How to manage and track your Shopify inventory as a manufacturer

Selling online is a must in today’s digital world. Direct access to customers, immediate feedback on your products, and more control over your customer service without paying any traders or resellers are just a few of the benefits of having an online sales channel. 

Many manufacturers use Shopify as their go-to e-commerce platform. While Shopify is a great and easy-to-use tool to get started with as a direct-to-consumer (D2C) manufacturer, there’s one crucial element missing — Shopify inventory tracking isn’t built for manufacturing. 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 ten years. 

Today Shopify is one of the most popular e-commerce platforms around — and this article will look into how manufacturers can use Shopify’s online store inventory management for their business and the third-party software that helps them manage production and inventory.

How to track product inventory with Shopify

Shopify comes with basic inventory tracking that allows you to adjust the inventory in your Shopify account manually. Because it’s already included in the Standard plan, many Shopify sellers make do by managing inventory this way. To set it up, you need to enable transfers:

1. Go to your Shopify admin panel
2. Select one of your Shopify 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
5. Don’t forget to save your changes

After you set up a transfer for one of your products, you can 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.

If you need a way to track raw materials, inventory, product recipes, and production processes, this won’t work — and neither will large, clumsy Excel sheets. External Shopify inventory control systems have become a viable option to iron out the creases in the platform’s native system and give you the visibility you need over all aspects of your Shopify business — from sales and inventory to production.

But before diving into the different types of job shop manufacturing software that integrate with Shopify, let’s first explore the native Shopify online store inventory system in more depth.

Is Shopify’s built-in inventory solution enough for manufacturers?

Many manufacturers selling on Shopify ask if it has a ready-made Shopify inventory tracking system — and the answers yes and no. 

Shopify’s basic track inventory function is okay if you’re reselling products, as it allows you to monitor stock coming from a supplier and what you’ve sold. But companies that make their products have a more complex workflow and find the Shopify inventory solution is missing critical features like:

• Raw material and work-in-progress (WIP) inventory tracking
• Bill of materials (BOMs) management
• Production planning
• Manufacturing floor-level control
• Manufacturing cost calculations

Do you use Excel to Shopify track inventory and production? We’ve got news! There’s a better way of managing inventory on Shopify. The best way to handle Shopify inventory tracking is to take advantage of Shopify inventory software like Katana.

When it’s time to level up to a third-party Shopify inventory management system

You may be able to manage your sales and track your inventory with Shopify, but Shopify’s online store inventory works best for drop shippers or merchants who act as a middleman. Even with a decent inventory system to track your finished goods, most inventory management systems do not come with features for monitoring your raw materials or WIP inventory.

Manufacturers can take their Shopify inventory management to the next level with third-party software that integrates with Shopify like Katana, which includes a range of manufacturing features that give control of all the moving parts of your business.

1. Master planning features

Eliminate manual tracking with software that supports master planning. Katana allocates products and raw materials to open orders based on availability and allows you visually track order progress in real time.

By easily tracking order statuses and implementing better procurement practices, you can your order fulfillment rates and keep your customers happy and your team aligned.

2. Sales order fulfillment synchronization

There’s no need to run back and forth between the different apps that you use with Katana. Synchronize your sales orders with third-party software to update the fulfilled and delivered sales on both Shopify and Katana.

This synchronization process also transfers to your inventory —once a finished good is removed from one inventory list, the other app will also reflect the reduction.

3. Optimized production process

The basic Shopify inventory system doesn’t give you any functions to manage your production processes. Using manufacturing ERP software like Katana lets you plan and schedule production while reprioritizing your important orders.

Best of all, if the system has master planning features, reprioritizing your workflows will result in automatic reallocation of your products and materials. Once integrated, 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 number of materials available in stock.

Setting up Katana for Shopify inventory tracking

1. First, log in to your Katana account. If you don’t have a Katana account you can sign up for a free 14-day trial here.

2. Click on Settings in the main menu

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 once finished.

In our case, that will be leatherstore21 a leather manufacturer.

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 to exclude 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 a minute. This will save you hours of time importing and exporting orders manually.

How to track raw materials for your Shopify orders with Katana

Here’s a quick tutorial on setting up your Shopify and Katana integration to track inventory and more.

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 material variants if you need them. In our case, we have leather in four different colors.

Nex, add your variant code, reorder point, and purchase price. Once done, 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 or duration, and cost.

How to select the right Shopify inventory solution as a manufacturer

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

1. Know what needs to be produced to fulfill a sales order 
2. 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 do missing materials arrive so that 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 your manufacturing ERP software, you will see product availability information based on your actual stock levels.

This means 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. But Katana takes it up a notch and shows you how many units of products are available in stock and how earlier sales orders have already reserved many units expected from production.

How priority-based resource planning software makes Shopify inventory management simple

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

To answer the last three questions, you need to define production recipes (bill of materials) for each product you make, as 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 has the production recipe info available and you have created a manufacturing order for the missing units, Katana will tell you exactly what materials you lack and when those materials will be 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 manufacturing ERP system will automatically reduce the stock levels of materials consumed during production and increase the stock level of products produced.

Typically, Shopify inventory apps lack the functionality of production recipes, and thus, you end up adjusting your stock levels manually. You can also use Katana to create production recipes that include sub-assemblies, which are products inside products, inside products — you get the idea. This will give you visibility over materials required throughout multilevel product recipes.

Additionally, manufacturing ERP software typically has built-in reorder point and safety stock functionality. By setting desired levels, you can always keep your stock levels optimized to have the right level of products and materials available.