it might only be a small shipping box, bubble wrap, and some tape, but for larger items, you might need wood pallets, custom boxes, and foam padding.

For our example, the items are small and use simple materials, so we used $2 in packaging material. Add that cost to the labor cost to get a total handling fee. In our example, that’s $3.75 + $2 for a total handling fee of $5.75. If you choose to add a fee to recoup some storage costs, add that number ($2 in our example) to the $5.75 for a total of $7.75.

If your handling fees are high compared to competitors or you have had customer complaints, you may need to find ways to reduce your costs. For example, streamlining your processes or finding lower-cost suppliers of shipping materials.

Shipping costs

Shipping costs go hand in hand with your handling costs but are usually charged separately from handling fees. Shipping costs include the costs involved in moving the item rather than preparing it for shipping. Postage, fuel charges, and surcharges make up shipping costs.

The final cost of shipping depends on many factors, including the package weight, size, destination, and any special handling required. If you outsource your shipping to a carrier like FedEx, UPS, or USPS, they may charge additional fees for pickups and other services as well. Be sure to compare prices frequently to find the best shipping provider for your needs.

Setting shipping and handling fees

When setting prices that will leave room for profit, remember that high shipping and handling fees may be enough to convince customers to abandon their shopping carts. A 2022 Statista survey found high shipping costs were the leading reason shoppers abandoned their shopping carts, with 48% of people leaving after seeing the shipping price.

To avoid cart abandonment at checkout, some sellers roll their shipping and handling fees into the overall item price instead of adding it as a separate line item on the invoice. However, including these costs in the item price could make your products appear more expensive than your competitors.

If you list shipping and handling as a line item, make sure it’s clearly labeled on the invoice. Cin7 inventory management software offers various integrations that allow you to customize your invoices easily and add or remove shipping and handling fees as needed.

Benefits of charging handling fees

Charging for handling fees can be a good business move. There are a number of benefits you may see when implementing these in your company.

Fulfillment cost recovery

If you aren’t covering all of your costs, your business won’t be able to turn a profit. This includes the fulfillment costs that your inventory incurs.

If your handling fees don’t cover all of your fulfillment costs, you might need to compromise on quality by using cheaper packaging or making other concessions in quality. In the long run, this will hurt your business’ reputation.

At the very least, you need to raise prices enough to cover your expenses, or you can look for ways to cut costs, like shopping around for a new shipping supplies provider.

Of course, if you don’t charge a separate handling fee, you can always add in these costs to the final price of your products. While this is simpler, it doesn’t explain your costs as clearly as an itemized report would. Most companies find that adding the handling fee as a separate line item from the subtotal helps simplify pricing for single items.

Upsell and cross-sell opportunities

Handling fees apply to the entire order rather than individual items. This opens up opportunities to sell more and increase your overall profit margin.

Customers love free shipping — it can even be a deal breaker — but one that can make you money too. According to Shopify’s data, customers spend an average of $22 more when free shipping is offered.

You can set up a minimum order amount to make orders eligible for free shipping and handling. This way, you can encourage customers to spend a bit more to qualify.

Say a customer has a cart worth $30, but an order is only eligible for free shipping and handling once it totals $40 or more. Customers are more likely to spend an additional $10 to get that free shipping than they are to pay a shipping fee to have their $30 order shipped.

To encourage customers to spend more, use their order history to recommend specific products they might be interested in purchasing. They might buy something else and spend more to get free shipping, making the customer happy with perceived savings and raising your profit margin.

Final Thoughts: How to calculate handling fees on your orders

After calculating the shipping and handling fee, you can set up your invoice template with one of the integrations offered by Cin7 inventory management software, such as QuickBooks Online, which will automatically add the fee to each online sale.

Cin7 has several other features that streamline your order receiving and fulfillment process, such as printing pick lists or batch tracking. Cin7 will help you set your business for multichannel sales and long-term success.

Are you interested in trying out Cin7 for your business? Book a free demo with our experts now.

Frequently asked questions

Who pays the handling fees?

The handling fee can be paid for either by the consumer or the company. Keep in mind, however, that by paying the handling fee yourself, you’ll reduce your profit margin in the process.

Is the handling fee the same as the delivery fee?

No! The delivery fee covers the costs associated with getting the item to the customer. Things like freight or transportation and often mail are lumped in this fee as well. The handling fee, on the other hand, covers the wages and any materials used to ship the item.

Should I charge a handling fee for my online store?

In general, yes. Handling fees help you ensure you’re pricing your items at a price point that’s sustainable. Not charging a handling fee means you risk charging too little and not being able to cover the costs of your business.