If you sell product you almost always have to carry inventory. The question is how much? The answer while simple isn’t easily attainable. We all know inventory needs to be optimal; not too much, not too less, but what that number is, and how to maintain it is a different thing altogether.
Maintaining this optimal amount might sound simple but it is way more difficult in reality. If products move too fast, you will definitely run out of stock and you might end up in a back-order situation and you lose sales. If products don’t move fast enough then you might’ve bought too much inventory which will tie up capital.
There is one more thing, the lead time: If you find yourself in a situation where you need to reorder, you should reorder before you run out of stock, do not wait for the last item leaves your shelf. In inventory management, tracking and saving stock for orders is extremely important for increasing sales and improving consumer loyalty. If you are not capable to give your clients specific item availability, status, quick delivery, and store pickup then you’ll lose the sale and the relationship with your consumers.
To top it all off, your optimal inventory is something of a moving target. What was a well-known product a year ago probably won’t be this year or a new promotion might make slow-moving products suddenly fly off the shelves.
How Do You Fine-Tune Your Business?
Given all these problems, how are you going to you improvise your inventory? Worry not because we’ve assembled 3 ways you can improve your inventory management whether you have a small business or large.
Steps # 1 – Fight the Temptation to Overstock
Resist the temptation to overstock. Holding too much stock will not only tie up capital, it will also affect storage capacity and expenses.
Let’s take the example of a party you are hosting at your house for 40 people. If you are a good host, you’ll make sure that there is enough food and drinks for everyone.
If you order too much food and drinks you’ll waste money, and the food. It has to be enough, not too less or too much. It it’s too little there’s embarrassment. If too much, you’ll be eating leftovers for the next week. Or worse, if there isn’t enough room in your fridge then you’ll have to throw stuff out.
In the case of business, the fridge is a big warehouse that costs you real dollars, and that cuts into your bottom line.
Solution: Optimize Your Inventory
Technology can greatly benefit you in this regard. If you have proper reporting that can provide you with historical data, you can make better decisions on when and how much to order. If you have thresholds set up you can order new items before you run out of them. For example if you have an item that sells fast, you can set a re-order threshold at 20 pieces. Once that is set up you will be notified when you hit that threshold, and you can order the item. These little helpful features add up to save you
Steps # 2 – Measure Item Velocity
Inventory or item velocity is the speed in which an item is cycled through the inventory. Measuring this is crucial to your business. Important factors to ascertain inventory velocity are:
Velocity of different products (which moves slowly vs which moves fast).
Which can benefit from forward staging (moving fast moving products ahead of others in your storage space)?
Is there a way to ‘automate’ part of the re-ordering process?
Can you continually improve that process?
Solution: Identify Low and High Performing Products
The only way to accomplish all of the above is through an intelligent inventory management system of some kind. As a small business owner you can’t access the top enterprise level applications, but you can use services like Wrkmash which can help you figure out the above and more.
Steps # 3 – Look For Trends
Demand for an inventory can change from time to time, it comes and goes with trends, seasons, or new releases of products. Looking at historical order data can help you build a model that can perfectly predict these trends and variations.
Solution: Use Inventory Management Software
A good inventory management system can help you spot trends that a spreadsheet based system won’t help you.
To sum up, technology is certainly a significant tool when doing such improvising. By choosing the right inventory management software you can improve the accuracy of your inventory control method. Our inventory management system is built for small businesses to improve help them manage their inventory, but you don’t have to use ours. Do your research and pick one that works best for your needs. If you want to try ours you can do so for free without any obligation.
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