If you’re in retail, wholesale, or manufacturing, then there’s one aspect of the business more crucial to profit than any other. Your inventory. If you haven’t taken a close look at your supply chain, how you handle and distribute orders, and how you look after the goods of the business, you could be losing much more than you think you are. You might even find you don’t have the supply to meet the demand. It’s time to find the weak links in that chain and get rid of them.
Know your needs
The first step is figuring out how much inventory you need, exactly. Market research should help you get a pre-emptive idea of which of your stock is going to be most in demand. After that, however, close tracking of your sales should inform your customers’ demands as well as the seasonal ups-and-downs of the business. If you don’t carry enough of your inventory, you can gain some temporary benefit from artificial scarcity, but in most industries, your customers can simply turn to a competitor instead. Acquiring too much stock can be just as dangerous, with the costs of inventory storage wasting money, taking a significant bite out of your profits and resulting in much more inventory that turns directly into waste.
Tell loss to get lost
A certain amount of inventory loss is expected in any business dealing with large quantities of goods. That doesn’t mean that you should be simply accepting it, however. There are several sources of loss to deal with, depending on your industry. In manufacturing, for instance, defects are the most common cause and are best dealt with through proactive machinery maintenance and automating to limit the impact of human error. A serious concern for retailers is loss through theft. A business owner has to realise that this kind of loss can be caused by both customers and their own staff. Improving your properties security is important, but manage who exactly has access to inventory and when, including a sign-in system for the stock room so you can narrow down the culprit when you need to.
Track it down
Regardless of which industry you work in, tracking your inventory has a lot of benefits. For one, it gives you the kind of raw data on sales and costs that allow you to better estimate which goods are in demand and make adjustments to your current orders or manufacturing priorities. Tracking your inventory also gives you a better idea of what you have and where it is at any given moment. If a customer has a query as to whether you have an item in stock even if it’s not on the shelves, you can quickly provide an answer as to whether you do, where it is, and when they can expect it to return soon.
Which inventory matters?
In a business that has huge amounts of inventory, then trying to keep track of every individual item can be expensive and incredibly time-consuming. A store-wide inventory check now and then is essential, but on the day-to-day, you shouldn’t necessarily be concerned with having a beat on every single item. Instead, consider those items which are most valuable and make them the focus of your inventory management system. Tracking the value of your inventory is crucial, not just to make this process easier, but also to ensure that your taxes are accurate for the year. To ensure you’re getting the full picture for the balance sheet, make sure you’re including the cost of inventory, too.
Stay in control
Using the data to track your inventory and keeping an accurate estimate of what you have and what you need isn’t the only way to improve how you manage it. Stock optimisation is the name of a loose collection of standards you should consider using, as well. If you want to prioritise inventory that offers the most profits, then figure out your inventory turnover ratio. This is the rate of how quickly inventory sells from the point it’s in stock and available to the consumer. The higher the ratio, the short the shelf life, which usually means higher sales volumes and thus greater profitability. Remember to update your management systems every accounting period to make sure your operational data isn’t being affected by stock that should be considered obsolete.
Make convenience a concern
Now, to move onto the supply side. Choosing fulfillment services, logistics options such as warehouses and transport, and suppliers depends on a lot of factors. One of the most important is how convenient they are to the business. If you choose the businesses closer to you, you can save on the costs of transport that, over time, can add up to the point that every inefficiency is a real risk. If you’re shipping internationally, then logistics software including Bill of Lading services can help you better manage your bills, improve efficiency, reduce freight rates, and transportation costs.
Rethink your route
When it comes to the logistics, you have to set real standards for your choice of freighting, transport, and warehousing services, too. Make sure you’re scaling the services to your needs, for instance. Don’t choose warehouses and shipping options that are built for dealing with volumes of inventory much larger than you tend to deal with. Make sure they’re fully licensed to do business in your area and insured so you’re protected from some of the risks. Get the specifics on the timeliness of deliveries, using companies that offer specific data on each delivery is possible. For individual packages, use companies that have internet package tracking. The reliability of your business is going to be dictated in large part by how reliable the other aspects of your supply chain are. Hire them based on the same standards you would apply to your business.
A ship-shape shipping room
Of course, you have to make sure that your business is living up to your standards, too. While many will outsource the warehousing and delivery of their goods, many of these same businesses will handle the duty of packaging and preparing items for shipping internally. If your shipping room isn’t thoroughly optimised, this can mean a lot of wasted time between deliveries. For instance, consider arranging it in a factory-line format, with individual members of the team handling individual aspects of the process, from boxing to sealing to labelling. Choose a strategic layout that means the most in-demand items are closer to the shipping station, too. These are the items the team will be handling the most often, so forcing them to make a trek every time they have to retrieve them will cause major slowdowns.
Keep it visible
If you’re handling your own deliveries, then you have to take every step to ensure that your deliveries are as efficient and as prompt as possible. The only way to do this is to use telemetric GPS devices on all your vehicles. This can help you see why any stops or delays happen. You can find and assign new routes to your drivers that not only help them cover more ground in less time but fit more deliveries in each run. You can cut the costs of fuel by creating an incentivising system that encourages them to drive more fuel-efficient, as well.
Keep it moving
The timeliness of deliveries, the data behind your stock management system, and your knowledge of how much inventory you have is all, in part, going to be dictated by how quickly you can process sales orders. If you spend a lot of time processing sales orders, it’s also going to reduce the amount of time you can spend improving your leads retrieval, talking to customers, and doing other work that directly impacts your profits. Make sure you learn the ins-and-outs of the order processing side of your inventory management software. Many of them come with tools that can help you more quickly complete or even automate some of the steps. Just make sure you take the extra step to verify any orders before completing them. Automating software isn’t free from error and it needs a guiding hand to correct any mistakes.
Focus on the customer
At the end of the day, the customer experience is what should matter the most to your business. Every tip above will not only improve how you run the business, it will make your service much more convenient to your loyal consumers. Inventory management systems allow you to fulfil orders more quickly and better inform them as to what is in stock in a timelier manner. Choosing more convenient and reliable supply chain partners will ensure that you can follow your promises to them. The data you collect, such as your inventory turnover ratio, will help you ensure that you always have the inventory they’re most likely to need. Never make a choice in your supply chain that benefits your bottom line, but not the customer.
Efficient, effective supply and better inventory management are crucial if you want to protect the most valuable and profit-sensitive assets your business has to offer. Failing to do so is essentially the same as letting your business bleed money freely.