6 min read

Intelligent Tricks to Decrease RTO for Your D2C eCommerce Business

June 30, 2021 by Srishti Arora - 6 min read

Did you know, at least 30% of all products are ordered online or returned? Moreover, 92% of consumers believe that they will buy from the store again if the return process is easy, and over 79% of consumers want free return shipping. 

This implies that returns play a massive role in the decision-making process of purchasing a product. However, returns are not such a good story for eCommerce sellers.  They involve huge commitments, shipping amounts, and resources that can drain out almost all funds out of the business. Most courier companies offer higher return charges as compared to forwarding charges.

Most times, the reasons for these return orders are the product not delivered on time, receiving the wrong item, COD amount not available, a fake attempt to provide the product, etc. 

In most cases, these situations can be avoided, and the product can be successfully delivered. You just need to be careful about a few things, and you will reduce your RTO. Let’s look at what RTO is and how you can reduce it for your eCommerce business. 

What is an RTO Order?

RTO stands for return to origin. It means that whenever an order is returned or undelivered, it will be returned to where it was picked up from. In most cases, courier companies ask the sellers if they want to return the order, and the sellers have to pay for the return charges. 

Why are RTO Orders Difficult to Handle?

RTO orders are challenging to handle because you have to incur separate charges for them. In most cases, the shipped product also becomes unusable because of the constant to and fro. If the product was the last of the lot, there are huge chances that it might not be used. Also, if the product was sold in the sale and you had to incur forward shipment charges for it, there is a big chance that you might go into loss if you pay for the return charges. For cash on delivery orders, the situation is even worse as customers refuse to pay for the order, and you also have to bear the return delivery charges. 

Most times, consumers just miss the order or are dissatisfied with the delivery because it is delivered late. In such cases, RTO can be avoided. 

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Why Should You Aim to Reduce RTO?

You should aim to reduce audio as it directly impacts the delivery performance. If you are constantly getting an RTO from an area, it is indicative that either fraud is being committed or the pin code is acceptable to many RTOs. Also, higher RTO tells you about the customer’s delivery experience. If the RTO is happening because the product is being delivered late, is faulty, or inaccurate, it means that the overall delivery experience is also being impacted. You must reduce RTO if you want to say that on your logistics costs and provide a superior delivery experience to your customers. 

Let’s look at how you can reduce at you with 3PL fulfilment providers like Shiprocket Fulfillment

How Can You Reduce RTO with Shiprocket Fulfillment?

Fulfillment Centers Across India

Shiprocket Fulfillment’s centers are located across several zones in India. This means that with fulfillment centres located in places like Delhi, Bengaluru, Gurugram, Kolkata, Mumbai, Surat, Jaipur, and Guwahati, you can quickly deliver products at a much faster rate. Also, you can practically have warehouses across the country and ensure that your products get delivered in the best shape possible. 

Store Inventory Closer to Buyers

The next advantage of Shiprocket Fulfillment is storing inventory closer to buyers. With fulfillment centres in the various cities listed above, you can stock your products closer to the buyer’s delivery location. You can also conduct demand forecasting with the help of predictive analytics and assess which Pin code or zone has the maximum demand for a particular product. This will help you evaluate your business better, and you can logically decide in which fulfillment center you want to store the inventory. With this, you can deliver your products faster and ensure that the right product is delivered to the customer. This ensures that you reduce audio by 60% by eliminating minor causes like skipped delivery or authentic products. 

Deliver 3x Faster

A vital benefit of utilizing Shiprocket Fulfillment is that you can deliver orders 3X faster. Since your products are stored closer to the customer and shipped with 99.9% accuracy with a skilled team, the shipping time can also be reduced with a lower first-mile and last-mile completion time. Courier companies can also pick up the products in bulk and ensure that they successfully deliver them faster within a specific zone or region. This ensures that the products are delivered within time, and RTO, because of late delivery, faulty products, or orders being missed, can be avoided. 

Reduced Order-to-Ship Time

Marketplaces usually have stringent fulfillment requirements for businesses. Also, customers expect receiving products within 1 to 2 days of ordering from significant marketplaces. To fulfill these requirements and ensure that the orders are not returned, you need to be on your toes to deliver them ASAP. With Shiprocket fulfillment, the skilled team works on each order meticulously and ensures that ship time is reduced. This enables faster first-mile and last-mile fulfillment of the order. Hence, RTOs are avoided. 

Robust Shipping Network

When you opt for Shiprocket Fulfillment, you ship with a robust network of couriers by Shiprocket. Shiprocket is one of the best shipping solutions in India, with a comprehensive shipping network across the country. In this way, you can deliver orders faster, more accurately and also reduce audio by 60%. 

Final Thoughts

Shiprocket Fulfillment is a facilitator if you want to reduce RTO bike by a considerable margin. Outsourcing e-commerce fulfillment two and 3PL fulfilment provider can help you improve other aspects of your business and help you save costs which can further enable you to give the best price to your products. These combined can help you get an edge over your competitors and give your buyers the ultimate shopping experience they desire. 

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June 30, 2021 by Srishti Arora

5 min read

What is Order Accuracy and Why is it Essential?

December 15, 2020 by Srishti Arora - 5 min read

Fulfillment is the most crucial step in your eCommerce business. It can become challenging to maintain fulfillment operations’ quality and synchronization.  There are several KPIs you have to track to support the success of your fulfillment operations. Otherwise, you might end up spending extra and not get the desired results. Handling incoming orders is the most critical aspect of your business, and you must track them thoroughly to not miss out on any. 

To ensure the successful processing of every order, you must measure order accuracy. It is one of the most important metrics to track as it is linked directly to the customer experience. To maintain maximum order accuracy, you must ensure proper synchronization between other operations involved in fulfillment like picking, packaging, and shipping.

Let’s look at what order accuracy is and how 3PL fulfillment providers can help you achieve the KPI’s desired results. 

What is Order Accuracy?

Order accuracy refers to the number of orders that you thoroughly fulfilled and shipped to the customer’s doorstep without any error. The errors could include mispacking of an item, wrong order quantity, wear, tear, etc. It is an important metric to track as it directly correlates to the customer experience. It can be difficult as it involves a certain amount of manual intervention. However, you must work on this metric to ensure that your customers have a positive shopping experience with your website.

Order Accuracy Rate Formula

To calculate order accuracy, you must calculate the order accuracy rate using the following formula – 

Order accuracy rate = (Total orders fulfilled accurately / Total orders fulfilled) * 100

So, for example, if you fulfilled a thousand orders from your warehouse, and 100 of them had processing errors, then your order accuracy rate will be – 

Order accuracy rate = (900/1000)*100 = 90%

What is a Good Order Accuracy Rate?

The fulfillment supply chain does not consist of only one operation. There are several systems, mechanisms, and people involved in creating the ideal fulfillment supply chain. Therefore, achieving a 100% order accuracy rate is not always perfect, even though it is the aim. However, you must maintain your accuracy rate closest to a hundred percent.

Almost all day to see brands, marketplace sellers, and social sellers try to keep their order accuracy rate between 96-98%. 

A reasonable order accuracy rate eventually constitutes a positive customer experience and wholesome reviews on social media. Many businesses lose out on customers because they cannot achieve the right order accuracy and have more negative experiences than positive ones.

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Why is Tracking Order Accuracy Vital?

Positive Customer Experience

The order accuracy is directly proportional to a positive customer experience. If you do not deliver products correctly to the customer or they are incorrect in quantity, you will have to bear the brunt of negative feedback and might also lose out on existing customers. Along with that, you will also have to arrange for RTO and pay an extra amount for that. Therefore, tracking order accuracy will help you analyze your fulfillment process and improve your order management. 

Identify Loopholes in Process

Measuring the order accuracy rate will help you identify loopholes in your fulfillment process. Suppose you notice a trend of reduced-order accuracy over a period. In that case, you can quickly identify the loopholes of your supply chain by analyzing each process and understanding where there is a shortage.

Innovate for Improved Order Management

Another advantage of the order accuracy rate is rich insights. The order accuracy rate will help you look for more innovative methods to improve your order management and accuracy. Even if your order accuracy rate is maintained, the data will give you enough insight into improving your customer experience.

Best Practices to Improve Order Accuracy

Audit Operations Regularly

The best way to improve your order accuracy is by auditing your warehouse operations regularly. This will help you analyze every step involved in the fulfillment supply chain, and you will be able to derive results as to why your order accuracy is not improving.

Improve Inventory Management

Inventory management has a direct impact on order management. Try to maintain a real-time inventory management tracking system so that you can analyze incoming orders and correlate them with your inventory. This will help you maintain your stock better and process incoming orders at a much faster pace.

Use the Right Technology

Using an automated system for your order management can help you improve order accuracy. As the system will be synced with your sales channel or marketplace, you will be able to process every incoming order and send it to the right stakeholder in your fulfillment supply chain. If the process is manual, there are chances that you will miss out on a certain number of orders, and that will eventually lead to a decreased order accuracy rate. 

Optimize Picking and Packing

The next most crucial aspect of your fulfillment supply chain is picking and packing. If these are not carried out accurately, there are chances that the order accuracy rate will be affected negatively. Therefore, for picking operations, utilize handheld devices (HHT) to pick products accurately and match them with the order. Have dedicated packing stations and compare your product packaging with SKUs so you can accurately bag every order without errors. 

Outsource to 3PL Providers

The best way to improve your order accuracy rate is by outsourcing your fulfillment operations to 3PL providers. 3PL providers have dedicated resources for every fulfillment operation, and they will be able to process your orders faster, with far better accuracy. 

Shiprocket Fulfilment is one such 3PL fulfillment provider that can help you process orders with 99% accuracy and deliver them 3X faster to customers by providing one day and two-day delivery options. 

Final Thoughts

Improving order accuracy rate is essential for comprehensive order management and fulfillment operations. Calculate the order accuracy rate to ensure seamless fulfillment, timely delivery, and a positive customer experience. 

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December 15, 2020 by Srishti Arora

6 min read

How Multichannel Distribution Can Help Expand Your Business

December 2, 2021 by Rashi Sood - 6 min read

Today, running a business is not limited to just selling on a single channel or platform. You can sell your products across multiple channels to reach more customers and increase sales. You can run a physical store, online store, or sell through both platforms. You can also consider selling on major online marketplaces like Amazon and Flipkart.

Multichannel Distribution Strategies

If appropriately managed, a multichannel distribution system can help expand your business by increasing customer reach. But without the right tools, resources, and technology, it might be hard for you to establish a multi-channel distribution system.

This blog will discuss what a multichannel distribution system is, its benefits, and its strategies.

What is a Multi-Channel Distribution System?

Nowadays, consumers want to shop from different places at their convenience. A multichannel distribution system is where a businessman sets up two or more sales and marketing channels. He does so to increase his customer reach and increase profits. He can sell through a brick-and-mortar store, online store, and online marketplaces.

A multichannel distribution system is majorly run with the support of technology. However, planning a multichannel strategy is also equally important and must be executed properly.

Benefits of Multichannel Distribution

Multichannel Distribution Strategies

Here are the benefits of adopting a multichannel distribution system:

Increased Customer Reach

This is the obvious benefit of a multichannel distribution strategy. Adopting the strategy helps reach a broader customer base and sell in more markets. You can blend physical store, eCommerce, and sales and marketing functionality to grow and increase sales. Reaching a broader range of customers simply means expanding your business into previously untapped markets.

Distributors will also benefit from a multichannel distribution system by reaching new customers from a broader geographical reach. They can take explore new opportunities and take advantage by selling through pop-up stores and online marketplaces.

Improved Customer Interactions

With the advent of technology, customers are now demanding more. Better and pleasant customer experience has also become significant. Multichannel presence is in demand, and all business owners are adopting it to offer maximum customer satisfaction to their customers to differentiate themselves from competitors.

Whether your customers are end-consumers or retailers, embracing a multichannel distribution strategy offers flexibility to your customers and enables them to purchase products at their convenience. This is bound to give you an edge over competitors.

Optimized Supply Chain

The supply chain is the backbone of the distribution business. To remain competitive and profitable, all businesses should optimize their supply chain process, which can happen with the help of a flexible multichannel distribution process. With a multichannel distribution process, you can ensure that the supply chain process is optimized.

Reduced Risk

Sometimes, relying on a single distribution channel can be risky. If it didn’t turn out the way you wanted, you could be in trouble. However, by selling on multiple channels, you can reach different people and reduce the risks significantly. It will help diversify your distribution network. However, it might be a little challenging to manage and track multiple sales channels in real-time.

Increased Revenue

Adopting a multichannel distribution strategy will ultimately lead to profits. Serving new customers through multiple channels brings in more sales, and thus revenue. Upon serving a broader customer base and penetrating new markets, your revenue is bound to increase. With this strategy, you boost your productivity and increase efficiency with the help of automation and a streamlined process.

Multichannel Distribution Strategies

Multichannel Distribution Strategies

Adopting a multichannel distribution strategy involves a lot of strategizing before executing it. However, once executed, it can be extremely beneficial for your business. Have a look at some of the strategies that you can start with:

Choose The Right Sales Channel

From physical stores to social media platforms, you can sell your products anywhere. But that doesn’t mean every platform is the right sales channel for you. Have you seen a car company selling cars on any of the social media platforms?

Before choosing any platform, you need to be sure that the platform you are about to sell on will provide you with the right opportunity and customers. Specifically, it won’t kill your margins or have any fees that might lead to fewer profit margins.

So, before committing to a sales channel, you need to consider if your target audience is present on the channel. Next, think about whether the channel matches the type of product you sell. For instance, social media channels like Facebook or Instagram are not the right option for selling cars. They indeed can be used to advertise to the target audience, but you surely can’t sell vehicles through these channels.

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Amazon offers all types of daily products at different prices. Most buyers tend to go to amazon to buy everyday essentials. However, buyers don’t have a look at the brand before buying daily products. Similarly, for beauty, health, and wellness products, most buyers go to Instagram and Pinterest. These platforms provide good visuals of the products and let the buyers interact during the purchasing process. You can present your products in the best light and with eye-catching visuals.

Centralized Data

When you sell through multiple platforms, it is crucial to have a single source of data. Always having data at your fingertips will help you make informed decisions such as inventory management for your business’s benefit.

Tracking inventory can be challenging, especially when you fulfill orders across different channels. That is why a centralized data system will make it easier to track inventory and refill it when required. You can also leverage technology to streamline the process and make it efficient.

3PL Service Provider

You can integrate your multiple sales channels with the 3PL service provider platform. With this, all your orders are automatically fetched and synced, and you can check all your orders from multiple platforms at a single platform. Not just this, you can also process and ship your orders from the platform only. Besides, the 3PL platforms also help in managing orders and inventory.

If you are looking for one such 3PL service provider, Shiprocket Fulfillment is your best option. With us, you can store your inventory in tech-enabled fulfillment centers across all major locations in India and fulfill orders 3X faster. Not just this, you can ship your orders to 29,000+ pin codes and 220+ countries at the lowest shipping rates and reduce RTO as well.

Conclusion

Diversifying and selling through multiple channels is vital in today’s competitive environment. With the help of multichannel selling, all business sizes can be benefitted by catering to new customers, markets, and geographic regions. It is an organic and cost-effective way to increase sales and profits.

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December 2, 2021 by Rashi Sood

4 min read

What Is US FDA? What Does FDA Regulate?

November 30, 2021 by Pulkit Bhola - 4 min read

The US FDA(United States Food and Drug Administration) is an organization that safeguards public health in the United States by ensuring the safety and security of food supply, cosmetics, human and veterinary drugs, biological products, and medical devices.

Not just this, FDA also regulates the manufacturing, marketing, and distribution of tobacco products to decrease the use of tobacco by minors.

What is US FDA

FDA is also responsible for improving public health by boosting innovations in medical products to make them more effective, safer, and more budget-friendly. 

Moreover, it provides accurate scientific information to the people about how they need to consume medical products and foods so they can not just maintain but also improve their health.

What Is US FDA’s Relevance For Your Business?

If you want to take your eCommerce business global, now is the best time to scale your business. Today, online shopping is one of the most popular online activities worldwide, especially in the United States.

Did you know? Revenue from eCommerce in the United States amounted to $431.6 bn in 2020 and is expected to increase to $563.4 bn dollars by 2025.

It is also important to note that India’s exports rose 42.33% to $35.47 bn in October 2021. If you want to grab this opportunity with both hands and want to start exporting to the United States, it is natural for this question to pop up in your mind:

What is US FDA, and how does it affect your business?

If you want to export your products that fall in the category of FDA-regulated products, they are required to meet certain laws and regulations. For instance, food items must be pure, wholesome, safe to eat, and produced under sanitary conditions.

Such products are subject to inspection when offered for import into the United States. For a successful entry, they must not appear to violate FDA requirements. However, some products are subject to certification and/or testing due to a history of violations.

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What Is US FDA’s Regulatory Authority?

The scope of US FDA’s regulatory authority is broader than one might think. FDA’s duties are closely related to those of many other government agencies. Here’s a list of the main product categories that fall under US FDA’s jurisdiction.

Foods

Dietary supplements, bottled water, food additives, infant formulas, and other food items.

Drugs

Prescription drugs (both brand-name & generic) and over-the-counter drugs.

Biologics

Vaccines for humans, blood & blood products, cellular & gene therapy products, tissue & tissue products, and allergenics.

Medical Devices

Simple items like tongue depressors & bedpans, complex technologies like heart pacemakers, dental devices, and surgical implants & prosthetics.

Electronic Products that give off radiation

Microwave ovens, X-ray equipment, laser products, ultrasonic therapy equipment, mercury vapor lamps, and sunlamps.

Cosmetics

Color additives found in makeup & other personal care products, skin moisturizers & cleansers, and nail polish & perfume.

Veterinary Products

Livestock feeds, pet foods, and veterinary drugs & devices.

Tobacco Products

Cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco.

Advertising

The Federal Trade Commission is a federal agency that checks several types of advertising. The FTC protects consumers by reducing unfair, deceptive, or fraudulent practices in the marketplace.

Alcohol

The Department of the Treasury’s Alcohol and Tobacco Tax and Trade Bureau (TTB) regulates alcohol production, importation, wholesale distribution, labeling, and advertising.

Consumer Products

The Consumer Product Safety Commission (CPSC) ensures safety of consumer products such as toys, cribs, power tools, cigarette lighters, household chemicals, and other products that pose a fire, electrical, chemical, or mechanical hazard.

Meat and Poultry

The U.S. Department of Agriculture’s Food Safety and Inspection Service regulates the safety and labeling of traditional (non-game) meats, poultry, and certain egg products.

Water

The Environmental Protection Agency (EPA) regulates all critical aspects of drinking water. They develop national standards for drinking water from municipal water supplies (tap water) to limit impurities.

We hope we have provided you with a detailed answer to the question: What is US FDA, and what does US FDA regulate? 

If you want to establish your eCommerce business globally and want to export your products to the United States, by now, you must have a clear idea about the role of US FDA.

Ship At The Lowest Rates

Apart from knowing the export-import rules and regulations, you also want to ship your products domestically as well as across the border at the minimum cost. We’ve got you covered.

By outsourcing your eCommerce warehousing & fulfillment operations to Shiprocket Fulfillment, you can ship your orders upto 20% cheaper. Using the in-house shipping solution, you can ship to 220+ countries at rates starting at just Rs. 110/50g.

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November 30, 2021 by Pulkit Bhola

5 min read

Reorder Level & Reorder Quantity Formula

November 23, 2021 by Pulkit Bhola - 5 min read

What is the worst nightmare an eCommerce seller could have? The answer is- an unexpected stockout. If you don’t update your inventory timely and adequately, you’re inviting the risk of going out of stock during high demand.

On the other hand, having a lot of inventory would be an unnecessary investment. You never want your products to expire or become obsolete before you sell them.

reorder quantity formula

Therefore, you need to strike a balance between the two. This is where inventory management comes into play. By optimizing your inventory management process, you can maintain the right amount of inventory.

That’s why you must know the reorder level and reorder quantity to keep your shipping costs, storage space, and stockouts at a minimum. Let’s understand what reorder level is and how you can calculate reorder quantity using the reorder quantity formula.

What Is Reorder Level?

The reorder level or reorder point is that level of your inventory at which you need to place a request for preventing a stockout. It is usually based on the average time taken by the supplier/manufacturing team for recovery, maximum usage of the product during the recovery time, and safety stock requirement.

Ideally, the reorder level should result in the arrival of inventory as and when your existing inventory quantity has dropped to zero. However, it’s always beneficial to keep an additional measure of stock, called safety stock, to meet immediate demand.

Calculating Reorder Level

To calculate your reorder level, multiply your average daily usage rate by the lead time in days for an inventory item.

Suppose, Mamaearth experiences an average daily usage of its Vitamin C Hand Cream of 10000 units, and the lead time for producing new units is 5 days. 

Hence, the reorder level is 10000 units x 5 days = 50000 units. 

When the inventory level of Vitamin C Hand Cream declines to 50000 units in stock, Mamaearth should stock more units. By the time the additional units arrive in 5 days, the on-hand inventory balance should have dropped to zero.

What Is Reorder Quantity Formula?

The reorder quantity is the total number of units of a particular product that needs to be recovered in the stock. This number depends on numerous factors like quantity discounts, shipping rates, warehousing costs, and working capital needs.

The ordered quantity or the number of units needs to be optimum considering the various factors like cost of order, cost of transportation, carrying costs, etc. The reorder quantity is the quantity that provides the best balance between the various factors like quantity discounts, freight, storage costs, and working capital requirements.

Reorder quantity is the total number of product units you request from a manufacturer or supplier on an inventory replenishment purchase order. The exact amount should not be so high that you have too much capital tied up in inventory and subsequent warehousing costs, but not so low that there’s not enough safety stock and you risk selling out before you can get the next batch of inventory.

Calculating Reorder Quantity Formula

You can calculate reorder quantity in 3 easy steps using the reorder quantity formula.

Let’s look at how this formula works in detail.

calculating reorder quantity formula

Decide your Average Daily Usage (ADU)

Average Daily Usage(ADU) is the total units of your product sold per day.

Usually, 30 days is a reasonable timeframe to consider, but it’s dependent on the time of year. For example, if you need to order products in time for Diwali, your ADU should be calculated based on the previous year’s Diwali ADU.

Determine your Average lead time (ALT)

Your Average Lead Time is the time(in days) taken between placing a purchase order and receiving the inventory.

For instance, if you reordered inventory on November 1, and that new inventory is ready to be used to fulfill your orders on November 30, then your ALT is 29 days.

Find Your Reorder Quantity

To know your reorder quantity, all you need to do is multiply ADU and ALT. The result gives you the amount of inventory you need to reorder. Here’s an example:

ADU = 10 units

ALT = 29 days

Your reorder quantity is equal to 290 units.

Why Do You Need Reorder Quantity Formula?

To Prevent Stockouts

Out of stock means lost customers. You can always offer backorders or split shipments, but those solutions don’t provide a seamless customer experience.

Knowing your reorder level helps you ensure a recovery in time before your stocks run out, while reorder quantity enables you to order just enough to last until your next order.

To Minimize Costs

You also never want to block too much capital in your inventory. If your stock levels are too high, you’ll need to scale up your warehousing storage capabilities.

By calculating reorder quantity, you can keep just enough inventory to meet your demand without overspending.

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To Manage Inventory

When you know exactly how much to reorder and when you need to reorder, you can set up notifications in your inventory management system, enable live inventory tracking, and manage changes in demand over time.

Store Inventory Closest To Your Customers

Do you know? You can fulfill your orders 3X faster by storing your inventory closest to your customers in our PAN India network of fulfillment centers. This not only empowers you to provide 1-day & 2-day delivery, but also reduces your shipping costs by upto 20%.

Get in touch with our warehousing and fulfillment experts today. 

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November 23, 2021 by Pulkit Bhola

6 min read

How A Better Logistics System Can Help Improve Supply Chain

November 18, 2021 by Rashi Sood - 6 min read

Many business owners approach logistics management as – if it’s not broken, it must not be fixed! They think if they complete their orders on time, making changes and improvements in their logistics system is not required. However, the importance of effectively organized logistics can’t be denied. Implementing efficient and seamless logistics plays a crucial role in keeping up with customer demands. It helps in scaling the business.

Logistics System

Whatever the size of the business, every business owner wants to grow and expand it. That may mean expanding it to regional, national, and international levels. Here, the logistics system can plan a crucial role.

The business supply chain is complex, and even if you are fulfilling all your orders on time, it needs to be managed efficiently. Efficient transportation is crucial for the supply chain, and thus, business owners need to optimize their logistics system to expand their business.

For transportation to be done efficiently, knowledge, skills, and professionalism are must-to-have. Efficient and effective transportation improves supply chain quality by decreasing waste of efforts, time, and materials. With the help of supply chain professionals, transportations can be done at the right location and on time. With the right logistics system in place, you can:

  • Improve the speed and efficiency of order fulfillment.
  • Increase customer satisfaction, and customer retain value.
  • Transform operation expenses into a revenue driver.

This article will discuss what a logistics system is and strategies to improve it to take your business to the next level.

What is Logistics System?

Logistics system includes the networks of processes and functions that help move the products physically throughout the supply chain. This ultimately leads to the successful delivery of orders to the customers. In a nutshell, any activity that helps fulfill the order – from the time an order is placed to its delivery to the customer’s doorstep, is a part of the logistics system.

Several activities, like inventory management, order management, warehouse management, and product picking, packing, and shipping, are integral to the logistics system.

How to Improve Efficiency of Logistics System?

Logistics System

Sometimes it becomes hard for merchants to understand when and how to start optimizing their logistics system. They can outsource their operations to a third-party logistics solution that is equipped with experience and best practices. The following are the best strategies that you can adopt to improve your logistics system:

Order Management System

Order management systems provide you with instant visibility into all the orders. Thus, you can manage the orders in real-time without any delay. The order management system will integrate into your eCommerce platform directly and automatically fetch all the orders. You can quickly process and track them from the system. With this system, you have all the required information at your fingertips and in one place, and you can easily take all the necessary steps.

Inventory Management Software

Managing inventory takes most of your time, and a lot of hard work is required to stock levels and replenish it. An inventory management system helps in locating inventory at the moment. Many companies are now using inventory management software to reduce costs and streamline their process.

With this information in hand, you get insights into data that helps avoid out-of-stock situations. Thus, you can always maintain the inventory turnover ratio.

Supply Chain Management

Data is the foundation for eCommerce strategy optimization, especially if it is real-time. Without new data in hand, you risk wasting time and resources. However, with this data in hand, you can track where the inventory is, its shipping time, inventory turnover rates, and order accuracy. Thus, you can optimize the supply chain process. You can make not only informed decisions regarding the supply chain process but also quantify the progress.

Inventory Distribution

Distributing inventory across different logistics centers can help speed up the logistics system depending on the order volume. Rather than storing all your inventory in a single warehousing unit and fulfilling orders from there, you can distribute your inventory in different warehouses and ship orders from the closest fulfillment center. This will not only save shipping costs but also help deliver orders faster.

However, this can be expensive if you plan to do this in-house and store inventory in your own warehousing units. Thus, it is better to outsource the operations to a 3PL service provider and let them store your inventory in their multiple warehouses. This is a cost-effective measure.

Faster Shipping Methods

In today’s time, faster and efficient shipping is not a bonus; it is a necessity that every eCommerce seller needs to provide. Customers expect to get their orders within a day or two, and that too at affordable rates. So, you must find ways to streamline your shipping logistics and look for faster and cheaper options like Shiprocket.

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Shipping costs depend on the service provider you choose. You can partner with a logistics provider like Shiprocket that has more than 17 courier partners onboard. You can choose a different courier partner for every shipment based on delivery time, shipping rates, etc. Not just this, but 3PL service providers also offer additional services, like insurance, live order tracking, courier recommendation, etc.

Optimize Warehouse Management Systems

You can implement a warehouse management system to increase the efficiency of your operations. With its help, you can automate your warehousing processes like order picking and tracking inventory. Simultaneously, you can also cut down on mistakes due to manual work and labor costs. Ultimately, by investing in a warehousing management system, you can improve your infrastructure to ramp up your growth and scale your business without sacrificing your services’ quality.

Automated Picking Systems

Repetitive tasks like picking similar orders across the warehouse can take a lot of time. Thus, you can automate repetitive tasks like this to speed up your fulfillment process and reduce the number of mistakes. This, in turn, can increase your order accuracy and help meet overall customer expectations.

Shiprocket Fulfillment: All-In-One Platform To Meet Your Order Fulfillment Needs

A 3PL eCommerce fulfillment solution, Shiprocket Fulfillment is an all-in-one warehousing and order fulfillment platform designed to help online sellers store, manage, and ship their orders. We have 8 order fulfillment centers across the country where you can store your inventory closest to your buyers. Also, you can ship orders to 27,000+ pin codes with the help of 17+ courier partners.

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November 18, 2021 by Rashi Sood

4 min read

Shopify Fulfillment: Fulfilling Shopify Orders Easily

November 16, 2021 by Pulkit Bhola - 4 min read

Shopify is an all-in-one eCommerce platform that enables anyone to set up an online store and sell their products. To help their customers handle everything from a unified platform, Shopify also provides order fulfillment services- Shopify Fulfillment.

Did you know? Shopify has the third-largest market share in terms of eCommerce software platforms worldwide.

Shopify Fulfillment

Shopify Fulfillment offers storage, inventory management, picking, packing, and shipping services. If you’re a Shopify seller, you can send your products to a Shopify fulfillment warehouse and let Shopify ship your orders for you. Here’s how. 

How Shopify Fulfillment Works

Product Dispatch

Shopify Fulfillment offers end-to-end solutions. You can send them your products and select items for fulfillment from your Shopify admin.

Inventory Distribution

Shopify also recommends inventory distribution for your products. They suggest which warehouses in their Fulfillment network are best to store your products so they are nearer to your buyers.

Shipping

With Shiprocket Fulfillment, you can make sales on as many Shopify channels as you want. Every time an item is sold, your order will be picked, packed, and shipped automatically.

Easy, isn’t it? Now let’s talk about what’s easier, faster & cheaper!

Boost Your Shopify Fulfillment With Shiprocket

Shiprocket Fulfillment is an all-powerful eCommerce fulfillment solution offering easy & efficient order fulfillment, warehousing, catalog, and inventory management.

Shopify fulfillment

Easy Integration

Shiprocket Fulfillment enables smooth order synchronization and operations processing by providing instant channel integration. Here’s how you can integrate Shopify with Shiprocket in one click:

How To Integrate Shopify With Shiprocket

  1. Login to your Shiprocket panel & go to Settings> Channels. Click on the Add New Channel Button. Click on Shopify>Add.
  1. Fill in the required information & then click the Connect to Shopify button on your screen to continue.

3. You’ll be directed to the Shopify seller login page. To log in, enter your Shopify username & password.

4. Once logged in, review your permissions & click on Install App. Congratulations, it’s done.

1-Day & 2-Day Delivery

With Shiprocket Fulfillment, you can store your products closer to your buyers in a PAN India network of fulfillment centers. Result? You get 3X faster Shopify fulfillment, enabling 1-day and 2-day delivery.

Up To 60% Lesser RTOs

As you speed up your Shopify fulfillment process, you always deliver your orders timely. Consequently, you increase your customer satisfaction and reduce your RTOs by a significant margin.

Lower Shipping Costs

You can take your eCommerce business closer to profits by storing your products closer to your customers. Save your shipping costs by up to 20% by decreasing the distance between your buyer and your warehouse.

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No Weight Discrepancies

Shiprocket Fulfillment enables you to raise weight disputes easily. You can get detailed reports of orders for which a weight dispute has been raised. 

Tech-Backed Storage

When you store your products in a Shiprocket Fulfillment center, you turn your logistics into techno-logistics. Shiprocket enables you to empower your fulfillment process with Warehouse Management System, channel integration, Order Management System, and logistics tech.

Zero Infrastructure Expenses

By outsourcing your eCommerce fulfillment to Shiprocket Fulfillment, you can avoid investing in additional warehouse management infrastructure and invest that money in other aspects of your business.

Wrapping Up

If you’re a seller on Shopify, Shopify fulfillment makes it easy for you to store, pick, pack, and ship your orders. However, you can deliver even easier, faster, and cheaper by outsourcing your order fulfillment to Shiprocket fulfillment. 

All you need to do is integrate your Shopify account and send us your products. We’ll store, manage, and ship them 3X faster at the lowest shipping costs. Let’s get in touch today.

Shiprocket Fulfillment features
November 16, 2021 by Pulkit Bhola

5 min read

Why Demand Estimation is Crucial for Your Online Business?

November 11, 2021 by Rashi Sood - 5 min read

Running a business is a tedious task. You never know how it will turn out in the coming month or year. Yet you have to anticipate how much inventory of each SKU you should store to meet the demands of your customers on time. Demand estimation is indeed one of the most challenging aspects of running a business.

demand estimation

Even if you have been forecasting demand for a while now, the projections can shift at any time.

What is Demand Estimation?

Demand estimation or forecasting is analyzing the historical inventory data to estimate and predict customers’ future product demand. It helps make a well-informed decision that calculates the total inventory demand, sales, and revenue for a period of time.

With the help of demand estimation, you can optimize your inventory by predicting its demand and sales by utilizing the data. You can use the data for everything – from planning inventory and warehousing space requirements to deciding product price and running a flash sale.

Importance of Demand Forecasting

demand estimation

The survival of any business depends on the demand for its product. If there is no demand, there is no business. Also, without understanding demand, no business would survive in the market for long. Although you can never be 100% accurate with demand forecasting, you can take steps to increase efficiency, production lead time, launch new products, and save money. All this will help you provide a better customer experience.

Prepare Budget

Demand estimation helps in reducing risks associated with overstocking of inventory and paying extra for warehousing space. Thus, you can make better decisions about inventory accounting, operations costs, cash flow, profit margins, allocation of resources, etc. Also, a business’s strategic and operational plans are prepared based on demand forecasting.

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Storing Inventory

As discussed above, you spend less money on inventory purchase and warehousing space to store it with demand forecasting. The more inventory you store, the expensive it gets to store it. By managing inventory efficiently, you can always have enough products in hand to meet customer demand. Thus, you need to track inventory levels closely and restock by forecasting inventory.

Planning Production and Storage

Demand estimation helps you be prepared with the products when the customers want them. It helps forecast demand for a particular product and be prepared with your marketing activities to attract customers. Being sold out for days and weeks when your products demand is high kills your business the most. Thus, you can forecast demand and control inventory to help you never run out of inventory, especially when it is high in demand.

Pricing Strategy

Demand forecasting also helps in deciding pricing for the products as per their demand and supply. It is essential to understand the market and the potential opportunity so your business can grow. Thus, you can formulate the right pricing strategy and use the right mix of marketing strategies.

If there is an excess supply of a product, you can slash prices or offer a discount. Similarly, if the product is scarce, you can increase its costs.

Types of Demand Forecasting

demand estimation

There are different ways to do demand estimation. Let’s take a look at the different models to do demand estimation:

Passive Demand Forecasting

One of the simplest types to forecast demand, passive demand forecasting, uses the sales data from the previous season to predict demand for the future. It is one of the most common types to forecast demand. You can use data from the same previous season, like last year’s Diwali season, to predict demand for this Diwali season. Thus, you can compare apples to apples to predict demand and sales for this season. This stands helpful if your business goes through seasonal fluctuations a lot.

Passive demand forecasting is particularly easy as it does not involve any statistical methods or studying economic trends.

Active Demand Forecasting

Active demand forecasting is the best option for businesses that have just started or are seeing an upward trend. It involves taking into consideration the market research and marketing campaigns. Some external factors are also taken into consideration, like economic outlook, growth projection, etc. This is an excellent option for startups as they don’t have any historical data to help draw demand estimation.

Short-Term Projections

Short-term demand estimation involves projecting estimation just for the next 3-12 months. It is an excellent option if you are looking to manage the just-in-time supply chain. With its help, you can adjust your projections with the help of real-time sales data and quickly respond to customers’ demands.

Long-Term Projections

Long-term estimation involves forecasting for 1-4 years. This method focuses on shaping the business growth trajectory and is based on sales data and market research. Many business owners also take long-term projections as a roadmap. With its help, they plan their capital investment, marketing, and supply chain operations.

Shiprocket Fulfillment features
November 11, 2021 by Rashi Sood

4 min read

How Does 3PL Work? 3PL Fulfillment Process Explained

November 9, 2021 by Pulkit Bhola - 4 min read

Do you want to know the secret to eCommerce success? It’s your fulfillment process. As an online seller, you must focus on your order fulfillment process. A good fulfillment process always produces good results.

3PL fulfillment process

Third-party logistics services make order fulfillment easier, especially for small eCommerce businesses. They also help you focus on the other critical aspects of your business, like marketing, growth, and customer experience.

Before we talk about the 3PL fulfillment process, you must understand what 3PL fulfillment is.

What is 3PL Fulfillment?

A 3PL fulfillment provider is a bridge between your manufacturing operations and your customers. They not only store your inventory but also pick, pack, and ship your products. 

When you outsource your logistics to a 3PL fulfillment company, you get everything you need to run your operations smoothly. Such vital services are warehousing, inventory management, picking & packing, shipping, and reverse logistics.

Did you know? The global third-party logistics market was valued at $889.01 billion in 2020 and is projected to grow at a compound annual growth rate of 8.5% from 2021 to 2028.

A smooth 3PL fulfillment process is vital to keep your customers happy and grow your business. Let’s understand this step by step:

3PL Fulfillment Process

3PL fulfillment process

Receiving Products

The first step of a 3PL fulfillment process is receiving the products. Once barcodes are assigned to all the products, they’re packed in boxes and sent to a warehouse. 

Next, your products are received at the warehouse, and a gate entry is made. To ensure the accuracy of receipt, proper barcode scanning and quality check is performed. Finally, the goods receipt note (GRN) is completed.

Warehousing & Inventory Management 

The next important step involved in a 3PL fulfillment process is warehousing and inventory management. Here’s how it’s done.

Your products are stored in storage bins, and the inventory area is divided into zones based on various categories. The zones are further divided into aisles, racks, and shelves. 

Once each of your products is scanned with the storage bin barcode, it is stored in the designated area and goes live for sale.

Order Picking

Whenever you receive an order, a picklist is generated, and picking operators start collecting items from their designated shelves.

If you sell on multiple sales channels, your orders from each channel are matched and clubbed together to reduce time and save costs. Next, your products are scanned & picked using handheld terminals (HHT devices).

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Packaging

After all the products of an order are picked, the next step in the 3PL fulfillment process is to take them to a packaging station. Here, the product code is scanned and mapped with the sales order or shipping label to generate an invoice. Finally, the product is packed and labeled.

Weight Measurement 

In an ideal 3PL fulfillment process, it is also essential to ensure there are no weight discrepancies. Once your products are packed and labeled, they are scanned again to verify their weight and dimensions. This also helps you to reduce weight disputes with your courier partner.

Shipping

The last and final step in a 3PL fulfillment process is carrier allocation and shipping. To make this process even faster and cheaper, your shipments are divided based on the courier partner.

For instance, if there are a total of 50 shipments, and 10 of them will be shipped with Bluedart, they are batched together.

Next, all the AWBs of one courier company are scanned. A single manifest is generated, the pick-up is scheduled, and the courier executive picks up the products for delivery. 

Once the products are delivered successfully, the 3PL fulfillment process comes to an end.

Experience An Efficient 3PL Fulfillment Process 

Now that you understand how an efficient 3PL fulfillment process works, you must start working towards implementing one in your eCommerce business. Don’t worry, we’ve got you covered.

By outsourcing your warehousing and fulfillment operations to Shiprocket fulfillment, you can easily enable 1-Day and 2-Day delivery and save upto 20% of your shipping costs.

This is made possible by storing your inventory closest to your customers in a PAN India network of tech-enabled fulfillment centers. You get all of this without having to spend a single rupee on warehouse infrastructure.

What are you waiting for? Opt for Shiprocket Fulfillment today.

Shiprocket Fulfillment features
November 9, 2021 by Pulkit Bhola

4 min read

How Efficient Logistics Management Can Take Your Business to Next Level

November 5, 2021 by Rashi Sood - 4 min read

The role of efficient logistics management cannot be denied in running a business successfully. Regardless of a business’ industry, specialization, or age, its primary function is to take its goods and services to the buyers. This coordination of goods and services movement from one place to another makes up the backbone of logistics. And therefore, it is essential to master logistics management.

logistics management

What is Logistics Management?

Logistics essentially means the complete distribution and control of inventory, from its procurement and manufacturing to the point of consumption. In simple words, the flow of initial production and procurement of products to its final consumption state, typically in the hands of consumers, is business logistics.

The term involves multiple processes. Therefore, its implementation focuses on making multiple steps for making end-to-end inventory management efficient and cost-efficient.

Logistics can be either managed entirely in-house or outsourced to a third-party logistics partner. Depending on the business’s nature, functions, and size, a 3PL provider can be a better option than managing the entire business logistics in-house.

The Role of Logistics for a Business

Efficient logistics management makes a business more profitable. Managing logistics well helps gain broader visibility in the movement of products from the point of manufacture to the point of consumption. While managing logistics efficiently helps create a fresh set of strategies with improved internal operations, you can also understand the aspects you can handle well and the ones that require updated systems.

We can break the functions of logistics in the supply chain management into the following:

  • Sourcing Raw Material: procuring raw material and distributing it into smaller and individual components to make a finished product.
  • Product Transportation: the actual movement of goods starts from here – distributing it between locations by arranging the inbound and outbound transportation. It can be done in-house or with the help of 3PL service providers.
  • Order Fulfillment: the management and delivery of orders from the point when a customer places an order to its delivery make the entire order fulfillment process. You can take the help of software for the efficient process.
  • Warehouse: the goods are stored in a warehousing unit until an order is received against them. The warehouse processes include storing inventory, managing it, preparing it for shipment, and managing returns.

Importance of Effective Logistics

Promotes Business Results

If logistics is outsourced to a third-party logistics solution, it reduces the overall load on you. Thus, you can leave behind inefficient processes. Besides, a 3PL comes with smart and practical ideas and processes that can increase your overall supply chain productivity.

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While deciding on a strategy, keeping the customers’ changing needs in the account is essential. A good and efficient logistics strategy is also required to keep store locations and transportation operations in hand. This will help you come up with a strong strategy. The following should be incorporated into your logistics plan:

  • Evaluate your logistics operations at regular intervals.
  • If there are changes in the supply chain, always keep those updated with up-to-date information those who directly deal with or are impacted by changes.
  • Revise your plan regularly and adapt to new strategies with changing times.

Better Experience for Customers

Happy and satisfied customers can become your most valuable asset. They play a vital role in all three phases of the supply chain – product, marketing, and logistics. Therefore, you must understand your customers and their needs, preferences, and desires. You can work accordingly to meet their needs and take your business to the next level.

When it comes to buying online, the following factors are essential for the consumers:

  • Plethora of buying options
  • Convenience of browsing
  • Secure payment options
  • Competitive prices
  • Good logistics solution – timely and secured order delivery

Additionally, the customers need to have a quick and straightforward buying and checkout process. They want to look at all options faster, place an order quickly, have secure and different payment options, including the COD option, and get their product faster in no time. Besides, they also want clear communications regarding where the product is and when it is likely to be delivered.

When you fall short of these customers’ expectations, you are more likely to get into trouble. An efficient business logistics guarantee that you don’t ever fall here.

Cost Reduction & Process Efficiency

With logistics management and maintained inventory levels, you can reduce storage space, thus the spendings on it. You can also reduce shipping costs as you can store inventory closer to your buyers. Many businesses also save by getting into agreements with 3PL service providers that offer storage, transportation, and fulfillment services.

By outsourcing your fulfillment operations, you can significantly increase the total business efficiency. By allowing these partners to handle fulfillment operations, you can work towards building a stronger brand.

Shiprocket Fulfillment features
November 5, 2021 by Rashi Sood

3 min read

Impact Of GST On Warehousing In India

November 2, 2021 by Pulkit Bhola - 3 min read

What is the backbone of manufacturing and trading activities in India? The answer is logistics. In a high-demand country like India, logistics plays a critical role. 

In other words, a well-optimized logistics and supply chain enables delivery of the right items in the right quantities at the right time to the right place for the right price in the right condition to the right customer.

Your logistics depends, to a large extent, on your warehousing capabilities. Your warehousing capabilities, in turn, depend on the ease of doing business in your country. A major part of the same is the taxation system and, precisely, GST.

Impact of GST on warehousing in India

GST is a destination-based tax that is levied on every value addition. The Goods and Service Tax Act was passed in Parliament on 29th March 2017 and came into effect on 1st July 2017.

Earlier, logistics businesses had to maintain multiple warehouses across states to avoid CST levy and state entry taxes. As a result, most of them couldn’t operate at their total capacity. 

With the introduction of GST, many operational inefficiencies of warehousing are decreasing. India is progressing towards becoming a single market wherein goods can move freely.

GST has many benefits for all the stakeholders, eCommerce sellers as well as the end consumers. Let’s understand the impact of GST on warehousing in India.

Positive Impact Of GST On Warehousing In India

Positive impact of GST on warehousing

1. Reduced Warehouses

The main impact of GST on warehousing in India has been in the form of the reduced number of warehouses. Tax efficiencies often affect warehouse quantity and location more than operating efficiencies. Under GST, it is no longer mandatory to have warehouses in each state where a business is operational.

Therefore, you can merge small warehouses with big warehouses at strategic locations and reduce labor and transportation costs.

2. More Third Party Logistics

The Indian 3PL market is expected to register a growth rate of over 11.5% during the forecast period of 2020-2025. As discussed, merging small warehouses with big warehouses means accommodating more inventory and maintaining technologically advanced systems.

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3. Better Inventory Management

The previous tax structure in India resulted in confusing warehousing decisions like setting up enormous inventory and, at times, running out of stock during unexpected demand. Thanks to GST, inventory efficiencies have been reduced due to lesser stocking points and fewer stockouts.

You can also take advantage of economies of scale and do better demand forecasting, thereby ensuring that your supply chain is up and running. This is yet another significant impact of GST on warehousing in India.

4. Faster Operations

Your order fulfillment time decreases due to the operational efficiency in your warehouses. As there’s no need to build warehouses in each state anymore, you can organize your warehouses easily and save your order-to-ship time.

5. Lesser Costs

Complexity is the enemy of cost control. GST has brought in an opportunity for organizing the currently unorganized setup of warehouses in India. An efficient and well-managed supply chain will ensure lesser order fulfillment costs.

Now that you’ve understood the impact of GST on warehousing in India, you must also ensure that you reap all these benefits by adopting an efficient & technologically advanced warehousing system.

End Your Warehousing & Fulfillment Woes

Store your inventory near your buyers in our technology-backed fulfillment centers, located across all significant zones in India. Start delivering your orders 3X faster and offer 1 day & 2 day delivery to your buyers.

By outsourcing your warehousing & fulfillment experts to Shiprocket, you can save up to 25% of your shipping costs & reduce up to 60% of your RTOs.

Get in touch with our warehousing experts today.

Shiprocket Fulfillment features
November 2, 2021 by Pulkit Bhola

4 min read

Why Should You Know About Inventory Carrying Cost

October 28, 2021 by Rashi Sood - 4 min read

Inventory is a non-liquid asset for a business that sells physical products. It must convert the liquid asset into cash by selling the inventory. How efficiently a company does that determines its profitability. Said that, the inventory carrying cost is an important metric to keep in the account.

inventory carrying costs

Inventory carrying cost is the amount a business spends on holding inventory – it includes the cost of owning, keeping, and storing inventory over a period of time. It simply is the expense of holding inventory before the orders are fulfilled.

An efficient inventory management process is required to keep inventory carrying costs minimum. With poor inventory management, carrying costs can become higher, eating most of the profit. Thus, implementing the best inventory control practices is essential to understand and measure the business’s carrying cost.

Components of Carrying Cost

Capital Costs

Capital costs account for the biggest portion of carrying costs. It includes the cost of purchasing raw material, inventory items, loan/financing fees, and loan interest. Money tied with inventory can affect cash flow. Thus, there can be a need for additional capital to run a business.

You need to forecast the inventory in advance and buy/restore inventory strategically. Also, you can negotiate with the supplier for a discount or lower inventory price.

Cost of Storing Inventory

Inventory storage cost is essentially the warehousing cost. It includes buying or renting a warehousing space; the cost paid for climate control and other utilities, security, and equipment if required.

While the cost is usually fixed if you own a warehousing space, the price depends on and fluctuates basis the usage and storage of inventory if you use a third-party logistics company. You can reimagine the warehouse layout from time to time to store different products and reduce storage costs.

Staff Cost

Staff cost is the labor cost that manages, arranges, and moves the inventory within the warehouse. They fulfill orders when you receive one. You can rearrange the inventory in the warehouse to cut labor costs. Like you can store inventory near packing stations. Or you can also automate some warehousing functions.

Inventory Service Costs

Many companies also insure the inventory. Flood or fire can destroy inventory. Thereby, insurance can cover the losses. However, the more inventory you have, the more the premiums will be. The inventory service costs include insurance premiums, hardware investments, taxes, and inventory management software fees.

Employing inventory management software can help you eliminate inefficiencies.

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Obsolete Stock

Obsolete stock is the one that can be sold any longer. The reason can be the stock might have reached the end of its lifecycle. The products that become obsolete must be depreciated and written off the books. This can lead to a spike in the carrying cost.

The best way to eliminate obsolete inventory is by never overstocking. Otherwise, you will have to dispose it of. Or, when the stock is near the end of its lifecycle, you can offer discounts on it or donate it.

Also, if there are no regular checks, you might be holding obsolete inventory, leading to additional costs like warehousing. So. It is crucial to perform regular checks and dispose of the inventory before it becomes obsolete.

Inventory Handling

A product requires a number of touches – from putting it in the warehouse to printing shipping labels for it. All the money spent on this comes under material handling.

Administrative Costs

Administrative costs include a variety of expenses, like facility maintenance, cleaning, property taxes, and equipment and transportation depreciation. Generally, a company with more inventories incurs higher administrative costs because it needs a larger warehousing facility.

Inventory Carrying Cost Formula

To calculate carrying cost, divide the inventory on hold by the inventory value and multiply it by 100 to get the total inventory value percentage.

The total inventory on hold is the sum of all the components we have discussed above. And the inventory value is the cost of inventory available multiplied by the available stock.

So, the inventory carrying cost formula is:

Inventory Carrying Cost = Inventory Holding Cost/Total Value of Inventory X 100

With the carrying cost formula, you can calculate the quarter or annual carrying costs. It’s best to calculate carrying costs at regular intervals.

Shiprocket Fulfillment features
October 28, 2021 by Rashi Sood