GUEST BLOG: Tackling supply chain uncertainty with data-driven stock management
While scaling across multiple marketplaces is usually a sign of positive progress for any e-commerce brand, these growth periods often bring a new set of challenges to deal with.
Among all these hurdles, stock management and order fulfillment are among the toughest to navigate as a growing brand.
Obviously, as an e-commerce brand, getting this right, and getting it right quickly, is absolutely essential to both your short and long-term success. Getting it wrong, however, can be extremely costly in terms of revenue, time, and brand reputation.
Over the last couple of years, in particular, we've seen businesses all over the globe have to rapidly adapt how they approach stock management, primarily fuelled by the pandemic, to cope with the surging rise in online shopping.
Optiply is a business dedicated to helping brands cope with these massive shifts, employing revolutionary algorithms to streamline and optimize inventory management. Simply put, Optiply allows brands generate more turnover with less stock through purchasing automation.
We met Optiply CEO Wiebe Konter to discuss how e-commerce brands should approach stock management in a post-COVID world, some of the biggest challenges facing these businesses, and what the future holds for brands selling online.
The origins of Optiply
Wiebe explained that Optiply came about due to an issue he and his co-founder, Sander van den Broek, encountered years ago when operating their own webshop.
"We were founded about six years ago in Eindhoven, where my co-founder and I were both at university. My background is in replenishment models, and his background is more in data science. We both owned a webshop, and that's how we ran into the whole purchase optimization problem—we were trying to figure out based on data 'what, where, and when to purchase stock.
We ended up solving that issue by building a purchasing algorithm based on historical sales data and other data-driven factors to predict as accurately as possible what and how much we were going to sell. Then, based on supply chains, we factored in things like 'how stable is my supplier?' and 'what are the delivery times?' to determine the right amount of inventory we needed.
The premise of this algorithm is that you don't lose sales due to missing stock, and on the opposite side of things, you don't have too much inventory, which negatively affects your cash flow.
So that's how we started, and now we have 400-500 clients, and that ranges from mid-market e-commerce companies, so a couple of hundred thousand euros, all the way to €100-€200 million businesses. We're currently developing for the UK market and plan to open in the Nordics later this year."
Keeping pace with the chaos
Without stating the obvious, COVID has triggered seismic shifts across the entirety of the e-commerce landscape, and Wiebe discussed the biggest issues posed by the ongoing uncertainty.
"It's hard when dealing with large assortments. When you have a wide variety of products, getting everything right and having a balanced inventory is difficult. You have to ensure you have enough stock of products that move quickly, and alternatively not too many of the ones that don't."
"There's also changing consumer demands, which become even more difficult to adjust to when we have supply chains that are currently a total mess. For instance, while getting goods in from China might once have taken only eight weeks, right now it's maybe double that. So both of these factors are more unpredictable than ever. To be on top of that, ensuring your inventory and purchasing changes keep pace with the market is incredibly difficult."
"The pandemic made everyone aware of how fast the world can change. From a consumer perspective, people suddenly needed office equipment at home very quickly.
"In supply chains, this side of things was predictable. You could once upon a time say, 'ok, this should take this long to arrive', and plan around that, but you simply can't do that anymore. The most recent example is Shanghai going back into lockdown, something that's had a huge impact right across the globe and completely flipped, once again, how so many businesses operate.
"Because of that, one of the biggest shifts I've seen is a wider understanding of the value in multiple suppliers and fulfillment alternatives. We only had a couple of clients that would operate this way, having different suppliers for the same product. Now there are a lot more people ensuring they have multiple suppliers for one item and having different routes of transport, so if one method doesn't work, you have a Plan B and a Plan C. Doing things this way might be a bit more expensive, but that's much better than your business coming to a halt.
"To regain a balanced supply chain anywhere close to what we had, that's going to take a couple of years at least. The container situation is still a huge issue. We have tonnes and tonnes of containers on this side of the world, but very few on the other. That's going to take a long while to solve."
Make or break: The consequences of poor stock management.
It is no surprise that if a brand doesn't have an in-depth and accurate understanding of its inventory, then the whole business model suffers. Wiebe pointed out that aside from not being able to fulfill orders, brands that don't optimize their purchasing could be losing a fortune in unsold stock.
"It's super competitive on marketplaces—this also applies on your own webshop—when your product is not there, a customer will quickly look elsewhere at one of your competitors. On the other side, especially in a fast-growing e-commerce business, cash is king. Having all your cash stuck in goods that don't move can literally eat your business.
"On top of all that, marketplaces can punish brands quite heavily for not being able to fulfill orders, which in turn means your chances of winning the BuyBox are significantly damaged.
"This also leads on to the huge sustainability element of our model. It's so unsustainable to have products ship worldwide without them ever being sold or used. I know our clients have an increasingly large focus on how to make their supply chain more sustainable, so that must be another big consideration."
Optiply's success stories
So how does all of this translate in terms of results and complex numbers? On average, Optiply's partners enjoy 12% more revenue due to better stock levels and product availability. Additionally, these businesses can hold 26% less stock, meaning a drastic reduction in waste, and spend up to 80% less time on their current purchasing process.
Time to enter a new marketplace?
The process of entering a new marketplace can be understandably daunting for some brands, so we quizzed Wiebe on a few of the initial considerations that should be taken during this period.
"What is really important when you enter a new marketplace is to understand you're potentially opening up a huge extra channel. So if your price is right, things can move fast, and you need to be prepared for that. It's so important that as you open across multiple channels, you're really accurate with your demand forecasting because things do change so quickly."
Suppose you do plan on selling across several marketplace channels. In that case, ChannelEngine vastly streamlines that process, allowing businesses to efficiently add new channels through automated integration software that takes care of the most common challenges associated with these growth periods. Combining this with Optiply's stock management algorithm is an incredibly effective way to optimize your marketplace operation and scale your selling capabilities.
What to do and what not to do
As an expert in all things stock management, it's only natural that we'd ask Wiebe to share a few of his own big dos and don'ts.
"Have a time-efficient and scalable process, definitely if you have growing assortments and multiple channels.
"Try to do things as data-driven and flexible as possible. You need to be agile if the world changes again and immediately know what this means for your supply chain. To prepare for that, try to diversify suppliers and utilize different transport routes.
"As for things to avoid, a lot of people still operate off gut-feeling. They'll say, 'I know the market, I know where it's going because I've been in this business for ten years, so I know how it works. When things change this fast, that approach just doesn't work anymore."
Four tips for optimizing your inventory
Diversify your logistics: Don't become reliant on a single supplier, delivery method, or route. If your current logistics solution falls through, you need an immediate alternative.
Be scalable: Things can move extremely fast when selling online. Building a model that allows you to grow with that demand will allow you to capitalize on that. Using an integrator like ChannelEngine significantly helps you streamline this process.
Be agile: Rapidly shifting consumer demands and massive supply chain issues have highlighted just how fast things can change. If you are not agile in dealing with these obstacles, then your competitors will quickly leave you behind.
Use data: Gut feeling no longer works when truly optimizing your inventory. Be analytical in your approach to purchasing stock to maximize revenue and minimize waste and your environmental impact.