Managing inventory is quite tricky and calls for professional help. Learn here about inventory management and what are the best practices to follow.
To outline inventory management in a nutshell, it’s the process that must be efficiently put into practice to ensure that your retail business is always equipped with the right number of products to meet the market demands. When your business neither has too much nor too little merchandise stocked up in the warehouse, it can offer efficient product fulfillment – one of the crucial factors in strengthening your customer base.
Inventory management can play a significant role in boosting both your online and offline retail business. Its role becomes important in the case of an eCommerce retail business. Only the right approach towards inventory management can ensure that an eCommerce business is winning consumers with accurate order fulfillment while also cutting down on the shipping costs involved in delivering within the shortest possible time.
Benefits of Inventory Management
Efficient inventory management is one of the most crucial pillars on which your retail business stands. Many small businesses are either too reluctant to track the inventory or use a dated manual method. They don’t realize that efficient inventory management can aid eCommerce fulfillment and enhance customer experience like nothing else can. Small business owners can ensure that they have the right quantities of the right product at the right time if they have their inventory under control. We all know how proper product distribution can boost the growth of an eCommerce business through efficient fulfillment.
ALSO READ: How New-Age TMS Technology Help Businesses Grow
Once you master the art and science of inventory management, you can reap multiple benefits. Some of the most beneficial effects are as follows:
- Product Availability. Bad eCommerce fulfillment can inhibit the growth of your retail business like nothing else. You can effectively avoid this with competent inventory management. A good grip over inventory management ensures the availability of products where the demand is the strongest and smooth shipping. Thus, it helps in on-time order fulfillment and wins customers’ hearts.
- Cost-Effective. Good inventory management has a direct positive impact on the profitability of your business. Since it cuts down the shipping and inventory cost, lessens deadstock, and ensures steady supply even during peak seasons, the profit graph rises.
- Planning Helps. Inventory management involves studying the market trends. Doing it well enables you to prepare better for seasonal fluctuations and plan your marketing strategies.
Thus, we can see that when practiced scientifically, inventory management can reduce dead stocks, bring down shipment and inventory costs, and ensure growth by making product fulfillment a certainty. It’s a process that doesn’t just significantly reduce the time and money spent to create a product available for its customers but can also aid you in forecasting market behavior.
Retail Inventory Management Rights
There are various types of retail inventory. Running an eCommerce business, you must get a good handle on all these categories to ensure the growth of your business.
ALSO READ: How to Introduce Sustainability in Logistics for Lessening the Carbon Footprint
Check out some of the most important categories here:
- Raw Materials. Raw materials refer to any items used to manufacture finished products. These materials may be produced by a business or purchased from a supplier.
- Finished Goods. The most important category is finished goods. As the name suggests, this type of inventory stocks products that are 100% ready to be sold. Irrespective of whether you internally manufacture the finished goods or procure them from vendors, you must manage this inventory skillfully to ensure customer satisfaction.
- WIP Inventory. Work-in-progress or WIP inventory is the second most important category. This type of inventory accounts for products on their way to market-ready. Using the right software and research-oriented expert inventory management can ensure that there is never a dearth of supply by expediting the finishing process.
- MRO Inventory. Maintenance, repair, and operations or MRO goods inventory is crucial despite not being a part of the finished goods inventory. Since these are used to manufacture, maintain and repair finished goods, a mismanaged MRO inventory can negatively impact eCommerce fulfillment. Without them, production and maintenance of the final good get affected.
- Packing Material. Lastly, the inventory of packing materials is also crucial. While a business mistakenly might not focus on this, it’s important to remember the significance of packing material to ensure customer satisfaction. Even finished products cannot be safely shipped to customers without proper packing material.
Best Practices of Inventory Management
Leveraging profitmaking eCommerce business as a case study, if you diligently follow certain inventory management best practices, it can significantly propel your business growth. Here are some of such best practices:
- Set KPIs. Setting essential Key Performance Indicators or KPIs to gauge progress must be established. KPIs like inventory carrying costs, inventory turnover rate, and order status aid prudent business decisions that will give you a competitive edge over others in the market. These will help forecast market demands and set milestones for your retail business.
- ABC Analysis. Next comes ABC analysis which enables you to optimize the utilization of storage space at a warehouse and helps streamline eCommerce fulfillment. ABC analysis helps a business arrange its inventory according to the importance of items. Here, A is an item with the highest stock priority, and C is the lowest.
- Keeping Record. A process to record stock receipts is essential. Unless you implement such a process, your retail business might run into problems like unexpected stock outages, unrecorded stock, and hefty payments for unplaced orders because of supplier mistakes.
- The Right Technology. Ensure you choose the right software that best suits your business. Many operations can be automated and better monitored using efficient software suitable for your business. Though some companies still manage inventory manually, the process is tedious, slow, and not free from errors.
- Supplier Relationship. Always remember that your suppliers are the most valued friends of your business. Work on developing a close bond with them. It will help you get the best deals, lower the risk of delays, and simplify your inventory management.
- Residual Inventory. Residual inventory management is a crucial step toward reducing deadstock. Put seasonal codes in place to keep it under control.
After all, competent inventory management requires you to correctly estimate the minimum stock threshold, the least amount of inventory you must always maintain at your warehouse. It ensures that you are never unprepared to meet a sudden sales spike. Thus, with your minimum stock threshold estimated, order fulfillment will never get disturbed. Who doesn’t know that steady eCommerce fulfillment is always directly proportional to a thriving business?
ALSO READ: #InsightsByXPDEL – Distributed Inventory: For Faster Delivery & Reduced Shipping Cost
A formula to calculate the same goes as follows:
(Average daily product sales ÷ number of working days in the month) x average product delivery time
To sum it up, inventory management is crucial to your business for accurate, fast order delivery and customer happiness. After all, we all know how much customer satisfaction matters for a good brand reputation. Offering stellar customer experience and earning customer loyalty can only come from efficient inventory management.
Manage your inventory efficiently or hire professional help to do so and keep your customers happy.
XPDEL helps eCommerce brands accelerate their growth, empowering them with multi-channel fulfillment, whether shipping directly to consumers, delivering to businesses, or selling through retail stores. We are founded and operated by veterans with experience from Amazon, FedEx, UPS, JDA, Walmart, Target, and other leading companies in eCommerce and Retail. Guided by these experts, we provide customer experiences that help you grow your business.