• A wholesale license allows businesses to purchase products in bulk without paying sales tax.
• It is not always required to have a wholesale license. Some jurisdictions only require wholesalers to have a reseller’s permit when selling to businesses (B2B). 
• While not always a requirement, obtaining a wholesale license fosters trust and adds legitimacy to your business.
• A seller’s permit is also required if your wholesale business plans to sell directly to consumers (B2C).
• To apply for a wholesale license, you’ll need to submit a variety of information about your business. Generally speaking, the process is simple.
• Legislation surrounding wholesale licenses differs based on your location. Be sure to check your local legislation beforehand. 

Not all businesses that sell physical products fall into the same category. For example, you’ve got retailers, wholesalers, distributors, and other business models like dropshipping. But in most cases, regardless of your business model, you’ll need a license of some sort before getting started. Otherwise, you may find yourself in legal trouble. 

Today, we’ll focus on wholesale in particular. We’ll go over how to get a wholesale license, why you need one, and what benefits it brings. So, if you’re thinking about how to sell wholesale, this article is a must-read. 

What is a wholesale license?

A wholesale license is a legal document that allows individuals and/or businesses to buy products in bulk directly from manufacturers or distributors without paying sales tax. In some areas, a wholesale license is required if you intend to sell goods to other businesses rather than consumers. However, wholesalers can operate in many places using a reseller’s permit or sales tax exemption certificate.   

Why do you need a wholesale license? 

While it’s true that you don’t always need a wholesale license, these situations are typically the exception rather than the norm. That’s why knowing how to get a wholesale license is so important. 

Even if it’s not always a requirement, having a wholesale license has some great benefits. Most notably, US businesses with a wholesale license are exempt from sales tax at the time of purchase. This is because the consumer will ultimately pay the sales tax when making the final purchase through the retailer. 

A less tangible benefit of having a wholesale license is that it’s a sign of trust. Sometimes, just having a business license isn’t enough. Manufacturers are more likely to trust someone with a wholesale license and may also be more open to negotiations with wholesalers who hold one. Ultimately, it adds an extra level of legitimacy to your business. 

How is it different from a reselling permit?

We briefly mentioned reseller’s permits above. These allow retailers to purchase goods tax-free from wholesalers. Although this sounds similar, the key difference is their intent with those products. Retailers specifically aim to sell to consumers, while wholesalers typically sell to other businesses.  

Although the two serve similar purposes, they’re split into two different documents. However, depending on your location, these two permits might be bundled together. Always double-check your local rules and regulations to determine what’s required in your area. 

What about seller’s permits?

Another important permit to mention is a seller’s permit. This permit allows businesses to collect sales tax legally when selling their products. It’s an essential part of any business that sells products directly to the consumer (B2C).

Wholesalers who are only doing business with other businesses (B2B) don’t need to worry about a seller’s permit since they won’t be collecting or paying sales tax. However, if you plan on selling both B2B and B2C, you will need a wholesale license and a seller’s permit.  

How to apply for a wholesale license

Now that you know why you need a wholesale license, you need to know how to obtain one. Some of these steps will differ from place to place, but the basic outline remains the same. Still, it’s best to look into your local legislation beforehand. Organizations exist specifically to help businesses obtain their licenses. 

Step 1: Register your business 

First things first, you’ll need to make your business legitimate. This means you’ll need to register your business, obtain a business registration, and choose a legal classification for that business. In this instance, “legal classification” means sole proprietorship, limited liability company (LLC), and so on. 

Step 2: Obtain an employer identification number (EIN) 

Even if you’re a one-person show, you’ll need an EIN. This also functions as your business’ tax number and is what you’ll use to open bank accounts and file taxes. To apply for an EIN, you’ll need to go to the IRS website and supply a variety of information. This includes your social security number, business address, and business name. 

Generally speaking, this process is relatively easy and not time-consuming. 

Step 3: Obtain a seller’s permit (if applicable)

Remember the seller’s permit we mentioned above? Well, if you plan to sell wholesale and directly to consumers, this would be the time to get a seller’s permit. The specific requirements to obtain a seller’s permit will differ based on location, so make sure to check ahead of time. 

Step 4: Gather the relevant information and apply

Before applying, you’ll need to put some information together. Most of it should be easily obtainable. A non-exhaustive list is as follows: 

• Business name
• Owner’s name
• Taxpayer ID
• Business address
• Contact information
• Nature of the business
• Seller’s permit (if applicable)
• General business license
• Employer identification number (EIN)

From here, you’ll submit an application to your local jurisdiction. We’ve said it a few times, but local legislation tends to differ based on where your business operates.

Additionally, applying for a wholesale license usually involves fees. These amounts can vary wildly depending on where you apply. For example, Alaska requires a bi-annual fee of $2,00 to maintain the license. On the other hand, Texas doesn’t require a wholesale license at all. 

Different industries may have different requirements

It’s also important to keep in mind that different industries may have different regulations. For example, a wholesaler carrying bulk hazardous chemicals will likely be subject to stricter regulations and require more certifications and licenses than a fashion company.

Knowing how to get a wholesale license is just the first step. You’ll also need to know the legislation surrounding the rest of your business and where to go next. 

Software that will help you succeed as a wholesaler

Whether it’s a wholesale license, reseller’s permit, or seller’s permit, obtaining the proper legal documentation is key to ensuring compliance with local regulations. This will keep your operation running smoothly from day one.

However, having the proper legal documentation is just the beginning of running a thriving wholesale business. How you manage your day-to-day operations is what truly determines your success. 

That’s where inFlow’s wholesale software comes in. Our all-in-one inventory and order management software helps wholesalers track stock levels, process bulk orders, and manage sales across multiple sales channels with flexible pricing schemes. That means you can easily sell both B2B and B2C seamlessly. With inFlow, you can also:

• Generate and track purchase and sales orders.
• Create, print, and scan barcodes with our built-in barcoding system.
• Automatically apply special tax rates for customers with exemptions.
• Integrate with ecommerce and accounting tools such as Faire, Shopify, QuickBooks Online, and Xero. 
• Create a private inFlow Showroom sales portal to display selected products and pricing for clients.

With inFlow, you’ll be ready to take your wholesale business to the next level. So what are you waiting for? See for yourself and give inFlow a try today!

The post How to Obtain a Wholesale License: A Simple Guide appeared first on inFlow Inventory.

• The core difference between wholesale vs retail is wholesale involves selling products in bulk to other businesses (B2B), while retail focuses on selling individual products to end consumers (B2C).
• When you sell products wholesale, you face less risk and lower overhead costs, reducing carrying costs and shipping expenses. In contrast, retailers face higher overhead costs due to the need for storefronts and a larger workforce.
• Retailers enjoy higher per-unit profit margins than wholesalers due to the added risk they take on.
• Some things to consider when choosing between wholesale and retail are product type, profit margins, overhead costs, customer relationships, marketing, and inventory management.
• Wholesalers rely on B2B marketing through trade shows and networking, while retailers focus on advertising and sales promotions.
• Some companies can successfully operate with a hybrid approach, acting as both wholesalers and retailers.

Wholesale and retail are two fundamental pillars of the supply chain, and each comes with its own challenges and benefits. While these business models generally have similar foundations, getting physical goods into the hands of the consumer, they differ significantly. Whether you’re an aspiring entrepreneur or a seasoned business owner, understanding the difference between wholesale and retail can significantly impact your business decisions.

In this article, we’ll explore the key differences between wholesale vs retail, the challenges and benefits each offers, and how businesses can decide which model aligns best with their goals. 

What is wholesale? 

As a consumer, you may have wondered where retail chains like Walmart and Target get all their products. After all, they offer a wide variety of products, ranging from food items to pharmaceutical medicine. They very clearly don’t manufacture everything in-house. 

That’s where wholesalers come in. Wholesalers sell products to other businesses in bulk at a discounted rate. Those businesses then sell those products directly to individual customers at a markup. Wholesalers typically charge less per item than retailers because they sell products in large shipments, which reduces carrying costs and shipping fees.

In general, selling wholesale carries less risk. Selling things in bulk makes moving products easier and means storing them for less time. Wholesalers also don’t have a physical storefront, further lowering overhead costs. This also reduces the need for staffing, which in turn reduces labor costs. 

On the other hand, selling in bulk to retailers can be difficult. A business-to-business (B2B) model requires building relationships, which can take a lot of time. And once you have those relationships, you’ll need to maintain them.  

What is retail?

We mentioned Walmart and Costco above because they are quintessential examples of retailers or a business-to-customer (B2C) model. Retailers purchase products in bulk from wholesalers, mark them up, and sell them to consumers. They play a significant role in the global supply chain because they are the ones who get the products into the hands of the consumer.

Selling retail vs wholesale can be challenging because having a product and being able to sell it are two very different things. Marketing your products to customers ultimately decides whether or not they sell, which can sometimes be expensive. 

Retail also involves more risk because you sell products individually. This means you hold products longer, adding storage costs and opportunity costs. Displaying and selling one product means that they can’t sell another at the same time. 

On average, retail has higher overhead costs. You need a storefront and somewhere to store the products that are not currently on the shelves. You’ll also need staff to handle day-to-day operations and more robust payment processing for things like returns. 

Retail vs wholesale: which is right for you? 

We can’t tell you specifically which model is best for your business. That will depend on a lot of different factors. However, we can give you some things to consider when deciding between wholesale vs retail.

• Product type—A good rule of thumb is that wholesaling works well with essential items, like food or clothing. Consumables, in particular, are great since you know they must be replenished, which means repeat business. However, consumables also often have expiration dates and lot/batch numbers to worry about. 
• Profit margins—Wholesalers will get a lower per-unit profit margin than retailers, but they typically get a higher sales volume. While retailers enjoy higher per-unit profit margins, they also have higher overhead costs. 
• Overhead costs—These expenses are arguably the most important difference between wholesale and retail. Typically retailers will have to worry about more overhead costs than wholesalers, which will eat into their gross profit margins. 
• Customer relationships—While wholesalers don’t deal with the end consumer, they still manage customer relationships. In this case, their customers are the retailers they supply with products. The relationships may be different, but both require work to maintain.
• Marketing and Branding—Depending on whether you sell wholesale or retail, attracting people or businesses to your products will require a different approach. Wholesalers tend to rely on B2B marketing through trade shows and networking events. Retailers, on the other hand, focus on advertising, social media, and sales promotions. 
• Inventory management—Both retailers and wholesalers will need to manage inventory, but the challenges differ. For example, wholesalers will likely need a larger warehouse space, potentially multiple locations, to store large quantities of products. Retailers might not have to store as many products, but they’ll likely have a much more extensive selection of products to manage. 

Wholesale vs retail: why not do both?

Of course, many companies act as both wholesalers and retailers. Take Nike, for example. While it has its own stores, it also sells its products in bulk to other retailers. While the scale on which they do this may be unattainable for most small businesses, it doesn’t mean it’s entirely out of reach.

Many retailers have found success selling their products wholesale online while still offering their goods to the individual consumer. This hybrid business model provides the benefits of selling wholesale and retail. You’ll be able to have the peace of mind that large wholesaler shipments provide but also benefit from the high per-product profit margins that retailers enjoy. However, you’ll also need to manage the challenges of both business models. 

For example, you’ll need to account for different pricing schemes for your products based on which customer you’re selling them to. You’ll also need to track your inventory across multiple sales channels to ensure you’re not overselling. Thankfully, our software inFlow can do all that and a whole lot more, such as barcodes and real-time inventory tracking.

Ultimately, when deciding between wholesale vs retail, you’ll need to consider the products you carry, what problems they solve, and your business goals.

The post How to Choose Between Wholesale vs Retail for Your Growing Business appeared first on inFlow Inventory.

• 3PL vs 4PL: refer to 3rd and 4th party logistics, respectively. 
• These logistical models involve handing off logistic operations (packaging, shipping, storage, etc) to external parties. 
• 4PL is the next “step up” from 3PL and involves handing over almost the entirety of supply chain control. 
• 4PL providers act more as coordinators and usually don’t own any of their equipment. 
• As a rule of thumb, 3PL is best when experiencing sudden rapid growth, and 4PL is best when approaching enterprise level. 
• While 4PL is more expensive than 3PL and involves giving up a lot of control, the service is much more comprehensive. 
• Sometimes, it’s better to keep things in-house, and business software offers a solution to achieve this. 

These days, it’s rare for businesses to operate entirely independently. Even retailers that operate primarily online need to coordinate with payment processing companies, shipping carriers, suppliers, and so on. These vital tasks are expensive, time-consuming, and require specialized equipment, training, and personnel. 

This is why so many businesses outsource these tasks and instead focus on their core operations. A manufacturer, for example, may outsource shipping and logistics to focus on its manufacturing process. That’s part of why we’re seeing a growing demand for 3PL logistics (third-party logistics) and 4PL logistics (fourth-party logistics) companies. 

Today, we’ll be discussing both 3PLs and 4PLs. As a business owner, how do you decide between 3PL vs 4PL? What are the benefits of each, and what are the major differences between the two?  

What is 3PL? 

We’ve talked about 3PLs in depth here before, but here’s a quick refresher. In business, “logistics” refers to how a company handles and allocates resources. Translated, it relates to how they package, ship, source, and store their products. A third-party logistics provider aims to take care of these things for a business. In short, 3PL providers handle order fulfillment. 

For example, an ecommerce shop may use a 3PL company to store their products in warehouses. When they receive an order online, the 3PL is in charge of picking, packing, and shipping the product to the customer on behalf of the ecommerce shop. 

What about 4PL? 

Unsurprisingly, there are quite a few similarities between 4PL vs 3PL. However, they differ in two significant areas: scope and scale. You can think of 4PLs as being one step up from 3PL. Instead of handling just a few things, a 4PL provider coordinates practically the entire supply chain. 

For example, a 3PL may only handle warehousing, picking, packing, and shipping orders. On the other hand, a 4PL company would do that, as well as handle supplier relationships, last-mile logistics, and coordinate between various separate 3PL companies.  

Another important distinction is that 4PL providers generally don’t own their own assets. This differs from 3PL providers, who usually own everything (vehicles, forklifts, etc.). 4PLs act more as coordinators across the supply chain. 

Why use 4PL? Or 3PL? 

Different parts of business operations require different skill sets, which means you’ll need to hire new staff. For example, a mechanical engineer would likely make a terrible inventory manager. They’re good at designing and building things, not managing a busy warehouse.

Not only will you need to hire new staff, but you’ll also need to consider warehousing space and assets such as forklifts, pallet movers, and wrapping machines. For many small businesses, it’s simply easier to use a 3PL or 4PL that already has the infrastructure to handle these tasks.

Generally, small to medium-sized businesses can manage fine using a single 3PL. On the other hand, more extensive operations may consider 4PL logistics. This is especially true if you have to coordinate between multiple 3PL companies for your fulfillment. Fostering these relationships can sometimes be difficult, especially as your business grows. A 4PL logistics company will manage these relationships on your behalf, eliminating headaches down the road. 

What are the benefits of 4PL logistics? 

The biggest advantage of using 4PL vs 3PL is that it offers a more comprehensive end-to-end solution. In general, there are quite a few advantages to consolidating as many business operations into a single place as possible. 

This is a large part of why integrations in business software are so important. After all, manually migrating data between platforms is a massive waste of time. Because 4PL companies handle so much of the supply chain, they have a much easier time comprehending information and coordinating efforts based on that information. 

Another often overlooked benefit of working with a 4PL provider is that they provide you with a network of suppliers. Because they work with such a broad range of vendors, they can help you find better prices.

The bottom line is that it’s often easier for businesses to outsource some of their work, especially at the beginning of their lifespan. Initially, you should focus on building your business at its core and let the professionals handle the logistics. Once you start to see some success, consider investing the time and money into bringing more of your operation in-house, ultimately improving your gross profit margin.  

Downsides of 4PL vs 3PL

Of course, despite all the benefits a 4PL offers, it has downsides. The biggest downside of 4PL vs 3PL is cost. 

While using a 4PL logistics provider may be cheaper than handling everything in-house, it’s still more expensive than 3PL services. It’s often worth the price, but it can be prohibitive nonetheless. 

Another downside is the lack of control. There’s no two ways about it: using a 4PL logistics provider means giving up a lot of control. They control where your product goes, whose hands it goes through, and how it ends up at its destination. That’s a lot of control to give up, and it certainly takes a lot of faith to surrender that control to an outsider. 

This also means that switching 4PL providers can be daunting. Ideally, you’ll never need to switch, but sometimes, things happen. It’s best to take the time to find a quality, reliable provider. 

When should you start using 3PL vs 4PL?

As a rule of thumb, it’s a good idea to start looking into a 3PL when you experience rapid growth and can no longer manage fulfillment alone. This could be due to a higher volume of orders or a lack of necessary storage space; often, it’s both. Handing off fulfillment to someone else allows you to focus on maintaining the growth you’re experiencing.  

4PL, on the other hand, is a bit more tricky. Their job is effectively managing the entire supply chain, and not every business needs that. A good rule of thumb here is to look into 4PL when approaching the enterprise level. Doing so beforehand makes the cost much more relevant, and often, it’s better to have a closer connection to the supply chain. 

For many businesses, the downsides of 3PLs and 4PLs are too significant to overcome, so they try to keep everything in-house. Doing everything yourself may seem daunting—and it often is—but sometimes, it’s worth the trouble. 

That’s where software solutions for different business areas, such as warehousing, customer relationship management, and shipping, come into play. Tools like inFlow can help you manage inventory, invoicing, and shipping in one place. With inFlow, you can manage your inventory and order fulfillment in-house for longer without resorting to a 3PL or 4PL.  

Are there any other options?

Of course! There’s other “tiers”, such as 1PL, 2PL, and 5PL. First-party logistics, though, actually refers to handling everything in-house. There are no other parties involved, hence “first-party.”

Second-party logistics refers to a business that transports goods from one location to another. This differs from 3PL logistics, which handles packaging, warehousing, and shipping. 

It’s perfectly possible to take different pieces of logistical models and meld them together. For example, you can use 2PL and hire a 3PL to manage them. It doesn’t offer as robust a network or solution, but it gets you most of the way there. And it’s usually much cheaper. 

When deciding between 3PL vs 4PL, it’s important not to rush into things. Ideally, you’ll work with them for quite some time, so make sure you find a reliable partner. 

The post How to Decide Between 3PL vs 4PL For Your Growing Business appeared first on inFlow Inventory.

• Price anchoring is a business strategy that sets a price “anchor” as a reference point for consumers to make prices seem more attractive. 
• Anchor pricing is one of many modern marketing tactics that take advantage of human psychology. 
• Humans prefer a reference point to make decisions; by giving consumers something to build their frame of reference with, businesses can influence their buying decisions. 
• Businesses should be careful how they implement price anchoring. 
• Often used in tandem with other strategies such as decoy pricing, comparative pricing, and bundle pricing. 

Regardless of what product you sell, deciding on a selling price is crucial. After all, the right price can make or break a sale. If you set your prices too low, you risk leaving money on the table, but if you set them too high, you risk scaring off potential customers. Thankfully, there are some tricks of the trade that many retailers use to give themselves an edge. 

One of those tricks is price anchoring, one of many tactics that capitalize on human psychology. Today, we’ll discuss price anchoring, how it works, and its role in modern business. 

What is price anchoring?

Price anchoring is a marketing technique that businesses use to drive sales and influence customer decision-making. It does this by providing customers with a price point (“anchor”) that they can reference when making a purchase decision.

The technique itself is relatively simple. You’ve almost certainly seen an example recently and probably never even realized it. Think of the last time you were in a store and saw a heavily discounted item. You see a big sale sign with the original price prominently showcased above with a slash through it. It turns out that’s technically price anchoring! The higher, undiscounted price is the “anchor.” 

The lower price seems like a good deal when you compare the two side-by-side. Even if the product was never intended to be sold at the original price. That’s what price anchoring seeks to take advantage of– and studies indicate it works. Businesses use this technique regularly in retail, real estate, luxury products, and especially ecommerce.

What is the price anchoring effect?

It may seem strange that we mentioned psychology above, but it’s actually part of a growing trend. Understanding how consumers (your potential customers!) think is a crucial component of effective marketing, and it falls squarely within the purview of psychology. 

It’s important to note that “cheap” and “expensive” are all relative. For example, if a vital tool costs $1,000, it’s still cheap if the next best option is $5,000. Smartphones can provide a more relatable answer. 

Even within their different SKUs (iPhone 15, Galaxy S24, etc.), there are variations. They might have different storage or connectivity capabilities or even processors—like Samsung’s Exynos variants. Regardless, consumers typically buy whatever they think is the best value. But best value according to what?

Generally, they look at other products adjacent to the one they’re interested in. So whatever phone they select is likely one of many. Let’s say that a full-feature phone costs $1000, and there’s another $500 version of that phone with 80% of the features. 

Most consumers will purchase the $500 model. Because in their mind, if they purchase the $1000 model, they’re paying double the price for only 20% more features. By comparison, paying $500 for 80% of those features is a really good deal! Or at least, that’s what they’ll think– and that’s the price anchoring effect in action.

Even if consumers don’t sit down to figure out the exact numbers, they almost certainly follow a similar thought process. The human mind needs a frame of reference to analyze something properly. You can steer them towards a specific option by providing a reference point. That’s the fundamental goal of anchor pricing. 

Tips for effective price anchoring

While price anchoring is effective, it’s not foolproof. Should you choose to implement it as part of your overall pricing strategy, here are some things to remember: 

• Start with a higher anchor price—If you intend to get the most out of price anchoring, choose the right anchor price. While it may be tempting to immediately price something at your desired markup, charging a bit more will make your price anchor much more attractive to the consumer.
• Ensure your anchor price is realistic—Your anchor price shouldn’t be exorbitant. Instead, it should be relatively in line with your competitors’. Customers won’t see as much value in the anchor price if they perceive it as overpriced.  
• Present your price anchor proudly—Next, ensure the price difference is noticeable. Most ecommerce sites, for example, use strikethroughs. It’s obvious, simple, and tells potential customers exactly what’s going on– and what sort of deal they’re getting.
• Create a sense of urgency—This is pretty simple to implement, as it can be as easy as including “while supplies last.” This takes advantage of another psychological phenomenon, fear of missing out (FOMO).

Common pitfalls to avoid

When implementing price anchoring, there are some things you should steer clear of. First and foremost, it’s essential that your price anchoring doesn’t seem manipulative. While it’s true that good marketing does aim to manipulate consumers to a certain degree, there’s a fine line between right and wrong. Trust is an important part of doing business– if customers don’t trust your word, they won’t buy from you. 

It’s also crucial that price anchoring makes sense for the product. Some products exist in a vacuum; sometimes, the strategy simply doesn’t make sense. 

Lastly, try to avoid overusing price anchoring. While an effective strategy, it often relies on a sense of urgency and scarcity. If you overuse price anchoring, you may find it will have the opposite effect. 

Complementary strategies

Price anchoring is just one of many relatively new business strategies that stems from human psychology. Many of them operate similarly to price anchoring and, as a result, have complementary effects. Here’s a short list of a few you should consider using; whether on their own or alongside price anchoring. 

Decoy pricing

This concept refers to when a business presents an inferior option to drive sales to the target. Returning to the phone example above, let’s say there’s a third option: $400 for a phone with only 40% of the features. Most consumers will likely view the $500 phone as a better deal despite its higher price.  

Bundle pricing

As the name suggests, bundle pricing involves offering discounts for purchasing multiple items together. It’s a common strategy for selling multiple products at once and works well with price anchoring. This tactic is also a great way to eliminate slower-moving items in your inventory, which will help you reduce dead stock. 

Comparative pricing

This particular pricing practice involves comparing your competitor’s pricing and setting your prices accordingly. This strategy may take a different shape depending on the business’s needs. For example, a new company may purposefully price its product lower than competitors to gain market share. 

How does inFlow fit in? 

Price anchoring may initially seem complicated, but it’s actually relatively simple. Unfortunately, implementing it and maintaining it can be difficult. 

The good news is that software like inFlow can help. Our inventory management software lets you set up different pricing tiers for the same product, such as Standard, Premium, and Discounted. We have great sales and invoicing features, and our reporting and analytics make it easy to check the performance of specific pricing initiatives. Our software even allows you to create and manage product bundles, just in case you want to add bundle pricing along with anchor pricing. 

So, if you want to implement anchor pricing successfully in your business, inFlow is here to help.

The post The Benefits of Price Anchoring for Your Small Business appeared first on inFlow Inventory.

• Microsoft Dynamics Great Plains (GP) is an enterprise resource planning (ERP) solution and will be discontinued after September 2029. It provides a variety of business needs, such as warehouse management, financials, and so on. With Microsoft Dynamics Great Plains sunsetting, businesses must plan their transition to new systems.
• GP will not receive any further updates or support after September 2029. However, it will receive security updates until April of 2031. 
• Using GP after discontinuation is not recommended, and businesses should look for alternatives. 
• Businesses using Microsoft Dynamics Great Plains should plan ahead and seek alternative solutions. 
• Microsoft offers a transition program to help users migrate from GP to their new cloud-based version, Dynamics 365.

In September of this year (2024), Microsoft announced the Microsoft Dynamics Great Plains sunsetting. While this doesn’t mean much to the average consumer, it has businesses worldwide looking for new solutions– and worrying about their futures. It’s also worth noting that this is somewhat of a trend, considering QuickBooks Commerce did the same last year. 

So, what does this mean for current users of the Great Plains software? How long until they need to find something new? And, perhaps most importantly, what does this mean for the future? 

What is Microsoft Dynamics Great Plains? 

Microsoft is synonymous with Windows and the 365 suite of applications, but that’s far from the only thing they offer. They also provide business-oriented software solutions, and Dynamics Great Plains (GP) just so happens to be one of them. 

It’s an enterprise resource planning (ERP) program developed with small to medium-sized businesses in mind. It provides business intelligence, warehouse management, service management, and other platforms like human resources and customer relationship management (CRM). 

While Microsoft ships it as an all-inclusive platform, critics point to its complexity and many different plugins. Some features also require extra payment to access. 

However, it’s a robust piece of software that many businesses still use today. This means many businesses will be left looking for alternatives now that it’s been announced that Microsoft Dynamics Great Plains will be discontinued. 

Microsoft Dynamics Great Plains sunsetting: what does it mean? 

Headlines like “Microsoft Dynamics Great Plains discontinued” have left many users wondering what’s next. What exactly does it mean now that Microsoft Dynamics Great Plains is sunsetting? 

In the software industry, sunsetting something means intentionally discontinuing or removing it while informing users in advance. Generally speaking, from the time of announcement to discontinuation, the relevant software will receive little to no support or updates. 

In this case, Dynamics GP will cease support and operations on September 30th, 2029. However, it will continue to receive security updates until April of 2031. 

Why is Microsoft Dynamics Great Plains sunsetting? 

There’s a lot of reasons that the Microsoft Dynamics Great Plains sunsetting is taking place, but a lot of it boils down to two reasons. 

First, technology, in general, is seeing a shift towards cloud-based solutions. This is because the demand for cloud solutions continues to increase. In 2023, the US cloud market was valued at a staggering 602.3 billion USD. Experts predict it to grow at a CAGR of 21.2% from 2024 to 2030.

This increase in demand is primarily due to the power of cloud computing. Running systems on the cloud lowers the demand for on-site hardware, which is notoriously expensive. Generally speaking, cloud systems are also accessible by any device that can access the internet. 

Nowadays, everyone has a small computer in their pocket, which further lowers the need for specialized hardware. It also allows employees to access important systems through unconventional means in a pinch. 

The second reason, perhaps unsurprisingly, has to do with money. There’s two facets to this. First, Microsoft is already developing a cloud-based successor to Dynamics GP: Dynamics 365. It doesn’t make sense to continue the upkeep of two of the same products– especially when they’re competing with the other. And at the end of the day, cloud solutions are the future, so it makes sense to cut Dynamics GP from the catalog. 

It’s also worth noting that the shift from Dynamics GP to 365 represents a change in business model. While a Dynamics GP license is a single expenditure, Dynamics 365 works on a subscription model. This aligns with the growing emergence of SaaS companies throughout the business world.  

Will I need a new ERP when Microsoft Dynamics Great Plains is discontinued? 

Technically, no. But effectively, yes. 

An important part of maintaining software involves releasing security updates and live support for existing users. We can’t overstate the importance of these security updates. Not only do they keep customer and employee data safe, but they’re also crucial to remaining within regulations. 

It doesn’t mean regulators will come knocking on your door the moment the security updates end, but it is something to be wary of. 

The lack of support is another thing to keep in mind. If something goes wrong, you’re on your own. There’s no one to help fix whatever error occurs. In the worst-case scenarios, you may be unable to migrate your business data or lose it entirely. And that can be catastrophic. 

Where do Dynamics GP users go from here? 

The most obvious path forward for Microsoft Dynamic Great Plains users is migrating to Dynamics 365. This is mainly because Microsoft offers a migration program designed to ease the burden of transitioning from GP to 365. They also offer a no-cost assessment program that helps users understand the steps they need to take to transition to the cloud. 

Of course, another option is finding a new solution entirely. It may make sense from Microsoft’s perspective for customers to just switch to their new cloud-based system. But this sunset has left many users unhappy with the company for discontinuing Microsoft Dynamic Great Plains, a software they paid for.

Now that Microsoft Dynamic Great Plains is discontinued, many businesses have an opportunity to reassess their business needs. And while GP is a robust platform, not every business needs all its features. In these cases, switching to multiple smaller solutions may make more sense. Like inFlow’s warehouse management software and QuickBooks Online, for example. 

While it may seem counterintuitive to purchase two software solutions rather than just one, the reality is that buying custom software for specific solutions will always yield the best results. Also, it’s worth noting that inFlow’s warehouse management software integrates with various software solutions, including QuickBooks Online, which will eliminate a lot of double data entry.  

What does this mean for businesses today? 

In the short term, Microsoft Dynamics Great Plains sunsetting won’t have any real effect. It will continue to receive support and updates until 2029, after all. But that doesn’t mean current users should sit on their hands, either. 

Five years may seem like a long time, but it’s hardly any in the grand scheme of things. Not only that, businesses these days record and store a lot of information. Migrating all that data takes time. 

Every business has unique needs; finding a suitable platform can take some experimenting. It’s best to plan ahead and demo as many solutions as possible. Chances are there might be something new on the market that wasn’t available when your company first started using Microsoft Dynamics Great Plains.

The post The End of an Era: Microsoft Dynamics Great Plains Discontinued by 2029 appeared first on inFlow Inventory.

• A fixed-price contract (also called a fixed-cost contract or fixed sum contract) sets a price from the beginning; no matter what, that will be the final payment. 
• While risky, they offer small businesses who know their craft a chance to make a great profit while giving their customers peace of mind. 
• Profiting from a fixed-price contract requires accurate demand forecasting and intimate business knowledge. 
• Fixed-price contracts are not suitable for every business project. Generally speaking, they are a good fit for smaller, less complex projects with a clear scope of work.

Contractors have to deal with a lot of contracts. It’s in the name, after all! While these contracts generally share the same goal of defining payment for a project, they can differ significantly in structure. One of these types of contracts is the fixed-price contract or fixed-cost contract. 

It’s common in many field service industries, such as construction, HVAC & plumbing, electrical, telecom equipment installation, etc. Today, we’ll be going over what a fixed-price contract is, when they’re useful, and when it might be better to consider a different type of contract. 

What is a fixed-price contract?

As the name suggests, a fixed-price contract is a contract that stipulates the final payment from the very beginning. Unlike many other contracts, there’s usually no room for negotiation once the agreement is in place. It also provides no extra payment for unforeseen costs, like additional resources or manpower. 

For this reason, fixed-price contracts leave little wiggle room for error. These types of contracts can be very attractive to the client/consumer since they offer them peace of mind. However, the contractors take on a massive risk if they’re not careful with their planning and budgeting.  

What are the benefits of fixed-price contracts?

On the surface, lacking breathing room and a safety net might seem like a bad idea. But fixed-price contracts have their benefits. 

The biggest advantage of these contracts (sometimes called fixed-cost contracts or fixed-sum contracts) is that they’re straightforward to understand. The buyer makes the final price clear from the start, and it’s up to the contractor to break it down. In many cases, that’s much easier than accounting for every cost along the way. It also cuts down the back-and-forth negotiations, which can expedite other processes. 

Because of this, fixed-price contracts can also be exceptionally profitable. Businesses who know their work inside and out can often deliver the final project under budget, which means more profit in their pockets.

As we mentioned before, customers often prefer fixed-price contracts for the transparency they provide. Service providers like them because of how they incentivize more efficient workflows. 

What are the downsides of fixed-price contracts? 

Of course, there are downsides to every contract, and a fixed-cost contract is no exception. That’s part of why there are different types of contracts. Different projects and jobs often require different guidelines for both parties. 

The biggest problem with fixed-price contracts is that markets are dynamic. Even the most stable markets see some price fluctuation, however slight. Depending on the project, an increase of even a few cents can equate to hundreds or thousands of dollars. 

Unforeseen costs present another, even larger issue. It’s no real secret that sometimes, things just don’t go according to plan. That’s just part of life. But, unfortunately, when things go awry for contractors, it usually means they’re losing profit. Extraordinarily dire circumstances may also lead them to lose money on jobs if they’re under a fixed-price contract. For this reason, businesses should consider these contingency costs beforehand and bake them into the contract. 

When should (or shouldn’t) you use fixed-price contracts? 

Generally speaking, it’s best to use fixed-sum contracts when the scope of work is clear. But what does that mean? 

Above, we mentioned a few different field service sectors where such contracts are popular. These sectors can typically define the scope of work beforehand. For example, a client may prepare an RFI, RFQ, or RFP, depending on the project stage. This allows contractors to do all the necessary number crunching to see how much they’ll need to complete the project based on past projects. By extension, this will enable them to work out roughly how much profit they’ll make. 

Fixed-cost contracts are generally a bad idea when dealing with fluctuating markets. If the cost of project materials rise and falls quickly, it becomes near-impossible to determine price and profit.

Another consideration is the complexity of the project at hand. In general, more complicated projects will have more unforeseen costs added on. For example, aerospace company Boeing says it’s unable to make money with fixed-price contracts. A large part of this is due to their Starliner program, and the high number of complex variables. 

Lastly, large-scale projects can be tricky to manage under fixed-sum contracts. Large projects generally take more time to complete, increasing the odds that something goes wrong along the way. You’ll also be dealing with more materials; even slight miscalculations could end up costing you thousands.

What other contracts should I consider? 

Sometimes, a fixed-price contract is just a bad idea. That’s the nature of doing business. In these instances, it’s better to consider another type of contract. Here are some examples: 

• Guaranteed maximum price (GMP): as the name suggests, this contract stipulates a maximum price. It’s similar to fixed-cost contracts because there’s a set price from the beginning. However, completing a project under the maximum price doesn’t mean you’ll receive the rest as profit.
• Cost-plus: in cost-plus contracts, the buyer pays the contractor for project costs and a predetermined profit margin. For example, let’s say that a cost-plus contract stipulates a 15% profit margin and that the project took $250,000 worth of materials to build. This would mean the total contract cost would be $287,500 ($250,000 x 1.15 = $287,500).
• Time and materials: under time and materials contracts, the contractor bills for material costs and labor at an hourly rate. This is the most straightforward and traditional type of contract. 
• Unit price: this one is a bit tricky. Unit price contracts divide labor into “units”, and assign a price to each unit. It’s generally used for projects that repeat the same thing over and over, like apartment buildings. 

How do fixed-price contracts affect inventory management? 

Let’s say you’ve decided to use a fixed-price contract for your next project. Operating under this type of contract introduces some challenges, mainly regarding materials, which is why proper inventory management is critical.  

It’s important to reduce lead time as much as possible when sourcing materials, so having proper reorder points can be a lifesaver. Reorder points will ensure you have the necessary materials on hand when you need them while avoiding the costs associated with holding excess inventory. If you experience a delay in materials, you’ll risk prolonging your timeline, which will mean less profit. There’s also an opportunity cost to spending too long on a project, and the longer it takes, the more you’ll miss out. 

Other important factors are budgeting and material sourcing. These two go hand-in-hand, as the budget is what allows contractors to purchase materials in the first place. Many contractors will buy the materials all at once to make budgeting easier. If prices go down soon after, there will be some profit loss, but it’s often better to plan ahead, mainly because the inverse is also true. Material prices can rise as quickly as they fall, leading to even greater profit loss.

Understanding your projected project costs is all about analyzing your historical data. Businesses can use the information they have from past projects to help inform their decisions on future projects. 

Implementing fixed-sum contracts successfully 

No contract is perfect; learning what works for your business can involve trial and error. However, you can mitigate early growing pains by adopting best practices early on. 

It’s important to remember that, under fixed-price contracts, the contractors assume all of the risk. It’s up to them to budget things accordingly to deliver on time while also making a profit. Deciding whether a fixed-price contract makes sense requires intimate operations knowledge. It is crucial to have a concise understanding of how quickly you can finish the project and how many materials it will take. 

Similarly, accounting for market shifts is vital, especially if you purchase materials in batches. Not accounting for price shifts and material availability are some of the most common reasons contractors lose money. 

The best way to remedy most of these challenges is to use field service management software, like inFlow. We developed our software to be the perfect companion for businesses using all different types of contracts. Our reorder point notifications make staying on top of your stock levels easy. We have all kinds of reporting features, allowing you to look at material costs on past projects quickly. Our built-in barcoding feature will help automate your most tedious and time-consuming tasks. And if you’re in the US and Canada, inFlow can even take payments online. 

So, no matter what type of contract your business uses, inFlow is here to help.

The post Navigating Fixed-Price Contracts: A Contractor’s Guide to Success appeared first on inFlow Inventory.

• Takt time is a concept used to determine the maximum production time per unit needed to meet demand. 
• Takt time is a key concept of lean manufacturing. 
• It pairs well with just-in-time (JIT) manufacturing and Kanban, which help streamline production and manage workflow effectively.
• The takt time formula is: takt time = available production time / customer demand
• Poor demand forecasting when using takt time could result in deadstock or stockouts.
• Despite technological advances, the core concept of takt time remains the same. 

You have to spend money to make money. That’s one of the core principles of any business. You need to pay employees, retain inventory, and fund marketing campaigns to attract new customers. That doesn’t mean that every business spends equally, however. Every business is bound to have its own unique overhead costs, and this is especially true for manufacturers. On average, manufacturers will have higher overhead costs than retailers. 

The reason for this is simple. They must source materials, manufacture their product(s) in-house, and then find a buyer for those products. It’s a long, drawn-out, and involved process that demands greater involvement and resources. 

For this reason, manufacturers often turn to a strategy known as lean manufacturing. While lean manufacturing has many benefits, it also brings one serious issue: meeting demand. This is where takt time, comes into play.

What is the takt time definition?

Takt time is a lean manufacturing concept used by manufacturers to determine the maximum amount of time available to produce a single unit and still meet demand. 

Every business operates according to market demand. Manufacturers are no different and, in many ways, are more susceptible to market shifts. In tandem with lean manufacturing, takt time seeks to provide the necessary pacing to meet demand while avoiding overproduction. 

What’s the takt time formula?

The takt time formula is as follows: 

Something important to note is that the unit of time can be anything: minutes, hours, even days, or seconds. The important thing is that it makes sense for your schedule. For example, long production times can sometimes take weeks. In cases like these, it may make more sense to use days as the unit of time. 

For the following example, we’ll use minutes. 

Let’s say a manufacturer operates 8 hours or 480 minutes a day. However, when using the takt time formula, it’s important to factor in downtime. Most manufacturing facilities aren’t able to operate a full 8 hours with no interruptions. There are employee breaks to consider, and also downtime caused by maintenance. So, for the sake of this example, let’s say there are 6 hours of manufacturing time per day, or 360 minutes. Let’s also say that the average demand is 60 units a day. 

Plugging that into the takt time formula, we get the following: 

takt time = 360 / 60

takt time = 6

So, in this case, the takt time is 6. This means the slowest production rate to meet demand is one unit every 6 minutes. Pretty simple, right?

While the takt time formula is simple, many variables are at play. For example, we factored downtime in the equation, but those numbers aren’t always as simple to establish. Downtime caused by machine maintenance, in particular, is incredibly difficult to predict. 

What are the benefits of takt time?

We mentioned lean manufacturing up above, and that’s not by mistake. Takt time is important enough to merit its own discussion, but it’s not a system on its own. It’s more accurate to think of it as a crucial piece of lean manufacturing. 

Lean manufacturing aims to reduce overhead costs, while takt time ensures that the manufacturing process can keep up with demand. Basically, the takt time formula is a tool manufacturers can use to improve efficiency across the board while eliminating waste. This waste could be time, materials, or labor. 

Another less obvious benefit is increased communication since it requires different parts of the business to exchange information regularly. It’s hard to overstate the benefits of regular, more transparent communication. 

What does takt work well with?

While takt itself is an important figure– and something you should always consider– it generally works best alongside other strategies. Two notable ones are just-in-time manufacturing and Kanban. 

Just-in-time manufacturing

Just-in-time inventory is an inventory management technique that Toyota popularized. JIT manufacturing follows the same principles and is another cornerstone of lean manufacturing. It should come as no surprise that it goes hand-in-hand with takt time. JIT dictates that manufacturers only begin production once they receive orders. 

Kanban

Another manufacturing system popularized by Toyota is the kanban method. It’s a Japanese word that translates literally to “signboard.” It refers to a visualization system for work. You can think of it a bit like an Excel sheet. It breaks down stages of tasks into different columns to be completed in order. Ideally, it outlines the entire process from start to finish. Notably, Kanban operates on a pull system. In this production control method, work is initiated only when there is a demand, rather than pushing products through based on forecasts or schedules. 

What are the challenges of takt time?

As helpful as takt time is, it also introduces some new challenges. Generally speaking, it requires accurate forecasts. Otherwise, you’ll find yourself on two possible sides of the spectrum: overproduction and underproduction. 

• Overproduction refers to manufacturing more units than there is demand for. On the face of it, there are some benefits to this. More product means there’s more to sell, which means higher profits. But like we said above, demand ebbs and flows. Extra stock can become deadstock at a moment’s notice, incurring heavy losses. There are also carrying costs to consider. 
• Underproduction refers to manufacturing fewer units than there is demand for. Some situations call for a slower, more controlled production process. For example, companies that manufacture vehicles often take extra care to ensure the quality of their products. However, underproduction to the point where you encounter stockouts is never a good idea. 

Another challenge with takt time is that it’s not a static figure. As demand changes, the rate of production must change to match it. While calculating takt time is simple, remaining aware of market changes and making adjustments can be difficult. 

How has takt time changed?

Takt time has evolved significantly with advancements in technology. Manufacturers are now able to make it more adaptable and precise. Here’s how:

• Real-time monitoring: Modern manufacturing software, like inFlow, enables perpetual inventory tracking, which allows manufacturers to make data-driven decisions. These systems make it easier to adjust takt time as market demands shift.
• Predictive analysis: Demand forecasting has always involved analysis to predict future outcomes, but today, technology has made the process more accurate and accessible. Businesses can now use software to run reports and get loads of relevant data with the click of a button. 
• Automation: When most people think of manufacturing automation, they picture big robot arms doing manual tasks. But in reality, most automation is pretty mundane. For example, inFlow has a built-in barcode system, allowing users to generate, print, and scan barcodes. Our software also has reorder points, which automatically track your stock levels and notify you when it’s time to order more. 
• Artificial intelligence (AI): While the subject has no shortage of controversy, AI is here to stay. It offers a potential solution for many different problems. It can gather data, organize it coherently, and help form business plans according to that data. Businesses can utilize AI to crunch the numbers and help with their future takt time calculations.

Technological advances will undoubtedly bring more changes to takt time in the future, but its principles remain the same. 

Conclusion

For manufacturers looking to employ lean manufacturing, takt time is a crucial component. It helps businesses be as efficient as possible while still meeting customer demand. Although the concept is simple, implementing the takt time formula effectively requires careful planning. You’ll need accurate forecasting and flexibility to adjust to changing conditions.

The bottom line is the takt time formula is a great way to maintain a competitive edge. Manufacturers who understand this metric and apply it effectively will streamline their operations, reduce waste, and foster better communication across teams.

The post The Power of Takt Time: Optimize Your Manufacturing Process appeared first on inFlow Inventory.

• Assemble-to-order (ATO) is a lean manufacturing strategy. 
• ATO seeks to lower carrying costs, which are overhead costs associated with holding inventory/materials. 
• ATO can lower both carrying costs and labor costs. 
• Not every product is suitable for an assemble-to-order manufacturing strategy. 
• Generally speaking, mid-to-high cost products with limited customization are suitable for ATO.

You have to spend money to make money. It sounds like an oxymoron– and a cliche one at that– but it’s true. And no one understands that better than businesses. Overhead costs account for a large part of their expenditures. Of these expenses, inventory carrying costs account for a large portion. That’s why manufacturers use methods like assemble-to-order (ATO) to reduce their carrying costs and increase their profit margins.

Assemble-to-order manufacturing is a process that offers a unique balance between customization and rapid fulfillment. It can reduce carrying costs while delivering tailored solutions to customers if used properly.

In this article, we’ll explore how ATO manufacturing works, its benefits and challenges, and how manufacturers can leverage this strategy to stay competitive.

What is assemble-to-order manufacturing?

The ATO meaning is, for the most part, exactly what it sounds like. Instead of assembling many identical units all at once, manufacturers assemble them to the customer’s specifications after the order has been placed. This is noticeably different from make-to-stock (MTS) strategies, where businesses assemble products ahead of time to match demand. 

There is also the make-to-order strategy, which involves manufacturing the individual components once the order has been received. This may sound similar to assemble-to-order, but MTO usually involves a high level of customization, while ATO is more limited. 

For example, let’s say you own a computer store specializing in customized computer systems for small businesses. Customers can choose different configurations, such as processor type, memory, storage options, and graphics cards. To fulfill your orders quickly, you keep an inventory of pre-built components (motherboards, hard drives, RAM, etc.) in stock.

When a customer orders, you assemble the system using the chosen components and ship it within a few days. This process is quick and flexible since the core parts are already in inventory. This is a classic example of assemble-to-order. The order triggers the final assembly, but most of the work is already done by stocking the pre-manufactured parts in advance.  

What are the benefits of assemble-to-order?

Adopting an assemble-to-order strategy has quite a few benefits. The two main ones are reducing the amount of necessary stock and labor costs. We’ve talked about lean manufacturing before, and you can think of it in a similar way. 

Assembling products all at once requires a lot of labor and a large number of components. Like lean manufacturing, assemble-to-order strategies seek to lessen that cost and spread it over a longer period. 

Only assembling units after receiving an order will directly reduce the required manpower. This is a big deal, considering labor can account for up to 70% of business costs. Having just a few assembly lines for a few product variations is less labor-intensive than mass assembling units. 

It also directly cuts down on the amount of necessary materials. Inventory costs account for a large portion of business costs. Not only are there acquisition costs, but there are also warehouse fees, maintenance costs, and even tax implications. Keeping your stock levels low will save you a ton on these expenses. 

The downsides of assemble-to-order manufacturing

Despite the many benefits of ATO manufacturing, this process is only viable for some businesses. For example, high-demand, low-cost products, like reusable water canteens, would not benefit from an assemble-to-order manufacturing process.

Another major drawback of assemble-to-order is the slight delay between buying and receiving an order. For some consumers, waiting longer before receiving their order is unacceptable, especially in the new age of fast-paced ecommerce.

It’s also worth mentioning that since assemble-to-order manufacturing blends the properties of both make-to-order and make-to-stock, it’s susceptible to the problems of both. Nevertheless, assemble-to-order strategies still rely on forecasts—just not as heavily. 

Assemble-to-order best practices

Implementing an ATO process takes time and generally requires some number-crunching to keep things running smoothly. Here are some best practices to keep in mind while implementing an assemble-to-order manufacturing process. 

Select suitable products 

We mentioned it already, but it’s worth repeating: ensure the product is suitable. It doesn’t need to be your only product or even your main product. An assemble-to-order workflow doesn’t need to be business-wide, but if it doesn’t make sense for the product, there’s no point. As a good rule of thumb, somewhat customizable mid-to-high-price products are suitable for assemble-to-order systems. 

Monitor demand 

Assemble-to-order relies heavily on accurate forecasts to meet demand while avoiding overstocking. That means it’s imperative that you monitor your demand closely and ensure that you order the perfect balance of components. Leveraging your historical data is also a great way to improve your demand forecasting, so take advantage of any analytics at your disposal.  

Segment the manufacturing process

Breaking the manufacturing process down into different stages can help reduce the delay between an order and delivery. For instance, let’s go back to our computer store example. Rather than assembling every computer component with each order, you could put some subassemblies together beforehand. This will dramatically speed up the assembly process and allow you to deliver your products swiftly.  

Use manufacturing software when possible

Automation is a big part of modern business, and manufacturing software is the cheapest way to start automating. Robust software like inFlow has features like bill of materials (BOMs) and subassemblies that are essential for any manufacturing business. It also has everything else you would expect in inventory management software, like real-time inventory tracking, reorder points, purchase orders, and sales orders. And did we mention barcodes? Well, inFlow has those, too!

Wrapping up

Assemble-to-order manufacturing is an excellent solution for businesses looking to balance customization and cost efficiency. By adopting an ATO workflow, manufacturers can reduce inventory carrying costs while still providing tailored options to their customers. However, assemble-to-order isn’t a one-size-fits-all approach.

Businesses should carefully select suitable products, monitor demand, and use automation tools whenever possible to make the most out of assemble-to-order manufacturing.

The post Is Assemble-to-Order (ATO) Right for Your Manufacturing Business? appeared first on inFlow Inventory.

• SOC 2 compliance is a framework that guides businesses on how to protect sensitive customer data such as addresses, credit card information, and other personal information. 
• Non-compliance is not illegal. However, clients or customers are typically hesitant to partner/purchase from a non-compliant entity. 
• The framework is built on five key factors defined by the American Institute of Certified Public Accountants: Security, availability, processing integrity, confidentiality, and privacy.
• A third party must measure SOC 2 compliance.

The world as we know it changed with the introduction of cloud-based software. Services like Google Drive, Dropbox, and various business solutions allow users to store their information remotely. This allows them to access their information no matter where they are. While this has enormous benefits, the flip side is cloud storage also introduces several unavoidable security issues. In theory, cloud-based systems are more vulnerable to outside attacks.

Data is valuable, which is why SOC 2 (Service Organization Control Type 2) compliance is so important. It ensures that customer data remains as safe as reasonably possible. 

But what is SOC 2 compliance? How do you know whether your business is SOC 2 compliant? And, more importantly: what are the ramifications of not complying with the SOC 2 framework?

There’s a lot to go over today, so let’s dig right in!

What is SOC 2 compliance?

Before understanding SOC 2 compliance, you need a basic understanding of cloud technology. If you’re reading this, you probably know what it is already, so we’ll keep things simple. 

Before cloud technology, computers required a physical connection to memory in order to access files. After cloud technology, files and data can be stored off-site and accessed remotely. For SaaS, this means businesses can use cloud-based software from anywhere, so long as they have an internet connection. In the long run, this saves businesses thousands, or even tens of thousands, of dollars.

However, as we mentioned above, remote access introduces some unavoidable vulnerabilities. It’s common for businesses to store customer information, such as addresses, zip codes, and even credit card information.

This is where SOC 2 compliance comes into play. SOC 2 itself is a security framework that businesses adhere to in order to keep customer information safe. 

Why is SOC 2 compliance so important?

It’s pretty easy to see the risks of credit card information getting into the wrong hands, but other forms of data are also valuable. There’s evidence of this in recent history. Microsoft’s acquisition of LinkedIn in 2016 was largely spurred on by its vast amount of user data. 

However, every piece of data has an individual behind it, and that individual has a right to privacy. So SOC 2 compliance isn’t just about protecting sensitive information. It also plays a critical role in maintaining customer privacy. 

To be clear, not complying is perfectly legal. However, customers see compliance as a sign of trust between themselves and a business. If that business isn’t SOC 2 compliant, there’s a good chance that potential customers might look elsewhere. That trust is important, considering the sensitive data that businesses regularly collect. In short, not being SOC 2 compliant won’t bring legal ramifications, but it could push customers away to a more secure competitor. 

For example, inFlow’s inventory system collects a large amount of customer data, and we take our duty to protect that data very seriously. That trust allows us to connect with businesses on a more personal level– and protect them in the process. This is why we ensured that inFlow is SOC 2 compliant, so our customers can have peace of mind.

Trust service criteria

SOC 2 compliance criteria are based on five trust service criteria defined by the American Institute of Certified Public Accountants (AICPA). These five criteria are as follows: Security, availability, processing integrity, confidentiality, and privacy. While some may seem to overlap (like confidentiality and privacy), each is distinct in the context of SOC 2 framework. Each of these criteria has its own criteria, or “focus” points, in order to be SOC 2 compliant. 

Security 

This refers to a business’s ability to protect information from vulnerabilities and prevent unauthorized individuals from accessing or disclosing private information. Unlike the other four criteria, security is mandatory.

Availability 

Availability is, for the most part, exactly what it sounds like. It’s meant to ensure that the relevant systems and information are available to the user whenever necessary.

Processing integrity 

This refers to whether or not a system works as intended. An important note here is that this is different from data integrity. A system can still work properly when it receives the wrong data. For example, if a customer enters a fake name, that’s faulty data. But as long as the package arrives at the correct address, the system is working correctly. 

Confidentiality 

This one is what most people probably immediately think about when it comes to SOC 2 compliance. Confidentiality refers to how an organization protects confidential information. This can be by limiting access, controlling where it’s stored, or by moderating its usage. This typically defines what employees can or cannot access certain information.

Privacy

This refers to how a business protects its customer’s personally identifiable information or PII. Depending on the business or organization, PII can refer to many different things. Including but not limited to: ethnicity, gender, sexuality, and sometimes individual health.

What should you look for in a SOC 2 compliant partner?

Of course, just being SOC 2 compliant doesn’t mean a business is automatically trustworthy. You’ll have to look a bit deeper in order to decide whether they’re a viable business partner. We haven’t touched on this yet, but SOC 2 is also an auditing process, meaning a certified auditor inspects the system and decides whether or not it meets the standards. 

However, something important to look for is that a business has been audited by an impartial third party. Mostly because it’s a little silly to say “we investigated ourselves and found nothing wrong..” 

Once the auditor completes the SOC 2 compliance process, they then create an SOC 2 report. These tend to be long and full of information, so here are some things to look out for. 

• Report date – the audit report should be current and up to date – within reason. 
• Description of services and the relevant systems. 
• Any exceptions to compliance. Sometimes, things happen, but you should note and examine any egregious exceptions with caution. 
• The auditor’s assessment which may be any of the following:
  • Unqualified (Clean) – This is the ideal outcome and indicates the organization is adhering to SOC 2 compliance. 
  • Qualified – Minor errors may exist, but overall, statements are accurate. 
  • Adverse – Significant mistakes exist; therefore, the organization is not considered SOC 2 compliant.  
  • Disclaimer – There is insufficient evidence to form an opinion. 

SOC 2 Type I vs SOC 2 Type II Assessments

When your organization decides on a SOC 2 assessment, it can choose from either a SOC 2 Type I or a SOC 2 Type II assessment. The SOC 2 Type I assesses the design and controls at a specific point in time. SOC 2 Type II assesses both the design and operating effectiveness over a defined audit period, usually 6-12 months.  

inFlow has passed SOC 2 compliance

Our inventory management software inFlow is entirely cloud-based, and we understand that many of our customers may feel less secure because of this. So, to prove to our customers that we are dedicated to keeping their data safe, we underwent the necessary steps to make inFlow SOC 2 compliant!

Our cloud-based inventory software allows you to access our system from anywhere, setup multiple locations, and take advantage of our mobile app. All while knowing that all of your sensitive data is safe and secure.

The post The Risks of Non-Compliant Inventory Software: Why SOC 2 Matters appeared first on inFlow Inventory.

• Cross-selling and upselling are sales tactics
• They seek to increase revenue but do so in different manners
• Cross-selling bundles complementary products together to increase the volume of sales
• Upselling offers a superior product of the same nature for a higher price
• Deciding whether to cross-sell vs. upsell will depend on your product/service

The cross-sell vs. upsell debate is a long and complicated one. Not to mention, the two selling strategies are similar enough that people often use them interchangeably despite key differences. 

With that said, both are time-tested sales strategies that aim to increase revenue in one way or another. They’re not suitable for every business, though, so it’s important to figure out which one will work for you. And that, of course, raises some questions. What is cross-selling? What about upselling? How do they increase revenue? How do you decide to cross-sell vs. upsell? Can you use both at the same time? 

There’s a lot to go over today, so let’s dig in!

What is cross-selling?

Cross-selling is a sales strategy that involves selling supplementary products alongside the main product. 

If you’ve ever seen Amazon merchants bundle items together, that’s an example of cross-selling. They’re bundling together items that are often sold together in hopes of increasing their sales. Cross-selling is not limited to just products, either. Service providers can do the same. For example, a mechanic primarily offering oil changes will likely provide a tire change service.

Generally speaking, cross-selling is one of the main ways that a business increases its customer lifetime value (CLV). It also helps a business diversify its product lineup, which lowers dependency on specific products. Cross-selling isn’t as simple as it seems, though. If done incorrectly, it can discourage your customers and drive them toward competitors.

At the end of the day, if you’re cross-selling, the products need to supplement one another. Sometimes, it can require some serious data analytics, but a lot of it just requires some common sense. 

Implementing cross-selling is simple in nature. Identify related products that are ideal for cross-selling. Many companies take this a step further by analyzing customer data and tailoring campaigns to appeal to certain groups. An easy way to track this data yourself is by itemizing invoices to see what customers are purchasing together.

What is upselling? 

While they share similar names and goals, upselling seeks to increase company revenue in a different manner. Instead of selling complementary products or services, upselling involves selling a similar, but more expensive product. That might not make much sense. Why would a customer buy a more expensive product if a cheaper one is available? There are a few reasons. 

At the end of the day, as consumers, we buy a product or service to solve an issue. This includes the clothes on our backs and our homes: each serves a distinct, necessary purpose in our daily lives. But even if multiple products solve the same problem, one solution could be more efficient, one could be more durable, another have more features, and so on. 

The bottom line is that consumers are often willing to pay more for a good reason. For example, someone whose job involves a lot of typing is likely willing to pay more for a higher-quality keyboard. They may also pay more for an ergonomic design. 

At the same time, the keyword here is good. Customers need a good reason to buy into an upsell strategy. If it’s something superficial, it could have the opposite effect, and push them towards purchasing a more inexpensive item.

Apple is actually a really good example of upselling. iPads are popular devices across many different fields for a variety of reasons. They’re fast and can complete tasks ranging from coding to graphic design. There’s just one catch: users can’t expand the internal storage. 

As a result, Apple sells models with different storage amounts. More storage means a higher selling price. The other iPad variants are also priced to walk consumers up the “price ladder” strategically.

Cross-sell vs. upsell: which is right for you?

Not every product or service can take advantage of these sales tactics– but most can. A good rule of thumb is to think of it like this. The goal of cross-selling is to increase the quantity of sales. The goal of upselling is to increase the value of each sale. 

With that in mind, it’s also important to consider the nature of the product or service. For instance, let’s say you sell cell phone cases. A segment of your customer base is super active and tends to damage their cell phones more than most people. You could easily upsell these customers a more expensive phone case that is both durable and water proof. They save money in the long run, in exchange for paying a little more upfront.  

Even if you provide a service, there are opportunities to upsell and cross-sell. HVAC technicians can encourage the purchase of a more efficient AC unit with a higher price tag (and profit margin). Plumbers can encourage snaking all the drains in the house for a slight discount rather than just the kitchen sink. The possibilities are endless.   

Are there downsides to cross-selling and upselling?

Of course, there are downsides to these sales strategies. Some are only present when poorly implemented, but others can be unavoidable. For the most part, cross-selling has the potential to annoy customers. There needs to be a connection between the involved products. If not, customers won’t buy them. 

As we mentioned before, it’s essential to do your due diligence before trying to cross-sell products together. Take a good look at your historical sales records. Have customers consistently bought these products together? If you then there’s a good chance they’ll be great candidates for cross-selling. 

As for upselling, there tends to be an upper limit. At a certain point, the diminishing returns keep customers from buying a premium product. In some cases, upselling can also encourage impulse buying. This, in turn, can increase the number of returns. Depending on your store’s return policy, this could end up being really costly. 

Many retailers already offer free shipping in an attempt to attract customers. That already eats into profit margins, and returns further diminish those margins. It’s also expensive in general. From 2011-2023, Amazon spent 89.5 billion on shipping. That’s an astronomical amount of money.

Brick-and-mortar stores experience this as well. Returns are not a zero-cost event: it requires an employee’s time to restock it, and potentially the operation of equipment. So be sure that the products that you upsell are providing additional value for your customers. 

Wrapping up

Deciding between cross-sell vs. upsell depends on a number of factors. It depends on your market, your customer relationships, and other key competitors in the same space. As with anything, finding the right balance is crucial. Building and maintaining customer relations is an important part of any business, and poorly implemented tactics can damage that relationship.

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