Inventory management has become a critical success factor in today’s retail. All businesses want to sell something to the customer who walks in the door and for this it is necessary to have what they are looking for.
The stock of merchandise of a business is immobilized money, the more inventory a business has, the less cash flow there is for other things.
The strategies for optimizing inventory management involve a balance between having the necessary merchandise to increase sales and not going overboard, to reduce costs, that is, having enough product to meet customer demand and selling all the product that you have bought, only then can we increase revenue and margins.
Adding to the importance of inventories in business results is the complexity of its administration, without a doubt it is a tedious task that many hate, however, this can be done with the help of inventory management firms.
In this article we want to reconcile you with this work, showing you its importance in business work.
What is inventory management?
Inventory management is the management and control of stock, a very important asset in the business; the merchandise that we order, store and put up for sale.
The fundamental objective of inventory management is to keep the quantity of product in stock balanced, without having too much or too little.
So inventory management is about having the right inventory, in the right quantity, in the right place, at the right time, and at the right cost. An important part of inventory management involves restocking at the right time, while maintaining an appropriate stock rotation. Managing inventory and product turnover is key to the profitability of any retail business.
Now that we know the importance of good inventory management, let’s look at some practical aspects. Inventory management is a highly customizable part of business management, the optimal system is different for each business.
1. The Just in Time method
It involves keeping stocks very low and ordering when needed. This means moving away from the traditional method to save on storage costs and reduce waste.
However, it requires accurate forecasts that meet customer expectations and can cause problems to meet specific peaks in demand. In addition, the profit is reduced to the extent that you cannot benefit from discounts for purchase volume.
On the other hand, in many sectors, such as textiles, the purchase is usually made several months in advance, which provides less flexibility and limits the options of working with a tighter stock.
2. Periodic stock review.
This review is simply an analysis of products against future sales. It is particularly useful for those retailers who manage their inventory manually, although it is recommended to have some specific software.
It involves setting a pre-defined period to review stock and compare current product levels with future projections to determine the amount of inventory to order. This system is time consuming and highly prone to human error.
3. Establish predetermined stock levels.
It involves setting the minimum quantity of product that must be available at all times. When the stock is below these levels, it is time to order more.
This system systematizes the purchasing process, facilitates decision-making quickly and helps staff. Always keep in mind that conditions change over time, so you need to check the default levels several times a year to confirm that they still make sense and update them if necessary.
You can also consult inventory management companies in India for better results.