With a massive influx of businesses in the market each year, there exists a complex network of supply and demand. The ability of companies to fulfill their customers’ requirements on time is the driving factor for the company. In such a complex and busy system, the need for an accurate and structured inventory management software can’t be denied.
In this article, we’ll take a look at the importance of an optimized inventory management software, and a few tips for you to achieve it.
Business experts would describe inventory management as the action of managing the business’s inventory to guarantee a continuous supply of end products in a cost-effective manner.
The reason why inventory management is such an essential aspect of supply chain management is that it allows better control for managers over the demand and supply in the market. There are several benefits that come from an organized and optimized inventory: manufacturers and distributors believe that doing so would allow for reducing overall costs and enhancing the quality of a business’s service.
When a business provides excellent service, it naturally gets customer satisfaction, giving them a competitive advantage in the market. Moreover, a company is able to maintain a strong business relationship with their customers. When your business optimizes the inventory, you substantially reduce unnecessary hoarding while saving up your money.
According to a study, 43% of small businesses do not track their inventory or utilize an old system. This means that if you track your inventory and optimize it, you can gain significant competitive advantage!
Here are a few ways you can optimize your inventory management setup:
Our first tip for an optimized inventory management setup is to invest in an accurate and structured inventory management software. By automating the process, you will be able to get some of the burdens off of you.
You would need to do manual checking every now and then to ensure that the numbers match. However, the software will give you so much more than just keeping track of things: it will provide you essential insights into what items are the most popular, which products sell the most on which days, and much more. These insights will allow you to make more informed decisions regarding your purchases.
Go For A Customer-First Approach
When you’re dealing with inventory management, it is crucial that you focus on your customers. The best customers often shop at your place and like your products. Your job is to keep them happy if you want them to keep coming back. Keeping your inventory stocked with products that are your best-sellers and popular among your best customers will likely keep your consumers satisfied. In this regard, remember the 80:20 rule: 20% of your customers will bring 80% of your profits.
Moreover, when you keep your inventory stocked with best-sellers that are popular among your best customers, it will likely attract other people who have similar tastes. This will give you an insight into the market trends and ensure that you stay on top of your demand.
Lead Time Forecasting
Another way of optimizing inventory management is to forecast lead time. You will begin by predicting the average lead time by utilizing the purchase history, understanding the lead time at several service levels, and getting rid of unwanted data. All of these factors, combined together, give a basic framework to plan things for the future.
The Economic Order Quantity
Economic Order Quantity, often abbreviated as EOQ, is the ideal number of items a company needs to purchase for their inventory, keeping in mind a few factors, such as the total costs of production, the demand rate, and much more.
With EOQ, a business can significantly reduce their costs. The formula for EOQ identifies the highest number of orders to purchase to minimize expenses. This formula also accounts for the number of units in delivery and storing. This is a crucial formula to help free up cash in inventory for businesses.
Create Tech Stack System
By using technology, QuickBooks, and other inventory-tracking systems, you can evaluate your inventory costs on a monthly basis. These systems will keep track of your orders and will help you in ordering accurately.
In olden times, a business would head over to the front of the store to keep a count of the inventory, record it, and then order the necessary items from a supplier. Now, accurate and structured inventory management software can help you take care of this task in much less time. Moreover, this software also helps you in identifying which products aren’t doing so well and getting rid of them to have better products that would sell well.
Manage Your Inventory In Various Locations
With a POS system, you can sync inventory between multiple locations. With this system, you will be able to view your entire inventory in one place and identify how much stock you actually have. You can then transfer inventory between locations to boost your sales and save costs from buying more.
Moreover, if you have various storefronts in multiple locations, you would naturally want to keep the exact same things in each, right? However, if you keep a few unique items in each store, it will allow for a more personalized touch and will be attractive among visitors.
An accurate and structured inventory management software can help you keep an optimized inventory management setup. With the use of technology, you will be able to keep track of your inventory, know which items to keep in stock more and which to discontinue, calculate the EOQ, save costs, and manage inventory at multiple locations. All of this allows for a better competitive advantage in terms of fulfilling consumer demand. A satisfied customer following will likely attract more customers and help you boost sales and your bottom line.