If you are a business owner, particularly in the warehousing and logistics industry the words ‘inventory management’ can bring you out in a cold sweat. To different organisations, inventory management can mean many different things. If the first thing that comes to mind is large amounts of downtime and tedious manual counting, then we believe it may be time for your business to review your inventory management processes. It is common for businesses to reconcile their inventory levels at the end of the year by ‘counting up’ their physical products and this can require a lot of downtime and manual labour. With Sage warehouse management techniques, we believe you can maximise the efficiency of this process as well as save money.
As trends and advances in technologies develop, it is vital for organisations to realise how important effective inventory management is. If we think about inventory management in its most simple terms, your held inventory is a placeholder for your company’s money. Money that you have paid out for inventory, will be eventually recovered, but while that inventory is sat in your warehouse it is just a debit in your company’s bank account.
Holding inventory can tie up significant amounts of your company’s cash – and there are also indirect costs associated with managing high levels of stock. That is why effective and efficient inventory management is crucial for a growing organisation and just like cash flow, it can make or break your business.
The good news is, it is not too late to get the right inventory management techniques implemented.
Why inventory management is important?
Before exploring the intricacies of inventory management, it is important for businesses to understand where you are now in regard to the management of your inventory. Are you just about managing to ensure you have enough inventory on hand and in movement to meet your customer demand or are you happy that your business is achieving a successful movement of inventory?
Sage warehouse management techniques can help save you money.
1. Avoid spoilage
If you are selling perishable products that have an expiry date, for example, food or makeup, then there is a high chance that the products will be spoilt if they are not sold in time. That combined with legal requirements of selling certain products within a set time frame means that without a system like Sage warehouse management, you run the risk of unnecessary spoilage.
2. Avoid deadstock
Deadstock means that you can no longer sell those items. This doesn’t always necessarily have to be down to an expiry date. There are many other reasons you can have dead stock such as your items being out of season, out of style, no longer required or otherwise becoming obsolete.
With Sage warehouse management technology, you can have a system in place that acts as a centralised hub for all your inventory information. This means you can access data in real-time, anywhere; all at your fingertips. Sage warehouse management helps you to avoid dead stock by enabling you to access vital trend information like what products are selling well and which are not, allowing you to make decisions regarding price reductions or increases. Information and alerts on stock levels and pending incoming stock can also help you drive efficiency and more importantly, save money.
3. Save on storage costs
The warehousing industry can often hold variable costs for storage, meaning it fluctuates based on how much product you are holding.
By storing excess inventory and ending up with items that are difficult to shift, your storage costs will naturally increase due to holding stock. Sage warehouse management offers real-time data on any stock movements, adjustments or change and is easily tracked and updated. This pinpoint accuracy allows goods in and goods out to move fluidly and eliminates duplication of tasks, increasing accuracy and validating data in real-time to reduce errors.
Inventory management improves cash flow
Not only is effective inventory management more cost-efficient, but it also improves cash flow in other ways, too. It is important to remember that you paid out cash for your inventory, and while it is there to be sold as revenue, while it’s sitting in your warehouse it is definitely not cash.
This is why it’s important to factor inventory into your cash flow management. Inventory directly affects sales (by dictating how much you can sell) and expenses (by dictating what you have to buy), and both of these elements factor heavily into how much cash you have on hand. In short, better inventory management leads to better cash flow management.
When you have a solid inventory system like Sage warehouse management, you’ll know exactly how much inventory you have, and based on sales data you can predict when that inventory will need to be replenished to make sure you replace it on time. Not only does this help ensure you don’t lose sales (critical for cash flow), but it also lets you plan ahead so you can ensure you have enough cash set aside for purchasing more inventory.
In our next blog, we will discuss different management techniques and strategy specific goals to implement within your organisation. Remember, money spent on inventory is money that is not spent on growth. To ensure you manage it wisely, contact Bit Systems to see how our inventory management systems can transform your business today.