Ask any Shopify brand where their cash actually goes, and inventory is usually the first honest answer. It's tied up in POs sitting on a container ship, in safety stock you're not sure you need, in the bestseller that sold out three weeks before the restock landed.
Prediko's CEO & co-founder, Youri Moskovic, collaborated with Limited Supply (known for insightful ecommerce conversations with Moiz Ali and Nik Sharma) for a super-informative webinar. In this episode, Youri talks about how brands can run inventory operations that protect cash flow instead of draining it.
As Youri put it, most brands spend their early years optimizing the storefront and marketing. Since COVID disrupted supply chains, more of them are looking at the back office, where a lot of money gets left on the table through manual, reactive operations.
If you'd rather watch than read, the full session is on YouTube: Cash is King: Cash Flow Boosting Tips for D2C Brands.
1. Build supplier relationships that actually hold up
Good inventory management starts with supplier relationships, long before a single unit ships. A steady, reliable connection is what keeps product flowing when everything else in the supply chain gets unpredictable.
There's a hard truth here: as an up-and-coming brand, you're probably not your supplier's favorite customer. They likely work with enterprise brands that order more and pay more reliably. You have to give them a reason to stick with you through tough times.
- Sell them your vision. Suppliers aren't just fulfilling a PO; they want to be part of where you're headed. Share your brand story and growth plans, as a supplier who's bought into your future will prioritize you when capacity gets tight.
- Show up in person. Email and Slack are fine for day-to-day, but a face-to-face visit, whether your supplier is in Asia, Mexico, or Europe, becomes an investment that pays off in how much they'll bend for you later.
- Don't overpromise. Every time a supplier locks capacity for you, they're turning down another customer. Give them realistic visibility on your expected growth for the next 6-12 months so they reserve the right amount. If you promise the dream and only deliver a fraction of it, they won't lock capacity for you next time. Under-promise and over-deliver, especially on your first few orders.
Negotiate every order
Here's the mindset shift: every PO is a negotiation opportunity.
- Treat every order as a chance to improve terms. Unit cost, production time, payment terms - none of these are fixed once you've placed your first order. Pick the one metric you want to improve on each order and focus on it.
- Be upfront about what you want. Vague asks get vague answers. Youri suggests saying it plainly: "I'm giving you business, and I'd like something in return." Many founders simply don't ask. There's no need to be afraid of it; it's a normal part of the relationship.
- Use volume as leverage. As your orders grow, so does your negotiating power. Suppliers will often trade better terms for the promise of consistent, larger business.
Consider a partnership (carefully)
If a supplier is core to one of your key products, a partnership can make sense. Say you're a health and wellness brand developing a unique formula, and you don't have the cash for months or years of R&D. A partner supplier might waive the R&D fee or cut it significantly.
The catch is the terms. The last thing you want is to be locked into a single supplier for the length of the contract. Map out every scenario before you sign.
Diversify before you need to
Youri shared a story from the Limited Supply community. A founder had a much better January than expected with a new brand and sold out.
Her only supplier was closed for Chinese New Year, so she was out of stock for two months. Think about how much revenue that cost her. During COVID, many brands faced the same thing when Asian factories shut for months.
Relying on one supplier creates a single point of failure and one disruption can quickly turn into a stockout.
- Put your backup supplier close to your customers. If you sell mostly in the US, look at Mexico. If you sell in Europe, look at somewhere like Portugal. Production may cost more than with your primary supplier, but selling product beats being out of stock for months. Learn how to choose the right suppliers if you're starting that search from scratch.
- Don't let any one supplier become irreplaceable. Reducing dependency lowers risk and also strengthens your negotiating position across the board.
- Vet strategically, not just on price. Look for alignment with your business goals, proven capability at your volume, and a cultural fit that makes collaboration easy.
- Start small with new suppliers. Test reliability and quality with a smaller order before committing to volume.
- Review supplier performance regularly. Track delivery time, quality, cost, and responsiveness so you know which relationships are helping or hurting your inventory plan.
2. Replace guesswork with forecasting and real-time data
Stockouts and excess inventory often start with the same problem: poor visibility into future demand.
Here's what planning looks like at most growing brands: export sales history from Shopify, ask the 3PL for an inventory reconciliation, paste it all into a spreadsheet, and estimate the next six months. Youri's point is that the logic is right, but the process is slow and error-prone. By the time you finish, the data is already out of date.
Step 1: Build your demand plan
- Visualize historical demand. Turn the spreadsheet into a bar chart of demand per product over time. Peaks, troughs, seasonality, and growth trends become obvious.
- Layer your growth targets on top. Apply your growth objectives, plus upcoming events like a launch, a holiday, or a collab, to historical demand. It's still an assumption, but one backed by data rather than "how did the last 30 days go?"
- Revisit the plan monthly. Check whether last month's assumptions still hold. Unplanned events have a knock-on effect on what you need to buy.
Step 2: Turn it into a supply plan
- Count stock on hand plus in transit. Stock on hand alone isn't the full picture. Units coming in from existing POs have to be part of the plan.
- Work out days of stock left. Compare what you have (on hand plus in transit) with upcoming demand for each SKU. This shows each product's stock health right now (at risk, healthy, or in excess) and when it will become a problem.
- Know your lead times and set a stock coverage target. Lead time tells you when to place an order so it arrives before you run out. Stock coverage tells you how many days of stock you want when the shipment lands. You want to avoid stockouts, but you also don't want a year's worth of stock tying up your cash.
Step 3: Decide what you're optimizing each PO for
Youri sees many brands order stock for products they think work. When you look closer, some of those products bring in less revenue than expected, or have lower gross margin than other products that sell just as well.
Before each order, decide what you're optimizing for: gross profit, momentum on bestsellers, or the products that drive the highest average order value. You can pull all of these from Shopify or a tool like Prediko.
Keep the loop running
- Track stock in real time to close the loop. Live stock visibility helps you catch shortages early enough to act. Connecting your POS and inventory system also brings purchasing data into your forecasts, making your next move more accurate.
- Automate replenishment to remove manual steps. Once data is in place, automate replenishment using software instead of relying on spreadsheet checks. That's where moving beyond manual spreadsheet management starts to pay off.
- Review your inventory on a schedule. Regularly review turnover, carrying costs, stockouts, and excess stock weekly or monthly. Flag slow-moving SKUs, rising holding costs, and recurring shortages, then adjust order quantities, reorder timing, or safety stock accordingly.
What this looks like in practice
Youri shared a case study with a two-year-old, eight-figure brand, ‘Healf’. Its fast growth was making forecasts inaccurate, which led to both stockouts and overstock.
After setting up on Prediko in a day and personalizing the buying table around what they wanted to optimize, their stockout rate fell from 4% to 1% within two months. That worked out to a 75x ROI and around half a million dollars in annual revenue.
3. Use pre-sale to manage stockouts without losing the sale
Even the best plan gets some things wrong. You can predict demand only to a certain level of accuracy. So what happens when you do run out?
Stockouts don't have to mean lost revenue. Pre-sale turns "sorry, we're out" into "reserve yours now" and done right, it builds trust instead of frustration.
- Be transparent about timelines. Tell customers exactly when to expect their order and why there's a wait. Honesty here builds loyalty. If customers feel informed, they are far more patient.
- Create urgency and exclusivity. Selling on pre-order ahead of restock generates its own anticipation.
- Incentivize the wait. A discount, free shipping, or an exclusive bonus for pre-order customers noticeably improves conversion and locks in demand data you can use for the next production run.
During the webinar, Youri walked through how Haven Athletic handles this:
- Label the pre-sale clearly on the product page. The out-of-stock product stays live, marked as a pre-order, with the date the next batch is available. The batch structure itself creates urgency: nobody wants to end up in the later batch.
- Automate pre-sale communication. Email automation keeps customers updated on order status and expected ship dates, and reminds them that shipping will take longer than usual, without manual follow-up.
- Tag pre-sale orders in Shopify. Every pre-sale order is labeled so the team can track them and dispatch them as soon as stock is replenished.
- Keep customers engaged through the wait. Consistent communication through the pre-sale period keeps satisfaction high even when the wait is longer than usual.
The problem with stockouts isn't just the lost sale: it's the customer who doesn't come back. Pre-sale, done transparently, fixes both. The PO is already placed; the stock just isn't there yet.
4. Have a Plan for Excess Inventory Too
Understocking gets all the attention, but overstock is just as expensive. It ties up capital and racks up storage costs the whole time it sits.
Deep discounts can also hurt your brand if you end up selling at or below cost. Here's how to prevent overstock and clear it without damaging your brand image.
Prevent it: test demand before you launch
Before you manufacture anything, build a product page for the idea: generated product images and a good description. Run ads to it and analyze who converts. You learn whether the product has potential and what ROAS to expect. You also learn who your customers are, so if you launch, you can target them rather than running general ads.
Clear it: three tactics that protect your brand
- Mystery box subscriptions. Customers fill out a form with their sizes, preferences, and how often they want deliveries. Then they receive a product matching their profile each cycle. Customers get a surprise, and you clear excess stock without touching your brand.
- Surprise and delight. If you run subscriptions, reward loyal subscribers with a free gift or discount after a certain number of orders, using products you're overstocked on. Excess stock clears and customers feel valued.
- Destocking platforms. Platforms like 260 Sample Sale in the US connect to your Shopify and run private flash sales on selected excess SKUs. They promote the sale to their large social followings and do the heavy lifting, at a fraction of what it would cost you, without discounting on your own store.
- Bundle offers. Pair slower movers with bestsellers. You move dead stock and improve average order value in the same transaction.
5. Track the Financial Metrics That Actually Matter
During the Q&A, an attendee asked what percentage of inventory to revenue a brand should hold. Youri answered differently. Inventory is often one of the biggest expenses, anywhere from 20% to 60% of working capital, so your margins decide how much you can afford to hold.
Beyond that, think in days: what's the lowest stock you're comfortable with (your safety stock), and what's the most stock cover you can afford? Those two numbers set how often you buy and how much risk you take on each product.
The following metrics tell you the health.
- Safety stock by product tier: Be more cautious with bestsellers and hold extra days of safety stock, because running out hurts. For slow sellers, you can take more risk and cut safety stock days, since a missed sale costs less.
- Landed cost: Your true unit cost isn't the supplier price. Add shipping, taxes, card fees, and other PO-level costs, spread proportionally across the products and quantities on the order. Margin decisions based on supplier price alone will be off.
- Demand forecasting accuracy: The more precisely you can predict demand using historical sales, trends, and customer feedback, the less safety stock you need to carry "just in case." AI-assisted forecasting narrows this further over time.
- Safety stock: Calculate it using statistical models that weigh both demand variability and supply reliability, not a flat buffer number pulled from habit.
- Lead time: Know your suppliers' actual lead times and size your stock levels around them.
- Inventory turnover ratio: A higher ratio means product is moving, not sitting. Set a target and monitor it; it's one of the fastest signals that something's off in either direction.
- Margin analysis: Not every SKU deserves the same shelf space. Regularly review margin by product and prioritize stock around profitability and not just by sales volume.
- Cash-to-cash cycle time: This is the gap between paying for inventory and getting paid for it. Shortening it through better supplier payment terms or incentives for faster customer payment directly improves liquidity.
- Inventory-to-revenue ratio: How much of your working capital is sitting in stock versus generating revenue? This ratio is one of the clearest signs of whether your cash is working for you or just waiting around.
- Cost considerations: Track direct costs (purchase price) alongside indirect ones (storage, insurance, obsolescence risk). The indirect side is where brands usually underestimate.
Remember to set targets for the metrics you track. Don't just monitor turnover, safety stock, or cash-to-cash cycle time; define what "healthy" looks like and adjust purchasing when you drift from it.
Bonus: Should you sell out on purpose?
One attendee said their analytics adviser recommended that apparel brands sell out fast to create scarcity and waitlist hype.
Youri's view was that it depends entirely on your business model. Some brands, like UK-based Represent, run weekly drops and have built a community around them.
But most brands have a core collection with occasional drops, and selling out just to create excitement may work for one brand and not another.
The stakes also vary by vertical:
- CPG and subscription brands usually have smaller catalogs and more predictable demand. But a stockout leads to a lot of churn, so they need to avoid it at all costs. Around the $2-5M revenue mark is usually when they need a proper system.
- Lifestyle brands (apparel, fashion, jewelry, cosmetics) often have thousands of SKUs. For them, the challenge is visibility: alerts and product-level insight, because manually going through that many SKUs in a spreadsheet takes hours.
How to forecast a product that doesn't exist yet?
There's no sales history for a new product, but there are two practical workarounds.
First, combine the historical data of existing products in the same category and use it as a first estimate for the launch order.
Second, if you release a new version of an existing product each year (think iPhone 15 to 16), carry over the previous version's history and apply a growth factor based on your revenue targets.
Reactive vs. Proactive Inventory Ops
Get Ahead of Your Next Stockout
One attendee put it simply: with around 500 SKUs, Shopify's built-in tools had stopped keeping up, and keeping track got harder as the business got busier.
Everything in this guide - forecasting, real-time tracking, automated replenishment, and margin visibility- is exactly what Prediko is built to handle for Shopify brands. AI-driven demand planning, a 12-month PO calendar, and restock recommendations that update as your sales data does, so you're not the one running the spreadsheet.
Want to hear more such conversations? Join the Limited Supply Slack Channel to catch future webinars and inventory strategy discussions.
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