finance articles businesses business management business marketing Technologies finance accounting Industrial Manufacturing starting a small business Investment health information

Effective Inventory Management

One of the biggest expenses a company can face is inventory. Without proper control over your inventory you will end up losing a substantial amount of money and possibly your company. When it comes to inventory you do not want to be attached. You need to hold just enough on stock to fulfill your orders as they come, not to have too much that it will take 6 months or longer for you to clear them out. Dead stock will not be able to retain its value in many cases and companies end up selling it off below cost just to get it off the shelves.

Inventory is going to be one of the largest assets that you will record on your balance sheet and it is by far one of the most important things that your company has but it is not your company's most important asset. What is your most important asset? Your customers! You need to focus a lot of time and effort on building strong customer relationships as this will drive sales and will really be responsible for keeping the business running effectively. The customers are the reason you even have inventory and they are the reason why the inventory flies off the shelves!

If you start ordering too much inventory you will quickly get into trouble. Ordering more for the holidays is one thing but ordering more year-round is going to stockpile and it is going to tie up your company's cash reserves. Will you be able to maintain the sales volume for the amount of inventory you are ordering? If you cannot answer this question, you likely won't be able to do the sales necessary to pay for the inventory that you have ordered.

To help you understand inventory you need to first learn about inventory turnover and what your company uses for turnover. How is your company turning over its inventory? The inventory turnover ratio makes up a big part of your sales and your expenses. You also need to focus on the gross margin return on investment. The GMROI will provide you with percentages of your inventory turnover to understand productivity and how much money you are getting in return for your investment.

Depending upon the item and it's value to your customers, it will either sit on your shelves or it will end up flying off your shelves. It is important that you understand where the customers rate your products and their level of satisfaction with every aspect of your company. By doing this, you will be able to see where you stand and what your supply chain may need to change to in order to appease the customers.

Find out what an appropriate level of safety stock is and work with good suppliers that can quickly back you up if you do randomly get a big order that cleans out your entire supply stock. This is a great way to reduce the wait time from the order to the delivery and it builds your reputation along with it.

Customers may like your product but that doesn't always mean they will buy it. Savvy marketing will help you to remind the customers where they can get the product but they are ultimately in charge of whether or not they buy it. If you aren't getting customers the desire to buy, you will end up with dead inventory. It is your job to continue marketing to them and convincing them to buy your product so you can keep product coming in and out of your inventory without tying up your books.

FREE: Get More Leads!
How To Get More LeadsSubscribe to our free newsletter and get our "How To Get More Leads" course free via email. Just enter your first name and email address below to subscribe.
First Name *
Email *

Get More Business Info
Sponsored Links
Recent Articles


Copyright 2003-2020 by - All Rights Reserved
Privacy Policy, Terms of Use