Inventory management is an art: as a retailer you want to have enough on hand to service your customers but not so much that it interferes with your business operations. After all, inventory is money invested at a negative interest rate: the longer it sits on your shelves, the more it costs. It depletes a company’s cash reserves and takes up valuable storage and display space.
Why Is Inventory Management Important? – The success of any retail business is dependent on proper inventory management – until you sell your product, it is an investment that a retailer must maintain. Other factors to consider include having too much or too little inventory, which can have a significant impact on your business’s budget and efficiency. A disorganized warehouse can also lead to chaos, costing you money and customer loyalty in the long run!
The following five inventory cost reduction strategies can help improve your profitability.
- Eliminate Unwanted Inventory
It may not appear so, but having excess inventory that is not selling will cost you money in the long run as a retailer. Instead of having valuable space taken up by low-selling products, your warehouse could be better utilized by holding stock that is selling well. An excess of obsolete stock can be a sign of larger problems, such as a lack of planning, poor product quality, and poor forecasting. Identifying unwanted inventory is one of the most beneficial things you can do for your store. Reduce the amount of obsolete stock you have by discounting prices, bundling products, or simply cutting your losses and getting rid of them entirely. Prevent this from happening again by encouraging better communication at all points of supply.
- Invest in cloud inventory management software
Quality logistics software can do amazing things for your retail shop. And there are dozens upon dozens of options to help you as a retailer keep track of your inventory levels, or risk overstocking and ballooning inventory costs. If you’ve been managing your inventory with a simple spreadsheet or a basic software solution with limited features, you’re probably not getting the full picture. Invest in cloud based software solution that automatically updates inventory information so you can make quick decisions when necessary. Logistics software also aids in the centralization of inventory control, which reduces costs by eliminating redundant effort. This is especially true for complex logistics operations that necessitate a detailed inventory plan. Centralizing supply chain models also helps retailers avoid excess and obsolete stock.
In addition, using cloud inventory management software is one way to help you save money in the long run. This not only makes it easier for retailers to track their inventory, but it also helps with almost all of the cost-cutting strategies.
- Set up automatic re-orders when inventory gets low
Automation is now available to small businesses, thanks to technological advancements. Retailers should take advantage of this. When your inventory runs low, automatically reorders ensure you don’t run out. The software, in conjunction with a perpetual inventory system, will assist you in avoiding those costly shortages. A perpetual inventory management system provides real-time inventory updates by accessing a database that tracks all of your inventory to determine when supplies are running low and when it’s time to reorder—all without the need for human intervention.
- Avoid overstocking
If you spend a significant portion of your budget on stock replenishment, you may be missing out on new opportunities to grow your business. Suppliers frequently drive a hard bargain with higher volume discounts, deals on new and promotional items, and even free products on certain orders. You can’t possibly say no to a good deal, can you? Wrong. Accepting deals and discounts may appear to save you money because you believe you will need to reorder products at some point anyway. However, if your products aren’t flying off the shelves all the time, you’ll be left with deadstock. That is the cost of paying for items that are in storage.
In conclusion, if your business has not invested in a cloud-based inventory management software solution, it’s time to consider signing up for the fastest, most cost-effective way to save on inventory holding costs.
By Carolyne Rabut
Content Marketing – CompuLynx