Whether you are a retailer or a restaurant owner, inventory is the heart of your business. Without sales of the items in your warehouse or stockroom, your business simply can’t make money. If you feel the need to keep your shelves stocked, it’s certainly understandable, especially during peak seasons or with high demand products. But when 69 percent of small businesses hope to see increased revenue, it’s essential to pay attention to the amount of inventory flowing—or not flowing—out of your warehouse. If inventory isn’t properly managed, items collect dust or rot, and the associated costs can be devastating. Does your company invest enough time and effort into inventory management? If you don’t, how can you to improve your handle on inventory?
It’s all about relationships
When you have a great relationship with suppliers or vendors, you manufacture or sell better products at better prices. These key partnerships can lower your costs and streamline your processes from receiving to shipping. How does this happen? It comes down to an important part of any relationship—communication! When you talk to your suppliers or vendors regularly, they gain an understanding of your company, customers, and your industry at large. As experts in both your given field, you can work together to advance your business, along with theirs.
It’s vital to start with the right strategic suppliers and find various ways to engage with them and keep the conversation going. Some ideas include events, websites, and chat software to make communication as accessible as possible.
You might think this is just something else to think about, along with your other responsibilities, during the course of your work week. But think about the alternative: bad supplier relationships can hurt your business in two integral ways:
- Money: If your supplier or vendor doesn’t like to work with you or doesn’t know you well, it’s likely they won’t readily hand out discounts.
- Supply: What if you run out of a high-demand item? If you have a poor relationship with a supplier, do you think your company will be prioritized to get the item first?
I can’t stress enough the importance of fully engaging your supplier and vendor base. From saving money to serving your customers better—it’s all about finding ways to work together to drive sustainable performance.
Waste not, want not
To manage waste, simply forecast at the right level. And let me say right now you can’t forecast accurately without an automated inventory management system. If you currently utilize spreadsheets or even hand-written records, reports won’t be correct. You might think “this is how our company has always done it, and it’s worked so far.” But has it, really? The best typist makes an error every 300 keystrokes, resulting in thousands of seemingly simple mistakes as time goes on. In result, stock items are mislabeled or misplaced, which eventually wastes time and money when items can’t be located or shipped in a timely manner.
With accurate real-time reports from an inventory management system, forecasting is easier because the details will be correct by channel, sales regions, and even by customer. If it means less cost due to waste, don’t hesitate to run as many reports as possible. The analytics you gain will show you what you need and don’t need, what’s selling and what’s not, and can even give you an idea about employee performance. Generating data reports is a fundamental way to cut back on waste and to move forward with better business practices.
Eliminate monitored costs
When inventory sits in your warehouse for too long, it either rots or goes out of style; and let’s be honest, these items could end up in the trash. Unfortunately, your profits could suffer the same fate due to expensive carrying costs and simply losing money due to items not selling. But there is a way stimulate cash flow: avoid minimum order quantities (MOQ)
A minimum order quantity (MOQ) is the smallest amount or number of a product that a company will supply. Although very common, MOQs are used by suppliers and manufacturers to unload more inventory on you, which reduces their cost of inventory but unfortunately it increases yours. They might offer sweet deals to sweeten their MOQ, like offering a bunch of free items if you buy a certain quantity. But guess what? It may sound great, but the truth is it only adds extra inventory you may not be able to sell. Again, with an inventory management system you’ll know what and how much sells at what times of the year. And you can know what items you really need at any given time.
However if a supplier deal is one you can’t refuse, ask fellow business owners if they need similar stock and perhaps you can cash in on the deal together. This can go a long way in reducing inventory costs. You can also offer to pay your supplier a little more money for less inventory if they forego their MOQ policy. A little more money up front could save you more in the long run.
Inventory management lets you know when to reorder and when get rid of obsolete inventory. When items take up space, they potentially cost you more money than you paid in the first place. Replacing an old manual process with automated inventory management can lower your waste and give you more space for growth.Business & Finance Articles on Business 2 Community