Inventory can account for a substantial chunk of your business’ assets. Therefore, optimal inventory management is crucial to a business’ ongoing success. It is important for entrepreneurs to understand inventory control and inventory myths and misconceptions.
1. Start the business first
Inventory control is important for the success of any business. Having an inventory management plan before starting a business will enable you to effectively manage your inventory as the business grows.
Thinking you can start a business without a strategy for inventory management is a big mistake and a common inventory myth. One that can have serious consequences when you consider mismanaged inventory is one of the leading reasons small businesses fail. The reality is, you need to have an inventory plan before you start, and it should be a priority for anyone looking to create an eCommerce business.
2. Demand forecasting doesn’t need inventory control
Accurate forecasting is vital to maintaining optimal levels of inventory stock. However, some eCommerce retailers think they can accurately forecast future sales using only past sales data. This is not the case and you need to plan out everything, including sales, seasons and inventory trends.
Effective forecasting and accurate inventory control help businesses to maintain the right levels of inventory stock, manage trends and seasonal fluctuations, calculate delivery lead times and crucially, know what is not selling so it can be removed from your inventory stock.
3. Buying in bulk saves money
Sure, economies of scale can be achieved through bulk purchases and larger order quantities, but it doesn’t always equate to saving money.
Bulk purchasing inventory stock can lead to a shortfall in cash flow and incur excess storage costs. When you have too much stock, your capital is tied up in product sitting on shelves. Stock that is taking up valuable space and runs the risk of obsolescence and waste.
While avoiding stockouts is important, buy in bulk only when demand forecast data shows there is a need to carry increased stock levels, or when the profit margins or savings in freight and transportation easily cover any additional storage costs.
When you are choosing a supplier, also remember that price is only one consideration. Suppliers who are unreliable or have long lead times can cost you money, despite their low prices.
While it is tempting to go with the lowest price, cheap is not always best. If the quality of the product is substandard, you could end up losing money and damage your reputation.
4. Inventory should be locally managed
Where you store your products matters. Often, companies will follow a localised inventory management approach, believing that using local warehouses is the best way to store products. This approach isn’t always the most effective.
When deciding where to store inventory stock, it is better to consider where your customers are located. Then decide which location is going to help get products to the customers in the quickest way.
Money saved on shipping can make it worth outsourcing fulfilment to provide customers with the best, most efficient order fulfilment service.
5. You don’t need an inventory control software
Inventory management solutions are important tools for managing inventory stock and warehouse management, ones that will adapt and grow with the business. Using an automated inventory control system is critical to achieving a flexible supply chain. Inventory control software saves time and resources, it enables greater efficiencies, reduces inventory costs and waste.
Technology provides some helpful tools to make inventory control easier, automating and speeding up processes and removing the scope for human error. Systems store huge amounts of easily accessible data, deliver more accurate real-time information and integrate easily with other software and eCommerce platforms.
Inventory can be complex, but it doesn’t need to be that way. By understanding inventory and through investment in the right inventory control solutions you can dispel the myths of inventory.