Most eCommerce businesses spend a majority of their sales order fulfillment time doing redundant tasks. Having to constantly make purchase orders is not necessarily a bad thing. It means your demand generation is working well.
When your demand generation is going well, you need to drive efficiency in your demand fulfillment process as well. One of the biggest hindering factors to demand fulfillment is inefficient purchasing and order generation.
WHY AUTOMATE YOUR PURCHASE ORDER GENERATION
Many small business owners still use manual purchasing systems to place orders and they have seen that mistakes on a purchase order can run you out of stock on a fast selling item and leave you with excess unwanted inventory.
In retail inventory management and eCommerce inventory management, staying ahead of your demand is key. The main objective of retail inventory management is to stay ahead of demand in the most efficient way possible, by balancing inventory levels.
Having too much inventory on hand will negatively impact your cash flow and sink your bottom line. Having too little inventory might mean lost customers. Having an efficient order generation system will ensure you are sufficiently stocked without unnecessary excess inventory.
Challenges of a manual order generation system
Trying to bring efficiency to a manual purchasing process will make you hit a few roadblocks.
- Lack of Understanding of Demand
Without proper visibility, you will not be able to make accurate purchasing decisions, and you will be left with too little or too much inventory.
- Delayed Order Fulfillment
Relying on manual processes will leave your business operations to human error, and a small error can spiral into out of stock situations before you anticipate it. Delayed and incomplete shipment will negatively impact your brand’s image.
- Increased costs
Holding too much inventory can bleed capital quickly due to the various costs associated with it. Manually making purchase orders can delay your orders and you will end up with excess inventory that goes unsold.
Benefits of Automated Order Generation
With automated order generation, you are firstly able to free yourself from manual, repetitive tasks. This will allow you to shift your focus on activities like Demand Generation. Let’s first define what an automated order generation software does:
An automated order generation software performs and automates all processes related to purchase planning and replenishment planning. It will alert you when stocks are running low, and sends a purchase order to your suppliers if necessary, so you are sufficiently stocked when demand is high.
The major benefits of an automated order generation software are:
- Decrease Delivery time
Having an automated order generation system ensures you are always sufficiently stocked. During times of high demand, you are not left scrambling to make a last minute purchase order to your supplier, and thereby delaying delivery to your customer.
Having an automated order generation system in combination with an effective warehouse inventory management tool will ensure your fast selling items are always available at the most accessible location for the quickest delivery possible.
- Reduce order fulfillment cost
The average cost to fulfill an order is 70% of the order value. With manual ordering, and all the delays that will bring, your costs will only go up. Holding costs, Transportation costs, Labor costs are just a few of the additional costs that will negatively impact your cash flow.
Automation of purchase order generation will bring down accumulation of excess stock and dead stock, and will considerably bring down your order fulfillment cost.
- Improved Inventory Management
Without anticipating demand, your warehouses can quickly become filled with products and raw materials. Retail Inventory Management is all about having the right balance of inventory at all times, to efficiently tread that thin line between overstocking and understocking.
An automated order generation will anticipate demand and constantly monitor stock levels, and place an order when a fast selling stock’s levels are running low.
Manually managing all your purchase orders is a common first step taken among small business owners, when their demand generation is stating to pay off. It is important to implement automated tools before you get overwhelmed, that can deliver you information well before time and enable your decision making and avoid costly mistakes.