How Do Shipping and Inventory Models Affect Your Bottom Line?

For small and scaling brands, shipping and inventory models are rarely given the same consideration as, say, ideation or sample making. Largely due to the belief that there’s only one way to manage the shipping process on a smaller scale, the rise of companies such as Shyp are changing the day-to-day operations for those who rely on the postal service as an essential part of their small business model. We spoke to Shyp to get the skinny on how shipping is changing, and what large-scale inventory models offer for smaller business endeavors.

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How do inventory levels affect product-driven business?

Typically inventory is only expensed as it is sold. That is, if I buy $100 of lemons today, and don’t sell any today, I am not forced to capture the cost. As orders comes in (i.e. sales) for those lemons over the next week and I ship the product, then I capture the costs of those lemons as an expense.

Businesses usually make adjustments to inventory once or twice annually, during what is typically called a Physical Inventory. All SKUs (stock keeping units) and units are counted manually to ensure accuracy.

What are the differences between key models?

A couple of very interesting themes and trends in logistics have been transportation – specifically time in transit and proximity to customer and different types of carriers, as well as the rise of third party logistics providers.

With Amazon’s push to getting product to customers faster – largely buoyed by the rise of their two-day Prime shipping – they have modeled their distribution such that they are closer to the consumer, and can leverage more cost effective carriers to deliver. Ten years ago, Amazon was 850 miles away from their average customer; today, they’re an average of 85 miles from the customer. Being closer opens the variability in carriers they can use, and cuts down the transit times.

Third party logistics companies, often called 3PLs, have been one of the fastest growing segments in logistics. These companies essentially provide outsourced supply chain services to businesses, both small and large. Services can range from a full service, end-to-end distribution and transportation solution, to just warehousing or transportation services, supplies procurement, and human resources.

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How can small and scaling brands take advantage of advanced inventory models?

Small and scaling brands can take cues from advanced inventory models in a couple of ways. For example, setting up a consistent system for inventory will help determine which products are moving and which are not, thus streamlining and increasing sales.

Further, proper inventory management procedure helps estimate future inventory needs much more accurately, therefore reducing waste and increasing profit.

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