How Strategic Supply Chain Management Drove a $100K Monthly Sales Increase with +32% Increase in Profits

Project Summary

Brankit transformed a struggling brand burdened by a -28% profit margin where 70% of revenue was consumed by Amazon fees, 34% excess inventory, and in-stock rates below 90%. Our strategic plan focused on removing excess stock to mitigate long-term fees, adjusting prices for enhanced profitability, and leveraging advanced forecasting for precise inventory management. In just three months we achieved an additional $100K in sales and a +32% improvement in profit

Initial Hurdles

1. Negative Margin: The client was struggling with a negative margin for the last five months before we onboarded it. The negative margin reached to -28% in November
2. High Amazon Fees: About 70% of revenue was being consumed by Amazon fees including the huge fulfilment fee and storage cost, impacting the profitability.
3. Excessive Inventory: The brand faced challenges with excess inventory, with 34% of stock deemed surplus causing inaccuracies in demand planning and long-term storage fees on excess stock
4. Poor In-Stock Rate: With in-stock rates falling below 90%, the Brand was losing sales opportunities and customer trust in multiple products running out of stock.

Plan of Action

To address the challenges, Brankit devised a multifaceted strategy:

1. Removal Orders: We executed removal orders for excess inventory to significantly cut Amazon fees. While this incurred some removal costs, it helped us avoid long-term storage fees and surcharges associated with completely stagnant SKUs.
2. Price Adjustment: Profit analysis conducted for all the items on a unit level and adjusted the prices to increase the per unit profit. This analysis enabled us to identify underperforming SKUs contributing to negative margins
3. Forecasting and Projections: Utilizing advanced forecasting techniques using AI-based tools, Brankit developed a precise quarterly projections plan, enabling proactive inventory management and order planning.
4. Marketing and Supply Chain Alignment: Brankit synchronized the marketing team with supply chain operations to eliminate communication gaps and optimize advertising spend, effectively addressing both out-of-stock and excess inventory challenges
5. Packaging and Cost Improvement: We conducted competitor analysis to optimize the product packaging, unit cost, and FBA fees
6. Master Data Correction and Alignment: Correction and alignment of master data between the Brand’s 3PL warehouse and Amazon platforms, allowed us to streamline the inventory management and remove SKU naming issues 

https://brankit.com/wp-content/uploads/2023/10/Jaeger-Tools-Case-Study.mp4

Outcomes Achieved​

By applying strategies, the Brand witnessed remarkable improvements in just 3 MONTHS:

1. Revenue Growth: The client achieved a revenue increase from $186K in November to $288K in February, with a clear pathway toward stable sales. 
2. Margin Enhancement: Margins increased from -20% to 12%, with stability in a short span of 3-months. 
3. Reduction in Amazon Fees: Amazon fees as a percentage of revenue decreased from 70% to 40%, majorly due to excess stock resolution, allowing the client to retain a larger share of their earnings
4. Inventory Optimization: Excess inventory reduced from 34% to 18% with reduced Amazon storage cost
5. Improved In-Stock Rate: The brand achieved a substantial improvement in in-stock rates, rising from less than 90% to 99%
6. Enhanced IPI Score: The Inventory Performance Index (IPI) increased by 98 points on Amazon within 3 months, reflecting improved inventory management and awarded with long-term benefits on stock storage by Amazon.

Lee Leathers, CEO of Jaeger Tools:
“This team is top-notch! I learned a ton while they
improved our systems, reduced our doc to an optimal level,
and took lots off our plate. A+”