Save Money- 8 Inventory Management Techniques
How do I manage the ‘Inventory Management’ at my business without investing in time& money?
Nowadays, It is essential to manage your solid inventory management in order to understand how much much you spend on inventories and how much profit you are making as a result.
Why Is Inventory Management Important?
Holding inventory ties up a lot of cash. This is why good inventory management is crucial for growing a company. Just like cash flow, it can push your business forward or break your business.
Inventory Management Saves You Money…
Inventory management saves YOU money in various ways:
Avoid Spoilage
If you are a restaurant owner and you have to sell X number of (food) products in order to break- even for that days use of food, it is essential that you advertise that particular food(s) in order to save money and avoid waste. This can be done through advertising via posters, word of mouth and special offers. Solid inventory management helps you avoid unnecessary spoilage.
Avoid Dead Stock
Deadstock is stock that can no longer be sold, but not necessarily because it has expired but because it has gone out of season, or customers have decided that it ‘old fashioned’. By managing your Inventory better, you can avoid dead stock.
The best solution for managing your inventory is by using the best service for Inventory management and keeping a close eye on exactly what your customers want/ need in order to remain productive.
Save on Storage Costs
Warehousing is often a variable cost, which means, it fluctuates based on how much products you keep in store. If you store too many products or end up with a product that is difficult to sell, your storage costs will go up. Try to analyze the number of products you sell per day, for example, if you are a supermarket owner, and you have a box of 50 soda beverages and your aim is to sell each one by the end of the day. It is important to report that in order to know how much of the products you need in order to be profitable before investing and wasting money and products.
Inventory Management Improves Cash Flow
Not only does good inventory management save you money, it also improves cash flow in other ways. Remember, inventory is the product that you have likely to have already paid for with cash (checks and electronic transfers as cash too), and you are going to sell those products for cash, but, while its sitting in your stockroom, it is definitely not cash.
This is why it is important to factor inventory into your cash flow management. It affects both sales (by dictating how much you can sell), and expenses ( by dictating what you have to buy). Both of these things factor heavily into how much cash you have on hand. Better inventory management leads to a better cash flow management.
When you have a solid inventory system, you will know exactly how much products you have left, and based on sales, you can observe when you will run out and make sure you replace it on time or automatically send a message to your supplier in order to deliver a new bulk straight to your business.
Inventory Management Techniques
Inventory management is a highly customizable part of doing business. The optimal system is different for each company. However, every business should strive to remove human error from Inventory management as much as possible. If you run your business with Figment, Inventory management is already built in.
- Set Par Levels
Make inventory management easier by setting “par levels” for each of your products. Par levels are the minimum amount of product that must be on hand at all times. When your inventory stock sends you the red alert, you know you are due for new stock directly from your supplier.
You would typically order the minimum quantity that will get you back above par. Par levels will vary by product based on how quickly the products sell and how long it takes to get back in stock. If you are using Figment, an automated message will be sent to your supplier in order to always be in stock.
Although it requires some research and decision- making, setting par levels will systemize the process of ordering. Noy only will this make it easier for you to make decisions but will allow your staff to make decisions on your behalf.
- First- In First- Out
“First- in, first out” is an important factor of inventory management. This means your oldest stock (first- in) gets sold first (first- out), not your newest stock. This is important for perishable products so you don’t end up with unsellable spoilage.
In order to manage a FIFO system, you will need an organized warehouse. This means adding new products from the back or otherwise making sure old product stays at the front.
For more information, please visit us at www.figmentech.com.