Inventory Management Systems: Facing the Challenges and Finding a Solution

Inventory Management Systems: Facing the Challenges and Finding a Solution

The source of almost every problem in my working life over the last year.

A comment like that is hard to ignore. Especially when it comes from a merchant doing over $20 million in annual revenue across six sales channels that span the online to offline (O2O) divide.

While you might expect their thorn to be one of the commonly cited “top challenges” in ecommerce — e.g., new product development, customer service, generating traffic, price competition, or sales and marketing — it’s not.

Instead, it’s far more insidious.

For high-growth merchants, managing inventory and orders through an ad hoc combination of spreadsheets, multiple apps, one-off workarounds, and in-house printing and record-keeping can be near crippling. Struggles with inventory and order management is a common theme among ecommerce icons like Death Wish Coffee, RIPT Apparel, and Shinesty.

The solution most businesses turn to is automation through an inventory management system (IMS). Unfortunately, the only thing worse than not having an inventory management system is partnering with the wrong one.

But, before we turn to how to pick an IMS, let’s examine …

What Are Inventory Management Systems?

Inventory management systems (IMS) are integrated software programs designed to track products, inventory, orders, and fulfillment both to and from customers as well as with suppliers. To avoid confusion, IMS is often used interchangeably with order management system (OMS), and the two phrases are synonymous.

Whatever the acronym, by consolidating all this data into a single location synced with your ecommerce platform, an IMS partner provides sales, support, and account management through a variety of features, including:

  1. Order management
  2. Inventory control
  3. Multi-channel sales alignment
  4. Comprehensive reporting and analytics
  5. Volume forecasting
  6. Purchase order generation
  7. Multi-warehouse syncing

Inventory Management Systems (IMS) or Order Management Systems (OMS) Overview

High-volume ecommerce companies use IMSs not only to avoid inventory shortages but also to streamline and optimize their entire order fulfillment process.

Centralizing your inventory and order data is especially important for companies that sell across multiple online and offline channels, utilize multiple warehouses, or for those who depend on kitting — bundling multiple items, often from multiple locations, which are sold and shipped as a single product.

Fluctuations in demand, seasonality, supply-chain logistics, and a product’s natural life-cycle can all make managing inventory feel like trying to “hit a moving target.” Add to those challenges the complexities of global ecommerce — namely, different taxation laws and currencies — and moving beyond spreadsheets and ad hoc workarounds becomes non-negotiable.

In other words, an IMS is an integral part of scaling your ecommerce operations through third-party logistics (3PL).

Given their foundational nature, we’ve written extensively about 3PLs already. Easily, the two most helpful and comprehensive guides are …

For inventory and order management, however, confusion often arises over another 3PL subcategory.

“The most common question we get from merchants is whether they need an inventory management system (IMS) or a warehouse management system (WMS). The first step is almost always an IMS because the right IMS can create huge wins in efficiency immediately.”

“A WMS, on the other hand, becomes necessary when a merchant needs to oversee multiple fulfillment and distribution centers, automate receiving and sending, outsource their ‘pick, pack, and ship’ needs, and handle returns.”

Jon Carmody, Shopify Plus Technology Partner Manager

Still, understanding what an IMS is — and why you need one — is only the first step. And a small one at that. In fact, for most people reading this, what and why are hardly the issue …

How Do You Pick an Inventory Management System?

“The source of almost every problem in my working life over the last year.”

Here’s the thing about that opening quote …

The merchant who shared it with me — and chose to remain anonymous — wasn’t talking about not having an IMS. They were talking about having picked the wrong IMS:

“[The IMS provider has] been the source of almost every problem in my working life over the last year. I’ve spent the last six months working on making sure our business is not dependent on a partner like that again.”

Just a small sampling of the problems they faced include:

  • IMS infrastructure that was unable to support their high inventory and order volumes
  • Custom workarounds the merchant built for themselves to eliminate 500 and 504 errors
  • Reported bugs the IMS refused to fix or commit timetables to fixing
  • Support staff that spent more time “deflecting responsibility than helping resolve issues”

To help you find a solution, Shopify Plus’ Partners Program has vetted a host of IMS providers. This list is certainly not comprehensive, but these are IMSs that — when aligned with your business’ size, growth trajectory, and industry — offer a starting point you can trust.

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Below, you’ll find a quick rundown each IMS in our Partners Program identifying the:

  • Size of merchants they typically serve (in annual revenue)
  • Size of inventory their platform supports (by SKU range)
  • Integrations they offer (apps, APIs, and ready-made programs)
  • Reviews (in the form of a link to at least one user-generated content site)

On top of that, you’ll also find advice directly from each platform regarding “Selecting a 3PL.” Their advice on this topic has been included because an IMS is just one part of the larger 3PL ecosystem your business relies on to thrive.

Stitch Labs

Stitch Labs Inventory Management Systems Screenshot

Size of merchants:

$1-100 million in annual revenue

Size of inventory:

Up to 100,000 SKUs

Integrations:

Stitch Labs offers 29 ready-made integrations with ecommerce, marketplace, accounting, and 3PL platforms. In the case of Shopify, because Stitch and Shopify handle product and order data similarly, translating information between the two platforms is easier and more native than most. In addition, Stitch Labs’ API provides partners with the ability to build custom integrations and solutions on top of the platform, extending it to cover further into the retail operations ecosystem.

Industries:

US-based brands, primarily in fashion and apparel, accessories, cosmetics, health and fitness, and home goods.

Reviews:

Shopify App Store

Selecting a 3PL:

What’s the number one thing merchants should look for when vetting 3PLs?

“Many of our customers have trouble finding credible reviews when searching for 3PLs. One way to circumvent this problem is learning who a 3PL’s customers are and reading those companies’ reviews that pertain to shipping and fulfillment.”

What’s the biggest red flag?

“Look out for the quoted price and understand that it often won’t include value add-ons like marketing inserts, gift wrapping, and special packaging. If you feel like you’re getting too good a deal, you probably haven’t asked all the right questions.”

Merchant review:

“With Stitch’s virtual warehousing functionality, we were able to move products from our warehouse to our virtual warehouse, providing us with a threshold of reserve inventory to prevent a customer from ordering something that’s actually out-of-stock. With this preventative measure for our highest volume day, we decreased backorders by 93% from the previous year.”

James Hargett, Manager of CX and Fulfillment at Chubbies Shorts

Orderbot

Orderbot Inventory Management Systems Screenshot

Size of merchant:

$3-10 million in annual revenue and $10-100 million

Size of inventory:

Unlimited (250,000 SKUs for their largest existing merchant)

Integrations:

Orderbot’s Shopify app — which operates via a ready-made API — not only imports orders from Shopify to Orderbot, sends shipping notices, and syncs inventory (across multiple sites and sales channels) but can also be used to update products and pricing in Shopify itself as well as process payments.

This IMS also integrates with accounting software like Quickbooks and Xero. ERP systems — like Netsuite Dynamics and SAPB1 — typically require some customization. Orderbot also integrates with most major shipping providers: namely, FedEx, UPS, USPS, and DHL.

Industries:

Apparel and fashion, house and home, consumer electronics, cosmetics, and food and beverage.

Reviews:

Capterra

Selecting a 3PL:

What’s the number one thing merchants should look for when vetting 3PLs?

“Insist on documentation to prove stability. 3PLs, like any business, can become insolvent. This can bring your entire business to a standstill. And trying to get your inventory from a 3PL that has had its doors locked is a nightmare.”

“Next, look for a proven track record and industry references. Don’t be a test subject for a new 3PL, no matter how shiny they look or what discounts they offer. Great references are a must. Take the time to learn from the experience of others. Ask about what issues they have had, how they were resolved, and what processes were put in place for mitigation.”

“Third, make sure they have other clients in your industry vertical. You don’t want a food 3PL delivering your apparel. Lastly, order something from an existing client of the 3PL to see how it is delivered for yourself.”

What’s the biggest red flag?

“If they do not promptly get back to you on questions during the vetting process, you can just imagine what it will be like when they already have your business. Alternatively, if they won’t provide you with proof of financial health or are slow or will not provide references, forget about them.”

Freestyle Solutions

Freestyle Solutions Inventory Management Systems Screenshot

Size of merchant:

$1-50 million in annual revenue

Size of inventory:

100s–10,000s SKUs

Integrations:

Freestyle Solutions exists as an app for native integration with ecommerce platforms like Shopify. Freestyle Solutions has a robust API that can transfer data to and from ERP solutions. It also has the ability for manual imports and exports with ERPs.

Industries:

Fashion, gift baskets, food and beverage, nutraceuticals, automotive, and sporting goods.

Reviews:

GetApp

Selecting a 3PL:

What’s the number one thing merchants should look for when vetting 3PLs?

“When vetting 3PLs, personal recommendations from people using the 3PL are great, but — when it comes down to it — visiting a 3PL in person and asking them questions to make sure they’re a fit for your business makes the most sense. Getting on the ground and face-to-face gives you the ability to see their size, how they operate, and how easily your products can tie into their existing structures.”

What’s the biggest red flag?

“Obviously, you would want to partner with anyone that hasn’t been around for at least longer than a year or doesn’t have enough reviews and recommendations from similar people in your industry.”

“Another thing to think about is your growth. You have plans of growing, can the 3PL you’re considering handle it? If yes, perfect. You can check that box. If not, maybe it’s time to move on to the next 3PL that may end up being a better fit anyway.”

TradeGecko 

TradeGecko Inventory Management Systems Screenshot

Size of merchant:

$1-10 million in annual revenue (up to $75 million for their largest current merchants)

Size of inventory:

Up to 20,000 SKUs

Integrations:

As a platform, TradeGecko is ready-made for Shopify, Amazon, Xero, Quickbooks, ShipStation, SalesForce, Lokad, and Inventory Planner. Their open API allows for custom development along with third-party partnerships. These third-party relationships integrate multiple sales channels, 3PL/WMS (3PL Central, InfoPlus, etc.), marketplaces (eBay, Walmart, Wayfair, etc.), drop shipping and EDI for a comprehensive inventory and order management solution.

Industries:

Small-to-medium enterprises, wholesale (B2B) ecommerce, and B2C ecommerce in apparel and clothing as well as food and beverage.

Reviews:

Shopify App Store

Selecting:

What’s the number one thing merchants should look for when vetting 3PLs?

“Speaking with our partners, the number one thing merchants should look for is proper fit and alignment. The best relationships are usually when the merchant is happy to have the 3PL, and the 3PL is happy to have the merchant.”

“Look for a 3PL that services similar merchants, both in terms of industry and order volume. Personal recommendations are good, but visiting the facility is the best way to judge the 3PL.”

What’s the biggest red flag?

“By far the biggest red flag is if the 3PL you are considering has a high level of churn. If merchants are leaving the 3PL by choice or because the merchants themselves are going out of business, those are bad signs. Ask to speak to a few reference merchants that have been long-term customers.” 

Finding the Right Inventory Management System

IMSs do more than manage stock and orders. They streamline those processes to save you time, money, and heartache. Logistics isn’t the sexiest growth topic. But it is one of the areas that dramatically affects your overall performance: for good and for ill.

Choosing the right IMS can mean the difference between more sales and happier customers … or the source of almost every problem in your working life.

To save yourself from that fate, be sure the IMS — or any 3PL — you vet provides you with …

  1. Financial proof of long-term health and viability
  2. Recommendations and reviews highlighting both the good and the bad
  3. One-on-one referrals to contact their existing customers
  4. A track record of success in your industry and at your order volume
  5. Price quotes that include special features like gift wrapping, returns, and purchase orders as well as how they monitor and deal with expiratory products (e.g., food and beverage)

Lastly, nothing can replace connecting with the IMS face-to-face to make sure everything checks out.

About the Author

Aaron Orendorff is a content marketer at Shopify Plus as well as a regular contributor to sites like Mashable, Lifehacker, Entrepreneur, Business Insider, Fast Company, The Huffington Post and more. You can connect with him on Twitter or Facebook.

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