While inventory management might not be the sexiest of subjects, it’s vital for e-commerce businesses to understand. On this 161st episode of the E-Comm Show, Andrew Maff interviews Bahadir Efeoglu CEO and Founder of Fabrikatör. Fabrikatör helps direct-to-consumer (DTC) brands make confident decisions when it comes to inventory management. 

In this episode, Bahadir shares his insights on the importance of data-driven approaches to inventory management and how Fabrikatör is revolutionizing how DTCs handle their supply chain. From predicting demand to optimizing inventory levels, Bahadir talks about the key metrics businesses need to know.

Watch the full episode below, or visit TheEcommShow.com for more.

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 A Data-Driven Approach to Inventory with Fabrikatör

Andrew Maff and Bahadir Efeoglu

CONNECT WITH OUR HOST: AndrewMaff.com  |  Twitter: @AndrewMaff | LinkedIn: @AndrewMaff 

Bahadir Efeoglu

I have over 7 years of experience in leading and growing direct-to-consumer (D2C) businesses with innovative and scalable solutions. As the CEO and Co-founder of Fabrikatör, I multiply the growth of D2C brands by equipping them with modern retail and supply chain technology. I oversee the strategy, growth, and partnerships of Fabrikatör. In addition to Fabrikatör, I am also the Founder and Co-host of D2CVille, an online community for D2C brands. I surface valuable insights by interviewing D2C founders on our podcast.

00:03

Talking about something that many people find it unsexy, so let's see if we can change their minds today. Hello, everyone, and welcome to another episode of The E-Comm Show as usual. I am your host, Andrew Maff, and today I am joined by Bahadir Efeoglu, who is the CEO over at Fabrikatör. Fabrikatör for me, when I'm gonna butcher it. But can you pronounce it correctly? For me, I know it's there's two ways to look at this European way. German way is Fabrikatör, yeah, you can call it fabricating with K, Fabrikatör with a K, oh, it's like, it's like, couture, easy. I got you so excited to have you on the show. I know we talked about a little bit right before we even kind of got started here that inventory management, operations, not exactly my strongest point. I'm the marketing guy. So when it comes to like operations, I'm always like, I'm gonna leave it to the professionals, which is why I love having people like you on the show, because you can be the professional. But obviously, as usual, I really appreciate you having the show and kind of helping me walk through all this stuff. I always like to start it off the usual way and just kind of give you the floor. Let everyone give someone, give everyone some insight about, you know, your background, uh, Fabrikatör, and we will take it from there. Amazing. Thank you very much, Andrew, thank you for having me talking about something that many people find it unsexy. So let's see if we can change their minds today, we've been we've been doing this for the last six years. We started on the manufacturing side. So we know the other side of the supply chain quite well. We did the inventory planning, raw materials planning for the manufacturers, and in the past five years, we've been doing it for the E commerce businesses, more specifically D to C brands on Shopify, focusing on procurement of finished goods. So briefly, fabricator is a cutting edge inventory planning software helping you with the demand forecasting and purchasing decisions tailored for growing e commerce brands, and unlike traditional ERP systems or manual spreadsheets, I know many, many of the brands are using fabricator combines the ease of use with powerful insights, like uncovering what's hidden in your inventory data, both in terms of risks and opportunities, Helping brands to accurately forecast demand, avoid the stock outs, and also optimize the purchasing decisions. So this is, this is the planning side, but we also have some secret weapon in our stash, which is back order automation. And I'm very excited to deep dive into this today, because that's a great cash flow saver, combined with a good, good planning, inventory planning. So if you're scaling and you need the data driven approach to inventory, I think this episode is going to be interesting for you. Yeah, actually, that was perfect, because that's the part I'm super excited to dive into the concept of back orders I love because, you know, sometimes it happens you run an inventory, you've got options. And the issue, from my end, from a marketing side of things, is like, if someone runs that inventory, we don't have the capability of doing back orders or anything like that. Like we're kind of, we just have to stop. So it's like, it's always a big hiccup. And during this time of year, obviously, as of this recording, we're a little bit before Black Friday, Cyber Monday, but once this comes out, we're going to be, we're going to be in the thick of it. So what I know that that's obviously a big time when people run out of inventory and things like that as well. So tell me a little bit about the back order side. How does that work? And what's that process? How does it kind of get involved in the inventory? Of course, yeah. First of all, back orders are more powerful if you already have a solid planning and forecasting in place. We position back orders as the as the plan B, because it should not be the regular business operation. It's it can cause problems if you heavily rely on it. But. But it's a great companion to good inventory forecasting and planning. And here's why, while we do our best, and I don't know if the merchants brands out there are doing doing their best to to forecast with the highest accuracy, supply chain is always volatile. It's not always something that you can predict with a high accuracy. A ship will be stuck in a swish canal. Now there's like conflicts and the routes of the logistics as well, so it's always a fact thing, and you have to keep an eye on what's happening in the world to make sure your estimated derivative dates are correct. And it's not always the case. It's mostly not not the case. So in this kind of situations, when that ship is stuck, your inventory is not in your warehouse on time, you need a plan B, and that plan B is back orders, which helps both marketers and also the inventory people. Marketers love back orders because they don't have to stop ad campaigns when you run out of stock, as far as I'm not a marketer, so like as far as you're far to inventory, I am quite far to marketing side of it. But what I know marketers hate stopping campaigns, because the platforms are punishing algorithms are punishing you when you restart the campaign, start and pause all the time. So we don't want that. And on the other hand, like there's another widely used solution, which is back in stock alerts, I know many people using Klaviyo is notify me back in stock solution, which is great for long term stock outs. But if the back in stock time is going to be not more than a couple of weeks, why not collect people's revenue, like money, instead of collecting their emails? Turn that into into something helpful for your cash flow, and I've seen the consumers appreciating this as well, because on the psychological side, shopping is usually a chore that you want to get done with it. When you find the product that you love, you're ready to pull out your credit card pay for it, and then you find out that it's out of stock, your willingness to buy just starts to diminish slowly, and by the time you receive that back in stock email on two weeks, you already lost that appetite. It's much more difficult to take you back on the website and buy it. But if I can get done with that chore, just paying for it right now, knowing that it will be delivered in a couple of weeks, not too long, I can get done with it. And I benefited from this as a consumer and the brand benefits it on in terms of cash flow, capturing the demand at the right time. Yeah, that's why, that's why I love back orders. That's why I I've seen them great, doing a great job, uh, recovering lost sales revenue, combined with, uh, back in stock alerts as well for long term periods. But yeah, it's just a tool that every brand should have in the in their belts. However, I also know many brands are burned by back order processes that were not very well managed, and they're traumatized. I don't know if you have any stories about the pre orders or back orders going wrong. Well, I was gonna add that was the other thing actually I was gonna ask you about is, like, how does that work from a pre order perspective? Is it relatively similar? So terminology wise, maybe I need to make that distinction. So pre order is when you haven't launched that product, so it's a new product and you're just introducing to the market. People already buy it, like placing a pre order for an iPhone or a Kickstarter campaign. The same time, back order is for bridging the gap between, like, temporarily out of stocks. So you know that inventory is coming, it's committed by the supplier, or it's already in transit, and you sell something that's already in transit, that's back order. I see that, like, two terms are being mixed up. Mostly it's, it's fine, but that's, that's the difference from our point of view. And in order to initiate the back order, you should have a purchase order in place with the line items, how many units are incoming? When they're incoming? So you can actually pass this certainty to your customers as well. If I go on to a web PDP, and I see that saying, like, pre order without any estimated shipment date, I lose trust. Like I lose my trust into that business. I'm not going to place a place an order without knowing when it is going to be shipped. But what we do, since we already know the purchase order data, we pull that estimated arrival date and the quantity. We change the Shopify page, product detail page automatically to pre order page, because we don't use the back order term for the consumers, because that's they don't really they're not familiar with that. We just call it pre order. We position it in a way that they understand. But what we do most importantly. Is showing the estimated shipment date. This could be the actual date of the PO going to arrive in your warehouse. So it could be with a buffer, because your warehouse needs some time to unpack stuff and make it ready to ship. So you're in control of what to show on that page, sir. And then we keep, we keep that information at every single step of the buying journey, in the shopping cart, order confirmation, emails, checkout pages, we just keep customers always informed. Because if you're selling something amazing, your customers are super excited. They just like, click, click, buy without noticing. It's a pre order, and then there's a customer support ticket. Hey, where's my order? It's been like, 10 days. I want to cancel it on every fund. So by over communicating that information about the delivery date and that it it's being a pre order, we minimize this to a very large extent. And then you also don't want to oversell. That's, that's another point that I heard, like, if you if there's 100 units incoming, you don't want to sell 105 and cancel the remaining five, because they will be angry leaving you a badge review. You need to issue a refund. Maybe you lose a customer that is going to be a repeating customer in the future. So what we do, we limit the number of units to be sold, uh, based on what's incoming. So because the full cycle, like we take the purchase order data and turn it into actually sales opportunity in full sync with your Shopify, also integrated with clavio. Because what happens if, if that ship is stuck and if your estimated delivery date is still wrong, additional 10 days, and there are people who paid for it, you gotta inform them, because if you don't, then the same story, like refunds, cancelations and everything going into play, you need to tell them, and that's the part where most brands are hesitant about this is what keeps them away from taking a back order. Like, if I sold 100 back orders and if the shipment is delayed, I need to go and find every single customer record, order record in Shopify and email them one by one. Either they get lazy, they don't do that, or they do it and take so much time they regret that they took back orders. Yeah, and you know, from a consumer spec perspective, like your your argument of taking a back order. Obviously, from the seller side, very beneficial, because you're bringing in revenue. But from a consumer perspective, it's a very interesting argument. Of like, you know, I could probably think of, like, a couple different types of products where, like, yeah, I don't mind waiting, and I will probably I don't need to order it right now, kind of thing. Maybe it's not a chore that I need to do, kind of, as you put it, but then I have to factor in. Now you're relying on a that person still feeling like buying your product, however long later, B, they actually open your email and or your SMS. So now you have to factor in your open rate. So if you say, I've got a great open rate of, let's say like 60% and you have 100 people that signed up to get alerted for when this new product comes out, you're now down to 60 orders on a on a good day, as opposed to anything else. So it's a very interesting argument of even having it as an option if it's not going to be like, you know, an extremely extended period of time. So in terms of the integration between fabricator and Shopify is that kind of how that data is feeding in? Of like, Hey, here's you can take the inventory and or, I'm sorry, you can take the revenue in. Here's when the inventory can be expected. Like, how does that kind of integration work? So we have a Shopify application in the app store. If you search for fabricator, and the moment you install it, we start fetching your historical sales data, which we use it for forecasting and then for back orders. The synchronization is also done through our app block that you add to your Shopify team with a drag and drop, very easy way. So that's how we manage the the product detail page, and we manage the setting on Shopify. People know this button, like continue selling, run out of stock. If you are using that setting, we start managing that policy. So if you have available inventory incoming, we keep selling, run out of stock, whenever you oversell, or whenever the products are delivered, we turn it off, and we switch to a normal selling mode automatically. And we do this for hundreds and 1000s of products, and at every single minute. So the integration is quite seamless, and we get whatever we need from Shopify without without additional data, the only thing that you need to put in is your purchase orders and the ETAs. So we use that for communicating with customers. How did you come up with this like, what, where, like, where like, what, what was your background that kind of got you into like, Okay, here's a clear hole in this market. Hey. So actually, it's, it came from a customer. I think it was two years ago. Yeah, back in 22 right before Black Friday, we were, we were about to have dinner at my place with my co founder, my girlfriend, was calling from inside, like, Hey guys, then dinner is ready. And we were just like, hold on, we're trying something new. Because the customer asked for a feature where we can actually limit the number of pre orders that they can take. Because it was right before Black Friday, they noticed the order is going to be light. Hey guys, can you do something quick? My co founder was hesitant. This is not our job. We are doing inventory forecasting, we shouldn't touch the storefront. And I was like, why not? Because if this is what they need, if we complete the full circle, then we stop being an back office tool. We do something different. We are an inventory planning app that is not only playing for higher efficiency, but also increasing the revenue. So that just started with a simple code and hacking for a customer, and then not so long after, we turned it into a core product feature now of supporting brands in more than 40 countries battling with out of stocks. Wow. So that the idea from the back ordering side stemmed from a last minute customer request that you guys were like, Screw it. We're doing it. Like, let's get it done. That's awesome. The that's not a lot of platforms will do that, so I definitely commend you for doing that. What's the what's the thought on everything else, right? So obviously, the back ordering side is, is a very big differentiator. But obviously the other side of things, of inventory planning, managing, cash flow, things like that, like how, how is that differentiated from the other inventory platforms that are out there? Yeah. I mean, cash flow is the lifeblood of any any business, especially in retail and E commerce, where inventory plays a central law overall, and it's the most. I think if you, if you're not in, yeah, if you don't own the real estate of your business, I think the most static asset that you have is the inventory, and you have to be careful with that, because, yeah, too much inventory can kill your business, especially if you're in a seasonal if you're in a seasonal business, what you cannot sell this year may not be sold next year at all. So that's that's super, super important. Um, one thing I would like to start with. I think I talk around like 10 to 15 brands every week, coming in bounds to learn more about our solution, and we go into the topics. And one thing that I noticed, especially if they are, if they're like, pre 10 million, they always want to jump into inventory planning. Let's, let's talk about purchase orders. Let's talk about how much we need to buy. And I was like, Wait, there's a step before that. It's demand forecasting. Supply forecasting comes after the demand forecasting. And then I always use the analogy of an inventory planning cake, which has the layers of the cake, and the base is the inventory data that you need to have. So you should have the data coming from your warehouse, you should have SKUs in place, barcodes available. Inventory data should be accurate, and then order data comes on top. But if you're using a platform like Shopify, you don't need to worry about the order data that's already standardized. And on top of that, you should start doing the demand forecast. What I mean by demand forecasting is doing a top level planning where you think about your targets, how much I'm going to sell this year, what's what's my goal, and then walk it backwards to each month, and then down to each product category and down to each SKU. So this should be done in an unconstrained way. I think many people miss out the unconstrained here, because they always think about cash flow. They always think about the lead time, supplier requirements, like the minimum order quantities, batch sizes, and they limit their potential the moment they start thinking about this, when they're doing demand forecasting. So set your imagination, free, run your ambition, leading your demand forecasting, demand planning, and put that number in. In the next step, we will talk about supply forecasting, which is constraint. We will talk about all the boring things that is that will be holding you down, selling millions, millions of units a year. So yeah, we help our customers with the demand forecasting by using utilizing different tools. You can use your last year sales data and say, I'm going to grow 100% this year reflect the same C. Nationality effect from last year to this year. And I want to see what my revenue is going to be like, so they can create multiple scenarios and see how it plays out in terms of cogs in in terms of revenue, if it makes sense that they go, they go deeper into it and edit the forecast. One thing that I like highly believe now we are in the age of AI. Every single day a new AI tool is popping up. AI is not ultimate solution for this. It's a tool, and we are positioning it as a tool, where the AI should not dictate what you should buy. It should be a guideline. So we provide our forecasting as a baseline, and then we ask our customers, now it's time to bring in your marketers. Ask them if this plan is viable, because mostly inventory people and marketers have a very loose connection in the in the companies. They only, they only go into these discussions when something goes wrong, like when inventory is out earlier than it was planned, or when there's an stock situation blaming the marketing that they couldn't sell. So we bring them to the same table at the very first day, when they're planning the whole year, and we ask the marketing teams, like, what is your estimation? Do you think? Like, we can double down on these numbers for April, or, because there is Valentine's Day, can we change something for February? So all of these things are being done at the demand forecasting so we also help facilitate communication between teams. And then we move on to the supply planning. Side with the buyers and the and the inventory planners, we ask them, like, look, we need to procure $1 million worth of inventory for the next year. How do you want to procure that? You can buy it every single month with 12 purchase orders, or you can do it quarterly, which is going to be more expensive, a heavier burden on your cash flow. Depending on that, the system generates a schedule what to buy, when and how much it's going to cost. So they can also play around with this scenario, see what fits them the best, and they commit to a plan. Then they start placing these purchase orders with the with the rhythm that they want to play it. So is that kind of like what you guys are in the thick of right now? Of mapping out, here's how 2025 is going to look for all the brands that you guys are working with right now, exactly. Some brands are still, still in the process of planning. Q1 not everyone is planning the whole year, which is a good approach. I mean, it's unpredictable. Yeah, exactly. So having having a general idea of setting target or setting targets for the 25 is great, but there's no need to plan the purchase order for December next year, December, if your supplier doesn't have 12 months of a lead time, hopefully not. Yeah, yeah. That makes tons. Bucha really appreciated having on the show. This was incredibly informative, very cool. I'm already thinking of several brands, actually, that I need to get set up with back orders. So this was awesome. We really appreciate having you on the show. I'd love to give you the opportunity to let everyone know they can find out more about you, and, of course, more about fabric. Fabricator, fabricator with a

23:16

K, yeah, with that name. I think it will be a little tricky to find us, but if you do, I'm pretty sure it's all worth it. Search my name on LinkedIn, Bahadir Efeoglu. I'm quite active there. I'll be happy to jump on a call and you're just guide you in the right direction. Or you can also find our website, fabrikator.io, or on Shopify app store. One thing to mention, we are beyond Shopify, so if you're selling on Amazon, if you're using an ERP like NetSuite, we are also integrated with all of these platforms to support brands at a larger scale. Yeah, don't be shy. Just reach out and I'll be happy to help

23:55

Perfect. Thank you so much for being on the show. Obviously, everyone who tuned in, thank you as well. Please make sure you do the usual thing, rate, review, subscribe all that fun stuff on whichever podcast platform you prefer, or head over to theecommshow.com to check out all of our previous episodes. But as usual, thank you all for joining us, and we'll see you all next time.

24:15

Thank you for tuning in to The E-Comm Show head over to theecommshow.com to subscribe on your favorite podcast platform or on the BlueTuskr YouTube channel The E-Comm Show is brought to you by BlueTuskr, a full service digital marketing company specifically for e-commerce sellers looking to accelerate their growth. Go to bluetuskr.com Now for more information. Make sure to tune in next week for another amazing episode of The E-Comm Show.