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Thomas R. Cutler

Innovation

Quality Means Never Being Out of Stock

Now, small direct-to-customer businesses have access to high-end inventory tools

Published: Tuesday, December 10, 2019 - 12:03

Quality control and inventory control are equally important to the ongoing success of all manufacturing businesses. Both form the basis of an efficient organization that operates at high productivity levels, minimizes waste, and delivers quality products to meet or exceed consumers’ expectations.

Until a about decade ago, there were layers of quality assurance and quality control steps before products reached the end user. Along with production controls, these steps included quality controls related to warehouse operations, logistics, and inventory verification at retail stores, in order to double-check product quality and order fulfilment accuracy.

Today, more than a million small manufacturers worldwide have forgone any retail sales in favor of a D2C (direct to consumer) model, cutting out warehouse operations and retail stores. The reason is simple: margins. A jewelry manufacturer, for example, selling a bracelet for $20 online, with hard costs of $2, can realize huge profit margins by eliminating the wholesale middleman. That same bracelet would have wholesaled to retailers for $8. But now, while product quality is still a customer expectation, consumers also expect quality delivery and customer service.

This more-complete picture of quality means that direct-to-consumer (D2C) manufacturers have to meet the expectations of consumers who expect to receive exactly what they want when they want it. With hundreds of thousands of online “retailers,” these craft manufacturing companies must capture every sale possible, build brand consumer loyalty, and secure reorders. That does not happen when the product is back-ordered or out of stock. And while these small manufacturing companies may have the expertise to ensure the quality of the product they are making, they may not have the tools or expertise to handle raw-materials tracking, customer relation management, or inventory control. They are innovators and builders, but not always logisticians.

There are many small manufacturing success stories, from Bombas (socks reinvented and a pair donated with each purchased), which tops $100 million in annual revenue, to Chubbies shorts at $40 million, and Allbirds, a basic sneaker company grossing $1.4 billion. Obviously, new brands take extraordinary effort to gain mass mindshare quickly. Harry’s razors signed up 100,000 new customers on an email waiting list; BarkBox grew its customer base to 600,000 on a shoestring.

Whether you are a Bombas, or a small custom jewelry maker, building a better customer experience is at the heart of the D2C, end-to-end brand. This means great ratings on customer service and products. High retention rates matter in this business model; churn is the enemy of the online manufacturing operation.

Viral marketing is not an advantage if the product cannot be tracked and delivered or maintain customer demand. Looking into 2020, here are some of the up-and-coming companies and what they have in common with monitoring quality by fulfilling every order on time and accurately.

Small D2C manufacturers taking the lead in quality

Small crafts—homemade manufacturing companies—are trending heavily toward Shopify. The online store is easy to set up and use, and is presented in a visually appealing manner. There are numerous app integrators, offering both security and reliability. Shopify offers excellent loading speed, powerful marketing tools, mobile responsiveness, and outstanding customer support. For new small businesses about to explode in the marketplace, having Shopify builds quality confidence.

Foxen Canyon Soap, a Shopify D2C manufacturer, is a sustainable and environmentally friendly small soap and skin care manufacturing company. Ellowyn Isaacson, Foxen’s owner, uses products from the diverse, local agricultural community. She opened for business March 2018. Every part of her business is designed to be sustainable and environmentally friendly, from sourcing the ingredients all the way to the impact of the soap washing down the drain. Foxen Canyon Soap has quickly grown to become one of the largest soap companies on the Central Coast of California.

Divine Island Design, another Shopify D2C manufacturer, is based in Big Pine Key, Florida. The company specializes in custom, handmade projects from woods and acrylics such as island-themed jewelry, ornaments, and magnets, according to Braxton Frankenbery, the owner.

Holley + Sage, a Shopify D2C manufacturer based in Charlotte, North Carolina, manufacturers garments handmade by women refugees. These amazing seamstresses work from home while providing for their families, according to Jennifer Shields, the owner.

Inventory control defines quality for small D2C Shopify manufacturers

What each of those three companies has in common is a reliance on a robust yet low-cost means of managing inventory and raw-materials tracking. These systems are key to customer satisfaction in terms of delivery. Inventory control systems exist to maintain inventory balance, replacing inventory at a steady rate consistent with its depletion rate. It is necessary to balance inventory stock levels to reduce waste and minimize the risk of damage to that inventory stock. Effective inventory control streamlines processes and helps to identify problems at the source, helping to improve quality control and on-time delivery. 

 

A screenshot of a cell phone  Description automatically generated
©2019 Katana

Small manufacturing companies, such as these, have turned to Katana, a cloud-based manufacturing solution to manage inventory and orders. Designed for smaller manufacturers or home craftspeople, Katana’s pay-as-you-go service is quickly outpacing the old familiar brands like MRPeasy and Fishbowl, so Shopify sellers can get a handle on real-time visual inventory control and order management.

“I’ve been using Katana for a few months, and I’m really liking it,” says Jennifer Shields, owner of Holley + Sage. “It’s great for managing order production. I use it to manage all my made-to-order orders. They are also always updating the app, which is great, and working to make it better every day. Customer service is great as well!” 

According to Braxton Frankenbery, Divine Island Design’s owner, “This app is perfect for my business. It helps track all my inventory, from material to finished products. The integration with Shopify is seamless. As soon as I make a product in Katana, it adds it to the inventory on my Shopify website.”

And Ellowyn Isaacson, of Foxen Canyon Soap, says that “Katana is perfect for coordinating Shopify sales, inventory, raw materials, and even accounting with QuickBooks. The integration is simple to set up. Customer service is outstanding. I always hear back within 24 to 48 hours.”

Manufacturing D2C: The 2020 game changer

More quality-crafted products are entering the market as manufacturers go D2C. But until recently, most cloud-based or software-as-a-service (SaaS) solutions were out of reach for small D2C manufacturers. They were expensive, and in many cases more than was needed, since they are developed to improve productivity and increase production efficiency by using bills of materials, inventory data, and production schedules to ensure manufacturing can meet demand efficiently. In short, they are designed for large manufacturing operations.

Yet small manufacturers have many of the same objectives. Their solutions must include optimizing inventory levels, production scheduling efficiency, and making sure raw materials are available on demand. However, even today the smallest of manufacturers still use electronic spreadsheets to follow these principles.

In the manufacturing D2C space, systems such as Katana are integrating online tools such as accounting, sales, and forecasting, giving small manufacturers the tools only large companies could afford in the past. As the D2C market continues to grow, so too will the need for flexibility to handle production workflows effectively and maintain quality.

Discuss

About The Author

Thomas R. Cutler’s picture

Thomas R. Cutler

Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., celebrating its 20th year. Cutler is the founder of the Manufacturing Media Consortium including more than 7000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Cutler can be contacted at trcutler@trcutlerinc.com and followed on Twitter @ThomasRCutler.