Commerce is mathematical and stock, inventory and inventory management is vital to any business. You can have the best advertising campaigns, the best content, social marketing and email marketing campaigns, but if you don’t know how to manage your merchandise inventory, you can lose sales and customers or invest in merchandise that won’t sell. You must have an inventory management strategy to optimize sales and profits. For these reasons, FR Logistics will tell you what inventory management is and how you can effectively control your shop’s stock.
What is stock management?
Inventory management is the tracking of the goods in stock, identifying their weight, size, quantity and location.
The aim is to minimize the costs associated with inventory management, allowing you to know when it is time to replenish your inventory by purchasing or producing new items.
What is inventory management?
The terms “inventory control” and “inventory management” can be used interchangeably. Having inventory control means monitoring stock on hand through efficient processes, and this is made much easier by adopting a centralized management system.
Why is inventory management important?
Proper inventory management ensures that your stock levels are in line with customer demand, protecting you from potential financial losses. After all:
- If you don’t have enough stock, you run the risk of not meeting demand and losing sales.
- Conversely, if you have too much stock, you risk losing money by buying products that don’t sell.
But that is not all. Effective inventory management benefits your business in other ways.
Benefits of effective inventory management
Avoid spoilage of goods
Do you sell products with an expiry date, such as foodstuffs or make-up? There is a real possibility of spoilage if you don’t dispose of them in time. Effective inventory management helps you avoid unnecessary waste.
Some products may remain in stock if they don’t sell because they are unsuitable for the season, out of fashion or unattractive to the public. By adopting a smart strategy, you can avoid this costly inventory mistake.
Saving on warehouse costs
Warehouse costs are usually variable and proportional to the amount of products in stock. If the supply is oversupplied or the product is difficult to sell, storage costs increase. If you avoid these situations, you will save money.
Proper stock management improves cash flow
Proper inventory management not only rationalizes costs, but also contributes in other ways to increasing cash flow. Remember: inventory is made up of goods that you have probably already paid for in cash (including cheques and transfers). But as long as the goods remain unsold, they do not equal cash.
Inventory is therefore an element to consider in cash flow management, as it directly influences:
- Sales (determines how much you can sell).
- Expenses (determines how much you have to buy).
Both factors affect working capital. In short: the more effectively you manage your inventory, the more liquidity you will have.
By implementing a solid stock and inventory management system, you will know the quantities of product on hand, accurately and in real time. Based on sales, you will be able to forecast and calculate when a product will run out, so you can reorder it in time. This mechanism will help you avoid losing sales, which is crucial for cash flow. It will also allow you to plan supplies by reserving sufficient financial resources.