The wide use of the internet has brought an end to segmented sales and reach in eCommerce. You can now sell to anyone; whether they’re next door, in the next country over, or even a continent away. With that simplified global reach comes a shift in our retailer’s eCommerce businesses to one of internationalization and international supply chains. And internationalization goes hand in hand with another “i” word—inventory management.
To clarify, inventory management includes overseeing and controlling the ordering, storage, and use of components that a company uses when producing the items it will sell, as well as overseeing and controlling quantities of their finished products.¹ So for instance, if you owned a mail-order bakery, your inventory management would cover everything from chocolate chips to vanilla extract, packaging materials to freshly-baked cookies ready to ship.
Managing your inventory is still one of the most challenging processes to master for eCommerce and omni-channel retailers, even when you have the rest of production all figured out. Depending on your company’s structure, you could have multiple locations, numerous countries of origin, and customer service available in many languages. Becoming proficient in international eCommerce requires hundreds of hours of your attention and consistent learning from mistakes—yours and others’.
If you are already selling internationally, or if international eCommerce makes an appearance in your corporate business strategy for 2016 or 2017, here are some tips to follow.
Find a business or solutions partner
It’s generally a good idea to have a presence on the ground wherever you’re warehousing or manufacturing your products. If hiring a full-time local employee isn’t feasible, you can hire a part-time representative. That person should be proficient in and knowledgable about the laws, taxes, and customs of the country. For instance, understanding the inventory holding costs in one country vs. another can save boatloads of money, and can help you decide how to adjust your inventory management techniques to best take advantage of the lowest option.
In addition, a properly vetted representative should have a digital rolodex that would allow you to make other connections in both the local area and in your country of origin. The right connections can knock down walls that others can’t get around.
Re-evaluate lead times
Lead time is the amount of time that occurs between placing an order for goods and finally receiving those goods. Your top-level lead time should include potential supply delays and reorder delays. If you change your supplier from local or regional to international, your lead time will naturally increase, and you’ll need to plan around that.
This change in lead time is an essential part of your inventory control and overall supply chain management—make sure to account for these changes and readjust it. Some of our Gauge clients use a best-case/worst-case scenario strategy. If a typical product order takes on average 13 business days, set your expectations at 15 business days to allow for delays and other unexpected snafus. As long as the company assumes this 15 day turnaround, you can properly plan for inventory warehousing and promotions—without outselling your current inventory.
Inventory forecasting methods are crucial
Product inventory forecasting is primarily about (1) anticipating which items in your stock are moving quickly, and (2) which orders to fulfill and when. Depending on your inventory management strategies, you may have to make some changes in order to go international. While your trending reports and base demand may stay the same, your general re-order thresholds and order quantity may need to be updated to adjust for the delivery and lead times required for each country. Every country is different, and each requires specific clearances and extra expenses.
Keep the holidays in mind… all the holidays.
Seasonality is a major concerns when you have international suppliers. If your business is based in the United States but you have a supplier from Mexico, Thanksgiving/Black Friday may be your busiest time of year. However, in Mexico, Dia de la Revolución falls on the Monday after Thanksgiving. It’s a major holiday in Mexico, and most workers have the day off. In short, make sure to be aware of holidays in each country you operate in. Sync up your schedules to account for those times when you’ll need to order more inventory than usual, and when your inventory lead time may be affected.
Choose your supply chain partners carefully
Most clients assume they are choosing supply chain partners soley for the partner’s ability to manufacture their products. Don’t get caught in this trap. When your supplies are intercontinental, relationships with suppliers can be essential to getting the goods on time and in the condition you need them. Choose a supplier that you truly feel comfortable with to form a mutually beneficial relationship. If budget allows, go visit your suppliers at least once a year to maintain good rapport and get in those face-to-face interactions.
Do your research
Whether you’re expanding to another country for warehousing, sourcing, or manufacturing, having a local employee or rep on the ground is only the first part of an effective strategy. You still need to do your research. Understanding the basics about each country’s culture, general business philosophy, and expectations for a beneficial relationship will help you make better inventory management decisions. A bit of research now will help you in the long run.
Pro Tip: Create a questionnaire—even if it’s a simple one—to distribute to potential partners so you can compare apples to apples. Include questions about quality, QA, and lead times, and find out if they have any other clients using a business model similar to your own. If one stands out above the rest, you may have found your best option. If you struggle to get through a coherent questionnaire or have trouble reaching understandings in the research process, you can predict that the day-to-day operations will be just as much of a struggle.
Move to the cloud
When you have multiple partners in multiple time zones and locations, Excel spreadsheets that need to be updated and shared manually just aren’t going to cut it. Yes, you can use Google Sheets to share and collaborate, but some companies block SaaS solutions like Google Drive for fear of security breaches. If you choose a proper cloud-based system, your company’s inventory levels, purchase orders, and operational information can be updated in real time. This will lead to lower shipping errors, human errors, and inventory shortages that effect the end customer’s opinion of the brand. Cloud-based software makes all your data accessible everywhere, no matter where you are or what device you’re using. Putting it all on the cloud means that if your computer, spreadsheets, or hardware melt down, your global inventory management stays intact.
Hopefully you enjoy these tips and can apply them to your regional and international supply chain. If there is anything you have a question about or want to clarify please leave a comment!