June 13, 2019      3 min read

When filling your warehouse with inventory stock, how do you know you’ve got the right amount? Do you have enough to keep up with a spike in demand? Did you order too much and now your inventory stock is parked on the shelves collecting dust?

Manufacturing companies use a variety of tactics to not only ensure they have the right quantity of stock but that it reaches the customer without a hitch. Inventory management is more than a forecasting game of numbers and making sure your shelves look orderly. It’s directly connected to your sales and how you manage your customer interactions and deliveries.

They may seem like they are separate entities, but actually, it’s quite interesting to see how closely sales and inventory management work together.

Inventory stock turnover

Inventory turnover is a key component in testing the health of your business. The more inventory that moves off the shelves, the better your sales are going. However, it’s not just about moving the inventory off the shelves, it’s about how it moves off the shelves. How fast are your warehouse employees able to find what they are looking for? Is it easy for them to get a product picked, packed and shipped or are there obstacles slowing them down?

If fast-moving goods are located far away from the shipping area, employees waste more time going to pick up these products, more frequently, from the shelves. If you can identify which product sales are moving quickly, strategically layout your inventory management design to suit. If you can decrease allocation time in the warehouse, a customer has higher chances of receiving their product faster. This leads to customer satisfaction and increases the likeliness of them being return customers. This is a great example of how sales and inventory management practices can really complement each other.

Customer loyalty

Customer satisfaction spans far beyond just receiving packages quickly. Building trust and loyalty with customers also doesn’t happen overnight; you have to sell a good product.

Quality is important, and sometimes it’s actually about the quantity too. Customers dread the ‘Sorry, out of stock’ message — and for good reason. Good inventory management strategies help you keep on top of replenishing stock. With healthy stocks that reflect demand, you can keep the ‘out-of-stock’ messages to a minimum and keep your sales growing. If customers know they can get what they want, and in the amount they want from your business, it will support their loyalty.

Overstock

Issues with inventory management can arise when there is too much stock and sales aren’t moving fast enough. If your warehouse reaches capacity but the sales have slowed right down, this can negatively impact your cashflow and sales. If you really need to move this stock, you might resort to selling it at a severely reduced rate. This means less profit from sales. However, the inventory has to move before it becomes totally obsolete and you can no longer sell the product at all. Think of this year’s round of chocolate Easter eggs or the 2017 America’s Cup shirts. Not many people are going to buy them afterwards, so you need to get rid of that stock as soon as possible.

As you can see, it’s important to recognise the connection between sales and inventory management when forecasting and planning for future stock and maximising sales growth.

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