11 Mar Navigating the Supply Chain Crisis: Should you Buy in Bulk?
Bulk buying could help your e-commerce business manage the challenges of the post-covid supply chain crisis. However, some have presented bulk buying as a one size fits all panacea to combat supply chain disruptions.
Many believe that buying in bulk helps suppliers and logistics firms take you seriously, as you compete with the order sizes of larger retailers. In the current crisis, small orders are not the priority. Therefore, you are far more likely to receive your stock when buying in bulk.
Some of the largest retailers, including Walmart and Target, claim to have felt no ill effects from the supply issues. Needless to say, suppliers are prioritizing their more profitable orders. This has tempted a lot of smaller e-commerce retailers into thinking bulk will solve their supply problems.
While there may be some truth to the benefits of bulk buying, the right sourcing method depends on your business.
When Should you Buy in Bulk?
When deciding what to buy in bulk, it’s important to consider which products are most popular. You might be able to specialize down to one product or group of products, that sell without fail. In this case, you might benefit from buying these specialities in bulk, and having popular products in stock consistently.
You may also benefit from buying packaging in bulk. Most e-commerce businesses, regardless of their store or product type, need plenty of good-quality packaging.
Cardboard and other packaging materials don’t go out of date, or stop working after a period of time. These materials are also relatively easy to store, and take up little space. Therefore, the majority of companies can benefit from wholesale or bulk packaging purchases.
If you build your products or require multiple components, consider purchasing important components in bulk.
For example, glue might be an extremely valuable resource for your product line. It is easy to purchase and easy to store. Buying it in bulk will help you avoid running out of inventory space while keeping on top of stock levels.
The majority of e-commerce businesses are struggling with stock in the current market, so if you can stay ahead of the curve by offering stock consistently, you can stay ahead of the competition.
Bulk Buying isn’t Always the Answer
Depending on your business and product line, bulk purchases may provide no benefit. Some products have a lifespan, and it is important to ensure that your sales will meet your inventory totals before their expiration date.
It is also important to consider your storage and warehousing situation. Buying in bulk requires an increased amount of storage space. If you store in a warehouse, your storage costs are likely to increase, which will reduce your profit margins. If you store on personal property, you can very quickly run out of room for your inventory.
Depending on your product offering, buying in bulk has the potential to result in a lack of variety. If the majority of your sales are made through a few select products, then bulk buying might benefit you. However, if your sales are consistent across your product line, then you could very easily overstock.
If you’re thinking about buying in bulk, a comprehensive analysis of your sales forecast is a must. There is an increased upfront cost associated with bulk purchases, and you need to know that you can sell your increased inventory quantity. If you cannot guarantee the sales, bulk buying could generate financial losses.
Analyse your Business
Overall, bulk buying has some potential to be a good supply chain management method, but that all depends on your business.
You need to know your business, and your market, inside out. There are some important steps to take before making a decision:
- Analyze your business/market: Consider how owners of similar businesses source their products. Get to know your business in relation to those in your market.
- Analyze your product offering: Assess whether your product offering suits bulk buying. Think about whether your products have expiration dates, or are seasonal.
- Understand your products within your market: Compare your products against similar businesses to understand sales trends.
- Understand your sales processes: Gather information about your sales journey, from sourcing to delivery to purchase. Consider how long the sales process takes, and take note of any invoice repayment terms.
At Yardline, we provide in-depth business analysis. We have teams of e-commerce experts with a working understanding of supply chain management issues.