Business efficiency is a buzzword right now and that’s because as a business owner or manager, having an efficient business means it is a profitable one. One area where businesses often suffer from low efficiency is in their stockroom, holding too much stock and selling it too slowly. Holding stock means extra expenses like the cost of physical space, staff to manage the inventory, insurance costs, maintenance, and even aging stock that has to be discounted or discarded. Here are a few ways you can lower your inventory costs as a business for maximum efficiency.
Don’t Store as Much Inventory
The enemy of every procurement professional is the idea of having too much stock on hand. You have to pay more to store it and more to insure it, and if you have a huge excess it might age before it is even sold. While just in time manufacturing and the improvement of global shipping times has made this an easier thing to avoid, sometimes minimum order quantities (MOQs) and other contractual obligations make this difficult to avoid entirely.
The general goal when it comes to inventory, however, should always be to try and store as little as possible without ever running out. Managing a low inventory is something that might mean you’re more reliant on data and you must know your reorder points very well, but it is a very effective way to lower your costs of inventory.
Do Something with Excess Inventory
Your aging and excess inventory is a risk to your business, so creating a plan of action to deal with it and lower your stock on hand is something you should do periodically. This might result in a sale of your overstocked inventory or it might be used for creative marketing like product bundling. Another option is to donate excess inventory, particularly aged inventory, and take advantage of tax deductions for these donations.
Switch to Flexible Packaging
Flexible packaging refers to a product packaging that is made of materials that are yielding and when filled or closed, the shape of the packaging can be easily changed. It has very strong advantages when it comes to inventory costs because it can take up less space, which means lower shipping and storage costs, and it also minimizes production costs. If your products are perishable, flexible packaging can also extend shelf life. There are many reasons why switching to flexible packaging is going to save you money on inventory costs.
Make Use of an Inventory Management System
If you’ve ever wondered, “Should I use technology to manage my inventory?” or if something like this crossed your mind: “What are the benefits of inventory management?“, then know that utilizing an inventory management system can be a great move to lower your inventory costs. These systems offer real-time tracking of stock levels, enabling you to optimize inventory levels and avoid overstocking or stockouts. By accurately forecasting demand and identifying slow-moving or obsolete inventory, businesses can minimize carrying costs and reduce the risk of inventory shrinkage. Additionally, inventory management systems streamline procurement processes, allowing for better vendor management and negotiation of favorable pricing terms. With enhanced visibility and control over inventory, businesses can improve operational efficiency, maximize profitability, and ultimately achieve a competitive edge in the market.
Bonus Tip: Lower Shipping Costs
Simply getting your products to your stores can be a significant expense. The cost of shipping, particularly if your logistics network is wide can quickly add up. Doing your due diligence and routinely comparing the costs and quotes of various carriers can lower your shipping costs, as can funnelling more business into the same carrier, unlocking large volume discounts. You should also investigate the possibility of association discounts offered by carriers for existing arrangements. Lowering shipping costs is often a case of shopping around and being thorough in your pursuit to do so.
Lowering the cost of your inventory means increasing profit margins and ultimately that means a better, more efficient business. Stock and inventory control is a delicate business, balancing many different aspects.
