The way your business manages inventory can have a huge impact on its success. But how do you know if you’re doing a good job or not?
Thankfully, if you learn more about the inventory management industry, you’ll be able to develop a better grasp on how well your business is doing.
Keep reading to learn 5 shocking and interesting facts about the world of inventory management. Read until the end and you’ll know how to improve the inventory management processes in your own business.
1. Warehouse Space Is Relatively Cheap
Because so many people are ordering items online, it means that there’s been a large investment in warehouse space. This has kept warehouse rental prices relatively low.
If a business experiences a sudden explosion in growth, it may not have to spend a ton of money on storing items. This means that it can maintain good profit margins as it grows and orders more products only to meet demand.
Of course, certain warehouse locations are going to cost more than others. The variables that affect warehouse costs tend to be its location and the services it offers.
If you want to keep warehouse costs as low as possible, try to look at a wide range of warehouse locations. Eventually, you should find one that is affordable and meets your needs.
2. A Significant Amount of Money Is in Inventory
One of the main reasons a company has too much money tied into its inventory is because it’s done a bad job of forecasting orders. They expect high demand when in reality, the demand is quite low. This can mean that the products take longer to sell, or that they might not sell at all.
Another reason can be suppliers who only cater to clients willing to order a certain amount of items at a given time. In other words, they may have a large minimum requirement for ordering. For a small business that’s getting started, this can create a lot of problems as it can hurt cash flow.
A business in this situation, though, may have to work with a specific supplier. This is because the supplier in question might be the only one that can meet the needs of the business.
There is the option of renegotiating the deal, but this might not pan out well if the supplier knows they don’t have a lot of competition.
3. Human Error Produces a Lot of Issues
If there are issues with inventory control in a business, it’s often due to human error. Human error means that someone might order more stock that was needed.
It can also lead to a situation where someone miscalculates the inventory levels. This can mean stock levels can be unexpectedly short, catching a business off guard.
You can overcome a lot of issues related to human error by using a computerized inventory system. One prime example of this is the use of a barcode system.
If a business uses a barcode system, it can reduce human errors associated with adding the stock to the system.
As soon as new products arrive, the person in charge will need to scan it. Following this, the product is then added to the inventory. When it is finally sold, it’s scanned again, so that it’s removed from the inventory.
The person in charge of managing inventory now has a more accurate outlook on the kinds of products that are selling and what they should replenish.
This can improve the finances of a business because the people in charge can make better decisions on the items that need ordering. Because improved data is now available, the person ordering stock will likely order items that’ll sell.
This is better than ordering items that are going to sit around in the warehouse for a long time. If you’d like to learn more about how software can improve the inventory control of a business, you can visit this website.
4. Poor Stock Management Hurts Company Reputation
The business world is a competitive one. If you do a poor job of managing your inventory, it can mean that you leave customers unhappy. So much so, that they might buy from a competitor instead.
This, of course, can hurt your reputation. Especially if the customer in question tells other people that your business “never” has items in stock.
The good news is that if a business uses an inventory control system, this problem is easy to solve.
The person in charge will know when inventory for a certain product is running low and can order more accordingly. This ensures that, outside of supplier issues, customers will always be able to buy certain products from your business.
5. Inventory Is Becoming More Diverse
Another interesting fact about the world of inventory management is that stock is becoming more diverse.
This is interesting because different kinds of products have different storage requirements. Innovations in the warehouse industry mean that dealing with a wide range of products isn’t much of a problem.
In fact, because warehouses can hold a wide range of products, it means that you can now offer a wider range of products. You won’t likely incur massive costs either. This helps if a business wants to expand into new product categories.
New innovations are also having a big impact on each stage of inventory control.
As alluded to earlier, new innovations are consistently affecting the inventory management process. The interesting thing, though, is each aspect of the process is getting innovated to improve efficiency.
For instance, some inventory management systems are using radio tags instead of barcodes. Some companies are even trying to reduce warehouse reliance, by requesting that customers ship items to stores.
Machine learning is also used to predict how seasonal demand will affect inventory levels. This can provide intelligence on how businesses should react as a result, in relation to item orders.
Is Inventory Management Exciting?
The world is developing a huge reliance on e-commerce and various forms of online purchasing. But for this all to work well, there is a need for effective inventory management systems.
This post has explored some of the interesting facts about inventory management. As you can see, there are many issues that are plaguing this aspect of business. But a lot of companies are working on solutions.
With that said, if you run a business that relies on inventory, consider using what you’ve learned in this post. In doing so, you might be able to make your company more profitable and thus, more competitive.
Interested in how you can reduce risk in your business? Check out this post for some tips!