Automate Your Shopify Store

Learn about the best ways to automate your e-commerce business and manage your inventory across multiple Shopify stores.
Inventory Turnover: Definition, Formula & Impact on Profitability (With Examples)
InventoryInventory Turnover: Definition, Formula & Impact on Profitability (With Examples)Does inventory turnover sometimes feel like a mystery to you? Certain products take forever to sell (even after you've discounted them many times), while others just fly off your shelves (figuratively speaking). Firstly, you must understand that inventory turnover is a balancing act between your sales and stock. Think of a scale: if you increase your sales but don't keep enough stock on hand to fill your orders then you can lose those sales. But if you have few sales, then your stock levels can remain high and cost you money instead of making it. Secondly, inventory turnover is a key performance indicator that helps you understand how well you're running your store and if your profitability is healthy. Keeping these two points in mind, let's try to demystify inventory turnover more. » Compare the best inventory management systems for your Shopify store Inventory Turnover Defined Inventory turnover is the ratio of cost of goods sold (COGS) to the average inventory value over a period of time. This ratio helps you measure how quickly your products are selling and how efficiently you're managing your inventory. High inventory turnover rate indicates that you're selling your products quickly and efficiently. Low inventory turnover rate suggests that there's an issue with either pricing or product availability. As we've already discussed, this is a balancing act and you need to find that sweet spot between high and low to ensure your long-term profitability. If your rate is too high, you may not have enough stock available to meet customer demand. If it's too low, you may be carrying too much stock and tying up valuable capital in unsold items. » Follow these tips to manage your Shopify inventory better Formula for Calculating Inventory Turnover Inventory Turnover = Cost of Goods Sold (COGS) / Average Value of Inventory You can compare your inventory turnover number to industry standards or previous years' results to get an idea of how well your business is performing. Now, let's break the formula down. Cost of Goods Sold (COGS) COGS represents the total amount it cost your business to purchase, manufacture, and deliver all the goods you've sold during a specific period. Average Value of Inventory You can calculate average inventory by adding your beginning and ending stock levels over a specific period together and dividing them by two. Example of Inventory Turnover Let's put the formula into practice: Let's say your business has $50,000 worth of cost of goods sold over the past year and an average inventory of $20,000 over the same period. To calculate your inventory turnover rate: COGS / Average Value of Inventory$50,000 / $20,000 = 2.5 In this case, your inventory turnover rate is 2.5—meaning it takes your business two and a half times to turn over its entire inventory during the given period. The Key to Profitability is Lowering Your COGS COGS has a direct impact on your profitability because it determines your gross profit. Gross Profit = Revenue — COGS Gross profit shows you if you're at least selling your products at a good enough price to make a profit. So: are you getting more out than you're putting in? By lowering your COGS, your gross profit can increase and you can get a better balance between your inventory and sales. Strategies to Lower COGS There are a number of strategies you can use to lower your COGS, including: Negotiating discounts from suppliersBulk buying when possibleImplementing just-in-time inventory management techniquesUtilizing barcode scanning systems to accurately and efficiently track your stock levelsUtilizing software to track purchasing trends and identifying potential savings opportunitiesAutomating ordering processes where possible » Can decoupling inventory help your online business? Don't Toss and Turn Over Inventory Turnover Anymore It's difficult to determine what a good inventory turnover is, because it depends on your industry and if you manufacture your products yourself or buy products to resell. By keeping an eye on your inventory turnover ratio and profitability, you can make informed decisions about your business's stock levels and overall purchasing strategy. With a bit of strategic planning and diligence, you can ensure that you are making the most of your inventory and achieving a profitable balance in the long run. » Explore Egnition's Shopify apps to simplify inventory management
Bulk Inventory Management: Weighing the Pros & Cons
InventoryBulk Inventory Management: Weighing the Pros & ConsIt's important for any e-commerce business to have an efficient inventory management system in place, but especially when you manage bulk inventory. Bulk inventory management (BIM) has 3 steps: ordering your stock in big quantities, storing the stock while it sells, and re-ordering new stock as you sell out. Below, I examine the advantages of BIM while also weighing its potential risks. By understanding both sides, you can make an informed decision about whether BIM will help you manage your Shopify inventory better. 4 Advantages of BIM With BIM, you can manage and track inventory levels, order fulfillment, and product availability. This makes keeping an eye on your products, orders, and customers easy. Let's discuss the advantages of BIM in more detail. 1. Access to Bulk Discounts & Wholesale Pricing By ordering large quantities of stock, you can negotiate with your supplier for a better price. In turn, you can use this extra margin to adjust your own selling prices or run specific promotions that will help your store stay competitive in the ever-changing online market. 2. Reduces Risk of Product Shortages Perhaps the most obvious advantage of bulk inventory is that your risk of running out of these products decreases. It also means that you're less likely to lose customers and sales to competitors because your products are available. 3. Accelerates Order Fulfillment Building on the previous point: if stock is readily available then it's easy and quick to fulfill customer orders. Think of the great impression your store and brand make if you can deliver a full order on a tight deadline. Customers don't have to wait for backorders or search for another store that can supply them sooner. 4. Enables Swift Replenishment Depending on how quickly your bulk products sell, it's easy to monitor the stock levels and place another bulk order for these products as your stock levels dwindle. You also don't have to re-order that often compared to single products that you keep in minimal quantities. » Here's how an automated inventory system can help you 5 Disadvantages of BIM Despite its above-mentioned benefits, BIM also has drawbacks—particularly when it comes to cash flow and warehousing. Follow along as I delve into this more. 1. No Margin for Error in Sales Forecasts Without a margin for error, you can't plan ahead if sales don't meet expectations. This can lead to overstocking or understocking, causing your business significant financial losses in the long run. » Opening inventory: Determine how much inventory you should start your Shopify store with 2. Warehousing & Storage Solutions Become Costly Warehousing and storage solutions can become costly. Firstly, you'll simply pay more for the space necessary to store your bulk inventory as opposed to the space for a few items because you only order stock as you receive customer orders. Secondly, if your sales forecasts are incorrect, you must still pay to store your products regardless of if they're selling or not. 3. Higher Risk of Inventory Becoming Obsolete Another potential risk is that inventory may become obsolete if you don't sell it in a timely manner. This may happen if you don't effectively monitor and adjust your inventory levels or you don't properly plan your inventory forecasting, particularly when it comes to products that are seasonal or a temporary trend. » Learn how to clear deadstock inventory 4. Minimizes Available Cash Flow BIM can affect your available cash flow greatly. Again, if your sales forecasts are incorrect, you may end up with an overstock of certain products. This means that your cash is tied up in excess inventory that's costing you money because you still need to pay your supplier, storage, insurance, etc. 5. Typically Results in Higher Insurance Premiums Your inventory is always valuable, but even more so when you work in bulk. Consequently, your insurance premiums can be higher because as your inventory levels increase, so does your risk. You need to properly insure your inventory against damage, theft, etc. » Find the best inventory management system for your Shopify store The Verdict I recommend bulk inventory management as a strategy for well-established companies. Whenever you work with large quantities, you must be able to capitalize on economies-of-scale, otherwise the venture isn't worth it. If you're a start-up or a young company, your risks are far greater at the moment than the advantages you would gain from this strategy. The costs of warehousing and insurance alone might make it unfeasible. But whether or not you opt for bulk inventory management for your store, having a better grasp on your out-of-stock items can't hurt. For my own store, using the Out-of-Stock Police app by Egnition greatly improved my inventory management strategy.
My 6 Expert Tips for Managing Pipeline Inventory to Meet Customer Demand
InventoryMy 6 Expert Tips for Managing Pipeline Inventory to Meet Customer DemandInventory management is an essential aspect of any business. What you might not realize is that inventory isn't limited to managing only the stock currently present in your warehouse—it also extends to pipeline inventory. Pipeline inventory refers to stocks that are in transit between locations and has not been purchased by a consumer. Remember, regardless of the lead time and demand rate, once the payment is made to a supplier, the product becomes your inventory. 1. Keep Track of Each Step of the Process I usually start by tracking where my pipeline inventory is in the supply chain, and I make sure I know how much time the manufacturing and transiting stages will take. This includes considering what aspects of my surroundings can lead to disruptions such as crises, accidents, disasters, or pandemics. Accuracy is vital so I like to create a single source of truth across multiple suppliers and freight forwarders. I use a host of different tools, including spreadsheets and real-time scanning technologies via barcodes, stock-keeping units, and smart devices. 2. Ensure Accurate Demand Forecasting Demand forecasting means I need to know how much a product will be in demand in the future so that I can align my stock according to that demand. Like with the previous step, accuracy is key because I don't want to be overstocked or understocked. I find that going through all the seller reports I get from my e-commerce platform helps with this. There are a number of factors that can influence customer demand for a product or service. Some of them are: Pricing: High prices tend to decrease demand whereas low prices lead to high demand.Quality: Customers are more likely to demand a product or service that is highly qualified.Features: Customers tend to demand a product with certain features such as ease of use, durability, and so on.Competition: Lack of competition can lead to high demand.Brand reputation: Consumers are more likely to buy from a brand they trust and perceive as reliable. » Haven't done inventory forecasting before? Here's how 3. Consider Placing Safety Stock Safety stock is an essential aspect of a business. It means that I set a certain amount of stock aside so that I can keep on meeting customer demand if any mishappening should occur at any point in the supply chain. So, safety stock serves as backup inventory and is invulnerable to the risk of losing customers and production slow-downs which can happen because of transit or manufacturing issues. 4. Implement Third-Party Integrations Integrating third-party apps with my pipeline inventory management system helps to enhance the functionality and capabilities of my system. Useful apps like Katana (manufacturing) and Ordoro (inventory management) can help a pipeline inventory management system access and utilize additional data, automate certain processes, and improve the overall efficiency and effectiveness of managing pipeline inventory. 5. Establish a Real-Time Inventory Management System Establishing a real-time inventory management system with the help of software like Cogsy, Zoho, NetSuite, or Fishbowl allows me to improve real-time visibility and control over inventory levels so I can optimize my operations and make better, more informed decisions. 6. Automate Your Inventory Management Process Finally, my last tip is to automate inventory management processes where you can. Stop performing tasks manually like drawing up stock reports. The right software will automatically provide these, thereby streamlining your reordering process. In some cases, you'll even be able to auto-replenish your stock and keep a certain amount of inventory on hand at all times. Automated processes can also help you forecast sales and lead times. This means that pipeline stock can be adjusted on the fly, automatically ensuring you can meet all of your customers' future orders. » Explore these best inventory management systems The Verdict Almost all e-commerce retailers must deal with pipeline inventory and just overall inventory issues in the supply chain. I suggest starting by identifying and qualifying pipeline inventory before you move on to balance your cash flow and supply. You don't want to undersell or sit without stock. By effectively managing your pipeline inventory, you'll be more than capable of dealing with changing customer demand—and thereby monitor the impact this has on your profitability.

Powered By

Don't Know what Shopify is?

Start your own online eCommerce business using Shopify platform. Shopify gives you all the tools needed to make the journey easier, faster and more profitable.

Frequent Releases

We work tirelessly to deliver more value to your business. Our roadmap is largely based on the questions you ask. We listen and we deliver as often as we can.

24/7/365 apps support

You can reach out to us via a dedicated support icon in the apps. We're always there. Or simply send us an email with your questions at

Pin It on Pinterest