Karri: Hello, I'm Karri Hiekkanen, the host of ReCommerce Podcast.

Tuomo: And I'm Tuomo Laine, the CEO and co-founder of TWICE Commerce.

Karri: This time, we are focusing on how to improve your business based on your inventory, analytics, insights and tracking. We have separate videos for both rental and retail businesses on the basics of inventory KPIs and explaining what do those mean and what are the most basic and important KPIs that you should be focusing on. So this time, we are more focusing on what type of questions can you start asking about your inventory and so improve and optimize your business. So Tuomo, what is a good starting point when you have tracking and you have some basic KPIs set up and available?

Tuomo: I would start with the basics. So looking at the profitability of your inventory on an overall level and then trying to find the high achievers when it comes to profitability and then maybe the low achievers or failures when it comes to profitability. Based on that, you can start to fish for insights that are going to help you figure out the drivers of the profitability in your business. So if you look at, for example, the top three most profitable items or SKUs in your operation, you might identify that hey, they also seem to have a very high utilization rate or that they seem to have a high value or similar. So you can start to figure out the drivers of the profitability in your operation. So I would start always from there and then the questions kind of almost come about by themselves because you're probably interested in asking why, why, why, why isn't it profitable? Why is it profitable? Why is it better than the other one? So you're kind of trying to double click your way forward there.

Karri: And I think these probably can be a little bit different based on your business model, not just rentals and resales, but also what type of rentals or resales are you doing and maybe in resale business it might be that I'm finding these to purchase with quite low price, but they have a high resale value and on rental, some example could be that some items don't require maintenance or are almost always available for booking and some other items constantly break down. And they actually are very labor intensive and require a spare part. So it almost immediately kind of starts to go into this maybe item or category specific insights.

Tuomo: Definitely. And it's really kind of again very business model and business specific that what kind of decisions you can make based on the insights, but a few of the things that usually are in your control somehow is that for example, if you're a resale business, you can start to see that some items that you're purchasing in from a, I don't know, trading program aren't actually actualizing in value. So they might sit on your shelf for too long time. And that's probably driven by the like resale price that you've set for them that might be a bit too high where the practical decision might then be that if you still feel that there's a market for these items, but you want to protect your cross margins. So as you're going to lower the resale value of the item, you are also lowering the kind of appraisal of those items. So really basic analysis on that part.

On the rental side of things, you might look at two different categories, like you said, for example, two models of a bike, both have high utilization on a superficial level. But the other one is a lot more profitable. And when you double click on the commitments looking at, hey, where is this actually being committed most of the time? So why isn't it available when you're double clicking on the on the commitments? You're seeing that the other model is pretty much always just committed to an order because it tends to be in shape and it's almost ready to use after lightweight inspection and cleaning. Whereas the other model is spending 25% of its time being committed to a maintenance operation. So there might just be a difference in the quality of the item. So you're now better informed when buying or increasing your fleet or renewing your fleet that you're going to probably invest into this better model as it's more capable of being committed to orders rather than committed to maintenance and other internal operations.

Karri: So already the profitability and availability times are maybe enabling you to do like short term optimizations improvement. So this can be, for example, pricing that you mentioned, but they can also provide you a lot of insights when you are, for example, planning the next season. So what type of gear from which manufacturers do you actually want to acquire it based on the data that you have and so improve maybe the whole next season for your business. What are some other questions or aspects that you might want to dive deep into besides profitability?

Tuomo: Well, there's a few like super practical operational stuff that might be decisions that your staff members do almost on a daily basis, depending on the on the kind of velocity and size of your operation. In rental specifically, you might have automated things like automatic maintenance or inspection times after every booking or so on, kind of assuming that there's X amount of maintenance that is needed and you don't want to risk getting a too tight gap between two bookings. So you want to make sure you have time to maintain stuff. But an individual staff member might be able to make the judgment call that when a bike comes in, when that automated maintenance time has been added there, they can easily see that it's not needed this time because those automated rules are kind of usually based on average cases. And there are times when the thing performed or arrived in a better shape than what it's assumed on average. So and your staff member might at that point, then just adjust, remove the maintenance in total. So that maintenance commitment freeing the item up for immediate rebooking or a booking by someone else, or they might just adjust it to be a bit shorter.

This kind of shuffling of those commitments can help you find monetization opportunities, whether it's driven this from with this kind of a proactive approach where you're just freeing it up without yet having to booking, but just making it possible that someone else might be able to book it earlier, or whether it's a case where you already have that customer that kind of maybe contacted you said that I really, really want the bike, but your website is showing me that there's no unavailability. Is it true that you might have had text on your page that always call us if you can't book it online, we're usually able to figure something out that usually able to something to be able to figure something out might look in practice like you just going to the software looking at what's needed and trying to see if you would shuffle some things around. Can you fit that customer in or not. This is kind of another, I'd say like a practical very day to day level thing that is made possible by that more intelligent inventory tracking and visibility of what's available and when.

Karri: Okay, so the flexibility of being able to edit and adjust, delete this type of automatic commitments and I think overall like the commitments that you have in your inventory and this probably works both for rental and resale businesses as of course rental businesses have bookings and maintenance and so on. On the other hand, resale businesses also might have that you have some items coming in and then you have automatic inspection, grading, refurbishment type of cycles so probably just understanding the commitments how long they are actually taking and if there is something that you can improve or optimize.

Tuomo: 100%. Yeah, one thing that might be interesting on an analysis wise is just looking at your turnover rate in general, whether you're rental business or a resale business so your inventory turnover like how quickly does the value that is tied to your inventory actually kind of turn over or cycle through. So with the rental it's assumed to be longer because we're not now counting in the income from the rentals we're just looking at you purchasing an item and then holding it in your stock and then selling at the end of the lifecycle. The revenues from the rentals count to profitability but in inventory value we're just looking at tight capital and then kind of freeing up that capital via the resale of that item. But looking at that is essential for resale. It's also quite interesting for rental companies because that can give you a bit of understanding of when you're purchasing new stock and you're investing let's say 50,000 or a quarter of a million or a million to the stock that is this stock to be used in rentals or is this stock to be used in resales and how fast can I assume this investment kind of to materialize or go through my warehouse. So what kind of a commitment am I actually doing here if you for example need to finance it with loan money.

Of course that can be like if we're talking about rentals that can be affected also by you understanding how profitable this kind of stock in general is in terms of rental income. So you can model the cash flows and make decisions on whether you can meet the interest payments and all of the deductions as the rental fleet kind of starts to accumulate income. But I think it's always healthy to look at also at the turnover rate just as like how long will this capital be tied in my inventory. And that can help you in negotiations for example with financial institutions when figuring out all of these purchasing decisions.

Karri: Okay so maybe quick recap that you have a lot of different KPIs and ways to look at them that those can be more like a snapshot what's going on now or then some type of aggregate or understanding how well it's performing in certain times. And then the tools or the decisions that you can make based on this is what type of stock how much are you acquiring them and how are you modeling the availability the maintenance times and so on. And if there is some commitments that are taking more time than they actually need. So these are the decisions that you are able to make in your operations daily or weekly, monthly or yearly. And how does twice commerce then help with all of this.

Tuomo: It all starts from the fact that those fundamentals that we discussed in those previous videos being having continuously a visibility to history and to the current time and to the future on your stock balances. How much you're available to sell how much is committed to sales or internal operations and having easily visibility to your utilization rates and value. These are things that we make quite effortless for you. We make it super easy also operationally for your team members to uphold the right picture of the operation. So instead of just having to update the status every day or week it's kind of continuously being updated as you run your operation.

Now this allows you to kind of have the headspace that when you have these questions whether it's triggered by you just needing a bit more profitable overall operation to finance a new investment or to meet the new cost levels. You have an easy way of starting to ask these questions and going deeper and we make it very easy for you to see the data over time. And it also what we kind of help you out there is that these are often questions where you tend to look a bit to the history. So kind of back you're asked a question like how profitable is this product category is often asked like I don't know two years in the future after you've been running that when you're trying to figure out what to buy next or if the financier is trying to figure out whether they want to finance this. So they're asking for a little bit of a proof. Now unless you've had a software like twice in place it can be very hard to answer that with data. It will always be a hunch and then making decisions based on hunches is always a bit more challenging. So I would say that twice not only doesn't help you to kind of consciously continuously help you to do this analysis but actually does it automatically on the background so that when it's the time to ask the question you have the historicals to go through without spending days, weeks in accumulating or building that history.

Karri: Based on some separated data points. So twice helps you with basically automatically capturing and enabling your employees or through APIs automatically capture this data that is then available in this maybe unique to re-commerce basis this temporality that I want to look how it's performing in last three months or similar.

Tuomo: Exactly. And it's really if there's a listener who hasn't yet run a rental business or hasn't run a resale business. I think the message that we want to also push out is that these really are things that we help you do without you even like saying that hey twice make sure that you do these things. So you don't even have to consciously kind of have these the presence of mind to be thinking about these things. You can just build away and go forward and make the sales and scale and you could be assured that when you get to the point when you start to get these questions and they start to be more relevant for you. You have used a system that can answer those questions for you even though you haven't consciously set up everything to be kind of on a level where you would track this. And this is really like the I would say one of the fundamentals of our operating system is that we understand that in re-commerce this kind of needs to happen for all of those key assets that are there. You don't need to be able to say that please make sure you do it like this or the residual value equation is this. You can just use the software and store the information that you want to store. We make sure that these fundamentals are covered so that when you get to the point and you have the question you can get that answer and you can do even some data remodeling there as you kind of understand your needs better and you can still answer the question. So there's a lot of things that we automatically just do and enable in the background without you having to consciously figure these things out before actually needing the needing to make the decision. So that's something that I think is important to get there that if you're just starting out don't worry too much about these things. You probably have one million other things to figure out first on like how to get the first initial sale. But yeah, we got you covered anyhow.

Karri: Sounds good and if you want to test it out there is a free trial available at twicecommerce.com. But hey, thank you very much Tuomo for sharing your knowledge.

Tuomo: Thanks Karri.