The most successful businesses meet customers where they are, which can often mean accepting orders across multiple sales channels.
While expanding your product’s availability is a clear route to increased sales, it also adds complexity to overall operations. Companies have to aggregate all incoming sales orders, coordinate with warehousing and fulfillment, and ensure total inventory levels are up-to-date.
Multichannel inventory management helps companies track products that are stored in different locations, as well as fulfill orders that are placed through multiple sales channels, including ecommerce platforms, marketplaces, and retail stores.
Whether your company is expanding to new markets or diversifying inventory storage space, it’s increasingly common these days to manage inventory across many channels.
This article discusses the benefits and challenges of a multichannel inventory management process, and how a centralized business management platform can optimize it.
What is multichannel inventory management?
Multichannel inventory management (also called multi-source inventory management) is the process of ordering and tracking products across different warehouse locations and fulfilling orders placed across multiple sales channels. This typically includes ecommerce businesses, online marketplaces, wholesalers, distribution channels, and retail stores.
Any company that sells physical products needs proper inventory control. Holding too much or too little stock, and not being able to adapt to market changes, can leave a company with unnecessary costs and insufficient revenue.
While traditional inventory management already oversees many components, multichannel inventory management compounds the effort with its increased number of warehouse locations and sales channels.
Ultimately, multichannel inventory management aims to achieve the most cost-effective amount of inventory on hand to satisfy customer demand.
Challenges of multichannel inventory management
With numerous storage locations and sales channels, managing multichannel inventory naturally comes with additional considerations. These are some of the most common challenges when managing multiple sales channels.
Overselling or product stockouts
When selling through multiple channels, gauging the optimal inventory stock levels can be difficult. It’s common for the increase in market demand to outweigh the number of products available in stock, which leads to missed sales. Companies may be required to pay higher costs for rushed orders or expedited shipping. Over time, stockouts can cause disappointed customers to shop at competitors.
Overstock or deadstock inventory
Conversely, a company can overestimate market demand and order more inventory than it’s able to sell. Overstock creates extra expenses, namely carrying costs and stocking fees, and if the products remain unsold, the company will lose revenue. This problem is exacerbated when selling on multiple channels, as distributed inventory is more challenging to consolidate and can add up to even more deadstock.
Inefficient warehouse management
When moving to multichannel inventory management, companies typically allocate products across multiple distribution and fulfillment centers. Without necessary visibility and tracking, however, distributed inventory can cause longer shipment times, higher logistics costs, and increased order errors.
Inconsistent inventory information
Maintaining consistent product information can be challenging when dealing with multiple warehouses and sales channels. Companies must synchronize inventory levels, product information, prices, and shipping labels to maintain accurate records and avoid mistakes in customer orders. This is particularly important when handling returns or exchanges to ensure timely refunds.
Inaccurate sales forecasting
Every channel has its own unique sales patterns, with factors like seasonality and customer preferences at play. Predicting market demand and determining the optimal levels for each channel is important. Rather than looking at general inventory turnover and sales, it’s important to analyze data per sales channel, warehouse tracking, and type of product.
Negative customer experience
Regardless of where a purchase is made, customers expect the same quality and level of service. This is relatively simple when selling through a single store. However, every additional channel introduces complexity to customer service. Inconsistencies between inventory and sales channels can lead to subpar service, delayed order fulfillment, and a negative customer experience.
Benefits of multichannel inventory management
When expanding your sales reach, multichannel inventory management can help to streamline workflows and organize the entire supply chain. Here are some of the key benefits of implementing multichannel inventory management:
Expanded market reach
Effectively engaging new markets and reaching a broader customer base are primary benefits of multichannel inventory management. By selling across multiple channels, such as online marketplaces, social media platforms, and wholesale platforms, companies increase their potential to capture customers who prefer specific channels and have yet to be reached via other channels.
Diversified sales and revenue streams
Selling through different channels reduces the company’s reliance on a single platform by bringing in sales from various market segments. Thanks to multichannel inventory management, companies can diversify their revenue streams and build more sustainable and profitable operations in the long run.
Optimized inventory allocation
Multichannel inventory management enables businesses to strategically allocate inventory across sales channels, in accordance with local demand and market preferences. By optimizing for overall inventory distribution, companies can reduce unnecessary costs tied to excess inventory while preventing potential stockouts and lost sales.
Insights drive by real-time sales data
Selling through multiple channels, as opposed to a single point of sales, offers increased inventory data and metrics. Multichannel inventory management systems provide a comprehensive view of real-time inventory levels and analytics, facilitating data-driven decisions and quick responses to fluctuating demand. By analyzing sales patterns and channel performance, companies can continue refining their strategies and identifying growth opportunities.
Builds a better customer experience
Multiple sales channels gives customers the convenience they’ve come to expect in their shopping experience. Whether through a traditional retail store or online store (i.e., Amazon FBA, eBay, Etsy, Shopify), running a multichannel business allows customers to purchase on their preferred channel. Customers can shop at their own convenience, which increases potential sales, repeat purchases, and brand loyalty. Furthermore, by synchronizing the experience across every sales channel, companies can promote a more holistic and engaging experience that meets customer expectations at every touchpoint.
How QuickBooks Enterprise supports multichannel inventory management
Managing inventory across multiple sales channels requires a dedicated inventory management solution. QuickBooks Enterprise enables you to manage your supply chain across different warehouses or even trucks, and track inventory down to their specific bin, shelf, pallet, or SKU.
Inventory can further be categorized up to four levels and assigned expiration dates, so you can determine which products should be moved across sales channels to reduce potential loss. Purchase orders can be easily batched and managed from a central dashboard, with detailed pick, pack, and ship instructions sent to the appropriate teams using barcodes and mobile scanners.
In addition to automating warehouse and order management tasks, QuickBooks Enterprise brings together the critical inventory management tools and functionality for companies to sync inventory, decrease fulfillment times, and address issues that can cut into your margins.
Final thoughts
To see success in today’s market, it’s important for companies to store their inventory in optimal locations and sell through omnichannel operations. Multichannel inventory management helps deal with the additional complexity by coordinating various sales channels, ensuring data accuracy, and maintaining efficient fulfillment processes as your company grows.
Multichannel inventory management software like QuickBooks Enterprise provides intuitive automations and integrations to streamline the process further. By leveraging the right software and strategies, companies can reap significant benefits from multichannel inventory management and remain competitive in the evolving market.
