Inventory management is the backbone of any successful CPG brand, especially for startups navigating the challenging world of food, beverage, or beauty production and sales. In the early stages, many startups rely on manual tracking methods, such as spreadsheets, to manage their inventory. While this might seem sufficient initially, as your business expands, spreadsheets can quickly become a bottleneck, leading to inefficiencies, errors, and even costly setbacks.
The Nightmare of Spreadsheets
There are potential nightmares associated with relying solely on spreadsheets for inventory management. One major risk is inaccurate lot tracking, which can lead to costly product recalls encompassing a much larger quantity than intended. Another common pitfall is unexpected ingredient or parts shortages, halting production and potentially jeopardizing relationships with co-manufacturers and retailers. Additionally, spreadsheets often lack the sophistication required for accurate financial reporting, making it challenging to track cash flow and make informed decisions about pricing and profitability.
When to Implement an Inventory Management System
As your startup CPG brand grows, several telltale signs indicate it's time to transition from spreadsheets to a dedicated Inventory Management System (IMS):
You find it increasingly difficult to manage multiple ingredient sources and batches, ensuring you receive the correct quantities and that expiration dates are closely monitored.
Reconciling orders, inventory, and production across different sales channels, such as retail, Shopify, and Amazon, becomes a logistical nightmare.
You experience frequent stockouts, leading to lost sales and frustrated customers, or overstocking, tying up capital and potentially resulting in product waste.
"Investing in a robust IMS offers numerous advantages that can significantly impact your startup's efficiency, profitability, and overall success ..."
Benefits of an IMS for a Startup
Investing in a robust IMS offers numerous advantages that can significantly impact your startup's efficiency, profitability, and overall success:
Gain real-time inventory visibility across multiple locations, including co-packers, ensuring you always have an accurate understanding of your available stock.
Automate purchase order creation and streamline supplier management, reducing manual work and minimizing errors.
Seamless integration with e-commerce platforms and accounting software, like Shopify or QuickBooks, eliminating double entry and improving the accuracy of your financial data.
Optimize order fulfillment and shipping processes, reducing errors and ensuring timely delivery to your customers.
Implement robust lot and batch tracking, enhancing traceability and ensuring compliance with food safety regulations like FSMA.
Accurately track costs and calculate COGS, providing valuable insights for pricing decisions, profitability analysis, and cash flow forecasting.
Empower data-driven decision-making.
The Importance of Onboarding Your Team
Successfully implementing an IMS involves more than just selecting the right software. It's crucial to effectively onboard your team, ensuring everyone understands the system's functionality and their role in maintaining data integrity. Neglecting the onboarding process can lead to confusion, resistance to adoption, and inaccurate data, undermining the very benefits the IMS is designed to provide. This often involves investing time in training, utilizing available resources like online tutorials and support teams, and establishing clear procedures for data entry and reconciliation.
Choosing the Right IMS
Selecting the right IMS for your startup CPG brand requires careful consideration of your specific needs and budget:
Prioritize user-friendliness and ease of implementation, especially if you have a small team with limited technical expertise.
Choose a system that can scale alongside your business, accommodating future growth and the addition of new products, sales channels, and locations.
Ensure the IMS seamlessly integrates with your existing systems.
Opt for an IMS with affordable and flexible pricing plans that suit your startup budget.
Costs of Implementing an IMS
Implementing an IMS involves both direct and indirect costs. Understanding these expenses upfront can help you plan better and ensure a smoother transition.
Direct Costs:
Direct costs typically involve the software subscription fees for the IMS itself. These fees can vary based on the scale of your operations, the features required, and the type of plan you choose:
Basic plans range from $50 to $100 per month, providing core features for small operations.
Mid-range plans cost between $200 and $500 per month, offering more advanced functionality for growing businesses with multiple sales channels and suppliers.
Enterprise plans start at $1,000+ per month and are suited for larger businesses with complex operations, requiring advanced customization and support.
Beyond the subscription fee, you might also encounter one-time setup fees or charges for additional features such as custom integrations, advanced reporting tools, or premium customer support.
Indirect Costs:
Indirect costs are often less obvious but can be equally impactful. These include the time and resources required to prepare and implement the system. For example:
Data preparation: Before importing data into the IMS, your team will need to clean, organize, and format your existing inventory information.
Training and onboarding: Implementing an IMS requires training your staff to ensure they understand the new system. You may need to allocate time for onboarding sessions, whether through self-guided tutorials, live training, or external consultants.
Stakeholder involvement: You will likely need to involve various stakeholders, including your bookkeeper and warehouse or 3PL team, who will have to learn the new processes and adapt to the integration with accounting or fulfillment systems.
Consulting or external help: In many cases, startups may need to hire external consultants to assist with the technical aspects of the implementation.
While indirect costs may not appear on your budget as upfront expenses, they often involve significant amounts of time and focus. Proper planning and budgeting for both direct and indirect costs will help ensure the successful implementation of your IMS without disrupting your operations.
Timeline and Timing to Implement an IMS
In regards to timeline, implementation can take anywhere from a few days to a few weeks, depending on complexity. If you have not gone to market yet (i.e., you have not started selling your products), and you're thinking of implementing an IMS straight from the get-go, the integration could be done in less than a week. If you are already operating, the timeline will increase with the complexity of your procurement processes, production, product assortment, sales channels, etc.
Why Did Olari Consulting Choose Cin7 Core?
Knowing an IMS well takes a lot of focus and energy, so we prefer to focus on a single platform and know it well rather than try to know two or more in less detail. We have worked with other IMS platforms, such as QuickBooks Commerce (now discontinued) and MRPeasy, and reviewed several others before making our choice. We specifically chose Cin7 Core for the following reasons:
User-friendly interface.
Comprehensive functionality.
Robust integration capabilities with key platforms.
Manufacturing module and production management.
B2B e-commerce module (rarely offered by other IMS solutions).
Comprehensive online support (though some instances of timeliness or quality of responses could be improved).
Quantity and quality of reviews on G2, Capterra, Shopify App Store, and QuickBooks Online Store.
Product roadmap: Cin7 Core is constantly being updated and evolving.
Free trials are offered, and we can help you get a deal.
Drawbacks of Cin7:
The reporting module is not the easiest to work with (we tend to export to Excel and work from there).
The CRM module is basic and lacks features.
Alternatives
While a dedicated IMS like Cin7 Core is generally recommended for growing CPG brands, some startups might explore alternative solutions, such as building a custom Google Sheet system. This approach can be more cost-effective initially, but it requires significant time and effort to build and maintain, and it lacks the robust functionality and integration capabilities of a dedicated IMS.
Tips for Successful IMS Implementation
To ensure a smooth transition and maximize the value of your IMS investment, follow these actionable tips:
Thoroughly understand your current inventory management processes and pain points, identifying areas where the IMS can provide the most significant improvements.
Prioritize data integrity and accuracy during the initial setup, ensuring all product information, supplier details, and inventory levels are correctly entered.
Invest time in training your team and leverage available resources, such as Cin7 Core University and support teams, to address any questions or challenges.
Maintain diligence in updating the system regularly, reconciling data with physical inventory counts, and staying informed about software updates and new features.
If you work with an implementation team like Olari Consulting, ensure you have the time and resources to provide them with the necessary information.
Conclusion
Investing in an IMS is a crucial step for long-term success in the competitive CPG industry. By automating tasks, improving data accuracy, and providing real-time visibility into your operations, an IMS empowers you to make informed decisions, optimize your supply chain, and focus on what matters most: growing your brand and delighting your customers. Cin7 Core stands out as a particularly compelling solution for startup CPG brands, offering a user-friendly platform, affordable pricing, and robust functionality specifically designed to meet your needs.
Take advantage of their free trial and reach out to us to benefit from special pricing on the first few months of operations.