7 Common Yet Overlooked Strategies to Improve Inventory Management
Inventory management strategies determine how good your supply chain management is. It is quite hard to figure out effective inventory management strategies that can be applied for every business as the requirements differs.
Still there are certain common areas which can be improvised to streamline inventory methods for all businesses in common and adapting an inventory management system is one among them. This following piece of information holds 7 strategies to improve inventory management. Read on…
Taking a micro-level look into your inventory will guide you in segmenting products. Here, by mentioning segmentation we mean to say segregating products taking into consideration factors like profit margin, demand in market and supply vs demand. This close look will provide ideas to decide on the rate at which a inventory that’s getting depleted should be replenished.
Segmentation minimizes the operational costs of products that are less profitable. The more the number of factors that are considered to segment products, the more the profit will be.
Timely Reminders for Stock Replenishments
Paying attention towards stock requirements is one of the crucial retail inventory management strategies. Restock levels are the best buddies which provide information on when to replenish stocks. Setting restock levels for every product offered by a business will provide instant notifications as and when the stock goes below a preset level. So that a business need not overstock unwantedly but stock only when there is a need.
However, there are a few things to be considered before setting the restock levels. It should be set based on the purchase frequency of a product, time taken to reach your inventory once it is stored. It will be quite tough to figure it out in the beginning but you can get it done eventually.
Prioritizing Products Based on Value
Prioritizing products can be, at times, confused with ABC analysis but it is totally different. Only 20 percent of your products will be responsible for creating 80 percent of sales. The next 30 percent of frequently sold items will be responsible for 10 percent of sales. Considering this situation your inventory is only half full.
This also indirectly denotes that you are using half of the warehouse space to stock products that contribute only 10 percent of sales. It means that your inventory is mostly occupied by products that are slow sellers and this calls for a stock re-strategy.
Find Out Carrying Cost
Finding carrying cost is one of the perfect inventory management strategies for cost reduction. Carrying cost is nothing but the money spent on a product, apart from procurement, during its time in a warehouse. These include inventory holding costs like storage space, equipments used etc and expenses induced by additional factors like damages, transportation, depreciation etc.
Carrying cost will increase the value of a product and eat up your profit margin by a great deal. The increase in carrying cost happens whenever businesses overstock in order to avoid stockless situation. Another disadvantage of long shelf time is that a product may become difficult to sell and at time become obsolete.
Drop Ship to Come Out of Inventory Responsibilities
Drop shipping gives a business owner no responsibilities on warehousing products and shipping role as well. Products are directly shipped from the manufacturer's facility to consumers and hence there is no need of inventory, holding cost and shipping expenses.
Additionally, you get to sell to consumers in a retail price but procure for a wholesale price. Through perfectly-planned contracts you can also increase the number of products you drop ship and earn more revenue.
Compare to Grow in All Angles
Comparisons are one among the inventory control strategies that play a crucial role in forecasting demands. Weekly, Monthly and Yearly comparisons give insights on how your demands are during different time periods. Seasonal demands can also be calculated to perfection by comparing sales charts.
Fill rate tells you the time taken for a stock to get into your warehouse shelf from the time it is ordered while inventory turnover in forms how frequently you have replenished your stocks. Apart from sales figures, conducting a comparative study on other key aspects like fill rate and inventory turnover can advise on procurement planning right from how much to procure and time of procurement.
Pick an Inventory Management Software
We have discussed many types of inventory management strategies and the one we are going to discuss now is one of the most sought after and the must needed strategies for improving inventory management which is nothing but leaving your responsibilities to an inventory management software.
Adopting an inventory management system ditches inaccuracies through automations and keeps a business owner updated about the level of stocks in real-time. Moreover, these systems can centralize inventory management tasks across multiple sales channels into a single console.