April 11, 2019      3 min read

Inventory management is a game changer when it comes to retail profitability. When your inventory is managed well, other parts of your business reap the benefits. However, the importance of inventory management isn’t always appreciated and can be overlooked by business owners. This is interesting because, from a financial point of view, inventory is one of your greatest assets. Yet, without the right kind of management to make it thrive, inventory can turn into a hauntingly large liability for your company.

These liabilities can come in many shapes and sizes and it becomes apparent that there are many factors affecting inventory management. If you overstock your inventory, this becomes a liability. Conversely, if you run out of stock, this can be a huge liability in terms of missed profits because customers couldn’t buy your product. Also if you have multiple warehouses and the inventory gets reported in different areas, the true amount of inventory stock might not match up.

What is centralised inventory?

Centralised inventory is when a company maintains a single hub that manages the inventory in the main location. Essentially, this model focuses on using one single, large warehouse to manage everything that is coming and going. While different parts of the warehouse are used to store different items, everything is housed under one large, warehouse roof. All inventory is housed in the same way and handled by the same people and methods of transportation. This reduces factors affecting inventory management.

The main benefits of incorporating centralised inventory model

All of the inventory is in one location so this means there is more consistency with the staff working at the warehouse. Additionally, the logistics and shipping companies that do deliveries and the staff who conduct the stocktake are all in the same place; there is steadiness and regularity when everything is managed in the same place.

Conversely, when there are multiple warehouses, staff might receive different training, or the functionality of the other location just might not run as smoothly. With a centralised inventory model, businesses can gain more control and have more transparency over their processes.

When everything operates within a central control point, a task such as stocktaking becomes significantly more streamlined when it’s in one location. It minimises the mistakes with poor or incorrect communication coming from other warehouse sites. Instead, there’s only one place to manage and to ensure numbers are correct.

Couple this with a powerful inventory management software that can track the movement of inventory coming and going, and you’ve got a winning combination.

Who benefits?

The benefits are across the board, from management, staff, supply chain and customers. The consistency allows for management to communicate better to staff. For instance, it allows them to train staff better since they only have to show them how to do one type of stocktake in one warehouse, rather than multiple ways in multiple locations. The supply chain will have one consistent delivery location and this makes shipping logistics to customers swift and timely.

Is it right for your business?

Centralising inventory comes with a number of benefits, but the impact of these benefits will depend on your unique business processes and needs.

Online retailers

Retailers that only have eCommerce channels or a single brick-and-mortar store will benefit most from centralised inventory. Since they are mainly concerned with packing and shipping, they have fewer logistical challenges compared to other businesses who might have multiple channels.

Brick-and-mortar retailers

Centralised inventory creates operational efficiency. With a single location of all stock, retailers with a physical store will ensure that the entire business are all looking at the same stock instead of guessing how many of a certain product is in another warehouse. Using inventory management will also help increase inventory visibility across the team.

For physical store owners, there are no discrepancies over the inventory data, allowing them to make informed business decisions.

Multichannel retailers

In a multichannel retail business, there are a lot more things to factor in as retailers try to keep data in sync across channels. Implementing a centralised inventory model allows everything to be processed from a single location, preventing double selling or selling stock from another channel.

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