Having too much stock, or not enough, can cost your business dearly. If you don’t have the products your customers want readily available, you might have to pay extra for an express order – cutting into your profit margin. Or worse still; lose the sale to a competitor.
With too much inventory, on the other hand, you could find yourself paying for storage or warehouse space that you wouldn't otherwise need. Excess stock might also have to be insured, secured against shrinkage, depreciated and taxed as an asset. All of this will eat into your working capital, reducing the amount you have to invest in things like product development, new equipment and marketing. That’s why planning and managing your inventory with precision is key to business efficiency.
Excellent inventory management is about understanding the supply and demand patterns for your business, then making sure your warehouse operations, physical stock and ordering procedures are aligned to meet your company’s needs. Here are our top tips on how to achieve this:
The first thing to consider is what you’re currently getting right, and where improvements can be made. Talk to the relevant team members and make sure you understand what each aspect of your inventory management process does, and why, so you can identify problem areas.
Make regular stock reviews part of your inventory management routine and keep your records up-to-date. Remember that tracking what you bought against what you sold isn’t necessarily a reliable measure, as some items are bound to get lost, stolen or damaged in storage.
By tracking and recording how often you need to restock various products, you can start to get a grip on customer buying patterns and any seasonal fluctuations in demand. This will help you plan for dry spells and busy periods, facilitating better inventory management and stock control.
Effective inventory management systems ensure you never run out of stock completely. At the very least, you should make it a policy to place an order and replenish stock items when they fall below a set level. Using agile stock control and sales software can automate this process, cutting out the risk of lapses in product availability.
This strategy can increase company efficiency by stocking products only as they’re needed for sale. This helps you avoid product waste due to damage or expiration, while decreasing the costs incurred in housing and maintaining unsold inventory.