Ship or Die!

By Eric Nelson

The DR scrapheap is piled high with products that seemed to have everything going for them, including great creative and solid media and fulfillment plans. Unfortunately, they were all undermined by not having an inventory management plan ironed out prior to launch.

Typically, these disaster stories stem from marketers thinking that inventory management would fall into place. After all, they knew who was manufacturing the product (well, kind of) and how it was getting here (kind of). The marketer never actually met with the manufacturer and freight forwarder, but was told the product could be manufactured at a good price and shipped in a timely manner.

But here's the dilemma: When you don't have inventory, you can't ship. The moment you go on backorder is the moment you start losing money. Here are some other common problems:

• Not processing orders and credit cards means no money is hitting your bank account.
• The customer's credit card was good at the time of order, but now it's been a week or two and that card is no longer valid. This means a lost sale, or an added cost to recover it.
• When you don't have inventory, you can't ship, and now the consumer has more time to think about what he or she bought and might cancel because of buyer's remorse.
• The consumer wanted it ASAP, but didn't get it, resulting in a lost sale and return costs.
• Customer service costs skyrocket as consumers call in demanding to know the status of their orders.

KEY GUIDELINES
Here are a few things you must have in place before you pull the trigger on an all-out launch:

• Educate yourself. Where and how is the product being made? How much time is involved in making and receiving the product? (Once complete, how long from doorstep to doorstep, what are the payment terms and what happens when it lands on U.S. soil?) Make sure you know your manufacturer.
• Have backup manufacturers, overseas and domestically (if possible). It may cost more domestically, but it will be a lot cheaper and quicker than air freighting product. Keep that domestic manufacturer in case of an emergency.
• Establish a great working relationship with your freight forwarders. Understand the customs process.
• Make sure you know exactly where you are with inventory at all times. Work very closely with your fulfillment provider, freight forwarders and manufacturers.
• Plan your inventory allocation wisely. Don't forget about retail, home shopping and DRTV. Keeping a proper balance of inventory is critical.

Backorder is like cancer--if you don't take care of it quickly, it can kill you. A proper inventory management plan and a fulfillment partner that can provide you with proper analysis and timely reporting can save you--and make you millions.

Eric Nelson is vice president at Christopher Morgan Fulfillment, a fulfillment and marketing company based in New Berlin, Wis. He can be reached at (800) 714-3155, or via e-mail at eric@cmorgan.com.