Entrepreneurs are always submerged with strategies on how to increase turnover and increase their customer base. However, have you thought about the looming disaster that might occur if your new and existing customers order for a product on your catalogue and it turns out unavailable? Inventory management is a vital part of a business. Not only is it necessary for operations, it also contributes to customer satisfaction. More importantly, proper management of inventory is crucial for the survival and performance of your business. A business is not sustainable if the profit made from sales is spent warehousing expired goods.
In order to maximize profit and avoid running at a loss, here are a few inventory management techniques to adopt for your business:
- Set Inventory Par Level
This is the minimum level of an item that must be kept at hand. Once your inventory falls below this level, you should remember to place an order for new stock. This is to prevent shortages and avoid having excess goods.
- Inventory Turnover
Carry out a careful study of the rate of sales of your respective products and make orders that will match the replacement quantity needed for each product.
- Manage Relationships
Many businesses suffer because of the little attention they pay to their suppliers. The intensity of supplier engagement should be almost the same level with customer engagement. If this is achieved, you can return a slow selling item to make room for a new product, restock a fast seller very quickly, purchase items on credit, or temporarily expand your storage space. You can also get discounts, negotiate minimum orders and receive promotional items.
- Accurate Industry Forecasting
Analyze the sale of the previous period and the behavior of the consumers of this product along with the economic trends and realities in order to determine demand. It will go a long way. The activities above are not totally exhaustive. If there is something else that will help create a more accurate forecast, be sure to include it.
- Contingency Planning
A lot of issues can arise related to inventory management. These types of problems can cripple unprepared businesses. For example, your sales may go up unexpectedly, causing you to oversell a particular stock item. Alternatively, you might also experience cash flow shortfalls, which may prevent you from paying for stock you desperately need. Imagine if your warehouse does not have enough room to accommodate your seasonal spike in sales, or your supplier runs out of products you urgently need to fill. The contingencies are endless! Therefore, it is important that you carefully analyze your most vulnerable risks and plan for them accordingly.
- Warehousing agreement
Source suppliers that can provide goods real time as your customers are ordering goods. This will save you the cost of warehousing and obsolesce.
Follow these techniques for your business and you are on your way to running an efficient inventory management system.
To learn more on Inventory Management, click here to check out the various learning packages available for you on the SME MarketHub. Also watch out for our upcoming article on the various inventory costing methods that can be used for your business.