Business combing – e-commerce – e-commerce inventory system


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E-commerce inventory system

What is inventory

Here is the explanation given by Baidu Encyclopedia:

The term “inventory” is defined as “various materials stored for the purpose of supporting production, maintenance, operation and customer service, including raw materials and work in progress, maintenance parts and production consumables, finished products and spare parts”.

  • Narrow sense: “store things in the warehouse”.
  • Broad sense: inventory is the stagnation and storage of any goods with economic value, and all idle resources for future use.

Where does inventory come from

From the WMS level (for warehouses), all inventory comes from purchase receipt at the beginning;

From the perspective of each sales platform, two modes are allowed: inventory before sales and sales before inventory (pre-sale).

Inventory related elements

Generally, the inventory we see on tmall is the number of pieces of a certain product. There are not many inventory related elements under management, only SKU code / name, available inventory and occupied inventory, but there will be many more inventory related elements to be managed at the real warehouse level:

  • Warehouse – identify which warehouse the goods are in;
  • Supplier – identify which supplier the goods come from;
  • Commodity code – the code generated by ERP system for sku according to rules;
  • Product name – the name defined by the enterprise employee for the SKU in the ERP system;
  • Production batch number – information of commodity production batch number, which can be found on the physical packaging box;
  • Production date – the production date of the physical goods, which can be found on the physical packaging box;
  • Period of validity – the effective date of the physical goods, which can be found on the physical packaging box;
  • Registration certificate number – the registration certificate number of the physical goods, which can be found on the physical packaging box, and is specially used for medical devices;
  • Owner – when the warehouse exists as a third-party warehouse (the goods stored are not their own), it is necessary to identify which enterprise owns the goods;
  • Location – identify the location where the goods are located to facilitate picking and recommend the location (accurate location requires great investment at the system level and refinement of offline operations, which is a great challenge);
  • Book inventory – see below;
  • Occupied inventory – see below;
  • Available inventory – see below;
  • Receipt time – used to calculate the stock age of goods (the length of time in the warehouse). Stock age combined with supplier accounting period can be used to calculate the inventory fund occupation of goods.

Explanation of several terms related to inventory

Book inventory: the quantity of physical goods in the warehouse reflected in the system. As the name suggests, it is only a number in the system. The real quantity of physical goods in the warehouse may not be consistent with the book inventory, so there is an inventory counting business.

Occupied inventory: indicates that the commodity inventory is temporarily owned by some orders. Occupied inventory is generally used to prevent oversold and count shortage information.

Release Inventory: This is a concept opposite to “occupied inventory”. Orders will release the original occupied inventory through operations such as cancellation, replacement and consolidation. After inventory is released, it can be used by subsequent orders.

Deduct inventory: the next operation after the order occupies inventory. After confirming that the current inventory is owned by an order (such as order issue), the occupied inventory and total inventory of goods will be deducted.

Return inventory: reverse operations related to inventory. For example, canceling an order after payment will return the inventory of goods on the sales platform. Canceling issue after order issue will return the inventory of goods in the WMS system.

Available inventory: available inventory is reduced by formula. Available inventory = total inventory – occupied inventory, indicating how much quantity is available at present. For example, the quantity of goods we see in the front end of Taobao is available inventory.

Inventory system of e-commerce system

The e-commerce system generally divides inventory into three layers:Sales layer, dispatching layer and warehouse layer.

  • Sales layer:That is, the quantity of goods on the sales platform (tmall, JD, Suning, etc.) is used for platform order occupation / deduction / release. When the inventory of the sales layer is insufficient, it is generally not allowed to continue to sell.
  • Dispatching layer:The scheduling layer summarizes the inventory of all warehouses (there may be multiple warehouses). The scheduling layer is responsible for synchronizing the commodity inventory with the sales layer and allowing the order on each platform to be occupied / deducted / released / returned in the OMS system after downloading, resulting in shortage information.
  • Warehouse level:The warehouse layer is responsible for synchronizing the commodity inventory to the scheduling layer. The book inventory of each warehouse is consistent with the total inventory of the scheduling layer. The orders through the scheduling layer will be sent to the WMS system for occupation / deduction / release / return.

The relationship between the three is shown in the figure below:

Business combing - e-commerce - e-commerce inventory system

How does the inventory of sales layer, scheduling layer and warehouse layer change

1. Sales layer

The sales layer divides inventory reduction by auction and inventory reduction by payment. Inventory reduction by auction will involve occupation, and inventory reduction by payment will not involve occupation. The impact of the two methods on inventory is shown in the figure below (here it is assumed that the purchased goods are 2 pieces):

Business combing - e-commerce - e-commerce inventory system

Photographed inventory reduction
Business combing - e-commerce - e-commerce inventory system

Payment minus inventory

The above is the sales layer’s own inventory occupation / release / deduction / return logic. In addition, the sales layer will also accept inventory synchronization from the scheduling layer. The synchronization behavior is generally generated regularly.

2. How do the scheduling layer and warehouse layer interact with each other

Since there are many inventory interaction businesses between the scheduling layer and the warehouse layer, the businesses that cause inventory changes between the two layers are displayed on one diagram.

Business combing - e-commerce - e-commerce inventory system

Issues related to inventory management

1. Out of stock (too little inventory)

What if there is a shortage?

OMS layer:

Shortage processing needs the cooperation of the operation layer, customer service and procurement within the enterprise. The operator is responsible for providing optional solutions. For example, he can negotiate with the customer to replace other products of the same type or inform the customer to cancel the refund; The purchaser is responsible for ordering and feeding back the order arrival time; Customer service is responsible for contacting the purchasing customer, communicating the solutions proposed by the operation to the customer, and informing the expected arrival time if the customer insists.

After the purchase arrives, the priority is to ensure that the user who orders first in the out of stock order will deliver the goods first.

At the product level, we need to provide a cooperation platform for the three parties to make their information sharing transparent.

WMS layer:

Shortage here refers to the shortage in the picking area. The system needs to inform the warehouse of the shortage quantity in the picking area. The warehouse operator can solve the shortage problem in the picking area by replenishing from the storage area to the picking area.

How to prevent out of stock?

OMS layer:

Or collaboration. On the one hand, it is necessary for the operation to make accurate sales forecast as far as possible and feed it back to the procurement department; The purchasing department shall make the purchase in time according to the sales volume forecast, inventory situation, supplier replenishment time and other information. If there are special circumstances in the middle (such as purchase suspension, supplier replenishment time is too long, etc.), it shall also be fed back to the operation synchronously to facilitate the operation to adjust the sales plan in time.

Of course, shortage cannot be completely avoided, which involves a concept. The goal of supply chain management is to maximize the profit of the supply chain. The shortage quantity under the condition of maximizing the profit of the supply chain is the most suitable for the enterprise.

WMS layer:

Replenishment alert can be set. When the quantity of goods in the picking area reaches below the alert line, the alert notice will be triggered. Warehouse operators can replenish goods in time before the real shortage in the picking area, without waiting for the real shortage.

2. Inventory fund occupation (excessive inventory)

There are many factors that affect turnover inventory, such as demand uncertainty, supplier replenishment lead time, supplier side promotion policy, each order cost, inventory holding cost, etc. How to determine an optimal order batch and safety inventory is still based on maximizing the profit of the supply chain.

3. Why does the internal inventory management of an enterprise need to be divided into OMS layer and WMS layer

Different division of labor

The OMS layer does not involve physical management, and can count the order shortage information based on all the inventory in the warehouse; WMS layer involves physical warehouse area management and even warehouse location management. After the order is issued to WMS, it will only occupy the inventory in the picking area, and only occupy the inventory in the picking area. It is impossible to know the real shortage of the order (the storage area is omitted). Of course, if the WMS of the enterprise does not need to finely manage the inventory to the warehouse area or location, it can share a set of inventory system.

The system boundary is clear, easy to expand and compatible

If the OMS system and WMS system of an enterprise do not belong to the same software company, or the services of other companies need to be replaced, just connect the inventory interface, and there is no need to make major adjustments. So it’s the same sentence. You can do whatever you want with any system. If you clarify the boundary, you can do things correctly.