Shopify Inventory Management for Makers and Manufacturers

Shopify Inventory Management for Manufacturers

More and more crafters, makers, and small manufacturers around the world are setting up their own web stores. Why? Because selling online has become so easy and has many benefits: direct access to your customers, immediate feedback on your products and customer service, plus you do not have to give away a margin to traders and re-sellers.

Most makers, crafters, and small manufacturers choose Shopify as their go-to e-commerce platform with more than 800,000 stores and counting. It's simple to set up and easy to run. However, there’s one crucial element missing: a Shopify inventory management software.

In this article we will explore ways how a Shopify store and a Smart Workshop Software like Katana work together to save time and money for all small manufacturers, crafters, and makers selling on Shopify.

Shopify Platform Background

The e-commerce giant Shopify may have started in a humble maker’s garage, but rapid growth has seen the number of sellers on the platform explode from 6,000 to over 800,000 in less than 10 years.  

Currently the online marketplace contributes to just under 10% of global commerce sales, but this is only going to increase, especially with internet usage increasing across Asia, Africa, and South America. As a country, the US makes the second highest number of online purchases per year, after China. Buying online from other countries is getting more popular. A 2016 poll of 13,000 worldwide customers showed 57% had recently bought something from overseas.  

Shopify is widely regarded as one of the best online commerce platforms designed for small to medium-sized businesses. It gives anyone the power to create their own online store. The ability to create a beautiful online store with ease makes it a must-have for small makers, artisans, and manufacturers to get their products into the global marketplace.  

Does Shopify Have Inventory Management?

Many small makers and manufacturers selling through Shopify ask if it has a ready-made inventory management system.  

Yes and no.  

The tracking features built into Shopify are fine if you’re just reselling. The standard Shopify feature simply tracks stock coming from a supplier and being sold to order. But companies that make their own products have a more complex flow, usually finding Shopify’s basic management features lacking.

Do you use Excel to keep track of your production and inventory? We’ve got news! There’s a better way to manage your processes.

Shopify inventory management can be handled in the same way it can for your entire business with Smart Workshop Software like Katana. Katana automatically receives all orders from Shopify and allows you to plan and manage your raw materials inventory and production process. This way, you never miss a deadline and you'll always have the right amount of materials available in stock.

Before we delve deeper into that, let’s look at what Shopify’s basic feature for inventory management does.   

Shopify Inventory Management — The Basics

Shopify expects you to set up the tracking and adjusting of inventory in your Shopify account yourself. As a result, many Shopify sellers just make do without all the inventory management features that are offered as standard. To set it up you need to enable transfers:

  1. Go to your Shopify admin;

  2. Select one of your product variants and click on “Edit”;

  3. In this window, go to the “Inventory” section and find the “Inventory Policy” drop-down menu;

  4. Select “Shopify Tracks this Product’s Inventory”; and  

  5. Don’t forget to save your changes.

After you set up a transfer for one of your products, you can set Shopify to receive inventory for this particular SKU. You can click on “Add Transfer” to set the number of items expected to be supplied into your Shopify inventory. But that’s all there is to it.

Most small manufacturers, artisans and crafters take care of their raw materials, inventory, product recipes and production processes in large, clumsy Excel sheets. But don’t worry - there’s no need to throw your computer out the window yet.  External inventory management has become a viable option to iron out the creases in Shopify’s native system. Katana was designed with a focus on complete Shopify integration since day one. It’s time to turn your workshop into a smart workshop.

Setting up Katana Inventory Management That Plugs Into Shopify

Let us take you through the process of integrating your Katana account with your Shopify store. We’ll take as example, a Shopify store for leather accessories, with three types of products: slingback bags, totes and wrap wallets.

  1. First, log in to your Katana account.   

2. Click on “Settings” in the top bar.

3. Select “Integrations” from the left-hand side menu.  

4. An input screen will pop up showing three stages. For the first, you need to input your Shopify Store address and click “Next”. In our case, that will be “leatherstore21”.

5. On the next screen, make sure the options to import Shopify customers, products, and stock levels of products are selected. You can choose to apply the same tax rates applied in your Shopify store to your Katana products. Also, you can set the initial price of your products in Katana excluding the tax rate applied to your Shopify products.

6. On the final screen, you can review your settings. When you are satisfied, click “Ok, connect my store” and the system will automatically redirect you to your Shopify store. Install the app and you’re ready to roll!     

Congratulations! You have now integrated your Katana account with Shopify and it all took less than one minute. This will save you hours and hours of time importing and exporting orders by hand. Katana and Shopify can talk to each other to completely streamline your order fulfillment process online. Shopify inventory management is now a piece of cake!

Now that we can see all our orders and products, we can move on to adding the materials necessary to create our products.

For example, the raw materials necessary to produce one of our wrap wallets are thread and leather in various colors — brown, black, beige and cognac. Let’s add these into Katana, by clicking the “+” sign and “Material”.

Add the materials variants if you need. In our case, we have leather in four different colors: brown, black, beige and cognac.

Then, add your variant code, reorder point and purchase price.

Next, let’s create the product recipes, based on the materials we’ve just added. For a wrap wallet, we need 13 feet of thread and 3 square feet of leather (brown, black, beige or cognac). By clicking “Add new row” you can add all the ingredients you need, in the specified quantity and color.

Finally, let’s see what actions need to be done, in order to produce one wrap wallet. In the “Production Operations” tab, we’ll add “Cutting”, “Sewing” and “Assembly” as operation steps, with their respective resource, cost per hour, time/duration and cost.

Now we have everything we need to keep track of our wrap wallets production and inventory!

What Small Manufacturers Need to Know About Good Shopify Inventory Management

There are two important steps to start handling your production and inventory management properly:

  1. Know what needs to be produced in order to fulfill a sales order and what materials are required to complete production

When an order comes via your Shopify store, an integrated app like Katana will automatically pull the order and give you the answers to the following critical questions:

  1. How many units of ordered products are immediately available in the stock for delivery?

  2. How many units of ordered products are missing that need to be produced to fulfill the order?

  3. What materials are required to produce the missing quantities?

  4. Are these materials available in stock or should you order some additional materials from suppliers?

  5. When would the missing materials arrive, so that production can resume?

Answers to the first two questions listed above are typically available on the sales order level. As soon as you open the Shopify-imported sales orders in the Smart Workshop Software you will see product availability information based on your actual stock levels.

This means that you can see how many units of ordered products are available in stock and how many units you need to be additionally produced to fulfill the order. Katana, the Smart Workshop Software, takes it up a notch and also shows you how many units of products are available in stock and how many units expected from production have already been booked / reserved by sales orders that have arrived earlier (are higher ranked), and are still unfulfilled.

In Katana, you can also change the priorities of sales order via drag-and-drop in case you need to prioritize a recent order to be fulfilled earlier than other open orders. It also re-books available units of ordered products automatically based on sales order ranking — this makes it easy to manage express orders that need to be delivered to customers as soon as possible.

In order to provide answers to the last three questions, you need to define production recipes (bill of materials) for each product you make, just like we did in the leather accessories example above. Think of it as a link between the final product and the materials you use for producing it. Once an MRP app has the production recipe info available and you have created a manufacturing order for the missing units, the MRP app will be able to tell you exactly what materials you lack to complete the production and when would such materials become available. For all the missing materials you can create a purchase order with a click of a button and it will be automatically sent to your suppliers.

Also, when you complete your manufacturing orders, the MRP system will automatically reduce the stock levels of materials consumed during production and increase the stock level of products produced. Typically, inventory management apps meant for traders and wholesalers, lack the functionality of production recipes and thus, you end up adjusting your stock levels manually.

In Katana, you can also create production recipes that include sub-assemblies — products inside products, inside products, inside... you get the idea. And you will have visibility of materials required throughout the multi-level product recipes. Additionally, MRP apps have built-in reorder point and safety stock functionality. By setting desired levels you can keep your stock levels optimized so you have the right level of products and materials available. Optimal stock = better cashflow.

Think of MRP as an inventory management app tailored for manufacturers and makers. But MRP is not only about inventory management - it also helps you plan your manufacturing and ensure floor-level efficiency.

2. Know what is being produced next and plan ahead

A manufacturing plan is rarely carved in stone. In a typical small workshop changes happen on hourly basis, which may affect your daily/weekly production plan. A sales order might get cancelled, a floor level employee might call in sick, a supply order of materials required for production may be delayed and so on. That's why it is important to work with a flexible tool that makes it easy for you to change priorities in sales and production on the fly. A good planning functionality means you can:

  1. Change the priorities of sales orders with a drag-and-drop and immediately see the availability of products in stock and products expected from production based on changed priorities

  2. Change the priorities of manufacturing orders with a drag-and-drop and immediately see the availability of materials in stock and materials expected from suppliers based on changed priorities

  3. Clearly see the link between a sales order, related manufacturing orders and related purchase orders of materials

  4. Get an immediate overview of status of each sales, manufacturing and purchase order currently being processed

With a Smart Workshop Software you will be able to adjust the priorities in your sales and manufacturing with drag-and-drop functionality and RAG (red-amber-green) dashboards which simply highlight the status of each order. You can easily track what sales orders can be immediately fulfilled, where products are available in stock, and what sales orders are waiting for production prior to fulfillment. You can also immediately see the availability of materials for each production order and track production statuses. This way you always know what is the status of your sales and manufacturing in glimpse.

Once you have finished manufacturing the missing units, sales orders from Shopify are ready for fulfillment. An integrated Shopify inventory management system will sync the shipping status with Shopify. This means that as soon as you ship an order from MRP the stock levels of products on the order get adjusted automatically and the shipping status is also synced with Shopify. This will ensure that your orders in Shopify and in your MRP will always have the same shipping status and everybody knows what orders are open and what have been fulfilled.

Benefits of Shopify Inventory Management with Katana

Here is a summary of what you get from Shopify inventory management integration with Katana.  

  1. Seamless product tracking — when you get an order through Shopify, it immediately appears in the Katana system. Create a manufacturing with Katana straight away.

  2. Keep track of raw materials — quickly allocate raw materials based on Shopify order priority. Make sure there is no confusion between products which require the same materials.

  3. Manufacturing floor-level control — get Shopify orders to your shop floor immediately. Fulfill orders with task lists for every production employee and production line. Your team will ship all online orders on time.

  4. No need to keep switching over — have your entire business inventory in one place. Shopify orders get fulfilled in the same channel as all the rest of your customer orders.

  5. Manage your business on a single platform — fulfilling Shopify orders updates inventory numbers for your whole business so you can always get the full picture.

  6. Integrate other features — see machining time and overheads for Shopify orders which means Shopify is running in sync with your business.

  7. Manage bulk orders with ease — rather than getting multiple Shopify add-ons, you can use a system that is built to adapt to high-demand periods, to avoid Shopify inventory issues.

Try 14 days of Katana for free, without entering any bank or personal details, and take your Shopify inventory management to the next level!