More Money in Your Pocket, Less Stuck in Inventory: Smart Ways to Boost Cash Flow for DTC Brands

Foreign from Manila. Good afternoon or good evening wherever you are. Thank you for joining us today and I am very excited for today's workshop because I'm not alone. I am with JM Olega, our expert in not just only inventory planning but also in logistics. So there will be a lot of practical tools or templates that we will be discussing today and not just theoretical steps on how we are going to solve and improving your cash flow. Especially this Q4. So welcome to the workshop again. I'm Lara Guevara, founder of Move Supply Chain and I'm with JM our expert expert in inventory. So in this workshop we want to discuss that every we are aware that every dollar sitting in the wrong sku is the dollar you can spend on marketing new products or scaling your team for your growth. And so what we are aiming to do right now is to share with you how to locate your cash leaks and how to lice and dice with smart segmentation and then negotiate on lock capital and then master your Q4 flow. And at the end of the session we will have a live Q and A. But at the same time if you have any questions during the time that we are presenting, feel free to use the chat box. We will be checking your questions every now and then and we can answer it if it's related to the current topic that we're discussing. So don't hesitate to ask questions or to even give some examples from your brands. It would be helpful for us to really provide an example that is close to your products. So we will be showing examples and sharing with you case studies. But if you wanted to share with us your products then feel free to do so and we will do as much as possible. We will provide examples close to your products. All right? Okay. So to start we are all aware of this problem every year. This is actually not just for Q4 but all year round situation. However, it's bigger in Q4 as it will affect the your Q1 as well. So maybe that's why you are all here as well is because you we've seen this many times, you've seen this many times in your brand, cycle by cycle and for us as well in MOOC supply chain we've seen this many times with our clients and I want to assure you that this challenge is very solvable. We're here to share with you practical templates that you can use to help to help you with the these challenges. So why is our inventory hurting our cash flows, especially in Q4 or in peak season? The problem is too Much cash is tied up in excess or slow moving inventory. We all want that for this season. We will not go out of stock for products that is very high selling or hero products. And at the same time we want to ensure that our supporting products are also in stock so that you can do your marketing bundles. There are a lot of marketing strategies that you do with your agencies or if you run it yourself, you have so many strategies, you work a lot in your marketing campaigns for this season. And the moment that your inventory fails, all of the investment that you have with your marketing will not return on investment because you don't have enough inventory. And that's exactly why we keep on pushing how to make sure that your effort in marketing is going to be supported with supply chain. We don't want you to spend thousands of dollars for ads when in fact your inventory is not going to support it. So this is the session for you. We want you to have the right volume for the right product at the right time. And we will be also sharing with you complimentary strategies in sourcing and logistics to help you with the overall cash flow improvement. And so again, too much cash is tied up in excess or or slow moving. And if there are things that you have to still work with your vendor, work with your team, with your partners, with your agencies, then this is the right wake up call timing for you so that you can gather your team. After this, do meet with your agencies, meet with your team members and create something that will make you make your inventory better. This and cash flow actually in Q4. All right. Okay. So first of our agenda is locating your cash leaks. So what is cash leak? Aging stocks, overstock products, slow moving SKUs and hidden fees like storage, disposal, markdowns, trading or margins. So for cash leak ZM later on will be sharing something to share with you how to how to spot this. But at the same time if you have this, you will definitely be working on hidden fees. So I just wanted to ask very quick question right now. Who among our participants right now are auditing your warehouse and logistics invoices every month? So 3 PL and warehousing. Can you share if you are auditing your costing? Like do you know how much is your per pallet? Do you know how, what is the stocking height? What is your peak impact cost? If you have a tpl, if you own it, if you own the warehouse then it's good. But if not, are you aware of how many bins are open or how many pallets are being used for your products right now? If There's a an inbound delivery. How much is being charged of you? So those questions if you have been checking it, then you will be able to see that there are some charges that is supposedly not there. Maybe you have to discuss that with your with your partner. But at the same time you can see how much of your cost is tied up because of your inventory that is not moving or slow moving or unnecessary products or overstock because of that. So it's like tool or subscription housekeeping. In our agency it's similar to tool housekeeping. We check all our tools. For example, in Google Workspace, are all members still active? If they're not active, we terminate the email. It's the same thing with dtc. There are so many hidden fees, especially related to inventory that you have to check. That will give you two things. An awareness of where you can still save because of you see that your 3 PLN warehousing is opening too many bins at the same time regardless if you only need one or if they are understacking your master cartons in a pallet so that they can charge more pallets at the same time, even if there are no incidents like that, you will be seeing how much is the real cost of your not or slow moving inventory in your warehouse. So that's the main practice and we will be maybe at the end of this session, if you don't have or if you haven't audited any of your invoices yet, please ask your partners to share it with you. And you can let them know that the goal is to work with them as a partner to lower down your cost and to prepare for Q4. They should be able to support you on that. They understand what is your goal and they should be working with you on how to do it. Especially this Q4 which is our biggest or our peak season, which is our biggest time of the year for dpc. So how does fot in the cache leaks? It's a regular SKU performance review and inventory audits to identify underperforming items. Jm I'll turn this over to you to share.

Yes.

Okay.

Hello everyone. So yeah, spotting those leaks doesn't have to be complicated. As mentioned, a simple regular SKU performing performance review combined with periodic inventory audits will flag underperformers before they become a cash flow problem. So to keep things simple, we've built this one page template you can plug your numbers into. And then one of the easiest way to find hidden cash leaks is by calculating the sell through percentage. So, so what exactly is sell to percentage. So this tells you what share of your stock actually sold in the last 30 days, for example. So if that percentage is low, your product is tying up cash on the shelf. So just a quick walkthrough to each of the columns. So first is your SKU which can be seen in your product master list. And then second is your stock on hand or ending inventory. So this is the current quantity in your warehouse, which can be extracted in your WMS or warehouse management system if you do have that. And then third is the last receipt date, so the day you last received any of the that sku so you know how long it has been on your shelf. And then fourth is the unit cost, so which can be seen as well in your product master list. And then the next is the total inventory value. This is simply your SOH multiplied by the unit cost, your cash tied up in that SKU. And then next is the unit sold for 30 days. So this can be extracted in your E commerce platform such as Shopify and Amazon. And then next is the sales velocity, 30 day sales velocity. So this is your average daily sales rate calculated as units sold divided by 30 days. And then we have here our sell through percentage. So this is unit sold divided by the units sold, adding the ending inventory or the stock on hand. So in other words the share of your total available stock that moved in 30 days, a low percentage flags slow moving items. So usually the threshold for this is minimum 30%. And then next column is the days on hand. This is your stock on hand divided by your sales velocity. So an estimate of how many days it will take you to sell out at your current days. And then next is the aging. This is computed by the day today minus the last receipt date. So that is why it's important to get the last receipt date. And then this means how long does the stock has been sitting idle. Usually the threshold for this is 60 days maximum. Okay, so following the column four carrying cost. So this is simply the hidden bill you pay for keeping products sitting in your warehouse instead of turning them into cash on your shelves. So the annual cost of holding that inventory. So to compute this is to get your inventory value, multiply multiplied by 20% and then multiply by the result of dividing the aging with the 365 days. So this covers storage fees and capital costs. So for, let me just get back to the 20%. 20%. In many industries a threshold of 50 capital costs. So for, let me just get back to the 20%. 20%. In many industries a threshold of 15 to 30% annual rate is used as a quick estimate of all those combined expenses. And then last is your flag column, which is yes or no. So we mark yes if sell through is below, below your minimum threshold or aging exceeds your maximum 30 days. So those are the items leaking cash. So that's how easy it is to identify your leaks. So yeah, just a quick note here for comments like slow moving or considered markdown. And then by filling in these fields, you instantly spotlight the SKUs that are tying up your cash. So from there you can decide whether you run a promotion or adjust your reordering quantities or even discontinue to a slow performer, if ever. So all to keep more money in your pocket. So I included here a sample empty template below that you can use above. Yeah here that you can use to fill in your data. So I hope that helps.

Thanks jm. As JM has explained, this template will enable us to identify and tag actually our products, especially if your brand has a lot of SKUs. If it's like different sizes, different colors, if it's in a barrel, then this is very, very important because sizes can vary from 3Xs to 3XL. And at the same time there are other products that has multiple sizes as well for one product. For example, if it's like 50ml, 100ml, 500ml and if there are different designs or formulations for that, if is it's very important that we identify what are the products that is slow moving. And that template that JM shared with us, we will be sharing it with you too. After this call you can plug it in your data and then you can see what products you have is slow moving at this point. Okay, moving on. So slice and dice with smart segmentation. So it's still connected to how do we manage our products not only this peak season, but all year round. But it's like we are emphasizing peak season because this is where you spend most and this is where you expect the highest return possible. So the impact is highest in peak season. So, so the smart Segmentation is the ABC segmentation, the 80, 20% rule, where 20% of your products generate usually 80% of the revenue and then focus on these key products to optimize each cash flow. Definitely you already know what your hero products are based on the experience and the number of sales that you that total sales that you have for that product. But at the same time making sure that you understand every product in your list is also categorized or segmented. So how to segment is using the ABC framework. It's classifying products into A bestsellers, B moderate and C slow movers. So again I'm turning this over to JM and share with you how ABC analysis looks like.

Okay, so moving on with the ABC analysis, this is a simple yet powerful method that surprisingly underused. So despite delivering huge gains in inventory, visibility and control. So it's built on the 8020 Pareto rule, as mentioned, that's roughly 20% of your SKU that generates about 80% of your revenue. So by classifying your products into A as your top 20% sellers and then B for mid performing and then C for your slow movers. So with this you can immediately know where to focus your effort and working capital. So I have here again a simple template so you can see how easy it is to run it quickly. So first is you pull your SKU level sales and on hand data for the recent period, for example January to June 2025. And this is commonly extracted from an e commerce platform such as Shopify and Amazon. And then important data that you need to acquire are product skill, KU code, your description and then category and then as well as the total item sold, the unit cost and the gross sales right here. So once you have this data completed, you can simply pivot the sales data. So just ensure that it is sorted from highest to lowest because based on the gross sales. So there are other companies or clients that prefer to do an ABC analysis based on the item sold, but mostly it's based on the gross sales. And then next is the percentage contribution which is dividing your current gross sales on that particular SK over the total. And then for the second column the percentage running is just simply adding each line item on the previous percentage contribution. So for example this one and then after that you can assign the top contributors to a, that's 0 to 80% running contribution, that's why this one is highlighted. And then next tag B for the running contribution from 81 to 95% meaning it contributes 15% of your revenue. And then class C, this only contributes 5% of your revenue. So running contribution from 96 up to 100. So at a glance you can see that you have four SKUs that are considered as top selling and then three SKUs that are mid and then C2SKUs. So with this simple template you will instantly scroll down got Your highest impact SKUs. Your typical strategy for class A usually are you ensure stock availability at all times, you forecast demand regularly, and then you prioritize class A in terms of promotion and bundles and then also considering expanding in more variants in this top selling SKUs or even just Scholars. And then for mid the usual strategies for this is you monitor your sales trend and pricing sensitivity because it might go to level C or slow moving items and then optimize your visibility or feature in seasonal campaigns. And then also you can bundle with class A, class B with class A to improve your sell through and then class C for slow mover items you limit reordering or phase out gradually deplete it over time. You can also move it to clearance bundle or sales selections and then we usually recommend to avoid launching new variants unless there's a data that supports the demand for it. So that's about it for ADC analysis.

Thank you. JM I just wanted to add how is this connected to your overall supply chain or your operations? Is this is the time that after getting the result or after analyzing the data in the ABC analysis you will be able to have your next steps with your vendors? Because the next steps that you can get is probably I need to reduce ordering product one and I need to increase ordering product two. But at the same time there are so many factors to consider. You'll say Lara, I know that I have to reduce my orders from 300 to 100 but my vendor is not allowing me. So again that's something that is a real situation in DTC where sometimes we are left with no choice because we are just ordering their moq and even if that is not the right quantity quantity that we should be targeting or buying, then we don't have a choice. So it will go back to the basics of why are we getting this product with that vendor when MOQ is clearly not. It's not feasible to be followed at the level of your company right now level of growth. So there will be multiple projects that you can think of after this. Either find a new vendor that will support me with the low lower moq. And at the same time there's another point where it I realized that in my product a I need to order more, I've been ordering so much less and I keep going out of stock and then say Laia, I'm ready to order more, I have cash flow, I know that I need to order more, but my vendor cannot sustain it, it's very small or they will always stay that I need more time, they need more lead time or their capacity cannot produce like they are only limit they have a limited capacity. And that is similar to finding another vendor who can support you with quicker turnaround or faster lead time and at the same time support you if you need more quantity because production limitation is a real problem. If you are ready to order more and your vendor is not ready to support that quantity you then you will end up being out of stock all the time even if you have the capacity to buy it. So as you can now imagine how connected inventory analysis inventory reports to your sourcing to your vendor management it will give you so many insights on what to do next. You will see and you will start seeing how under optimized your supply chain is by identifying that I'm I need to do this and that but there are so many things that is not allowing you or limiting you to do that. So ABC analysis also like I just wanted to share this based on experience where overstock and understock both have their own challenges and disadvantages, right? So overstock more quantities because production limitation is a real problem. If you are wrong you have you you will incur more costs. You will incur more costs and your cash is sleeping and your cash is tied ready to order more and your vendor is not ready to support that quantity then you will end up being out of stock all the time even if you have the capacity to buy it. So as you can now imagine how connected inventory analysis inventory reports to your sourcing to your vendor made up. And you cannot use that for any growth plan that you have. But you still have that in your warehouse. And someday somehow you can still sell it if it's seasonal products or for example it's a for apparel. If it's a Christmas management it will give you so many insights on what to do next robe that you're selling. Then probably next Christmas you can sell it. You will see and you will start seeing how under optimized your profit again. But it will have to wait for another 10 months before you can start selling it again. So the cost is incurred. And of course the sleeping cash supply chain is by identifying that I need to do this and that. But there are so many things that is not allowing you or limiting you to do that. So ABC analysis also like I just wanted to share this based on experience. While for out of stock is not only missed sales but probably a missed client already. If you keep having out of stock they will move to another brand that can support their needs. If they keep ca out of stock out of stock then definitely experience where overstock and understock both have their own challenges and disadvantages, right? So overstock they will be transitioning or turning to another another render. So you're not Just you have you. You will incur more costs. You will incur more costs. Missing that specific sales, you're affecting your LTV as well, which is very important for you. And then so where do we go? Like how do we find the perfect bat? And your cash is sleeping and your cash is tied up and you cannot use that for any growth plan that you have. But you still have that in your warehouse. And someday, somehow you can still sell it. If it's seasonal products or for example, for apparel, if it's a Christmas robe that you're selling, then probably next Christmas you can sell balance. There's no perfect balance. There is just understanding what is the best scenario for your type of product. That's why ABC analysis is very, very important. If you want to overproduce or if you want to to invest more money for a certain product, then invest it in your aim. Because again, but it will have to wait for another 10 months because before you can start selling, they are, you know that you can definitely sell it at a given time and you know that they are your hero products. So investing money is there. So if you will be overstocked, that is the, those are the category. Product A is where you want to be overstocked. And then for, for, for B is something that you should always watch for because it can go to A, it can go to C. So if you are, if you're dealing with B, that's where you want to play safer. Because you always want, as Jingham said, you want it again. So the cost is incurred and of course the sleeping cash to watch out. You're watching for this, you're watching closely for this. While for out of stock is not only missed sales, but probably a missed client already, if you keep having out of stock, they will move to another brand that can support their needs. If they keep seeing out of stock out of stock, then definitely they will be transitioning or turning to another render. So you're not just missing that specific sales. You're affecting your LTV as well, which is very important for you. And then so where do we go? How do we find the perfect balance? Type B products, because you, you might. You'll never know if they go balance. There's no perfect balance. There is just understanding what is the best scenario for your type of product. That's why ABC analysis is very good to see. You want to ensure that you support that product.

But for C.

Those are the products that you will choose to be out of stock more than overstock. And again, having, having the tag out of stock is so negative to hear. But sometimes it's better than being overstocked. So in, in, in this, in this part, this very, very important. If you want to overproduce or if you want to to invest more money for a certain product, then invest it in your aim. Because C, the product C is better out of stock than overstock. And there's also another layer to that. It's not just your abc. I want to, you know that you can definitely sell it at a given time and you know that they are your hero products. So investing money to think of something that will make it D, but I don't have that word. But it's your seasonality product, so it's ABCs. Hopefully I can find a good word for you for that, that it will make it easy. But for your spec there. So if you will be overstocked, that is the, those are the categories for your seasonal products. It is treated very different. Especially product A is where you want to be overstocked. And then for, for, for B is something that you should always watch for because it can go to A. It can if you're selling it for Christmas season like candle that is Christmas season, Christmas scent, formulated products that is Christmasy design or go to sea. So if you are, if you're dealing with be, that's where you want to play safer. Because you always want, as JM said, you want to watch out. You're watching for this, you're, you're watching closely for this type B products because you, you might, you'll never know if they go or Black Friday design or New Year design and, and apparels that are for winter. So definitely these seasonal products should be treated carefully as products that you don't want to overstock it. So watch out. It's better to be selling it to a limited, for a limited time and doing that marketing that it's for limited time offer. If they miss it, they miss it, they can't get it and they have to wait for next year to get it again. Rather than having products that will stay and go to A, they go to C. You want to ensure that you support that product. But for C, that, that those are the products that you will choose to be out of stock more than overstock. And again, having having the tag out of stock is so negative to hear. But sometimes it's better than being overstocked. So in, in, in this, in this part, the C, the product C is better out of stock than overstock. And there's also another layer to that it's not just your abc. I wanted to think of something that will make it D but I don't have that work till Q1 especially for products have shell slice. So if your products are expiring like for example for candles, the fragrance are changing over time and some. And for formulated products you have a shelf life of course, especially for natural products where it's shorter for food as well, of course the shelf life. If it's not shelf life issue or scent issue, then it could be the size of the products issue. So I would just want to raise that so that we can ensure that we are treating seasonal products very carefully as well. Okay. So we want to move on to its complementary steps wherein after analyzing your data you now know what are the other inefficiencies in your supply chain could be. And it will be connected not just now with your inventory, but the way that you manage your vendor, the way that your vendor gives you payment terms and moq minimum order quantity, your your lead time, your unit cost. And so it's now the. The next work is to negotiate to unlock more capital or to work with projects that will be. That will be complementing the results or the analysis that we've had in the ABC analysis for example that JM has shared. So. So there are many strategies I've actually deep dived but it's your seasonality product so it's ABCs. Hopefully I can find a good word for you for that that it will make it abcd. But for your special for your seasonal products it is treated very different especially if you're selling it for Christmas season like candle that is Christmas scent, formulated products that is Christmasy design or Black Friday design or New Year design and apparels that are for winter. So definitely these seasonal products should be treated carefully as products that you don't want to overstock it on this on a separate workshop I will be sharing with you the link to that workshop so that if you want to dive deeper on these kinds of projects so watch out. It's better to be selling it to a limited for a limited time and doing that marketing that it's for limited time offer. If they miss it, they miss it, they can't get it and they have to wait for next year to get it again rather than having products that will stay until Q1 especially for products have shelf life. So if you're a product you can definitely refer to that. But I just wanted to share with you some products are expiring like for example for candles, the fragrance are some important Factors where vendor terms is very important as well. So in a lacking capital extending payment terms is very changing over time. And for formulated products you have a shelf life of course, especially for natural products where it's shorter for food as well very important. As if your vendor is in China then you might have experience already that they don't have the usual net 30, net 60 net. Of course the shelf life. If it's not shelf life issue or 90 financial or payment terms they usually do 30, 70 or cent issue then it could be the size of the products issue. So I would 30% in deposit and 70% balance to be paid before it even leaves their warehouse. So in that case if there are there there are other ways on how to just monetize that so that we can ensure that we are treating seasonal products very carefully as well. Okay. So we want to move on to its complementary steps wherein after analyzing your data you already you now know what are the other inefficiencies in your supply chain could be. And it will be connected not just negotiate payment terms. It's there are if you cannot reach the net 30 at least request for a few percent. And I've seen this work many times request for like a certain percent after it arrives the US or your warehouse. So for example is 10% deposit, 60% balance payment and then the remaining 30% will now with your inventory. But the way that you manage your vendor, the way that your vendor gives you payment terms moq minimum order quantity, your your lead time, your unit cost. And so it's now the the next will only be paid as it arrives your warehouse. And sometimes I even see that the 30% last payment is paid net 30. So they might not agree to the net 30 for the whole invoice amount, but they might agree for net 30 for a certain percent of your invoice. So work is to negotiate to unlock more capital or to work with projects that will be. That will be complementing the results or the analysis that we've had in the ABC analysis for example that JM has shared. So there are many strategies. I've actually deep dived on this on a separate workshop I will be sharing with you the link to that workshop so that if you want to dive deeper on these kinds of projects, you can definitely refer to that. But I just wanted to share with you some try that. If you haven't tried it. We have a lot of vendors having this type of. Of payment terms. I just wanted to also share with you that other vendors from other countries are more in yet in payment terms like for example Philippines, Vietnam, Thailand, they offer net 30, net 60 right off the bat. Even if you are a new partner, you just have to of course before you start partnering with some important factors where vendor terms is very important as well. So in a lacking capital, extending payment terms is very, very important. As if your vendor is in China, then you might have experience already that they don't have the usual net 30, net 60, net 90 financial or payment terms. They usually do 30, 70 each other. You will require documents from each other and as long as you provide the documents to your to those vendors, they will give you net 30, net 16 right away and maybe improve it to net 90 in the next few months. So China is a little bit stricter in payment terms. But if you try other vendors outside China, you see that they offer better payment terms and then 30% in deposit and 70% balance to be paid before it even leaves their warehouse. So in that case, if there are there there are other ways on how to negotiate payment terms. It's there are if you cannot reach the net 30, at least request for a few percent and I've seen this work many times request for like a certain percent after it arrives the US or your warehouse. So for example is 10% deposit, 60% balance payment and then the remaining 30% will open. Next is negotiating better prices on bulk orders, long term commitments or open po. So we need to be create only be paid as it arrives your warehouse. And sometimes I even see that the 30% last payment is paid net 30. So they might not agree to the net 30 for the whole invoice amount, but they might agree for net 30 for a certain percent of your invoice. So think outside the box on how we can deal and how we can manage our pos, our quantities. It's not just what I need right now PO this, deliver it one time. So sometimes there are strategies that will be beneficial for you, like open pos wherein you will be sharing the whole forecast quantity for the year so that your vendor is aware of what is the estimated orders for the year. And then the delivery is staggered. Of course, if I say that from August 1st to December, I might still order 10,000 pieces, but the delivery is 2,000 for August 15th, 2,000 for September 15th. So it's like a blanket P.O. where you order 10,000 pieces and it is stipulated there that it is a step staggered delivery. What your vendor can do and why this is advantageous for you is that they can order your raw materials upfront or in a try that if you haven't tried it, we have a lot of vendors having this type of payment terms. I just wanted to also share with you that other vendors from other countries are more in yet in payment terms like for example Philippines, Vietnam, Thailand, they offer net 30, net 60 right off the bat. Even if you are a new partner, you just have to of course before you start partnering with vats, if the raw materials or if they if they can manage the cash flow and if they have the space to store your raw materials and they would order it in advance so that your lead time can be lessened in X number of days. Because what happens is when you order that po, that's the only time that they buy their raw materials too. And now they have to wait for that raw materials to arrive. And then now you have to wait for setting up the production in their area. And then with all those additional steps, your lead times 60 days as compared to just maybe 25 to 30 days. So there are vendors that will use that as also as a good partnership, building a good relationship or good partnership because you are like the way that they feel it is that you're giving them the opportunity each other. You will require documents from each other. And as long as you provide the documents to support you in a longer period of time and you are trusting them with your annual forecast, for example. And now that there's transparency, they would somehow make allow you with some of your requests that you might have. So there's a lot of positive outcomes to this, especially if you have a good year to those vendors, they will give you net 30, net 60 right away and maybe improve it to net 90 in the next few months. So China is a little bit stricter in payment terms. But if you try other vendor partner, if you have a good vendor, so try that because you'll never know outside China. You see that they offer better payment terms, right? And then that they might they are capable of ordering your raw materials in advance. And the better part there is not only the raw materials, but also it's definitely the understanding with your vendor that you can nest is negotiating better prices on bulk orders, long term commitments or do better price. All right. Okay. Looking at the alternative vendors with lower tariffs and unit cost now we are waiting again as I mentioned earlier, we're waiting for the announcement tomorrow. Will it go back to its original percent? Will it be the 125%? We don't know yet. But whatever it is, we cannot sustain growing our business waiting for open po. So we need to be creative and Think outside the box on how we can deal and how we can what other surprises the administration or the tariff war will be affecting us. So let's hope for the best, but let's not rely on the positive because if it doesn't happen, we hope for it. But if it doesn't happen, you're going to be super affected with the tariff that is so much higher. Manage our pos, our quantities. It's not just what I need right now PO this delivery at one time. So sometimes there are strategies right now. So diversifying your source is always a good choice. Whether you we have a tariff war, we have the previous pandemic. Whatever supply chain disruption may come in, at least we are supported with alternative vendor sometimes will be beneficial for you like open pos wherein you will be sharing the whole forecast quantity for the year so that your vendor is aware of what is the estimated orders for the year. And then the delivery is staggered. Of course, if I say that from August 1st to December, I might still order 10,000 pieces, but the delivery is 2,000. I hear this a lot with our clients where they have a good relationship with their vendors and they don't want to change them, that's fine. And you can keep those vendors that you have a great relationship with. But looking at your business, it's not very safe that you only have one. So what I suggest for them to do is always find an alternative vendor with approved sample and then just. Just hold it after approved sample. So after you find for August 15, 2004 September 15. So it's like a blanket PO where you order 10,000 pieces and it is stipulated there that it is a step staggered delivery. What your vendor can do and why this is advantageous for you is that they can order your raw materials upfront or in advance. If the raw materials or if they. If they can manage the cash flow and if they have the space to store your raw materials, they would order it in advance so that your lead time can be less than in X number of days. Because what happens is when you order that P.O. that's the only time that they buy their raw materials too. And now they have to wait for that raw materials to arrive. And then now you have to wait for setting up the production in their area. And then with all those additional steps, your lead times 60 days as compared to just maybe 25 to 30 days. So there are vendors that will use that as also as a good partnership, building a good relationship or good partnership because you are like the way that they feel it is that you're giving them the opportunity to support you in a longer period of time and you are trusting them with your annual forecast, for example. And now that there's transparency, they would somehow make allow you with some of your requests that you might have. So there's a lot of positive outcomes to this, especially if you have a good partner, if you have a good vendor. So try that because you'll never know that vendor. You have to ensure not only that the price lead time, MLQ is within your expectations, but also the sample is approved. So any given time that your original vendor cannot fulfill your products, your orders anymore for something that is not their fault as well, like, like any supply chain disruption, then you can definitely shift from that that they might, they are capable of ordering your raw materials in advance. And the better part there is not only the raw materials, but also it's definitely the understanding with your vendor that you can do a better price. All right. Okay. Looking at the alternative vendor that you really like to the new vendor that you have an approved sampling on. So after that, vendors with lower tariff and unit cost. Now we are waiting again, as I mentioned earlier, we are waiting for that approved sampling. If you want to order, go order. If not, then you can just hold it. In our practice in the one of the. One of the big food chain here in the Philippines, when I was working there, our practice is to is to get an alternative vendor and order partially order a small quantity announcement tomorrow. Will it go back to its original percent? Will it be the 125%? You we don't know yet, but whatever it is, be there. So if I have a good relationship with this vendor and I found a good alternative with a good price and it's a new partnership, I'll order 10%, we'll allocate 10% to them. So it's also giving me the opportunity to see how a good partner they are. Because if you only do that until sample, then you will not know if the production is even at par with the samples. How's the quality? How's the. We cannot sustain growing our business waiting for what other surprises, the administration or the communication. How's the commitment that these new vendors have? So if your budget can allow you to order at least 10%, then do it. If it will fall under their mop, the tariff war will, will be affecting us. So let's hope for the best, but let's do it. If not, at least sample. But don't allow yourself to be in a situation where you don't have any alternative vendors at all. And then let's not wait. Let's not rely on the positive. Identify projects to save on costs. Some of these are redesigning packaging. So I'll be referring you to the previous workshop again, working with 3PL to optimize the flow, consolidating shipment with other vendors. There's a workshop that will teach you how to do this and because if that if it doesn't happen, we hope for it. But if it doesn't happen, then tariff engineering where there are projects right now that can help you lower down the tariff cost legally. So we need to partner the earlier tools that JM shared with complementary project savings to unlock more capital and to get more money on your pocket. All right, moving on. If you don't have questions, feel free to share them in the chat box if you have all right. If you don't have other questions, you're going to be super affected with the tariff that is so much higher right now. So diversifying your source is always a good choice whether you we have a tariff war. We have the previous pandemic. Whatever supply chain disruption may come in, move to mastering your Q4 flow. So how to optimize inventory for Q4 so how to optimize this phase Purchase orders, ordering waves to avoid overstocking so this is tie in at least. We are supported with alternative vendor sometimes partnership with sourcing and inventory planning because we want to follow the recommendation of the inventory planner. I hear this a lot with our clients where they have a good relationship with their vendors and they don't want to change them, that's fine and you can keep those vendors while we manage our vendors on how to do it. So an example of this is again the open PO I shared earlier. We can set a blanket PO CEO of 10,000 pieces but work closely with your inventory planner to advise you what quantity should be delivered on a specific date that you have a great relationship with. But looking at your business, it's not very safe that you only have one. So what I suggest quantity on a specific date and make sure that your vendors can follow that schedule. Titan forecast means for them to do is always find an alternative vendor with approved schedules. Be more precise with demand forecasting for the holiday season, JM will be sharing a simple forecasting tool later on and then balancing inventory across channels. So before there's only shopify sample and then just hold it after approved sample. So after you find that or sometimes it's just in Shopify and sometimes it's just 100% in that vendor, you have to ensure not only that the price lead time moq Amazon, but right now we have multiple channels. You have Shopify, you have Amazon, and sometimes you still have few in retail. And so you have to manage your inventory distribution across all selling platforms properly. Like we cannot even if we have a generally healthy inventory of your product. But if you are not able to distribute it properly with different within your expectations, but also the sample is approved. So any given time that your original vendor cannot fulfill your product's your orders anymore for something that is not their fault as well like platforms, then you will go out of stock for others as well. So make sure that this is considered especially if you're selling not only in Shopify or any platform, but if you have Amazon, if you have other retail or if you have wholesale as well, then like any supply chain disruption, then you can definitely shift from that vendor that you really like to the new vendor that you have an approved sampling on. So after that the then distribution forecasting is now going to play a huge role. For that I'm turning this over to JM again.

All right, so for Q4 preparation. So as the year's biggest quarter approaches, a few simple tactics will approve sampling.

If you want to order, go order. If not, then you can just keep.

Your cash working and your bestsellers still in stock without tying up the excess capital. So here's a ready to use Q4 forecasting template. So I'll just be explaining for column again. So first is the actual sales. This is what you sold last year in the same week or month. It's basically your starting point. And then next is your growth percentage. So how much more you expect to sell compared to last year. So for example additional 15%. And then for marketing promo quantity, these.

Are extra in our practice and one of the one of the big food chain here in the Philippines. When I was working there, our practice is to is to get an alternative vendor and order partially order a small quantity there. So if I have a good relationship with this vendor and I found a good alternative with a good price and it's a new partnership, I'll order 10%.

Will allocate units driven by planned campaigns. So probably you can acquire this with your marketing team. And then the safety buffer percentage, a small reserve of 5% to protect against sudden spikes or shipping delays if ever. And then next is the forecast before buffer. So this is your projected sales after.

Growth and paid 10% to them. So it's also giving me the opportunity to see how a good partner they are. Because if you Only do that until sample, then you will not know marketing.

So the formula is stated right here.

And then if the production is even at par with the samples, how's the quality, how's the communication, how's the commitment that these new vendors have?

So finally the final forecast. This is your order if your budget can allow you to order quantity once you add the safety buffer. So, so yeah, formula is stated as well in here. Okay, so think of this template as your shortcut to stress free ordering. So you start with what you actually sold last year and then layer on your expected growth for any extra sales from marketing. And then finally you build in a small safety margin and then the result is clear week by week or month by month order sales that reflects the real demand. So you avoid both the stock outs and the excess inventory without navigating through complicated spreadsheets. So that's about it for just a simple forecasting template.

If you're at least 10%, then do it. If it will be it will fall under their moq. Then do it. If not at least sample. But don't allow yourself to be in a situation where you don't have any alternative vendors at all. And then identify projects to save on costs. Some of these are redesigned. You have a tool, a programming tool like inventor planner covc scene 7. What are the others? Stocky. There are a lot of tools integratable in Shopify for inventory planning. It extracts sales from your Shopify store and signing packaging. So I'll be referring you to the previous workshop again has different tools, have different ways on how to forecast. To help you with forecasting, we have shared with you a simple tool especially for product for brands that doesn't need a tool yet because I mean we have encountered clients with forest use. So I don't think that you need to buy a tool for that. If we can do it in spreadsheet, however there are free tools. So if that free tool can make your work faster, then definitely go for it. Just don't pay. Working with 3PL to optimize the flow could consolidating shipment with other vendors. There's a workshop that will teach you how to do this and then tariff engineering where there are projects right now that can, that can help you lower down the tariff cost legally. So we need to partner the paid version. So for I wanted to share with you that for the longest time we've been using Stocky F T O C K Y which is a very good platform for me. It was free before in Shopify. Earlier tools that JM shared with complementary project savings to unlock but they said now you have to pay. But it's not a lot. I've been using only the free version for Stocky and it can be your PO management system too. You can create POS from there. You can receive. You can use that to receive your deliveries as well. It can integrate your inventory to shopify. So we've been using it for a very long time for free. So it's not at all advertisement paid advertisement for Stocky. It's a real experience that I've had. It's very helpful. Especially my expertise is in new product development, negotiation and sourcing. It's not much in inventory, so for me to be able to use it, it's super helpful and I know there are more capital and to get more money on your pocket. All right, moving on. If you don't have questions, feel free to share them in the chat box if you have all right, if you don't have other questions, I'll move to mastering your Q4 flow. So how to optimize inventory for Q4 so how to optimize this phase for a lot of clients listening to us, that is also not very Excel and sheet experts. So if that's the case and if it overwhelms you, don't worry because there are features that you can use example of those are stuck and there are more now there are more and more. And what I wanted to always share with the owners or the founders is that purchase orders ordering ways to avoid overstocking. So this is a tight partnership with sourcing and inventory planning because we now that you have the basic forecasting tool, whether it's a sheet Excel or a tool that you pay for or a free version, there are always things that we have to consider aside from buffer. So right now in my time before as a planner and inventory as far as a sourcing in want to follow the recommendation of the inventory planner while we manage our vendors on how to do it. So an example of this is again the open PO I shared earlier. We can set a blanket PO of 10 big companies or multinational companies. We don't have. We don't consider paid ads. That was like 15 years ago. So we consider buffer a healthy buffer. But we don't consider paid ads. We don't. We consider seasonality a buffer. But paid ads and thousand pieces but work closely with your inventory plan and other marketing campaigns is not included in our forecasting because it's not very heavily affected back then. Right now you will be. You will to Advise you what quantity should be delivered on a specific day. Know more and more that if you're in DTC and E commerce space, paid ads is everything as well for your business. So our templates are more complicated. Date quantity on a specific date and make sure that your vendors can follow that schedule. Titan Forecast win templates that for example JM run for our clients, we set up from ground up. We create a template specifically for our clients because there's no two clients that have the same business. So we set up a specialized template for them where we can input factors like that growth factor for the year. I want to include 5% growth factor flows. Be more precise with demand forecasting for the holiday season, JM will be sharing a simple forecasting tool later on and then balancing inventory across channels. So before there's only Shopify for this year, I wanted to include these paid ads that we are going to start doing. For example, if you know your roas then we can compute the effect of that inventory based on on the amount of dollars that you will say. So for example from you, you'll say I'll spend $5,000 or $10,000 for this ad and this is the ROAS that you can use with those two information, the budget and the ROAS. Or sometimes it's just in Shopify and sometimes it's just 100%. And now compute your inventory planner can now compute for the additional requirement that you you will need because you added this paid ads your budget. So not only paid ads. If you are like doing trades and you know that you'll sell more, make sure that you come Amazon. But right now we have multiple channels. You have, you have Shopify, you have Amazon and sometimes you still have few in retail. And so you have to manage your inventory distribution across all selling platforms properly. Like we cannot even if we have a geni that your inventory planner so that it's communicated to the vendor, to the sourcing to everyone. And there's no surprise because we want to support you with all your marketing campaigns that we want to do regardless if it's. It's a big event like Black Friday, Cyber Monday and the in the Christmas season. Even if it's not as big as that. If you wanted to have a marketing campaign for a specific day really healthy inventory of your product. But if Mother's Day, Father's Day, just some important taste for your product, let your supply chain know because we have to adjust your inventory planning so it's not just you are not able to distribute it properly with different plants Basically always checking your previous sales. But we have to consider so many factor platforms. Then you will go out of stock for others as well. So make sure that this is to add and your cooperation, your marketing's cooperation, the founders cooperation is very very important. All right. Let me very quickly share with you the last slides that we have. We just misconsidered especially if you're selling not only in Shopify or any platform but in if you have Amazon, if you have other retail or if you have wholesale as well. Then wanted to share with you a real case study with experience with our vendor. And JM will be sharing this slide with you.

Thank you. Okay, so just a quick story. So one of our clients in order to reduce the client's excess inventory we.

Started then distribution forecasting is now going.

To play by cleaning the product master list. And they thought they had around 500 plus active SKUs.

So use Rule for that. I'm turning this over to JM again.

All right. But once we remove the duplicates discontinued also there are no Setup so for Q4 preparation. So as the year's biggest quarter approaches a few simple tactics will second hand. In no sales record but are tagged as active the number fell to 200 plus. So imagine since it was tagged as active it is being included in the reorder recommendation of their inventory planning system. So this resulted to accumulated or higher percentage of overstock items. So at the same time we'll keep your cash working and your bestsellers still in stock ran an ABC analysis. So before we start with without tying up the excess capital. So here's a ready to use any inventory management optimization. We always go back to the basics of keeping or ensuring that the product master list is cleaned and Q4 forecasting template. So I'll just be explaining and then we run ABC analysis. So to flag those 20% of SKUs driving again the 80% of the revenue. So in just column again. So first is the actual sales. This is what you sold last year in the same week five weeks. This cut their expenses inventory by 40% so freeing up to shelf space and reducing the capital tied up in slow moving stock. So second is we focus more on the overstock items that are tagged as class C or slow movers because we're okay with overstock items that are fast moving because event or month it's basically your starting point. And then next is your growth percentage. So how much more you exponentially they can be depleted over time fast. So we focus more on the slow movers. So that resulted to training the active SKUs by 53% and put the purchasing effort on the 200 cell compared to last year. So so for example additional 15% and then for marketing promo quantity these are extra plus core items. So with that our client are claiming two units driven by planned campaigns. So probably you can we're $2,200 in working capital. So that's cash. They can now reinvest into high velocity holiday products or marketing campaigns or fast reordering cycles without actually stretching their budget. And then yeah above all a clean product master list with plus straightforward ABC analysis is not an advanced inventory tactic. It's actually the foundation. So and acquire this with your marketing team. And then the safety buffer percentage a small reserve of 5% so it helps you stop overpaying for products that don't sell and gives you the cash you need to stock what does so that's how you set yourself for to win for Q4.

Yeah. Is a quick story. Thank you so much. This success story could to protect against.

Sudden spikes or shipping delays if ever. And then next is the forecast before.

The success story for you as well. Just do the work with our buffer.

So this is your projected sales after.

Growth and already laid out what are the things that you should do. It's not I believe this project. Yes. In five weeks. This happened in five weeks. So as long as you're committed to learning your data and analyzing your numbers and you have a team to support you in this, this is not impossible.

And marketing. So the formula is stated right here.

And then this is the right timing to make your supply chain more efficient before the rush season, before the biggest season arrives. So yes. And we now have ended our our workshop and if you have any questions for me please chat us if you want.

Finally the final forecast. This is your order quantity once you add the safety buffer. So yeah formula is stated as well in here. Okay. So think of this template as your shortcut to stress free ordering. So you start with what you need.

To join our supply chain Slack community. We have started it. You can ask our experts there. JM is there together with other experts in logistics sourcing new product development. This is the link to that. You can join that Slack group. We also do like a live Q and A sessions there.

Ask me anything truly sold last year and then layer on your expected growth similar to that.

And then any questions that you fire in the channel there is also going to be answered by an expert. So feel free to join. I shared the link in the chat box or we will be sharing it as well.

For any extra sales from marketing and then finally you built in a small safety margin and then the result is clear week by week or month by month order sales that reflects the real.

And the post email. All right. And then if you wanted to Paul, I think what we can do is we can share to our customers participants the list of workshops that we had done in the past so that they can choose if they want to listen to that. So we are going to share with you all the templates that JM has shared. So that's a happy holidays gift from Moom supply chain. You can do that. You can use that. If you have questions on how to use it then join the Slack group and then keep asking JM because she's there. And so yeah it's a community that we wanted to support you more on. You don't have a lot demand so.

You avoid both the stock outs and the excess inventory without navigating through complicated spreadsheets. So that's about it for just a simple forecasting template.

If you have markup of supply chain community support we wanted to start that and you have a tool a programming tool like Inventor Planner Cob. I hope to see you there. Join that and for other workshop future workshops that we have Next workshop is about new part of development scene 7 what are the others Stocky which is again my favorite and I hope that I see you there also. So if you don't have other questions thank you so much for joining jm. Thank you so much for helping me in this very difficult topic. There are a lot of tools integratable in Shopify for inventory planning. It straps sales from your Shopify store and it thank you bye bye has different tools have different ways on how to forecast. To help you with forecasting we have shared with you a simple tool especially for product for brands that doesn't need a tool yet because I mean we have encountered clients with forest use so I don't think that we have.