There are lots of ways to bolster your business’ sales — but for a product-based business, inventory management is arguably the most important one. After all, if your products aren’t being sold then you aren’t making money.
Great inventory management complements your sales team’s ability to sell, boosts your customers’ loyalty, and plays a crucial role in your multichannel strategy. When you have complete control over your inventory:
- Your sales team can leverage real-time data on stock levels and pricing to close a sale
- Your customers will be able to see exactly what’s in stock and get their orders delivered faster than ever
- You’ll be able to manage inventory across different sales channels so that stock is allocated efficiently
Let’s take a look at how inventory management can help you execute a great multichannel strategy, boost customer satisfaction and empower your sales team.
Inventory management enables you to sell multichannel
Consumers are now shopping in more locations than ever: including social media, marketplaces, and other spaces. That provides a huge opportunity for businesses to grow sales.
When you’re selling the same products on different platforms, inventory management can be a nightmare if systems are not synchronised, accurate and organised. A recent study found that 29% of retailers lack the inventory visibility across stores, vendors, and warehouses that’s required to accurately fulfil multichannel orders.
A successful multichannel strategy involves more than just listing your products on a variety of platforms; it requires effective inventory management. Without proper inventory management in place, you run the risk of losing out on sales, losing control of stock levels, slowing down order fulfilment and more.
Consider this example:
Bob manufactures and sells his bikes through various channels: his retail store, an online store, on Amazon, and high street shops.
His eCommerce software and point of sale software are integrated with a basic accounting software that gets updated when he makes a sale. However, it doesn’t update any of his other sales channels. As a result, customers can see available stock on Bob’s website and on Amazon, yet Bob doesn’t have enough stock to complete those orders.
To make matters worse, his spreadsheets and accounting software don’t give him any visibility over his manufacturing inventory stock – he can’t tell his customers when they’ll receive the bikes they’ve paid for. As you can imagine, this leaves his customers unhappy.
In a panic, Bob ramps up production to meet all his new orders. However, his inventory system doesn’t show him the margin he’s making on each sale, and his wastage is going up because he’s losing track of parts. His total costs are rising and he can’t tell why!
With a dedicated inventory management software at the heart of his business, Bob can distribute his products to various sales channels efficiently. He’ll also have full visibility over all his parts so he can easily scale production to match demand. The inventory system can report on Bob’s landed costs so he’ll know the exact margin on every sale.
Find out more about inventory management and multichannel selling.
Inventory management helps your sales team close the deal
Inventory is best managed through dedicated inventory software, which can quickly become an essential tool to support your sales team. Here are three ways your sales team will benefit with great inventory management software at their disposal.
Promote other products
When executed correctly, upselling and cross-selling can help a business generate additional revenue. Is a lack of inventory visibility impacting your sales team’s ability to further promote products?
With inventory management software in place, your sales team will be able to locate what the customer wants and quickly find complementary items that are available too. For example, if a customer is looking for a washing machine, the salesperson could instantly see if stock is available and if a newer model is in stock too. This upsell opportunity might have been forfeited if the salesperson didn’t know what was in stock.
Know what they can discount
Great inventory management software will be able to show your sales team price tiers and other discounts. This way, they will be able to push hesitant customers over the line.
Consider this example:
A cash-strapped couple is looking for a dining table at a price within their budget but nothing in your store will do. Luckily, a sales staff looked at the warehouse inventory and saw that they have a dining table that has not been sold in the past half a year. They can see how much the business bought the stock for, and know that this dining table is unlikely to be sold at the current price. Equipped with information about stock levels and purchase cost, they offer it at a lower price to the elated couple.
In this situation, inventory management software was a tool that helped the salesperson sell to a couple who might have otherwise left the store. For your business, it has helped clear stock that was stagnating in the warehouse.
Inventory management can have far wider-reaching benefits than sales. To really grow the business, you need an in-depth understanding of your profit margins on each product, know where you can minimise inefficiencies in your processes and where you can improve. Learn how inventory reporting can fortify your business growth.
Happy customers start with better inventory management
It shouldn’t come as a surprise to any business owner that customer satisfaction is also reflected in their revenue. Happy customers will stay loyal to your brand, make repeat purchases and even recommend your products.
In the search for better customer service, sometimes businesses neglect to get the basics right. If a customer cannot get the stock they need or frequently experiences delayed delivery, they are likely to be unsatisfied and search for a different retailer that can meet their needs.
Poor inventory management could mean selling a product that is in fact sold out. Aside from this, there are many other consequences:
- Failing to meet customer demand because you can’t accurately identify trends or accurately forecast
- Letting down your customers with slow and inaccurate order fulfilment
- Rising inventory costs might be passed on to customers in the form of higher prices
Here are some ways better inventory management can lead to greater customer satisfaction.
It’s always a constant balancing act between carrying too much inventory and incurring inventory holding costs, and not carrying enough and risking stockouts.
If businesses are unable to fulfil orders due to a stockout, they risk damaging their reputation and losing their customers’ trust. Over time, this systematic failure to manage inventory levels can lead to lower revenue and a diminished reputation.
The aim of any inventory management system is to accurately reflect stock levels. The best way to prevent understocking, though, is to adopt inventory management software. It accurately reflects stock levels in real-time, allowing you to gain 100% visibility over stock levels, which goes a long way towards eliminating out-of-stock situations.
Shortens lead time
The time it takes for the business to fulfil a customer order is a key factor that affects customer satisfaction. Customers prefer suppliers who can meet orders as quickly as possible.
Consider this example:
It’s Wednesday night and you’re preparing to go on a ski trip that weekend. You’ve realised that you don’t have ski goggles! You hop online to order a pair to get delivered before you leave for your trip. One retailer can deliver it in two to four days – so you could get your ski goggles on Friday, but it might also arrive on Sunday. On the other hand, the other retailer can have it at your door by Thursday evening. Do you take the risk or order from the retailer who can deliver on a guaranteed day?
Great inventory management makes it possible to quickly order inventory in response to customer orders, keeping processes as lean as possible. Short lead times mean that a supplier is able to respond quickly if a customer urgently needs to place an order.
Of course, you could place a bulk order once every few weeks to ensure that you always have plenty of stock in your warehouse. However, this can quickly increase carrying costs, and stock might risk becoming obsolete before it’s sold.
If you have a good inventory management system in place, you will know stock levels of each item at any time – as well as its lead time and turnover ratio. Knowing these key indicators helps you determine:
- Which items will need to be stocked more frequently
- When you should restock in order to avoid holding stock for longer than necessary
This way, you can keep your stock levels lean and lower the cost of carrying inventory while still fulfilling orders quickly and increasing the rate of inventory turnover.
Effective inventory management will help you generate sales reports, inform purchasing decisions and provide visibility into your stock levels so that you can fulfil orders as fast as possible.
Forecasts customer demand
Demand forecasting is how businesses predict what customers will buy, how much they will buy, and when they will buy it. Failing to meet customer demand during the peak season won’t just hurt profit – it’ll compromise your reputation with customers as well.
Why do businesses need to forecast demand?
With globalisation, markets have become increasingly competitive. To keep customers satisfied, businesses cannot afford to react to demand. Instead, they need to proactively predict and plan for future demand, so that they will be able to fulfil customer orders with short lead times without missing delivery estimates.
How to forecast demand
To forecast demand, you’ll need to be able to accurately predict when sales orders will be coming in most frequently. You can do this by examining inventory spreadsheets, but using inventory management software with advanced reporting functionality makes it much easier, enabling you to:
- Accurately forecast demand with the most relevant data – such as how frequently stock is turning over, obsolete stock, the frequency of stock outs and more
- Capture all your data, by integrating your inventory system with other software in your stack. Ideally, your forecast should take historical data, market seasonality, future sales orders and current demand conditions into account
- Adjust for variables that are not recorded in the numbers, including special events, competitor actions, or even the weather! By easily spotting sales spikes, you can delve a little deeper
Find out more about how you can grow your sales with great inventory management software.