One of the best ways to increase the profits from your eCommerce business is to improve your inventory management. Even if you think you’ve got a good system for inventory management, there’s always room for improvement that could take your process and profits to a higher level.
Let’s look at 5 Ways You Can Optimize Your Inventory Management.
1. Set Minimum Stock Levels
If you have a customer that falls in love with your strawberry scented candles, you would hate to tell them that you either don’t have that scent, or it will take seven weeks to get it shipped to her. What does that add up to? A lost customer.
But, on the other hand, you don’t want to tie up all your cash and warehouse space with strawberry scented candle inventory.
There really is no perfect solution to the dilemma of balancing carrying costs against the need to have enough product on hand when an order comes in. You basically need to figure our how to have just enough stock but not too much. There is no way to achieve the perfect inventory level, but keeping minimum stock levels are a great way to approach this balance. By setting a minimum stock level for each item, it allows you to order new stock in before you run out. You can figure this out by basing your minimum stock on sales data combined with time needed to acquire new stock.
If you sell about one strawberry scented candle per week, then you need to order when you have seven (or eight) on hand, so the new stock will arrive before you sell out.
You need to optimize your indirect material as well. You should be using strategic sourcing software so you can get the best value out of your indirect material. A core element in optimizing your procurement is learning to take your supplier relationship from transnational to collaborative.
3. Track the supply chain
When you are able to make informed decisions about cost-cutting options, it makes keeping track of supply easier. Manufacturers will often deliver real-time updates, and logistic companies can provide the exact location of stock, and customer delivery services will tell you exactly when your goods have been delivered.
Even the use of new technology, like mobile devices, barcode scanners and tracking devices, contribute in a big way. The end benefit is that you can pinpoint problems as soon as they arise and implement contingencies quickly.
4. Minimize Shrinkage
Managing inventory that is empty can be one of the most frustrating aspects of inventory management. Shrinkage is basically damage, breakage, loss, and petty theft: which is why the strawberry scent isn’t on the shelf, even though your inventory says it should be.
Most of the time, businesses have an allowance for shrinkage. Maintaining the optimal inventory level may not be the best part of running your business, but it is one area where an investment of time can bring you big financial returns.
5. Find inefficiencies in your warehouse
There are many ways a business can improve inventory holding costs, whether products are stored in your own warehouse or with a third-party.
When you have tighter storage methods, more efficient layouts, and transfers of product between low-demand and high-demand warehouses, are all areas for experimentation that might lead to improvements.
Effectively utilizing space will also mean that you can take advantage of supplier discounts by ordering larger quantities of stock at appropriate times.