This is a Guest Post by Andrey Zavyalov of National Business Research Institute.


Typically, when anyone starts an online business, they already know what they should sell. The next question is usually how you will get those products, will they be hand-made, will you outsource to a wholesale supplier or a combination of the two. Whichever method you choose, you need to take into account how you will manage your inventory. There are three industry standards for making sure products are easily tracked in your supply chain: drop shipping, product fulfillment service and shipping from internal inventory. For online businesses, ecommerce platforms offer added flexibility that allow you to combine these techniques as you see fit. Read on for more information on how these strategies can help you with your online strategy.



Drop Shipping

Right out the gate, drop shipping can prove advantageous, especially if you want to experiment with new products. Drop shipping doesn't require that you keep inventory on hand - thus keeping your initial investments low. With the money you save on inventory you can target to other areas like overhead and online advertising. For more established businesses, you can use drop shipping to add to existing product offerings. You can also test how well certain products sell and determine the ROI of a particular group of items. Even those that typically keep an inventory of their stock can utilize drop shipping by measuring how well a particular item sells and then determining how much of it they need to keep available. This type of testing allows owners to keep a lean warehouse when market fluctuations can add variability.

To enroll in a drop shipping plan, there are two routes you can take. There are drop shipping companies that specialize in managing large volumes of products, associated data and shifts in supply that might yield discounts. Larger companies can even provide up to date information by the hour on the status and availability of items. If you're looking for a more seamless process, consider those that work directly with shopping carts. This would allow you to automate the tracking tasks without switching platforms; however, convenience has its price. Because the supplier controls so much of the process, they also have the ability to name their own prices or even charge membership fees. You also need to keep in mind that there are several other online retailers using the service in the same way. This could leave to aggressive tactics like price matching that could ultimately cut into your profits. These are just a few things you will need to consider before fully committing to this type of service. In some cases, using an external company for drop shipping may not be justified in your business model.

The alternative to using a drop shipping company is to sign an agreement with a manufacturer or certified importer. This method will allow you to cut out the middleman and have the products delivered directly to the customer. You also don't have to run the risk of having prices marked up or additional membership fees. World Wide Brands and Salehoo are two of the most widely known search networks for wholesalers who have drop shipping services. Going directly to the manufacturer does have a downside as well. You cannot always rely on the manufacturer's inventory tracking systems to provide you with timely and accurate data. Stock levels can fluctuate and this can be stressful, especially when you've already made a sale only to find out that the item is unavailable. It will definitely take more time to monitor what the supplier is doing in order to avoid possible lags in supply and unhappy customers.


Fulfillment Service

Another tactic that companies often use is fulfillment services which allow it to outsource the storage of your products. This can be a possible cost saver by reducing the amount you have to invest in a warehouse and associated overhead. If your company experiences rapid periods of growth, a fulfillment service can help you manage the extra work and inventory as needed. This method is beneficial for those who may need to stock items depending on the workflow within a given year. Meaning, whether you need a warehouse to hold a few items or a shipload, they'll have the space and manpower to accommodate your needs. Fulfillment services can also over lower shipping rates because they tend to deal in bulk quantities and direct suppliers. Amazon Fulfillment and Ship Wire have perfected the fulfillment method and are industry leaders. Business owners will need to factor in the cost of using this type of service, however, they can end up saving the business money in the long run.


Stock Products Yourself

In some cases, stocking your own products is the best way to oversee the flow of your inventory. Wholesalers tend to like businesses who favor this option because that typically means bulk purchases. This will ultimately increase the per product profit margin. What you must figure out is how to manage the quantity of your products and where to store them. You also will have determine how much of your workforce you can dedicate to overseeing inventory levels, Employee wages along with inventory carrying costs and rent are only a few of the costs associated with handling your own stock. Companies that succeed often find a less competitive field.

If you jump into an inventory business without fully understanding how the system works, you can quickly find yourself in over your head. Sometimes the simplest way is keep track of products moving in and out of your storage facility is to purchase barcode scanners and equipment. You can find these devices in nearly any warehouse and can be every effective in reducing costs. Barcodes help managers do detailed tracking of inventory levels and keep up to date records of where a product is within your supply chain. There are several companies who specialize in creating state of the art barcode equipment, like System ID  – The Barcode People. System ID is an industry leader in providing inventory management systems to large and small scale operations. Business owners can choose from a wide selection based on their needs. The company also provides substantial supplementary information and customer support each of their devices.

How you determine which inventory platform is suitable for you is by doing a thorough analysis of your business model. No solution is without its flaws but you can make an educated decision based on what was discussed in this article.


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