Marketing Podcast for Shopify Merchants: The Ecommerce Coffee Break

How to Master the Art of Inventory Planning | #193 Blake Young

June 01, 2023 Claus Lauter Season 5 Episode 2
Marketing Podcast for Shopify Merchants: The Ecommerce Coffee Break
How to Master the Art of Inventory Planning | #193 Blake Young
Show Notes Transcript

This episode of the Ecommerce Coffee Break Podcast features a conversation with Blake Young, founder of Automyze Inventory Planning. We discuss how to optimize inventory management & forecasting through management tools and analytics.

On the Show Today You’ll Learn:

  • Why efficient inventory management prevents loss and improves business operations.
  • How to properly allocate your budget for improved financial management.
  • How to shift from traditional methods to AI for substantial cost savings.
  • How to manage overstocking by running discount campaigns.

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Claus Lauter: Hello and welcome to another episode of the E-Commerce Coffee Break podcast. Today we want to talk about how you can optimize your inventory management and your forecasting. Now, obviously there's a lot of money, in your inventory that is not really in your cash flow. You wanna optimize that as much as possible.

So therefore, with me on the show today, I have Blake Young. He is working for automized inventory and he started his career in technology focused investment banking and finance, and then made it transition into software development. , his experience with financial modeling and data analyzers helped in, in building the Shopify app, automized inventory planning.

And that's what we wanna dive into now. Hi Blake. How are you today? Good, good. 

Blake Young: Very excited to be here. 

Claus Lauter: Like inventory management. It's not the easiest one specifically if you have a lot of skews in your business and then it's easy to lose track of what is in your warehouse and what's coming in, what's going out.

Now you have a financial background and you are a data person, which helps obviously a lot in getting an idea on how to optimize that. What are the biggest problems that you saw when you are approaching that topic with merchants managing their inventory. 

Blake Young: I'd say definitely, as you mentioned, the issues scale as your SKU count, increases.

And so you see where you can get really into the weeds with how you forecast certain SKUs because there's certain trends that are particular to the product. And so that works at a smaller scale where you can kind of one-off forecast products that have certain trends, but once you get to a certain.

Number of skews or certain level of inventory getting managed, you start to have difficulty having that granularity and forecasting without sacrificing accuracy or spending a lot of time. And so I think a lot of it is from the Excel and spreadsheet standpoint, having a very scalable forecasting approach that is an extremely manual, and tedious and prone to manual error.

just from what I experienced from the modeling standpoint, Building something extremely scalable that can also be flexible to account for different business assumptions is something that's been very, very important, for all businesses. 

Claus Lauter: Now, Shopify's not really built for forecasting, so obviously your app helps with that.

Most people, as you said, are using spreadsheets or any kind of reports to get an idea of what's happening in their business. Where does make your solution the difference? What are the details there? 

Blake Young: So Shopify is very helpful with giving access to a lot of different data. So you have all the data that you could want as a business, but the issue is there's so many different reports you could create that you need to have something pretty specific to forecasting or your use case.

And so from the autotomized, from our solution standpoint, helps with a variety of different features beyond inventory forecasting and planning. But that's definitely the main focus. And so from that standpoint, takes all of the real-time data from Shopify, ensures and minimizes the risk of any manual input error, and allows you to forecast in an automated manner where you can have a bunch of different scenarios for how you expect SKUs to sell.

And that's all done from choosing different approaches from within the app. That all uses historical data rather than you having to go through Shopify download reports and then do that yourself in Excel. So it's a much more scalable way to forecast and it uses all of the data that Shopify provides, which is very helpful for kind of realtime insights as well.

Claus Lauter: Forecasting has a lot of impact on different parts of your business. That can be marketing, that can be obviously, the cash flow. Give me some examples on. The data that comes out of your solution, how does it impact the workflow, for instance, of a marketing department? 

Blake Young: from the standpoint of what is offered to help make decisions for autotomized, there's a lot of different analytics, reporting and insights that essentially dictates how you can allocate spend. And so when you look at inventory specifically and making purchase orders based on how products sell, if you're allocating too much capital towards, say, a product that's not selling as much as it should, and you're having some cash tied up there.

Then you have to look at, well, what would my return on that cash be if I were to spend it towards marketing? So you start to get into opportunity cost, and you start to see that if you can manage inventory efficiently, that's where a lot of capital is gonna get deployed. And if it's not managed efficiently and you have too much towards something or too little, then you're gonna be missing out on stuff that might be bringing greater return to your business.

From atomized standpoint there's a lot of key takeaways that. Aren't your traditional analytics that'll show how much you're missing on lost sales from not having enough inventory, how much you might be incurring in extra costs from having too much of inventory that doesn't sell well when we think you should make purchase orders.

It accounts for all the traditional analytics you want to see, but a lot more granular stuff too, such as like trends in unit economics. Is your sales being driven by increase in selling price or an increase in volume or both? And so there's a lot more granular analytics that all tie together to big picture help you decide where should I allocate capital and is that inventory, is that marketing and stuff like that.

Claus Lauter: Quite interesting that you said. It's about the trends. It's not having too much stock, not too little stock to just be on spot on what you have in your warehouse. Now when it comes to you have overstock, you want to get rid of that. discounting is one way to do, and I understand , your app helps with that.

How does that work? discounting 

Blake Young: is probably the main, or one of the main ways to reduce overstock. And so from the approach of running discount campaigns and whatnot, Shopify allows you to do so in a nice manner that makes it pretty easy, but, When you look at how much margin you're giving away per sale on when you're running discounts, so say if you just run a flat 20% discount until you hit X units, you could be missing out on selling that product and maybe a 17% discount.

There's something that's incremental. And not that full 20%. And so when you're just looking to tweak your inventory levels here and there, by selling your items at a lower price to increase demand, you want to ideally maximize the margin per product. And so to do so with Automize, it makes it easy where you essentially give a range of how much you want the product to be discounted, and as the product starts to sell and reach an optimal inventory level that you specify.

The discount is then reduced, so it could go from 20% discount as it's the most overstock possible, and then eventually reaching a 5% discount once it's starting to get close, and then the discount goes away, which it reaches the optimal level. And so this approach is a way to save incremental, Price losses that you would've had if you would've just discounted at one flat rate.

And really, and helps to ensure that you always have the ideal level of inventory. And so that's a good way to really maximize the effectiveness of discount campaigns without giving up too much on those actual discounts. 

Claus Lauter: Okay? Now, as a merchant, I obviously don't want to give out the whole control tool, an app.

So I have it a hundred percent automatized. What kind of tools do I have to keep track? What's happening? 

Blake Young: That's one of the main things too, is to be able to. Allow businesses to have settings within autotomized apply to all of your different products, but also if you don't want it to control everything at once, you can also have individual, like SKU control, individual, discount campaign control.

So for instance, from discounting, you can discount for certain product collections and have it only applied to say summer products or Spring Pro, like stuff along those lines. But then also you can have. Different settings that disable these campaigns. So if you don't want discounting automation to be enabled whatsoever, at its point in time, you can just say, I want this disabled, and it won't affect your business whatsoever.

And so the same applies for and whatnot. You can and choose. When these automation tools go into effect, the sweet spot is a balance between automating stuff that can be tedious while still allowing the business to use their expertise to make , the more granular decisions about like trends and stuff that they'll know better than any numbers can provide.

Claus Lauter: From the forecasting, how long into the future would you recommend to have e merchants looking into forecasting? 

Blake Young: right now we look at a year forward on a month by month basis, and you can look further, but I think you want to count for recent trends. You don't want to be too recent in how you look at data, but once you get beyond a year or so, it becomes just increasingly more difficult to forecast.

And so as long as you. Don't have to make decisions for many years ahead. Right now, I think 12 months is where we see the forecast as optimal for the users and the businesses. But, it could vary by business. But I think looking at the next 12 months and accounting for how long it typically takes for your product to be purchased and then, and user's hands and stuff accounting for that.

, also dictates it, but I think a year or so looking forward's pretty ideal. 

Claus Lauter: Do you get any kind of email alerts, when something should be reordered 

Blake Young: there's a few different types of alerts that help businesses are implemented within the platform. And so when you look at.

Stock related alerts as well as reporting you can receive stock alerts that essentially are indicating when a certain SKU falls below a threshold of desired inventory. And so once, say a SKU hits X units, you could receive an email that will say, this SKU just fell leap. It fell below the threshold.

You might want to check this out that's from like the stock management perspective within the app it shows like different recommended , times for purchasing, like timing to account for desired units on hand, and you can receive Scheduled emails essentially for any type of report. So there's probably a dozen plus different types of reports ranging from sales performance, inventory, performance forecasting and whatnot.

And you can receive those as say, daily or weekly scheduled emails that you get, to basically save some time and allow you to start to make decisions without having to dive in and create all these reports yourself. 

Claus Lauter: What kind of results do you see from merchants that have implemented your solution?

Blake Young: You can generate a pretty quick return on investment from a time standpoint in terms of just lots of low hanging fruit from not having to manually download and manually upload. So that's some low hanging fruit regarding just saving time as a business owner.

But then also from the forecasting standpoint, you start to get more granular, learn how you order your products, and within a few months, start to see immediate benefits from ordering maybe less of a product that you used to order more of because it doesn't sell as well.

You start to increase your, , quantities or your increase the frequency of which you purchase products that you realize are selling better than you thought. I think the mix of time saving and the actual value attributable to spending your capital more efficiently is seen pretty quickly.

But then also you can start to figure out how to allocate. You allocate spend elsewhere. So it might not be completely related to inventory, but you might realize that you can start to allocate cash towards marketing because you're even spending a little bit too much on inventory that you don't need.

And so that's like the type of results you can see. And I think a lot of the types of qualitative benefits in terms of, not having to spend as much time on low value add activities comes through stuff like the analytics, the takeaways and these types of reports that kind of save you time from having to manually do stuff yourself.

Claus Lauter: It brings me a little bit to the 80 20 rule. You wanna focus on the 20% of products that really bring you the money and the ones that are just sitting in stock and not selling you wanna find them as quick as possible. As a merchant what kind of homework do I have to do before I can get started?

Blake Young: It's very user friendly in terms of getting started and onboard and usually we'll have a demo with the merchant, around 30 minutes or so showing the different features or what they want specifically. And so during that we'll touch on a lot of what.

Would be part of the onboarding process. But we're always happy to do very detailed walkthrough in about 30 minutes or so to get you started. and it should only take about 30 minutes to an hour to get started. And there's a lot of different kind of step-by-step tutorials and guides within the platform and video tutorials for specific features.

it's pretty much you're ready to go once you. Install the application. The only initial wait time is just if you have a significant amount of data. It might take a few hours for stuff to get synced up with the application, but the learning curve is intentionally tried to make, not too steep whatsoever.

But then we're always very happy to walk through things live through meetings to help the businesses. But there's a lot of different tutorials to help you understand what you're doing, why it's important, and how you can execute it within the app.

Claus Lauter: after the setup how many skews or when does it make sense? What's the minimum number of skews you should have before that really makes sense to implement your solution? 

Blake Young: So I'd say it definitely the value increases proportionately with how many SKUs you have. So you'll definitely a user with or business with a few thousand will get more value than, business with a few dozen.

But I'd say once you start to have even just a few SKUs, you'll start to realize value from the application. From the forecasting standpoint, you wanna have at least like a handful of s skews minimum, but you're going to see value pretty quickly regardless. But then some of the other features regarding like different stock alerts, different reporting and whatnot, that's pretty beneficial regardless.

So your SKU count, but I'd say like a sweet spot of a few hundred skews or so is where you start to see, A difficulty in scaling your existing forecasting procedures in Excel. And so that's when it starts to see a real quick return on your investment in the softwares once you start to see a few hundred SKUs.

Claus Lauter: Okay. Now, offering a Shopify app and the implementation should be very straightforward, but I there any kind of APIs to other solutions? 

Blake Young: Yeah, so currently there's no. Other support for different e-commerce platforms. And from the integration and from the data management standpoint, you can upload any third party data that you wish in terms of tracking inventory, sales and whatnot.

And so if you have. Some businesses , that have brick and mortar exposure through their own stores, or they have different wholesale contracts. You can up upload any data related to that and sync it that way. Which is done more through like an Excel upload rather than an api, but definitely the main focus or direct to consumer Shopify businesses or some businesses with retail exposure rather than Businesses that might sell exclusively or might sell on like Amazon or stuff like that.

So definitely focused on brands that might have some brick and mortar exposure as well. 

Claus Lauter: Okay. Gimme a bit of an idea about the pricing. How is that structured? 

Blake Young: Yeah, so from the pricing standpoint it's a pick and choose of your different types of features. And so it's trying to zero in getting the value for exactly what you want.

And so right now there's about seven features, each of which has their own price. And then you can pick and choose which features you want. And so one feature would be forecasting, another would be discounting and others reporting and others analytics and so on. And so the lowest price for a feature would be the stock alerts, which is recently implemented.

That starts at around $10 a month. And then the most expensive features would be $50 a month for something like forecasting at 50 a month for U s D for something like discounting. The ideas that. You can start out and test out what you think is most important to your business at the time, and then maybe as you move along and like that, you might think that you'll wanna add another feature that could add value.

But basically we want businesses to be able to really quantify how much value the software's bringing and only spend what they want for the solution and not get other types of features that they don't really need as part of that cost. 

Claus Lauter: No, I like that idea. So you really can start small, test it out for what you need, and then grow as your business grows, and then just add more features as you go.

I like that a lot. Are there any specific golden nuggets that you see from merchants, implementing your solution where they really have like quick wins? 

Blake Young: From a big picture standpoint, I think just being very methodical , and really quantifying every decision , is extremely important mindset.

And That comes from analytics or from forecasting whatnot, but just as like a business owner really saying, I'm justifying this spend decision because it's going to generate X amount of incremental sales or X amount of value, and seeing how quickly you can achieve that return is very important. And that can be from looking at a hiring decision that comes from realizing that maybe the software can help.

Free up time and you might necessarily not make a hiring decision, or you do make a hiring decision based on extra capital, and really quantifying every decision. And that's shown in the platform where essentially you quantify when you should make orders, how much you should purchase in an order and basically, Arriving at a number for every decision you make, whether that's hiring, whether that's spending on marketing, spending on inventory, just really trying to quantify everything you can.

that's big picture, but it's also shown our platform, we try to help you really quantify how you can generate value every step. 

Claus Lauter: No, I really like that. I have been a victim of, not being good in forecasting myself in the past. I got better in it. But your solution definitely will help me much more than I could to on my own.

Where can people find out more about you guys? 

Blake Young: I'd say the best for learning more about the platform broadly is automized inventory And then from there you can access our Shopify listing, which goes a little bit more into the app and how to install it through Shopify as well as it could send you to our LinkedIn or , different YouTube videos regarding the platform.

But I'd say our website's the best source and that'll point you in the right direction. and definitely. If it's something you want to quantify, see if it's the right decision. We also have something that looks at the potential return on investment of our software, which is something worth checking out if you're considering how software could help your business with inventory management.

Claus Lauter: Okay, great. I will put the links in the show notes and you just won't click away and then can reach you directly there. Blake, thanks so much for giving us an overview of how you do inventory management the right way with Shopify, and I strongly recommend our listeners to check it out. Thanks so much for your time.

Blake Young: Thank you.