What optimizing inventory levels can do for your business
It’s easy to underestimate just how much it matters for the general well-being of your business to have optimal inventory levels. Nobody likes having their money tied to inventory that’s piled up somewhere, in a warehouse. It is bad enough that you are waiting for that money to finally turn over, not to mention the inability to complete orders due to that lack of money.
Although they seem unavoidable, these problems can be tackled before they blow up and leave you feeling frustrated. By approaching the issue in a strategic way, you will need to think of how much inventory has to be replenished and pinpoint the exact time when it needs to be done. Let us take a closer look at both of these aspects:
Think of what needs to be replenished and how
Instead of continuously investing in your business and placing your available funds towards research & development, your money might have been spent a little too hastily on inventory that is grounded in a storage unit and that keeps you unnecessarily grounded as well.
One way to predict how the sales curve will turn out in the future is to analyze past performance and historical sales from past periods similar to the current one. This way you will be able to set up sales forecasts and to keep an accurate rendition of them at all times.
What you need to consider most in this case is a product’s life cycle – ever since it launched, to its maturity and finally, to its decline. Managing this lifecycle means that you will be able to make the most of your product regardless of the stage it is in.
Think of what needs to be replenished and when
A surprisingly large number of businesses would rather just wait to see their inventory levels drop and then replenish, since it seems to be the most obvious reasoning.
Ideally you will need to know when this moment comes in order to prevent it from happening. This would also solve all your other problems: you won’t ever be incapacitated when it comes to fulfilling customer orders and you will also be able to invest your money to strengthen other core business operations.
There are some best practices that you can take into consideration to make sure you’re doing everything by the book. Among them is the necessity to take note of and prepare for approaching busier or slower periods of time, to identify arising trends when it comes to order frequency or demand and to track lead times.
Abundance or scarcity – neither excessive situation is right when it comes to inventory levels. Striving for the perfect timing is an end goal that needs to be on your list.
Consider operating with more than one warehouse
The one-warehouse model suffices for businesses that are still managing with one central unit, that makes more financial sense at the end of the day. However, as your business starts to expand, you will need to consider the possibility of operating with more warehouses under your belt.
Among other benefits, you will notice that access will be easier and shipping costs will be lower, since you are spread out on a larger surface, you will have more than one inventory, making it easier to fulfill customer demands at any time. This leads to increased customer satisfaction and ultimately to bigger profits.
When replenishing your inventory levels, you need to also think of the vendors that provide you with that certain merchandise. Thorough research is needed when choosing vendors and opting for a long-term relationship with them because even they are subjected to decline, bad decisions and anything else that might impact the quality and consistency of their stocks over time.
It is indicated to always be alert to any red flags that may appear when dealing with your vendors.
How EDI can help you reach better inventory management
By automating the process surrounding inventory replenishment, you will be able to keep track of inventory levels and to be up to speed to your vendors’ performance, as well as to track lead times correctly. Apart from this, you will also be able to see and synchronize data in all your warehouses.
Basically, you will notice improvements in more than one aspect: your labor costs will drop, while data will be exchanged timelier and more accurately than ever. For more information, give us a call.