As a small business, there are many things you need to handle. Although you can feel a little overwhelmed with all the responsibilities, they are all intended to help you be successful. However, not all businesses are the same.
If your main activity is to sell certain products, then one of the primary concerns will be the inventory. Namely, you will have to employ inventory management in order to organize your work. Depending on the number of different types of products you have, this may require some extra time and effort.
When done correctly, inventory management will tell you the precise quantities of products you need. It will also show you the current demand and for which products to slow down the supply. In the end, the general purpose is to keep your production costs in check without creating additional expenses.
But the importance of inventory management is wider, and here is exactly why.
1. Keeping track of stocks
Although you already have a means to keep track of your stocks, you will have to be more efficient with predicting the needs. If you are a wholesale or retail business, you have to keep records of goods you acquire from your suppliers. Customers expect you to have the certain product. If you can’t provide them with that product in the shortest period, they will go to your competitors.
The easiest example of this is to use a grocery store. One of the basic goods that people buy is milk. If you didn’t keep a good track of your inventory, you will stay out of milk and customers will go to the other grocery store. This may be the simplest of examples, but the principle stays the same for all other business activities.
There are software solutions specifically designed to help track your stocks, like Zoho Inventory or Erply. Alternatively, you can have one specifically made for your business. No matter the means, make sure that you keep a precise record of your stocks in the most efficient way.
2. Maintaining a good supply chain
This item relates directly to the one before. If your inventory is well managed, then you will be able to fulfill the customers’ demand.
The last thing you want is to turn away customers. However, the customers are not the only ones you have to keep satisfied. Whether a dealer or manufacturer of goods, you have suppliers. When they sell you the products you need, they require being paid in exchange. But if you don’t pay them in time, you will create a bad reputation for yourself and lose one part of supply chain.
If you overstock your inventory, the surplus products will waste away. Although some suppliers may be ready to take their goods back, the others will see it as done deal. As a direct result of bad inventory management, overstock can create unnecessary and detrimental costs for the company. Therefore, you should always take as much as you need in order to maintain a good supply chain. Moreover, well-organized inventory management will make sure of that.
3. As forecast tool
Inventory management is an effective means to help you determine the demand. Since customers follow trends, their taste and needs oscillate frequently. There are many ways to predict their behaviour and needs from marketing tools to customer service. However, inventory will also be a helpful tool to forecast the demand.
For example, there are products that become popular unexpectedly. They’re not advertised through media, but rather by the word-of-mouth. This is especially the case with small manufacturers just starting to conquer the market. If you notice that people are showing interest in the certain product, you should make sure that your inventory has enough to fulfill the demand.
Nevertheless, not all demand is tied only to the customer behavior. There is market prognosis, and the forecasts related to the weather conditions or season. For example, if you supply pellet for heating, you will have to make sure that your inventory is well stocked for the upcoming season. This means that you will have to take into account weather forecasts and account the last year’s demand.
4. Fewer costs for manufacturers
Manufacturers and retailers have in common that they both sell goods and have their own chain of suppliers. If their stocks are empty of certain product, they will start losing cash flow and customers. No matter the industry they serve, manufacturers use raw materials to create the final product. The needed quantities are precise and without them, products can’t be made or will be faulty.
However, due to the scope of their business, manufacturers have to keep an extremely precise track of their inventories. Sometimes several people may be in charge of inventory management and making sure that everything is in order. Even small manufacturers can have huge costs and penalties if they don’t have regular and well-organized inventory management.
5. Organization of storage
Inventory needs space. As your business grows so will the needs for more space to store your goods and materials. Inventory management doesn‘t only deal with the numbers of products in your inventory, but also has to make sure it’s well-taken care of. If you can’t afford a bigger warehouse, then search for cheaper self storage options.
Namely, the moment you notice that your products are taking two-thirds of the available storage space, you should look for other solutions. Some products are sensitive and require dry and dark places for storage. If any of the inventory items is damaged or destroyed due to insufficient storage space, you will have to bear the costs.
In the end
Inventory management will help you have a more organized business to the satisfaction of both your suppliers and customers. Today’s market is very competitive and you always have to try new strategies and tactics to be on the top.
The last things you need are unplanned expenses and losses because your inventory was not well organized and appropriately managed. The key to successful business is approaching every aspect of it with utmost dedication and seriousness. That is exactly what inventory management is designed for.