The cost of inventory is the cost to your business of holding and storing inventory in your storage facility. In these times when businesses are trying to make cuts wherever they can, it is vital that businesses carefully control their inventory in order to reduce costs and function efficiently. Follow our simple tips to successfully control your inventory in order for your business to maximise profits.
1. Look at KPIs
Monitoring Key Performance Indicators is crucial for your business in general, and not just in terms of controlling your inventory – this is important to consider when considering the cost of inventory. Businesses should be monitoring sales, fill rates, cycle times, write-offs and inventory turnover.
2. Know When to Reorder Stock
Make sure you have a formula to work out exactly when you will need to reorder stock to ensure the process runs smoothly. You will need to consider sales, including peak selling times and how long stock takes to reach you, to make sure inventory is not ordered too early, leaving you with a glut of stock taking up space in your warehouse or storage facility.
3. Organise Your Warehouse
This sounds obvious, but by properly organising your warehouse or storage facility you can maximise space. The increasing popularity of shopping online has contributed to a near doubling in demand for warehouse space. An organised warehouse reduces the risk of lost or damaged stock, and planning stock location and layout can allow your picking and shipment process to be streamlined.
4. Reduce Inventory
Inventory reduction is essentially getting rid of obsolete stock. If you are holding on to too much, this will be taking up much-needed space in your storage facility, which is costly to your business. By organising your inventory correctly it is possible to see exactly how much room inventory is taking up. Think about offering bundled deals to shift stock quickly or even donate stock to make way for faster-selling items.
5. Think About Inventory Management Systems
There are now systems available which can help businesses keep track of and manage inventory. Software can help you know your reorder point and provide accurate metrics. You also need to ensure that you have the appropriate security measures in place such as using a Security Seal on high ticket items to prevent thefts from occurring.