Running a business successfully takes accurate planning and forecasting. It’s normal to have the number of clients you service fluctuate over time and for business to come in surges and spurts.
Some industries are busier at specific times of the year and find recurring downtimes that fit predictable patterns. In others, however, what’s hot one moment, and not the next, can be difficult to foresee.
How can you avoid death by inventory so you can keep on truckin’ and meet with success? Check out our top 10 tips for inventory management in order to stay in business and keep your customers coming back for more.
Audit your stock
If an order takes months to reach the buyer, or a customer comes into your store expecting to see certain products on the shelves but they’re empty, the potential buyer will turn to someone else to meet their needs.
They may not come back and this lost business can add up to thousands of potential sales that spiral out of control. Keeping track of how much inventory you have, and what it consists of, is important.
You can audit your stock yourself in a few ways. Some experts advise you divide your sales and storage areas based on the products they house. This makes it easier to track what you have too much of, and what is running low. Count the number of products you have and note this down on paper.
Compare your existing inventory levels with your purchase and sales reports and receipts. Keep track of all your data and analyze it to assess what you need more or less of and when.
Invest in cloud based inventory stock management software
You can now track your inventory in the cloud with easy-to-use, accessible systems with platforms online. According to Investopedia, the best inventory management software systems now available sync in real time, giving you up-to-date data at every moment. Zoho Inventory offers a free platform and there are many you can pay to use on a monthly or yearly basis. Check out this list of best inventory management software to get ahead.
Engage in strategic discounts
If you have too much stock and you need to get it out of the store quickly, consider discounting your merchandise. Advertise this to your customers and hold a storewide event. Do this only once or twice a year and engage in online flash sales. Discount what doesn’t sell quickly and attract new customers while you’re at it.
Return your inventory for a refund or credit
Some suppliers allow you to return unsold inventory for a full refund, a partial one, or a credit. If you have inventory taking up space that simply won’t move, this could be your best option. You might have to pay to ship these products out but it will free up your space for something that may sell better.
Trade with your industry partners
It could be the case that you have something you can’t sell but that someone else in your industry can move quickly. You may find they have something to trade in return. By swapping inventory, you get something new to sell and also build valuable relationships with others in your industry.
Engage in consignment
When you consign your products you maintain ownership and allow your distributor to take a cut of the sales. This could be a 75/25 split and so you don’t get 100% of the sale but at least you recover something. With physical consignment, the distributor stores and delivers your goods. When it comes to virtual consignment, you store the goods and ship them. Because of this, you need to be ready to respond rapidly once a sale is made. Consignment can help you move products to make way for new items while earning from the sale of the goods.
Auction goods on ebay
Ebay, like Amazon, takes a percentage of your sales, which often sits around 13%. This being said, auctioning off goods on eBay that you’re unable to sell elsewhere can help you move items off your shelves.
Conquer your lead times
The lead time is the time between the moment you purchase an order of inventory and the date it’s really delivered by your supplier. Knowing what your lead times are and reducing them in any way possible is crucial to success. Your aim is to make your lead times as short as possible so that you aren’t left guessing how much inventory you need, and thereby risk over or under ordering.
The goal is to meet customer demand while minimizing the time passing between paying for your new stock and receiving it to sell. The more you gain control of your lead times, the more accurate your stock levels can be.
Calculate and Identify reorder points
In addition to counting your stock, decide at what point you will need to reorder it. Identifying your inventory reorder point can allow you to replenish items without risking a stock out or having too much inventory. An optimal reorder point considers the time it takes for you to place a new order and includes this in its calculations.
To calculate your reorder point:
Reorder point = (average daily usage rate x lead time) + safety stock
It could be that every product you sell has a different reorder point, and so take this into consideration for accurate replenishment.
Try vendor managed inventory
Vendor managed inventory is a supply chain agreement that allows the supplier to take control of managing how much inventory you need. As a retailer, you share specific data with your supplier and the supplier agrees to maintain a certain level of product inventory at your location. This type of system can be beneficial as it takes the responsibility of managing inventory out of your hands, allowing you to focus on other aspects of growing your business. When done right, it also guarantees you always have the right amount of inventory at any given time, meaning you won’t be caught with empty shelves.
There are numerous ways to streamline your inventory in order to manage it for success. Take the time to do it yourself or hire some to do it. Proper inventory management can help you prime your business for long term success in the years to come.
Written with the assistance of the Smart Hustle editorial team