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Whether you’re selling fasteners or some other product, to maintain a successful operation, you need to increase inventory turnover. Manufacturers have several channels through which they sell goods, including directly to customers, through distributors, and through retailers. However, many don’t maximize the potential of e-commerce. Vertical online marketplaces can significantly boost inventory turnover, especially for specialty products, such as fasteners.
Moving more goods not only means more sales revenue but also improved cash flow, increased warehouse efficiency, and increased customer satisfaction. Maintaining excess inventory ties up capital that could be used to address business needs, such as responding to market or operational changes.
Utilizing a vertical e-commerce platform, such as the Bay Supply Marketplace, enables manufacturers to align their supply with demand. A marketplace provides direct access to buyers and enables smarter sourcing using digital workflows and automation. Improving turnover efficiency makes it easier to predict demand, frees up warehouse space, and unlocks working capital. Access to drop-shipping also helps move goods faster, further shortening turnover time.
How to Think About Inventory Turnover
To appreciate the potential value of a vertical e-commerce sales channel, you should first understand how to track turnover. Tracking the inventory ratio is a key indicator of operational efficiency. The higher the turnover ratio, the better the efficiency and the greater the likelihood of reducing costs and keeping pace with customer demand. A low inventory turnover ratio indicates that you have too much inventory in stock, tying up capital and suggesting ineffective inventory management.
The inventory turnover ratio is easy to calculate: Turnover ratio = Cost of goods/Average inventory.
Maintaining a relatively high turnover ratio is a sign of a healthy business. For manufacturers, a healthy turnover rate indicates that you’re effectively controlling costs and maintaining business stability. A vendor’s reputation is based on the quality of its products and the level of customer satisfaction. Maintaining a profitable inventory turnover demonstrates that the company’s products are well-received by customers.
A slower inventory turnover often indicates poor sales forecasting and limited visibility into the supply chain. There are several barriers that manufacturers typically encounter that can hurt inventory turnover:
- Having a limited customer network results in longer lead times
- Manual sourcing and slow responses to quotes, purchase orders, and approvals
- Inaccurate demand planning that leads to overstock and shortages
- Lack of integration between procurement, the warehouse, and finance
A vertical e-commerce marketplace helps manufacturers address these and other challenges related to inventory turnover.
How Bay Supply Improves Turnover
The Bay Supply Marketplace was created to streamline the selling of fasteners and help manufacturers optimize inventory turnover. The marketplace offers several features:
Real-Time Access to Suppliers
The marketplace model provides buyers with access to a wide range of fasteners from a single location. Products from verified manufacturers and distributors can be ordered directly, which helps vendors by enabling just-in-time sourcing and replenishment, thereby reducing overstocking.
Automated Requests for Quotes (RFQs)
RFQs are fully automated, including competitive-bid and order-confirmation processes. By automating the process online, RFQs can be fulfilled in hours rather than days, increasing the turnover rate and matching it to demand.
Better Supply Visibility and Analytics
As part of the marketplace, vendors get access to a centralized dashboard that tracks sourcing activity and supplier performance. Visibility into online purchases makes it easier to track sales trends, identify underperforming stock-keeping units, and plan for stocking and reorders.
On-Demand Procurement
Utilizing an efficient online marketplace that streamlines order placement and expedites delivery via drop shipping enables on-demand sourcing, eliminating the need for long-term overstocking. It also allows vendors to adopt a “push” sales strategy rather than a “pull” model, which reduces the need to maintain excess inventory.
Best Practices for Improving Turnover
One of the biggest advantages of using an online marketplace is the greater visibility it offers into sales and sales orders. The transparency the marketplace provides contributes to inventory management best practices.
For example, inventory management requires tracking orders and adjusting order quantities as needed. Marketplace data makes it easier to spot sales trends for inventory planning.
Leveraging multiple suppliers improves inventory flexibility. Having a central marketplace makes it easier to coordinate orders with distributors and supply partners, resulting in greater inventory redundancy and resilience.
Replacing manual ordering processes with automated ordering, such as digital RFQs, streamlines procurement and improves order accuracy. It also makes it easier to integrate workflows, allowing data to be shared between shipping, the warehouse, and accounting. It also provides visibility into turnover rates, stockout frequency, carrying costs, and other key performance indicators.
Maximizing inventory turnover is the best strategy to power business growth, but inventory efficiency isn’t just about reducing the stock on hand. It requires more innovative sourcing tools. Using online channels, such as the Bay Supply Marketplace, not only extends sales reach to new customers but also streamlines and automates the sales process, resulting in greater inventory control.
If you want to learn more about how the marketplace can improve your inventory turnover, why not schedule a meeting with one of our onboarding agents? There is no cost to sign up for the marketplace, and it could have a dramatic positive impact on your fastener sales.
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