Determining the correct inventory levels
Poor inventory management can lead to loss of sales and escalating costs for businesses.
Not having enough inventory results in stock-outs, where companies are unable to meet consumer demand can and potentially lose sales to competitors. Not only does your business risk losing loyal customers and its reputation, but this can have a disastrous effect on cash flow.
On the other hand, carrying too much stock can also land a business in financial issues. When you take into account warehousing, insurance, shrinkage, depreciation and asset taxes - the costs of excess inventory start to mount up. The money tied up in unsold inventory is unavailable for other purposes, affecting cash flow.
How to improve inventory management
Here are five things you can work on right away that will improve your inventory management, whether your business is small or medium.
1. Evaluating inventory strategies
Before implementing cloud-based inventory management software, it’s a good idea to gain an understanding of your current inventory systems. Evaluate the efficiency of your current inventory management process to highlight areas that need improvement.
2. Stock takes
A key step in accurate inventory control is tracking how much stock you have. Simply checking bought and sold figures is not accurate, as inventory can be lost, stolen or damaged in transit or in the warehouse. Performing routine stock reviews is essential.
3. Stock replenishment
Having a system in place to replenish your inventory once stock falls below a certain number ensures that you won't be faced with stock-outs. By efficiently managing the replenishment process, you can avoid having a lapse in product availability between the time you order and receive the shipment.
4. Customer behaviour
By tracking how often you restock certain items, you can identify any trends or patterns in consumer behaviour, including higher seasonal demand or quieter periods. By gaining an overview of customer demand, you can better plan and manage stock levels.
5. Just-in-time inventory management
Just-in-time (or JIT) inventory management is a strategy that includes only stocking products as they are required for sale. This reduces warehousing costs and product loss due to expiration. A JIT inventory system relies heavily on its supply chain and can come into issues if there are delays or if a large unexpected order comes in.