3 eCommerce Operations Terms to Know

Insight

No big preamble or introduction here. The year is 2021, another year in the eCommerce decade, and at Daasity, we want every eCommerce company to succeed.

Here are 3 eCommerce operations terms to know.

1. Inventory Turnover (a.k.a. Inventory Turnover Ratio or Inventory Turns)

The what: Inventory turnover is a ratio of how many times a unit of inventory is sold over a given time period.

The how: Here's how to calculate inventory turnover:

inventory turnover formula is COGS divided by average inventory amount

The why: Tracking and understanding your brand’s inventory turnover over the course of a year is key to understanding how efficient your business is at moving product. It also helps you optimize purchases from your supplier(s): ordering too much or too little supply of product can put pressure on different teams within your company. 

Too much supply means that the marketing team has to scramble to sell more product, and storage costs for that supply increase. Too little supply means unhappy customers and potentially higher costs to expedite shipment from suppliers.

If you want to learn even more about inventory turnover, check out this article from Skubana.

2. Stock Keeping Unit (SKU) 

The what: A SKU is a number or barcode (or both) that a brand uses to internally track inventory based on variables of the product. E.g. PNCI - BLK - 10 for cast iron pan black 10in vs PNCI - BLK - 16 for cast iron pan black 16in

The how: If your brand has a small product catalog, your "sitSKUation" is probably fairly simple, but if you’re in an industry such as apparel, you might find that your sitSKUation is incredibly complicated. Ensure that you are careful with generating SKU numbers and keep a close eye on organizing them.

The why: Using SKUs, eCommerce Operations teams can track inventory levels and decide when to place new POs for specific items vs the entire product or category of products. 

Marketing teams can also use SKUs to track sales data to get a more granular understanding of which items are the most successful and learn more about how customers are using their product.

3. Enterprise Resource Planning (ERP)

The what: ERP refers to software that a business uses to manage daily operations. For eCommerce operations, this means your finance, product, inventory and warehouse management systems. Some companies also use their ERPs as a CRM as well.  

The how: Choosing an ERP platform that is appropriate for your business is key, and implementing it carefully is equally important. If you need some help choosing one and learning about the options out there, check out this article from Mesa.

The why: Simply put, tracking the back end of an eCommerce business is complicated. Having reliable software to organize your operations, collaborate between teams, optimize spending, and generate reports can be the difference between life and death as your brand scales.

For even more about ERPs, we love this article from BigCommerce.

Final Thoughts

Strong eCommerce operations are part of a balanced eCommerce brand’s breakfast, and we hope this quick list may have clarified a thing or two. 

At Daasity, we support all elements of eCommerce data, including operational data. If your brand is having some operations woes (or you just want a super sleek system where all your eCommerce data is in one place), sign up for a free on-demand demo here.

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