Do you know what’s in your business inventory at this very moment? Can you easily find or follow where your inventory is being used and by what departments?
Using various tactics and techniques, along with trusting technology to handle your inventory, can put you on the path to making profit and sticking tightly with your financial projections.
What are some ways to manage your inventory?
1. Be Aggressive
Inventory can be a valuable or a costly asset, depending on how it’s handled and the turnover rate. Unused and unsold inventory sitting in storage does nothing but decrease in value over time, especially if it’s a perishable item such as cosmetics or food products. Inventory requires space, power, insurance and interest to carry, therefore moving it quickly is smarter financially. Inventory with no sales equals a dwindling profit margin. The inventory is paid for when it’s purchased, and the longer it takes to see a return on the investment can cause your business to lose money slowly over a period of time.
2. Negotiate Terms
Negotiating terms with suppliers is one of the very best things for a business to do to manage their inventories. Suppliers definitely want your business and may be willing to negotiate terms to get it and keep it.
You can reasonably negotiate to extend your payment terms or propose arrangements for product consignments. In a product consignment setup, you and the manufacturer split the profit costs, and can save your business money in the long run.
You can also use vendor managed systems where the supplier absorbs more of the associated costs. This is much like the drop shipment method, where your company doesn’t store any of the inventory and the manufacturer is responsible for shipping the item(s) directly to the consumer or client.
3. Use Smart Financing
Think creatively and frugally when you decide on the type of inventory financing to use in your business. Many business financing companies can provide you with lenders who can connect you with financial services that are conducive to your own business industry and methods.
Good financing in inventory management will ensure that payment terms and arrangements with the vendor are substantially longer than the terms offered to your customer base. This method allows you to rotate your cash without grossly affecting your budget. This also ensures that your inventory has time to go through the entire process without interruptions, since there is time for the products to be paid for by the consumer, and time for the cash to go through your books and garner a profit in time for you to pay your vendors.
4. Frequently Rotate Inventory
When inventory is frequent rotated, downtime is decreased on unused or unsalable inventory that is on your warehouse shelves. You can eliminate inventory regularly by offering discounts and special promotions on products.
The idea is to constantly keep your inventory moving, salable, and in demand. Offering special promotions also stokes the interest of your customers. They will gladly look forward to any product discounts that are offered by the company. Fairly set your profit margin to see gain if this becomes necessary, so as not to lose money on sales.
Many businesses that use ERP software can track this information about their inventory while ensuring that it is all being maximally used. But you also need to know what’s going on, yourself, in order to change your strategy.
You don’t want to break your business, so make sure you’re working smart and not hard to avoid mistakes. Leverage every possible asset you have.