The Supply Chain and Inventory Planning Blog

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4 major supply chain mistakes and the brands that endured them

2/6/20 9:24 PM / by Fuse Inventory posted in supply chain, supply chain management, merchandise planning, inventory planning, supply chain optimization, demand forecasting, ecommerce, industry, inventory, inventory management system, retail

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As the old saying goes, everyone makes mistakes. From misinterpreting trends to software issues, it’s no surprise some retailers are paying closer attention to their inventory strategy this year. 

H&M

Fast fashion mega-retailer H&M made headlines in 2018 due to having $4.2 billion in excess inventory, a mistake attributed to the misinterpretation of trends and rising competition in the fast fashion space. The inventory, which was eventually purchased and burned as a form of energy, faced major backlash and criticism.

In early 2019, the company announced their intent to reduce discounting in order to preserve brand value and support the limited amount of inventory owned. Looking ahead, H&M is exploring how artificial intelligence can help them accurately predict fashion trends and reduce their lead time.

Under Armour

Similar to H&M, Under Armour also faced a small mountain of excess inventory to the tune of $1.3 billion in 2018. The cause of this overstock was also related to the inability to keep up with a change in trends—in this case, a shift from performance to streetwear.

The company spent the greater part of the year and early 2019 liquidating the goods which eventually resulted in a 12% drop in inventory levels. These efforts coupled with sales that beat expectations, allowed shares to jump nearly 5% in the early part of the year. Under Armour continues to monitor inventory and trends closely, a matter not to be taken lightly in the ever-changing global fashion economy.

Rent the Runway

Rent the Runway kicked off 2019 by announcing a fresh round of funding at a $1 billion valuation. However, the company soon faced a huge downturn after a software issue caused inadequate inventory levels and lack of order fulfillment. The brand faced major consumer backlash when dresses for special occasions just didn’t show up. They had no choice but to ban new subscribers and limit purchases for special events. They even went so far as issuing lump sums of $200 cash to those impacted to offset the costs of purchasing elsewhere.

To offset the major sales loss associated with the lack of inventory, Rent the Runway has recently partnered with W Hotels in an effort to increase sales exposure by offering pieces for rent on site. Irrespective of this initiative, RTR will need to push the envelope in innovation as competitive threats increase with major retailers such as Urban Outfitters and Express taking on the clothing rental model. 

Popeyes

Inventory misses aren’t just for the fashion industry. Fast food chain Popeyes also faced major backlash last summer after they abruptly ran out of chicken just two weeks after the release of their wildly popular hot chicken sandwich.

The company scrambled to restock, watching the window of opportunity slipping away as competitors launched copycat sandwiches. The sandwich did return to Popeyes menus some weeks later, but the company inevitably missed out on a major sales opportunity generated from the $65M media impact. Because of this flop, some may say that Chick-fil-a won that #chickenwar.

Takeaways

Misinterpreting the market or being unprepared for the success of a new product launch can be costly for a business. Whether purchasing too much in the case of H&M and Under Armour, experiencing unexpected technical difficulties like Rent the Runway, or stocking out at an inopportune time like Popeyes, it's clear that less-than-stellar supply chain management can leave businesses vulnerable to big mistakes.

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Unlocking Amazon's secret to success: supply chain

2/1/20 12:43 PM / by Fuse Inventory posted in supply chain, supply chain management, merchandise planning, inventory planning, supply chain optimization, demand forecasting, ecommerce, industry, inventory, inventory management system, retail

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Since launching in 1994 as an online bookseller, Amazon has notoriously evolved into the world’s highest-valued company by offering cloud services, media, manufactured goods, and much more. With over $200 billion in revenue, they’ve captured over 13% of the world’s e-commerce sales last year. So how exactly did they go from selling books to having warehouses in the air over the course of 25 years? In one word: scale. 

The optimization of Amazon’s supply chain has fueled their exploration of other innovative projects; thus allowing their success to snowball and propel the company forward. What sets Amazon apart from any other retailer is their ability to own the entire supply chain from start to finish -- the sales of which make up over 65% of their product revenue. They were able to do this by scaling:

Manufacturing

Over time, Amazon has collected data from its customers to inform product trends. They have been able to take this insight and couple it with the economies of scale they’ve built to cultivate low-cost comparable products sold at competitive prices. 

Warehousing

The accessibility of goods is what fuels Amazon’s shipping breakthroughs. Warehouse locations are carefully chosen based on consumer data and geography. What’s even more innovative is their anticipatory shipping algorithm which forecasts demand by location regardless of order placement. Amazon utilizes this to ensure goods are shipped before an order is placed, thus shortening the delivery window.

Technology

In addition to this patented forecasting, Amazon optimizes order fulfillment by location with more traditional means of order forecasting. What sets them apart to the consumer, however, is the ease and automation of the purchasing experience. Amazon’s release of the dash button, subscription services, and AI ordering liberated us from the confines of traditional online ordering. 

Delivery

Amazon’s popular 2-day shipping has since been adopted by many large retailers in recent years. Therefore it’s no surprise that they became the pioneers in same-day and eventually, 2-hour shipping promises. The secret to this initiative’s success has been Amazon’s fleet of owned cargo including airplanes and delivery vans. And if wheels weren’t enough, the company also invested in pick up hubs including lockers and brick and mortar partnerships. 

Final thoughts

With all this differentiation, it’s no surprise the retail behemoth has maintained 20% annual growth numbers. In the past 15 years, Amazon has evolved from fulfillment-by-amazon (FBA) for third-party sellers to become a powerhouse of owned goods and services. Fueled by their strengths in the supply chain, forecasting, insights, and innovative practices, Amazon lives by the ideology, "Why make a dollar when you can make five?"

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A day in the life of a Merchandise Planner

11/27/19 3:00 PM / by Fuse Inventory posted in merchandise planning, inventory planning, demand forecasting, industry

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You may be wondering what exactly a planner does with their time, besides the obvious planning. Put simply, your main responsibility as a planner is to order the right amount of inventory, at the right time. But in order to do this, you must put in place and manage quarterly, monthly, weekly, and daily processes consisting of pre-season, in-season, and post-season planning and analysis. In other words, no two days are the same!

1. Check Your Emails

Pour yourself a large cup of coffee and get ready for the day ahead! Because your role as a planner is integral to the connectedness of the organization, it’s important to stay up to date on all relevant information from the teams you bridge. This means staying on top of what your Finance, Supply Chain, and Marketing teams are requesting or sharing with you.  

2. Know Your Sales

While you’re probably naturally curious and want to know how you’re performing, having a pulse on performance will also help you with the day’s decisions and ensure others you are well informed. Trust is a fundamental component of any Planner’s relationship with their team and knowing what your sales are is a key part of building it. Stay on top of performance highlights, wins and losses, and you’ll be sure to leave a good impression!

3. Manage Your Inventory

A big part of planning is having a good handle on where your inventory lives. This means staying on top of deliveries and any shifts in receipts, stock levels, and any other inventory records that may impact sales and performance. This time may be spent running and analyzing reports, asking and answering your own questions, and most importantly, taking note of anything that will impact product planning.

4. Forecast

Alas, you have the most up to date information to influence your planning strategy and projected sales. Now’s the time to put these learnings into effect. This is the part of your day spent in any systems and/or excel models used to forecast demand and inventory needs. While this may be among the most time consuming of the day’s activities, it is undeniably the most important.  

5. Submit Your Handoffs

Similar to how you start the day making sure you’re up to date on everything, you typically end the day ensuring anything that may impact others is shared in the appropriate manner. Once you’ve cleaned everything off your plate, spend some time planning the rest of your week and making sure all monthly and quarterly to-do’s are being taken care of as well. 

Enjoy the Ride

Being a planner truly is an exciting role. You get to work with every part of the business, buy products, and watch mathematically backed guesses unfold. Not only do you forecast inventory needs and performance, you’ll be on top of both short term and long term business planning as well. A great practice to make the ride as smooth as possible is ensuring information is up to date and accessible to others, asking questions, and staying curious! 

At this point, you may be wondering, “Are planners superheroes, too? How is all of this done in one day?” The short answer is, it won’t always be. That’s where Fuse comes in. Our goal is to help simplify the inventory planning process and make a Planner’s role easier. We take out the grunt work from these tasks so that you can focus on the big picture. Less day-to-day, more accomplishment-to-accomplishment. 

 

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What's the difference between a Buyer and a Planner?

11/27/19 1:00 PM / by Fuse Inventory posted in supply chain, merchandise planning, inventory planning, demand forecasting, order management, industry

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While the two go together like peanut butter and jelly, there are key differences between the role of a Buyer and that of a Planner. For instance: 

  • The Planner determines the right order quantity and order time whereas the Buyer determines the right selling quantity and selling time. 
  • In some cases, the Buyer is also responsible for making sure the business has the right product, in the right place, at the right price. 

In any case, it’s important to note that Buyers and Planners must work together, challenge each other, and ultimately align on what’s best for the business. 

So what exactly are the main differences? 

1. Working with Marketing

The main difference between a Buyer and Planner as they work with Marketing is that a Buyer provides information to Marketing whereas a Planner receives information. Since a Buyer’s responsibility is determining the selling quantity, their objective is to sell products as effectively as possible. This means providing the Marketing team with product strategy to optimize selling. Explaining who the products were purchased for and why can help inform the marketing strategy.

A Planner, on the other hand, is a recipient of this strategy. Their objective is to understand the outputs that will impact future demand so that the right order quantity can be determined for a later point in time.

2. Working with Supply Chain

Similar to the relationship mentioned above, Buyers are often providing information in the earlier part of the supply chain whereas Planners are often receiving information in the latter. A Buyer may work with the team on the development or procurement of goods, whereas the Planner is more involved from the stages of PO placement to receipt. 

Put simply, a Buyer is responsible for product records such as vendors and costs, whereas a Planner is responsible for inventory records such as receipts and timing of ownership. 

3. Analyzing the Business

While both will dive deeply into understanding the business, a Buyer will most often speak to top sellers and the result of marketing efforts on product sales, whereas a Planner will go further into category insights, comparison to forecasts, and monitoring inventory. 

This process is one where the two roles must work the closest together to best understand the business.

4. Using Data

While the data both Buyers and Planners read to understand performance may be similar, a key difference is that Buyers are more focused on data related to the future and upcoming trends whereas Planners are more focused on past demand and historical sales.

5. Organizational Structure 

Because their worlds overlap so much, you’ll often see a Buyer and Planner by each other’s side. However, they may technically sit under separate teams. A Buyer will often sit under a function that oversees revenue, such as Sales or Marketing. On the other hand, a Planner may sit on a team that oversees inventory and budgets, such as Finance. This separation helps ensure there are healthy challenges across interests, thus supporting what’s best for the overall business. 

Two Peas in a Pod

The synergy of Buyer and Planner is integral to the success of any organization. While the Buyer focuses on who, what, why and where in order to build a top down approach, the Planner focuses on how much and when to build a bottoms up logic to eventually align at the optimal level. 

Fuse helps align these two forecasting methodologies systematically so that less time is spent on the nitty gritty, and more time can be spent on building the best relationship and strategies for the business.   

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3 things eCommerce brands can learn from Amazon Prime Day

11/26/19 7:27 AM / by Fuse Inventory posted in supply chain, supply chain management, merchandise planning, inventory planning, supply chain optimization, demand forecasting, digitally native brands, ecommerce, inventory

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This year’s Amazon Prime Day was record breaking generating $1 bn in sales. Not only did Amazon beat it’s own Black Friday and Cyber Monday sales, but sales also increased 60% year over year relative to last year’s Prime Day. Amazon continues to dominate e-commerce and will continue to do so for the foreseeable future. But, as we said in our previous post, we definitely believe that there is room in the market for digitally native brands to succeed. They just need to compete on a different dimension rather than trying to beat Amazon at the game that it’s mastered - convenience.

As Amazon continues to grow and dominate, we think that Amazon Prime Day has valuable lessons for growing brands that they can apply to their own business models successfully.

1. The membership model works really really well if you’re fulfilling a real need

While subscriptions of one sort or another have long been in vogue for ecommerce companies, not all of these companies have been successful over the long-term. This year, a record number of customers signed up for Prime Day, demonstrating that the membership or subscription model can work really well, but it needs to have several key components. Namely that the benefits have to be unique, exclusive and drive significant value to the customer. 

The thing that makes Prime Day so special is that it is available to only Amazon Prime members. Most e-commerce subscription providers tend to provide a subscription for the sake of stabilizing their own revenue and cash flow and not necessarily because they offer something unique, exclusive and valuable to the customer. 

That being said, companies like Stitch Fix and Dia & Co. have been successful because they provide exactly that. In the case of a company like Dia, they’re meeting an untapped market need for plus size clothing and have a unique offering in a space where there’s a clear market gap. Literally the perfect use case for a membership model. 

2.  Don’t be afraid to run experiments

In a way, Prime Day is one big experiment for Amazon. The company has used it to test new product lines and releases or supply chain innovations with the focus shifting slightly each year. Once it becomes clear what worked and what didn’t, Amazon can use the plethora of data to improve throughout the remainder of the year. 

While most e-commerce brands do have a strong ethic of A/B testing whether it’s landing pages, marketing copy or other initiatives, it can be hard to run potentially game changing experiments and take big risks as a small company. But, that being said, what Amazon and other successful e-commerce players like Jet have taught us is that big bets can pay off. In an ecosystem where retail continues to be challenged, those who innovate successfully and take bold steps to reinvent their business models even when they seem to be working will be the ones who come out on top. 

3. Make sure your supply chain and logistics are in order before ramping up marketing

While in the past Amazon has had some technical snafus related to Prime Day, the company has certainly succeeded in making sure everything went smoothly this year. While Amazon has a particular strength in supply chain and logistics, the lessons from its past technical malfunctions can teach smaller brands a thing or two.

Similar to the Amazon example, you don’t want to spend a ton of time, effort and money driving traffic to your site when that traffic can’t convert due to a shopping cart glitch (back in 2016), or, on the supply chain side, when you’re out of the inventory you’re advertising. At Fuse, one of the most common problems we encounter is a lack of coordination between the marketing and the supply chain teams. 

While marketing may launch a meticulously planned, omni-channel campaign, too often we find that these campaigns don’t take into account critical questions like if the campaign has the desired impact, can the company actually fulfill the orders? Will there be enough inventory to satisfy demand? While it seems obvious in hindsight, it usually takes a crisis or two for e-commerce brands to streamline the coordination between functions. 

As your company grows and scales and focuses on putting these lessons into practice, Fuse is here to help you focus on your business, not your inventory.

 

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What is an inventory planner and why do you need one?

11/26/19 7:05 AM / by Fuse Inventory posted in merchandise planning, inventory planning, demand forecasting, inventory

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Are you an Inventory Planner? Have you ever tried to explain to your friends or coworkers what you do and had a hard time getting them to really get it?

Are you a business owner building a brand who’s been told that you should hire a planner? Have you wondered to yourself, ‘why?’ and ‘what would she help me with?’

If you fall into either of these two buckets, this post is for you! If you’re an underappreciated planner, we hope you can send this to your friends and coworkers so that they truly understand how much you contribute to your company. If you’re a business owner who’s new to ops but wants to scale, we hope we can persuade you to get an inventory planner before you run into a major operational crisis like stocking out of your top selling SKUs.

First, let’s start with some basic definitions. Inventory planners help companies:

1. Determine how much inventory they need to order. 

Just like Goldilocks, growing businesses need just the right amount of inventory to survive. Order too little and you risk stocking out, damaging your credibility with your customers and harming your brand. Order too much and you can wind up with hundreds of thousands or even millions of dollars of wasted inventory. The capital you invested may be permanently lost, crippling you from investing in other critical business initiatives like products that are selling well or marketing to attract new customers. Inventory planners do a complex optimization exercise every year, quarter, month and even week to make sure that just the right amount of inventory across all products has been ordered.

2. Determine when the inventory needs to arrive.

It’s not enough to simply order enough inventory, but the inventory planner’s role is also to make sure that it arrives when it’s needed. If a company has a three month lead time, discovering that more inventory is needed the week before isn’t helpful. Conversely, if the inventory will sell through eventually but is just sitting in the company’s warehouse for six months, that capital could certainly have been put to better use. Timing is a critical piece of the planning equation.

3. Aligning with sales and marketing. 

Marketing and sales are always trying to drive business. A critical input into planning are questions like “what promos are we running this month?” and “what big wholesale accounts do we expect to win next year?” Inventory planners work closely with marketing and sales to make sure that there is the right amount of product to support and prepare for the big wins expected to come from these initiatives. In prior blog posts, we’ve highlighted the importance of coordinating with operations if you’re in sales or marketing. 

So, why are Inventory Planners important?

Well, we hope that after reading our definitions, the picture all starts to come together. Yet, the unfortunate reality remains that inventory planning remains one of the most misunderstood and least appreciated functions at growing brands. 

So, here’s what we think. Inventory is either the #1 or #2 investment that companies make. If it’s #2, it’s second only to marketing. An investment this big, if not managed properly, can and has been the cause of failure. The less capital you have to play with, the more important it is to optimize that investment. While there is a lot to be done downstream in the supply chain, and we’ve highlighted this in our post on 7 supply chain questions you need to answer, the best optimization on the fulfilment side can’t help you if you’ve ordered the wrong amount of inventory. Because of this, the person who plans your inventory - makes sure you’re investing enough and makes sure it’s coming in on time - is one of the most important people in your company and one of the earliest roles all consumer brands should hire for early on. 

Whether you’re an inventory planner with decades of experience or a start-up founder who’s just coming to grips with the importance of operations and inventory, Fuse is here to help you focus on your business, not your inventory.

 

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Are you financing your inventory the wrong way?

11/26/19 6:59 AM / by Fuse Inventory posted in inventory management software, merchandise planning, inventory planning, demand forecasting, inventory

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Over the past year, we’ve learned that many young companies are financing their inventory completely the wrong way. What’s the wrong way to finance inventory? With venture capital funding. 

Why you don’t need VC funding for your brand

First and foremost, unless you have a completely new business model (like Dollar Shave Club or Birchbox when they were first starting out) or something else that’s extremely innovative about the brand you’re building, venture capital funding is probably not right for you. If you do take VC funding, it should be used exclusively to drive your business’ hiring and marketing needs. These are important investments in growth and worth selling a piece of your company for. But, given that there are many other ways to finance your inventory, selling a big chunk of your company to do so doesn’t make any sense. 

At this point, you might be asking yourself, well if I can’t use venture funding, what should I do? Here are three options:

1. Your Suppliers and Manufacturers

Our advisor, Lisa Hom, who’s starting a new brand called Kaleido Concepts and has been an executive at multiple $100 mm+ brands, plans to finance her inventory by, “...getting creative when working with manufactures and suppliers. It all comes down to cash flow. The strategy should be to pay your manufacturers for the goods after you sell them. I asked a manufacturer for terms of net 120 days, meaning that I didn't have to pay him for the goods until 120 days after he shipped the product.  So it gave me 90 days to sell it and not have to pay for the goods out of my cash.”

While it may take a bit of leverage to get that type of accommodation from a supplier, most founders don’t even know that they can ask. Many manufacturers feel that they are falling behind and are eager to partner with founders who can educate them on the world of e-commerce. When starting a new brand, you need to talk to suppliers from a place of strength, so getting creative about what your strengths are is super valuable. Moreover, we’ve seen several start-ups partner with their supplier by letting them take an equity stake in the company. Not only does it give you capital, but it also completely aligns your incentives.

2. A Letter of Credit

Now that you’re in business and actually have sales, you can go get a letter of credit from a bank. The letter of credit will demonstrate to your suppliers that you will be able to pay them. This letter of credit not only allows you to purchase more inventory than you otherwise could, but it also allows you to negotiate better payment terms with your suppliers. Now that you have more inventory, you can drive higher sales, increase the amount guaranteed by the bank, buy even more inventory and do it all over again. So long as the inventory is selling, you’ll continue to be able to use this approach to finance your business.

3. Inventory Factoring

Finally, although inventory factoring sometimes gets a bad name, there are great companies like Dwight Funding, who are revolutionizing the world of inventory factoring and taking a modern approach to working with young companies. Inventory factoring is when a company takes on debt to finance inventory against its future sales or accounts receivable. This can be especially effective when you work with large retailers like Sephora, Nordstrom and others that commit to purchasing large amounts of product for the upcoming season well in advance. These receivables can be leveraged to get a loan in order to be able to buy the inventory that will support these large contracts. 

What do you need to be successful?

If you pursue these strategies, you need to maintain trust with the third parties you work with by forecasting your demand and inventory needs accurately. If you’re unable to pay your supplier because you’ve vastly overestimated the sellthru rate of your inventory or your factoring partner can’t get a straight answer on what you expect this year, these partnerships won’t be successful. That’s where a tool like Fuse comes in to help you forecast demand and inventory more accurately. Planning inventory and getting it right is our bread and butter. As a scrappy start-up, our tool can help you gain leverage and continue to forecast easily and accurately as you grow your SKU count and monthly order volume without throwing more bodies at the problem. No matter how you choose to finance your inventory, Fuse is here to help you focus on your business, not your inventory.

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7 supply chain definitions every founder should know

11/21/19 11:00 PM / by Fuse Inventory posted in supply chain, supply chain management, merchandise planning, inventory planning

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We work with many young companies started by inspiring founders who often have incredible marketing and branding chops. But, when it comes to inventory, that expertise is hard to hone and hire for. Even if you’re not an expert, there are things you can do like follow our 7 step guide and get familiar with a few basic definitions: 

1. Lead Time 

This is the most basic concept on the list and probably something you’ve already heard from your suppliers. Lead time is simply the number of weeks or months between when an order is placed with a supplier and when the finished good can be delivered. Your fully baked lead time will be not only how long it takes your supplier to make your product, but also how long it will take them to ship it to you. 

2. Minimum Order Quantities (MOQus)

If you’re a small brand, you’ve probably already run into this concept with your suppliers. Minimum order quantity is the minimum quantity in units per SKU, units per category or dollars that your supplier will allow you to order. Although you might do a lot of sophisticated analysis to figure out the exact amount of inventory that you need, it might not matter if this amount is below the minimum order quantity defined by your supplier. While it might not be possible, you should definitely try to negotiate the MOQu down to give you flexibility and avoid holding more inventory than you need or can sell.

3. Buffer Stock (Safety Stock) and Service Level 

No matter how accurately you are, there is always risk that you may have underestimated the inventory you need. To avoid stockouts, companies keep extra stock on hand by setting a service level target which is the probability that all customer orders will be fulfilled. New brands might want to set a high (99%) so as not to damage the brand with stockouts. But, service level does rely on relatively predictable demand which many young brands don’t have. That’s why at Fuse, we rely on a weeks of supply target. 

4. Weeks-of-Supply

Weeks-of-supply is calculated as total inventory / weekly sales. Weeks of supply can be calculated based on historical results or as a forward looking metric based on your forecast. Many inventory professionals consider the forward looking approach to be best practice because seasonality can vary drastically throughout the year. In Fuse, we seamlessly calculate your weeks of supply target and build it into your inventory buffer. We’ll look to your expected seasonality and make sure that you’re always ordering enough for next season.

5. Sell-Through Rate 

Weeks of supply and sell-through, when used together, can help give you a complete picture of your inventory position. Sell-through is defined as total sales divided by inventory stock at the beginning of the period. So, if you sold 500 silk blouses in January but started with 1,000 silk blouses in inventory, your sell-through rate would be 50%. A high sell-through rate and a low weeks of supply number means that you need to restock while a low sell-through rate (5%) and a high weeks of supply number means that you’ve overbought and may need to mark down your inventory. One of the most relied upon concepts in inventory planning, sell through can give you a good benchmark for understanding the health of your inventory. 

6. Reorder Point and Reorder Level

The reorder point is the level of inventory at which a reorder is triggered. This point is calculated as the forecast sales during the lead time plus buffer stock. The reorder point tells you when you need to reorder, but not necessarily how much (the reorder level). Fuse can help you understand both metrics by seamlessly linking the pieces together. We provide a reorder recommendation based on the buffer you set, your lead time and the demand forecast you’ve created using our advanced algorithms.

7. Open to Buy 

An open to buy puts all of the concepts of inventory planning together in one report. It is a budget that highlights how much capital is available to spend in a given period, and how much already has open POs against it. In many instances, a planner may know exactly how much product she needs to order to support demand, but she may no longer have the budget to meet this demand. For example, she might need $150,000 of product next month to reach the brand’s sales targets, but $75,000 may already be allocated to open POs. In this type of example, the planner’s job is to optimize the allocation of the remaining budget to best serve the business. Usually, at this point, the best course of action is to determine how best to optimize margin. The planner will evaluate which SKUs can generate the most profit given the limited budget available rather than simply doubling down on best sellers.

At Fuse, we’ve implemented these concepts and best practices in our software to vastly simplify the analyses that planners have to do. We’re here to help you focus on your business, not your inventory.

Sources: 
https://www.thebalance.com/sell-through-rate-2890389
http://www.threebuckets.com/category/formula-cheat-sheet/
https://en.wikipedia.org/wiki/Service_level
https://www.thebalance.com/open-to-buy-planning-2890318
http://www.businessdictionary.com/definition/lead-time.html
https://en.wikipedia.org/wiki/Reorder_point
http://dictionary.cambridge.org/us/dictionary/english/minimum-order-quantity

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How to tackle your biggest business investment: your inventory

9/22/19 5:19 PM / by Fuse Inventory posted in supply chain, supply chain management, merchandise planning, inventory planning, supply chain optimization, demand forecasting, order management, industry

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After conducting almost 200 customer interviews, we’ve gained some insight into what separates the great from the good when it comes to inventory.

We started by asking our advisor, Oseyi Ikuenobe, the Senior Product Manager of @WalmartLabs’ Smart Forecasting product for his thoughts. At @WalmartLabs, Oseyi and a team of data scientists and engineers plans the inventory for Walmart’s $13 bn e-commerce business. 

Inventory management should have ROI benchmarks

According to Oseyi, "The best inventory strategy is one that allows you to buy the 'right amounts of the right inventory' to maximize revenue, profitability and growth. Instead of trying to simply control costs, it is better to think of inventory decisions the way we think of marketing spend - in terms of ROI. Once you have that mindset, you quickly realize that the ultimate smart inventory solution is one that can synthesize the collective wisdom of the organization and deploy it to drive decision making."

We’ve gleaned two insights from Oseyi’s thoughts:

  1. Best-in-class retailers think about inventory as an investment, not a cost center
  2. Collaboration between key functional areas is key to successful inventory planning

Reframing inventory as an investment

We work mostly with start-ups and all too often we see them allocating a fixed budget to inventory. But, inventory is an investment, much like marketing. The investment that a company makes in its inventory supports the company’s sales target. We’d propose that companies go through a series of questions to set their inventory budget:

  1. What is our marketing budget?
  2. Based on our marketing spend and our organic reach, what is our revenue target?
  3. How much product do we need to sell to support our revenue target?

This third question is the start of the planning process. Once the revenue target is established, a planner can go through and make a determination regarding the product mix and volume of product needed. 

Collaboration improves inventory planning

The process described above only works if there is tight collaboration between all of the functional areas that impact sales like finance, marketing, merchandising and operations. 

Unfortunately, we have seen a lot of avoidable crises caused because one functional area forgot to tell operations about planned changes. Things like changing the discount amount on a promo or A/B tests planned on the site. While these lapses might seem small, they can have a big impact if there isn’t enough product in stock to support these initiatives.

So What?

We want to encourage our customers to reframe the way you think about inventory: it’s not your biggest cost center, it’s your biggest investment. At Fuse, we’re designing a tool to help automate the grunt work of planning so that you can focus on important, strategic decisions. 

We’re here to help you focus on your business, not your inventory.

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Struggling to forecast your inventory in Excel? Don't worry, you're not alone.

9/22/19 4:58 PM / by Fuse Inventory posted in supply chain, inventory management software, merchandise planning, inventory planning, demand forecasting, order management

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At Fuse, we have the privilege of helping our customers enjoy their work more by providing an easy to use, beautifully designed inventory planning tool. As we’ve gotten to know our customers, we’ve been deeply impressed by how thoughtful, sharp and hard-working you are.

We’ve compiled data from over 150 customer interviews to send you one message: you’re not alone. In every single interview, our customers inevitably ask, “Are we the only ones using Excel and Google sheets?” 

The answer is no, you are absolutely not. You’re not alone. That’s exactly why we at Fuse decided to tackle the challenge of inventory planning and management head-on.

90% of customers manage inventory in Excel

Almost 90% of our customers manage their inventory in a combination of Excel and Google Sheets, while just under 10% have moved on to build a custom system -- a costly and lengthy process. Typically, companies start thinking about a custom system at the 100 SKU mark when they’ve pushed their existing Excel models to a breaking point. Excel is crashing on a daily basis and procurement is nearly impossible to track in Google Sheets. 

We asked Karan, Director of Ops at Boxed, a company bringing bulk wholesale shopping to mobile, why they built a custom system: “At Boxed, we needed backend inventory forecasting systems that were customized for our business model and flexible. We searched for a solution on the market and didn’t find anything that met our needs. This is why we chose to design something in-house.”

Custom inventory management systems have drawbacks

Of the companies we spoke to that have built a custom system, the top three reasons for building something in-house were not being able to find a system that meets their needs, not being able to afford existing systems and not wanting to spend a long time implementing an external solution.

Unfortunately, custom systems come with their own challenges. Most require at least one full-time engineer to maintain them, taking away valuable engineering talent from important product initiatives that could grow the business. This is exactly why most companies don’t devote a full-time engineer to maintaining their system. Inevitably, it fails to keep up with the growing organization’s needs and ultimately needs to be overhauled. 

Building a custom system is expensive. The companies we’ve spoken to have spent anywhere from $200,000 to over $1,000,000 just to build it, excluding the cost of ongoing maintenance. 

Fuse's mission is to change the frustrating status quo. Our favorite part of our job is talking to customers and improving your quality of life. Working at a fast-growing company is exciting and fun. We want to help you spend more time focusing on your business, not your inventory.

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