Do You Really Understand Inventory Control?
Inventory control is an absolute necessity in the wholesale distribution business and should be one of the first thoughts on your mind. A main goal of inventory control is to maximize profit and enable a greater oversight of stock. Your company needs to understand what you have in your warehouse, where it is, and when your stock is going in and out. Your company will often use inventory control to not only assess your inventory, but also your financial reporting and balance accounts.
Inventory control enables you to maintain a balance of stock. Not keeping track of inventory can create chaos and potentially lose a sale. If inventory issues present themselves to be constant from a wholesaler many customers find a new supplier for what they need. Learn how to best control your inventory and your company will be successful.
How to Control Your Inventory
Understanding what your customers demand allows it to be much easier to control your inventory. Having a realistic idea of what is and is not selling enables you to purchase the right amount and not over stock your inventory. With too much inventory there are often profit losses created by damages, expirations, an item going out of season, or your customers just don’t want it anymore.
There are many ways in which you can count your inventory. Whether you want it to be labor intensive or completely automated is you and your company’s choice. However, more often than not growing companies do not want to deal with having someone hand count all of the inventory on an excel spreadsheet. The more automated your system, the less human error and the faster the process.
Now you need to decide how you will know when to order more stock. Management must decide what the maximum and minimum levels of inventory will be. Management will also need to decide the re-ordering process before you hit that minimum to know you will not go below. Depending on your inventory and how much you move through it, it may need to be re-ordered weekly, biweekly, monthly, or more than that.
Whether you choose to wait until you reach a certain minimum to order more stock or you order the same amount on schedule there are many ways to manage your ordering. The need to order and the numbers to never go below or above with your stock will all be looked at by management, but will also need to be discussed often as the company will be ever changing with items.
Budgeting and Optimizing Inventory
Throughout deciding how you will manage your stock you also need to decide on a budget. You will need to plan out your costs, which should always include the total cost of ownership to keep inventory on hand. You will also need to understand your inventory turnover and watch it closely. Having a shorter shelf-life will often create leads to higher sales and more profitability.
Your company must also optimize how it goes about purchasing inventory. The purchasing procedures need to coordinate with sales and demand history of products in inventory. Items that do not sell or have declining demand should be flagged in the system to adjust costs and re-ordering. Throughout the purchasing process you will quickly learn what does and does not need to be re-ordered.
As mentioned earlier, inventory control is an absolute necessity for your business to succeed. Never let inventory become the collapse of your company. With managing stock on an automation platform, tracking sales and demand history, budgeting, optimizing inventory, and learning the entire process takes time. Everything is ever changing in the distribution business, but by keeping yourself ahead of the game and constantly staying on top of your inventory you will succeed!
At the end of the day, the purpose of having inventory is to send that inventory out to customers. Managing orders is a major topic in and of itself. Here at Mobisoft, we specialize in improving how wholesale businesses manage their ordering systems. If currently face even minor frustrations with the system you use for accepting and managing orders from your customers, then we invite you to jump on a call with us so we can help you troubleshoot and improve your current system. At the end of the day, our goal is to make your ordering system as effortless and error-free as humanly possible. Let us know how we can help!