5 Inventory Control Tips to Help You Stop Leaving Money on the Table

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No business wants to leave money on the table. Whether you’re a one-room startup or a large enterprise, keeping a tight eye on both your margins and your cashflow is vital to your long-term business health. Losing money to inefficiency or missed opportunities is particularly painful; it’s one thing deciding not to pursue a source of profit for strategic reasons, and it’s an entirely worse thing to needlessly lose those potential gains. One of the simplest ways any business can avoid leaving money on the table is to improve its inventory management performance; here are five tips to do just that.

Don’t overstock a month more

There’s a good chance your business carries too much inventory — and the time for doing something about that is now. Holding on to too much stock doesn’t just scream poor inventory control; it ties up capital you could invest more profitably in the business, increases financing costs and typically results in your accountant writing off a bunch of stock when it becomes spoiled or obsolete. Get rid of excess stock and be done with it.

Consider going lean

One way to avoid carrying too much stock is to adopt a just-in-time inventory management strategy. This strategy requires thorough planning but, implemented successfully, means that stock only arrives in your warehouse as and when it is required. Taken to the extreme (dropshipping), your business could eliminate the cost of a warehouse altogether.

Invest in inventory control

Manually tracking inventory is a false economy. The slow pace of work, inevitable mistakes and the increased potential for fraud and deception make spreadsheets and clipboards a fundamentally expensive inventory management solution.

Many businesses persist with bespoke (read: deficient) spreadsheet-based systems and manual methods because the perceived capital cost to upgrade their inventory control system is too high.

In reality, cloud-based inventory management can be implemented for a fairly low monthly subscription – typically an expense rather than a capital investment. With RFID tags and barcode scanners, stocktakes can be less frequent, meaning you spend less on temporary support and lose fewer sales due to stocktake shutdown. When it comes to the cost of inventory software, your bank manager will be thrilled, not concerned.

When it comes to inventory control, focus on the critical few

This post is about saving money, not time — but there’s no denying that using the time your business dedicates to inventory control more effectively can make a real difference for the bottom line. Instead of focusing on investing less time to manage your inventory, common business wisdom suggests you should invest that resource where you’ll get the biggest financial return. Unsurprisingly, getting better at managing high value, fast-moving products tends to save a business more money than fretting about managing the kinds of products a business has on hand just-in-case.

Try refocusing your inventory management priorities with an ABC analysis. This involves splitting your inventory into three broad categories:

A: This category could be the top 10-20% of your SKUs by revenue; it is not uncommon for these top performers to account for 75% or more of the organisation’s revenue.

B: Include middle-of-the-road products here.

C: These items earn your business a small portion of its revenue, but could easily amount to 50% of the products in stock.

Forecast more effectively

In a hyper-competitive marketplace, the business with the best crystal ball makes the most money. Good forecasting can help businesses avoid selling out during a spike in demand and also avoid being lumbered with stock they expected to sell and couldn’t. Although no one can predict the future, an easy way to leave less money on the table is to invest in inventory software that uses past inventory data to estimate the future more effectively.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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