Best Practices on How to Manage Inventory

Most importing companies are faced with the challenge on how to properly manage inventory levels. Bring in too much unsold merchandise and you are forced to cover the carrying costs including the costs to warehouse the merchandise for extended periods as well as the financing costs. Keep the goods too long and you might be forced to mark them down. On the other hand, if you don’t have the right merchandise that is being requested by your customers, you will have to deal with the lost business.

Recently, inventory management issues have been magnified due to the lingering affects of the worldwide supply chain bottleneck. Towards the beginning of 2022 retailers were scrambling to secure goods that were in short supply and to stock up on inventories. Consumers flush with excess savings were filling their carts, both in-store and on-line. Importers were concerned that they would not be able to receive goods on time and ordered goods earlier than usual and in higher quantities than they felt they needed. This was done to make sure they had an adequate supply of merchandise to properly serve the retailers.

However, there was an abrupt and unexpected shift in the American consumer’s appetite. Almost suddenly, shoppers switched from buying bigger ticket items like clothing and home furnishings, to essentials such as food and groceries. Retailers were left with full shelves and overflowing warehouses. Walmart’s inventory level at the end of the first quarter of 2022 was a third higher than a year ago. As of April 30, 2022, Target’s inventory levels were 43% more than a year earlier. The retailers not only did not need more merchandise and were reducing orders going forward, they also were faced with giving markdowns to move the merchandise that was stalled in their stores. This only highlighted the importance of importers properly managing their own inventory levels.

What are some basic inventory management techniques? 

Basic inventory management techniques, coupled with software that fits your situation and adheres to best inventory management practices, will help you to have the products you need in appropriate quantities, at the right time. It is important for the warehouse management system to communicate properly with your inventory software to save you the hassle of having to constantly compare two sets of data and to manually transfer data from one system to another.

Make it a point to avoid the potential of having to mark down goods, lower your risks of holding on to outdated products, and focus on spending money on stock that makes you money, not costs you more. Don’t find yourself out of stock or keeping funds tied up in excess stock that isn’t being sold or purchased. Instead, seek an inventory management software program that keeps you on top of your inventory in a way that yields the most monetary growth for you.

What should you be looking for in inventory management software?

When searching for the right inventory management software for your situation, consider one that offers the following attributes:

• Helps you to recognize ways to lower your cost of purchasing inventory
• Enhances cash flow
• Increases your company’s net income
• Tracks inventory levels in real time
• Predicts supply-and-demand
• Identifies the potential for production shortages before they happen
• Ensures the company does not accumulate more stock than can be sold
• Provides you with easy access to inventory analytics
• Offers total accessibility via automated reports
• If you own your own warehouse, the software should improve the warehouse’s organization
• Provides multi-location management abilities

How can inventory management aid your company?

It is likely not news to you that your company could drastically benefit from inventory management techniques, but you might not know what that inventory management looks like in practice. Here are some ways that inventory management techniques can help you:

• Adjusting your forecasting process: Your calculations pertaining to projected sales are best when they are centered around sales figures in the past, current market trends, and the growth you anticipate seeing, as well as the current economy.
• Taking the time to identify low-turn stock: If you are holding on to stock items that haven’t sold in 12 months, it’s a sign you need to make a course correction. Consider no longer stocking that item, but more importantly, do whatever you can to sell the stock that you do have by applying a special discount or promotion to the items.
• Counting your inventory regularly: Take time to count your inventory every so often to ensure that you have the number of items that you believe you have. You might consider using a process where you check stock at the same time every week, month, or year, depending on which frequency works best for your company.
• Staying as organized as possible: A system in which your sales analytics are adjusted in accordance with ever-changing stock levels is very beneficial. You’ll receive updates when stock values are low, and you’ll have the option to prioritize your purchases. From there, you can monitor various aspects of your business in a more efficient manner. This also includes staying on top of quality-control procedures.
• Looking into drop shipping as an option: Drop shipping may be the right process for you, even if margins are lower. A major benefit of drop shipping is that it does not require you to hold on to any inventory on your end. That will eradicate the shipping and fulfillment processes for you, making your warehouse and stock costs far lower.

Inventory management techniques help you track your inventory more diligently, keep tabs of your stock, and manage your inventory on a per-location basis across warehouses. Instead of purchasing merchandise in massive quantities for the sake of vendor discounts and discounted shipping costs, focus on applying inventory management techniques to all parts of your company’s processes. If you are considering updating your inventory management system, feel free to reach out to your LMC professional.

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