Anyone who has experienced the joys of inventory control understands that one of the most critical components of this task is keeping costs down as much as possible. The key is striking the optimum balance by keeping only the amount of inventory on hand as is needed. Failure to do so effectively will negatively impact the cash flow of your business. The good news is, there are certain strategies that you can implement to help lower these costs and maximize profitability.
Invest in a Real-Time Tracking System – The number one rule of successful inventory management is knowing in real-time how much you have on hand at any given moment. This is why investing in a quality inventory management system is essential. It’s the most straightforward way to avoid costly overstock.
Conduct Regular Counts – Inventory shrinkage is a real concern for businesses, and it can cause all kinds of headaches even with an inventory management system in place. To avoid this, conduct regular cycle counts to ensure that your information is accurate and identify any areas of concern right away so they can be addressed accordingly.
Purge When Necessary – If you’ve got items sitting on your stock shelves that are obsolete, they’re taking up valuable space and you’re losing money as a result. Identify items that can and should be removed from inventory, mark them down and get rid of them.
Resist Volume Discount Temptation – Purchasing in bulk to save money can be effective, but in many cases, it only results in overstock situations which drive inventory costs up. Be cautious when taking advantage of such a deal and only do so when you’re truly confident that you’ll be able to rotate your stock off the shelves in a timely manner.
Negotiate with Suppliers – Many businesses end up with excess inventory due to minimum order quantities and price breaks. In most instances, these things can be negotiated. If you’re a valued customer, don’t be afraid to ask your supplier for a break on their MOQ’s or see if there’s a way to still get a discount if you’re close enough to the next tier.
Consider a Supplier/Vendor Managed Inventory Program – If you’ve got an established relationship with a particular vendor from whom you purchase a large amount of inventory, you may be able to set up a plan through which the supplier actually maintains and manages the inventory for you. This can be done a number of ways, including point of sale (POS) and consignment stocking. Either of these can dramatically reduce the costs associated with managing inventory.
Are inventory costs impacting your bottom line? Do you need assistance setting up a strategy that will effectively optimize your stock while maximizing profits? Give us a call today – we can help!