Inventory is one of the key factors that can be managed to improve business performance. The strategies in which a company manages its inventory has major consequences to performance. There is a real need and a shift to more efficient inventory management and software can help achieve this. In particular, software that oversees inventory management when combined with inventory management strategies can positively affect business performance.
Classify and categorise your inventory
It is imperative to classify items into manageable and relevant categories that make sense to your company. It helps to then define a strategy for each product category. This saves time and money affecting business performance.
Analyze your inventory
Secondly, analyze the current inventory situation of your company by looking at past sales, volumes, and delivery performances. This should be done periodically to understand the health of such inventory that can affect overall performance.
Calculate inventory forecasts for accurate strategies
Thirdly, calculate inventory forecasts according to each category. Inventory levels can directly affect cash flow with. Excess inventory levels resulting in cashflow being misappropriated during the current accounting period. This affects your business’ performance as expenditure on excess inventory can have a significant affect on profitability. This can lead to the need for more warehousing for example, which is a cost that requires more time and labour. Knowing the right amount of inventory to have on board is crucial to any company’s success.
Continually revise inventory policies
Fourthly, revise inventory policies. In order to optimize costs, you must optimize the replenishment of your company’s products. Create different replenishment policies according to each item’s product category. The key to profitability is inventory turnover, or the number of times inventory is sold over a given period. Keeping excess inventory that may be obsolete has a low turnover of sales. In addition, this takes up valuable warehousing space. On the contrary having high demand boosts sales levels. Inventory levels should consider demand levels to avoid overstocking and under stocking. Sound inventory management is vital to maximizing your business’ performance.
Collaborate with your suppliers
Lastly, it is a good idea is to collaborate with your company’s suppliers. Ensure that you create good working relationships with your suppliers to create a plan that guarantees your items will be received in a cost effective way and in a timely manner. This eliminates the need for last-minute and late orders, which can be costly when paying for freight to expedite the order to ensure customers are getting what they need.
Inventory management is a process that requires revising and adjusting accordingly. This enables your company to identify trends, opportunities or to pinpoint weaknesses that may need solutions such as marketing initiatives. We believe the five above strategies can help your company take advantage of maximizing operational efficiency in turn positively affecting your business.
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.