The Complete Guide to Logistics for Wholesale Suppliers

by Craig Anthony

4 min read

Being a wholesale supplier comes with a unique set of challenges. Fortunately, there are also many aspects of wholesale businesses that make operations easier. These aspects are typically tied to logistics — the ability to move products and produce sales in the most efficient way possible. Here are some tips for using logistics as effectively as you can.

Always Offer the Lowest Prices

The greatest expense your business can incur is a loss of customer satisfaction. You want your customers to be happy, so your best bet is to treat them well. For example, notify a customer of an upcoming sale prior to selling the same product that will be soon discounted. Consider offering a customer a sale price if they will be unable to submit an order during an upcoming promotion. As well, think about price-matching if a customer has a need for an item but found a cheaper alternative. These initiatives may cut into your bottom line, but it will result in greater future business.

Improve Efficiency

Your company can save money by being as efficient as possible. For example, implement a minimum order quantity for customers. This means customers have to purchase at least a fixed number of units to submit an order. This can be a quantity or dollar amount. For instance, a customer must purchase at least 50 units or $50 of goods to submit an order.

By implementing a minimum order quantity, you reduce shipping costs in comparison to goods sold. Purchase quantities will be higher, resulting in more revenue to offset mailing fees. In addition, administrative expenses will be improved as more efficient orders are placed. Instead of having to process two orders of 25 units, a customer is forced to order all 50 at once, eliminating half of the paperwork, documentation, shipping, processing, and potential customer inquiry.

Implement Dropshipping for Retail Customers

Dropshipping is a fulfillment method in which a company does not maintain an inventory of products to sell. As a wholesale retailer, you would purchase inventory from a third party and ship the materials directly to the customer. In this situation, you don’t handle any of the product, even though you have completed a sale. The most obvious benefit from this strategy is that no inventory balance is required. The only time materials are ordered is when a customer places an order. Even in this situation, you are not required to maintain any inventory level, inventory internal controls, or asset insurance.

As well, less capital is often required, as you only make purchases immediately prior to a sale. This means capital is required for a short time, and the amount you need is substantially less than attempting to maintain inventory levels. In addition, less money is tied up in a warehouse, shipping, inventory tracking, and handling customer returns. Finally, your business has greater capacity to offer more products, as anything your supplier sells immediately becomes a product you can sell.

Offer Scaled Pricing Through Tiers

When offering wholesale goods, encourage the purchase of higher quantities by incorporating scaled pricing. This means goods are sold in groups of units, and purchase discounts come into effect as more groups are purchased. For example, the price per unit for your product may be $0.25 for the first 100 units sold. However, if a customer purchases an additional 100 units, the price per all units could become $0.24. By reducing the price as the quantity purchased increases, you are more likely to receive larger orders and more total revenue.

This tiered pricing system should follow a few rules. First, do not extend the tier below your cost per unit. Always keep the incremental quantity fixed (every 100 units or 1,000 units), and do not offer the reduced price for less than this multiple. If a customer purchases 155 units following the example above, the price per unit is $0.25. Advertise the tiers, and be proactive towards customers who are close to the threshold. If a customer wishes to purchase 195 units, inform them of the pricing options as a customer service gesture.

Use an Automated Inventory Management System

Implementing an automated inventory system (AIS) comes with many benefits. First, automated systems maximize your ability to scale your business, as less of your time will be used towards analyzing data. Automated systems can handle higher information volumes and will produce more useful information for inventory preparation.

As well, AIS systems decrease manual or human errors in tracking, adding, or omission of information. Automated systems also produce faster results, and you will be able to determine exactly what you have available for sale almost immediately. This translates to quicker sales order completion, invoice billing, and more efficient replenishment of depleted stock. Finally, automated inventory systems also reduce the risk of fraud. Because stronger internal controls can be implemented, less inventory can be stolen as more stringent tracking occurs.

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