Ultimate Guide to Shopify Inventory Management for Manufacturers
More and more crafters, makers, and small manufacturers around the world are setting up their own web stores.
Because selling online has become so easy and has many benefits, such as 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 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: Shopify inventory management tailored for makers and small manufacturers.
Shopify Platform Background
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 recent study suggests that global eCommerce sales are expected to reach $4.8 trillion by 2021. At the beginning of the next decade, there will be about 2.1 billion shoppers buying goods and services online. Trends like this one confirm that global eCommerce growth is nowhere near slowing down.
Shopify is one of the best online commerce platforms designed for small to medium-sized businesses. It gives anyone the possibility to create their own online store by just picking one of the available Shopify themes, uploading product pictures and writing their descriptions.
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.
Is There a Built-In Shopify Inventory Management?
Many small makers and manufacturers selling on the platform ask if it has a ready-made Shopify inventory tracking system.
Yes and no.
The Shopify track inventory basic function is okay if you're reselling. Shopify inventory tracking allows you to monitor stock coming from a supplier and being sold to order.
But companies that make their own products have a more complex flow and find the Shopify inventory management features lacking.
Do you use Excel to Shopify track inventory and production? We’ve got news! There’s a better way for managing inventory on Shopify.
Shopify inventory tracking can be easily handled by makers with Smart Workshop Software like Katana.
Katana automatically receives all orders from Shopify and allows you to get better Shopify inventory tracking of your raw materials 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 the Shopify inventory control basic features.
Shopify Inventory Management — The Basics
The basic feature expects you to set up the Shopify inventory tracking and adjust the inventory in your Shopify account yourself. As a result, many Shopify sellers make do by managing inventory on Shopify without the features offered as standard. To set it up you need to enable transfers:
Go to your Shopify admin;
Select one of your product variants and click on “Edit”;
In this window, go to the “Inventory” section and find the “Inventory Policy” drop-down menu;
Select “Shopify Tracks this Product’s Inventory”; and
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 Shopify 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 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 Shopify inventory control systems have become a viable option to iron out the creases in the platform’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 for Shopify Inventory Tracking
Let us take you through the process of integrating your Katana account with your Shopify store. Let's take an 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 then you’re ready to roll!
Congratulations! You have now integrated your Katana account with Shopify and it took less than one minute.
This will save you hours of time importing and exporting orders manually.
Katana and Shopify can talk to each other to completely streamline your order fulfillment cycle online.
Shopify inventory management is now a piece of cake!
PRO TIP: Check out this video tutorial on how to connect your Shopify store with Katana, and learn about how smart Shopify inventory tracking can help your business.
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 Shopify track inventory!
What Small Manufacturers Need to Know About Good Shopify Inventory Management
There are two important steps to start handling your production and Shopify inventory management properly:
A. 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:
How many units of ordered products are immediately available in the stock for delivery?
How many units of ordered products are missing that need to be produced to fulfill the order?
What materials are required to produce the missing quantities?
Are these materials available in stock or should you order some additional materials from suppliers?
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 Katana’s Shopify inventory software has the production recipe info available and you have created a manufacturing order for the missing units, it 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, Katana’s MRP system will automatically reduce the stock levels of materials consumed during production and increase the stock level of products produced.
Typically, Shopify inventory management apps are 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 Cash low.
Think of Katana’s MRP system as a Shopify inventory control app tailored for manufacturers and makers. MRP is not only about how to Shopify track inventory, but it also helps you plan your manufacturing and ensure floor-level efficiency.
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 an hourly basis, which may affect your daily/weekly production plan.
A sales order might get canceled, 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:
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
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
Clearly see the link between a sales order, related manufacturing orders and related purchase orders of materials
Get an immediate overview of the status of each sale, manufacturing and purchase orders 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 the RAG (red-amber-green) status highlight the progress 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 at a glimpse.
Once you have finished manufacturing the missing units, sales orders from Shopify are ready for fulfillment.
Katana’s integrated Shopify order management system will sync the shipping status with Shopify.
This means that as soon as you ship an order 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 software will always have the same shipping status and everybody knows what orders are open and what has been fulfilled.
The Benefits of Using Katana to Shopify Track Inventory
Here is a summary of what you get from Shopify inventory management integration with Katana.
Get out of spreadsheets – By upgrading to Katana’s Shopify inventory management system, you’ll able to avoid delays caused by the inefficiencies of Excel spreadsheets.
Seamless product tracking — when you get an order through Shopify, it immediately appears in the Katana system. Create a manufacturing order with Katana straight away.
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.
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.
Integrating accounting software – alongside your Shopify store you can also integrate accounting software such as QuickBooks to generate invoices in Katana.
Set reorder points – by establishing a reorder point on your products or material Katana will notify you when inventory is running low, helping you avoid business damaging stockouts.
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!