03/04/2019
The Importance of Inventory Management
Managing inventory is a challenge that many companies face. Whether you are a small business or a massive retailer, implementing an effective inventory control system is one of the best things you can do to ensure your success. Read on to learn what our warehouse consultants have to say on balancing inventory and the pros of a good management system.
Common Issues Warehouse Consultants Encounter
As anyone who has ever handled inventory knows, inventory management is important for keeping inventory numbers stable as well as determining and controlling the levels of stock needed for optimal profit, its management can be a delicate balancing act. It takes time and effort to properly keep the balance, but the rewards will make it more than worth your while.
Inventory Shortage
Odds are, you have experienced the problems that come from not having enough inventory at some point. Put simply, this problem occurs when customer demand exceeds what you have available. While “selling out” can indicate that you’ve made quite a bit of money on a popular item, it also means that your business had the potential to make much more.
Inventory shortage can also cause you to lose customers. While you may have some that are loyal to your business and will wait the extra time it takes for you to restock, many consumers in today’s fast-paced world will simply look elsewhere. Unfortunately, you are likely to lose a good portion of these potential customers for good as they establish relationships with your competitors.
Inventory Surplus
An inventory surplus can cause even more problems than an inventory shortage. As you are probably aware, there is a cost to everything associated with inventory - from storage to labor to shipping and beyond. Excess inventory not only takes up valuable storage space, but it also ties up monetary resources, until it is sold. This can have a huge impact on your cash flow and is one of the main issues that our warehouse consultants see in the businesses they work with.
Additionally, the longer inventory sits on the shelf, the more chance there is of “shrinkage” (the mysterious disappearance of inventory through loss, theft, or human error). Finally, time takes its toll on many retail items. Clothing goes out of fashion, technology continues to rapidly upgrade and improve, and fads and trends come and go. The longer your inventory sits on the shelf, the higher the likelihood of being forced to sell it at a loss.
The Benefits of a Good Inventory Management System
There are many benefits that come from managing your inventory well, including:
• Lower Inventory Costs - When you have control over your inventory, you also control the clear majority of the costs associated with it. These costs include storage, labor, shipping, overstock, and those that come from risk. The resulting increase in cash flow can free up your financial resources, allowing you to make additional investments, giving your business a definite advantage.
• Better Labor Management - A reliable inventory management system allows your employees to work in a more efficient and streamlined manner, which raises both productivity and morale. With a good system, you will also be able to see which employees deserve to be rewarded and praised.
• Better Customer Experience - With a streamlined inventory, your business will be in a position to provide a high level of customer service. Few, if any, customers will be lost due to a shortage of the item they want.
• Making Use of Patterns - Certain times of the year bring swings in customer purchasing tendencies. For example, the early part of football season is also tailgating season, which means you might want to stock up on hot dogs, brats, buns, chips, condiments, and any other things associated with tailgate parties. The same holds true for sunscreen in the summertime, gift wrap during the holidays, and warm, stylish clothing during the winter months. Using an inventory tracking system helps you track patterns from year to year and plan your purchases accordingly.
Questions on how to better manage your inventory? Please give our warehouse consultant a call at (484) 988-1248.
