Online Inventory Management - Part 2: Duplicate SKUs, Overselling, and the Importance of Integration
More hours in the day. It's the one thing every multi-channel merchant wants, and yet it's impossible to attain. But what if you could free up significant amounts of time to focus on the responsibilities that really matter? This post resumes our series about online inventory management and expands the concept of having a single master SKU for every item in its base unit of measure. This way you can eliminate the time-consuming task of creating and managing duplicate SKUS and replace it with a value-added one like adding new products, sales channels, and suppliers.
In Part 1 you learned that by managing inventory at the 'base unit of measure' level, cost and inventory information can be controlled at the master SKU level, while listing content such as quantity, price, image, weight, and descriptions can be controlled at the individual listing level. We defined 'base unit of measure' and took a closer look at unit of measure conversion. Part 2 covers managing and publishing listing specific content as well as overselling and the importance of integration.
For example, in the table below we're selling O'Keefe's 'Working Hands' Cream. There are 4 sales channel listings:
- An 'each' listing on Amazon
- A 2-pack listing on Amazon
- A 4-pack listing on eBay
- A 6-pack listing on your website
|Conversion||Item||Base Unit of
- All listings have unique quantities, prices, images, weights, and descriptions
- The description of the 'each' listing says 1 unit and the description of the 2-pack listing says 2 units
- The image and weight of the 4-pack listing is different from the image and weight of the 6-pack listing
You must control all this - listing specific content at the listing level, with cost and inventory information controlled at the master SKU level. This will prevent you from having to create duplicate SKUs just so you can manage different units of measure and the unique content (quantity, price, image, weight, and description) of each individual listing.
Why is creating duplicate SKUs a bad idea? It makes inventory management, purchasing control, and competitive repricing almost impossible because every SKU for every listing across every channel must first be manually combined! Not only is this task extremely tedious and time-consuming but it also prevents you from having true visibility to the velocity of the item (how many are selling in a given time period).
You must also have dynamic stock publishing and delisting. Let's say you have 60 units of O'Keefe's 'Working Hands' Cream in stock. You have 3 'each' listings on Amazon, 1 'each' listing on eBay, and 1 'each' listing on your website. If you publish 100% of your inventory across all 5 sales channels you've just told the world you have 300 units in stock - and you could sell all 300 units if you're not careful! You can't allow this to happen. Based on your supplier's fill rate, your fulfillment method options (pick-pack-ship, cross-dock, drop ship, etc.) and the variety of your inventory sourcing you must carefully configure the allocation you want published to each sales channel.
For example, if your supplier has a 97% fill rate, you may want to publish only 95% of their stock to compensate for their fill rate and have a safety cushion. Also, if your supplier doesn't provide an inventory file you could choose to set absolute values (i.e. always publish quantity of 3.) The last thing you want is to have your Amazon account suspended due to overselling. This is the key benefit to maintaining accurate inventory levels.
The Importance of Integration
Finally, whether you use an online inventory management system or an Excel spreadsheet, your solution must be integrated to purchasing and sales. As you buy and sell, your inventory levels must be kept up-to-date. When you order products and receive stock, your inventory counts should automatically go up. As you sell your products, your inventory counts should automatically go down. If your solution isn't integrated to purchasing and sales then it's dependent on you to do inventory adjustments.
If you receive inventory and don't publish to your sales channels, you won't sell anything because the sales channels think there are no products available. On the flip side, if your sales channels aren't integrated to your inventory control, you'll have to deduct inventory on a daily basis - or inventory levels will be artificially high and you'll oversell.
See how critical it is to have a solution integrated to purchasing and sales?
If your solution offers sales integration but not integrated purchasing, you won't get the input you need to grow and expand. Many new merchants use entry level solutions but it only gets them so far.
Bottom Line: Control listing specific content at the listing level and cost and inventory information at the master SKU level. This will prevent you from having to create and manage duplicate SKUs and allow you to spend more time on the work that matters. To avoid overselling and suspension carefully configure the allocation you want published to each sales channel. Your online inventory management solution must be integrated to purchasing and sales. If it's not, then it's dependent on you to do inventory adjustments.
Topics: Etail Vantage Point