Idle items in the warehouse are often a waste of time and precious resources to maintain. Arriving at the desirable number of items to stock is essential for an entrepreneur to avoid unnecessary losses. Minimizing the amount of stock held, while ensuring you have enough items to serve customers involves a careful balancing act.
"Some entrepreneurs overstock because they are tempted by the lower prices offered by suppliers for large volume purchases. This is something that must always be compared to the demand side of the business, because even if you get them at a lower price but you can\\\'t sell them, you still lose money," Kessel says.
He adds that entrepreneurs who are faced with offers like this must also remember that their suppliers, as businesses which also keep inventories, must also dispose of their items in an orderly fashion. Use this as leverage to get the best possible deals, such as extended payment terms, bulk discounts, and other freebies.
Refreshing your inventory with new items must also follow your stock purchasing plan, as you don\\\'t want to be stuck with old items customers are not as ready to touch. Kessel says old stocks are harder and more costly to maintain, and entrepreneurs must look for ways to monetize them before they are spoiled.
4. Invest in a system
A good way to have an efficient inventory management system is to install standards and checking systems to ensure your resources are being allocated properly. This can be done manually, electronically or a combination of both, whichever measure suits your budget.
Kessel outlines the basic functions of the two methods:
Manual inventory checking:
- Involves regular visual control, with employees checking shelves on a regular basis.
- Doing regular stock takes. Count inventory items on a daily basis stored in physical locations.
- Using stubs to measure sales and determine reorder rates. The retailer keeps a portion of the "till stub" for record purposes.
Computerized inventory management:
- Buying a Point-of-sale (POS) terminal that automatically updates inventory levels from storefront to warehouse.
- Barcodes and barcode readers to improve the speed of inputting inventory and completing stock checks.
"If it\\\'s a small, startup business, manual checking is adequate, but as the business grows, it can become costly both in manpower and time. Automation, although expensive, is a one-time purchase, and will help you track your items in real time as opposed to manual counting. If you want your business to run at an optimum level, you should implement a combination of both," he recommends.
Successful inventory management is an exercise in balancing the costs of inventory with the benefits of inventory. Although the costs are often significant, loss of business can also result from not having stocks readily available to meet customer demand.
"Inventory management should a priority for any businessman. The advantages can be great if you get your inventory choice, quantity, and management down pat. The effects of getting it wrong, however, can often be devastating for startup or growing business," Kessel ends.