Inventory management is an ongoing struggle, and too often it can feel like you are losing the battle. Some wholesalers struggle for years on their own with limited success. Other wholesalers choose to outsource back office services to act as an inventory management specialist and help secure the resources they need to gain the upper hand. But that solution doesn’t work for everybody.
What Kind of Wholesalers are Outsourcing Their Back Office to the Greatest Effect?
- Smaller sized wholesalers with annual sales of anywhere from <$1m to $6m
- Midsized wholesalers with annual sales from $6m-$60m
- Domestic manufactures of any size
If you avoid some common pitfalls, a third party back office service can substantially change how your business manages its production, inventory and shipping. For domestic manufacturers it can also help manage your materials supply chain and help automate fabric and trim ordering, track fulfillment, and help you manage your contractors and deliveries.
With an inventory management specialist comes real cost-savings in terms of warehousing, production, fulfillment, and more. It can improve relationships with retailers, reduce markdowns and chargebacks and improve your net profits.
Back Office as Your Inventory Management Specialist
So you wonder if you should jump on the bandwagon. How can an outsourced service improve your inventory management and how can they translate to your bottom line? Do they really help and can you afford the price?
The right back office solution has greater resources to devote to personnel and software than the typical wholesaler. Wholesaler’s core business is design, production, and sales and so that is where they logically direct their greatest investments. It may sound silly to say it: A back office service company’s core business is back office services, so they direct their investment toward personnel, training, technology and software. A good back office service provider will also have on staff developers improving software and creating customizations on an ongoing basis.
Expertise dealing with 3PLs and warehouses
The right back office service provider will have experience dealing with a wide range of warehouses. They can create file exchanges where appropriate, create labels, oversee routing, track pending shipments, and create easily searchable electronic archives for BOLs. They can help manage ecom and direct-to-consumer shipping by utilizing APIs and other integrations that many wholesalers struggle to put into place effectively.
Back office service providers should deliver better reporting tools. They should have on staff developers working to customize reporting so that you can use it in the real world, efficiently and without additional manual manipulation. For example, one invaluable tool to help manage your inventory is an inventory aging. An inventory aging is similar to an accounts receivable aging – except it ages your inventory and helps direct you to potentially stale inventory. Often your first mark down is your best markdown, so an aging can help you maintain your margins. In addition, with lenders paying increasing attention to inventory age quality reporting can help you stay one step ahead and protect your cash flow. A good back office services company will have a library of effective reporting to help you sell and manage your inventory.
A good back office services company will set up a strategic array of auto alerts. Too many alerts and people stop paying attention. Too few and you risk short shipments and other compliance related chargebacks. Delivery dates change. Placed orders face shortages. When projected inventory changes, salespeople and management can be alerted automatically and notified which specific orders will be impacted. This gives you a better chance of resolving inventory issues early on.
When a warehouse reports a shortage you can’t just take their word for it. Your back office can create audit trails to your warehouse and direct them to look for the freight again. You may be surprised how often they find the freight when a well designed audit trail is presented to a 3PL.
You do business in so many ways. You ship some combination of the following:
- Major retailers
- Specialty stores
- FOB overseas
- International sales
Each of these areas requires technological solutions and expertise. A good back office should offer quality solutions to all of these shipping challenges. They can help segment your inventory so that you don’t commit to an order when you can’t deliver. That helps you avoid costly chargebacks and maintain good relationships with your buyers.
Retailers make an ever-increasing number of demands on wholesalers. They have the leverage to deliver thick compliance manuals for you to absorb. You ignore them and the updates at the peril of chargebacks. Back office service providers should help turn that battle into a fair fight. They should have the resources and expertise to become your inventory specialist. The right back office partner should do all that, and do it at 50% less than most small and mid-sized wholesalers can do it on their own.
Wholesale Executive Insider helps clients with renovating business for success, in fine-tuning inventory and stock handling to expedite fulfillment, conserve business intelligence, and provide industry-wise insights at every step of the process.
Are you ready to focus on growing your wholesale footprint? Contact one of our specialists today for a 1-on-1 session that will change the way you do business!