Any business owner knows the importance of maintaining an effective inventory. Without managing and controlling the inflow and outflow of stocks, a business cannot stabilize itself as a successful one. Many retailers are still unaware of why effective inventory management is important, and this article will help understand the benefits of inventory management!
Before we jump into the core of the matter, let us first look at inventory management and how it helps your business.
Inventory Management – How much do you Know?
Out-of-stock situations are not a rarity, but they should be definitely avoided.
Customers inquiring from your business and then getting a response that an out-of-stock item is considered a bad experience. Unfortunately, 91% of customers who experience this won’t engage with a business again, driving them to your competitors.
Inventory management boosts efficiency.
This is where inventory management steps in and saves the day. Inventory management is all about keeping track of your company’s inventories, right from the raw materials to the finished product. The processes involved in inventory management include storage, usage, and, finally, inventory sales.
A shortage of raw materials or even processed goods is not very favorable, given that they create demand and chaos. As a retailer or a business owner, you must invest in an inventory management system. You might think inventory is important, but the answer lies in the fact that you might face a cash flow shortage without a proper inventory management system.
You might own a small business, wondering how or why inventory management is important for you. Businesses of all sizes and standards need to implement a powerful inventory management system. There are numerous effective inventory management systems that help owners and retailers to get hold of their stocks and manage them productively.
There are two major methods in inventory management – Just-in-time (JIT) and Material Requirement Planning (MRP). Depending on the type of business and the complexity of their inventory chains, one can choose the suitable method for them and go ahead with that.
Why Effective Inventory Management is Important for Your Business
One of the major reasons effective inventory management is important is that it helps you deliver what your customers ask for at the right time. Also, the lack of proper inventory management might cause an overflow of stocks, thus leading to stagnant situations.
If we think of the benefits of inventory management, there are numerous ones. Here are the top 10 reasons you should opt for a good inventory management system.
1. Deliver your Orders Accurately
One of the biggest drawbacks of not having a functional inventory management system is the failure of proper delivery of orders to your customers. It’s not just about losing revenue but also about a bad reputation.
If you are keen on keeping your service honest and reliable, you must not falter in your responsibilities. With a proper inventory management system, you can promise your customers timely delivery and good customer service, as you will be aware of the state of your stocks in the warehouse.
2. Cut on Storage Costs
Inventory planning and control are not just about storing, processing, and delivering your goods perfectly but also about planning and forecasting your needs in terms of inventories. When your inventory management skills are good and up-to-date with the right amount of stock needed, you can cut storage costs.
When you maintain adequate inventories with the help of an inventory management system, you will not waste more storage space by stocking up extra inventories. This will reduce storage costs, thus enabling you to gain more revenues with reduced stocks.
3. No more Overstocking
When there is no proper data on how much stock is resting in your warehouse, you will not know whether you have adequate stocks or to stock up more. Many times, retailers dealing with perishable goods face problems related to overstocking. And, as mentioned, perishable goods don’t do good in your warehouse when they stay beyond a certain time period.
This is one of the main reasons why effective inventory management is important. If you are not aware of the inflow and outflow of goods from your warehouse, you might overstock.
Stock check and correct delivery is a critical aspect
4. Offer Regular Supply to your Customers
Out-of-stock situations are as bad, if not worse, as overstocking situations. Even if you have surplus goods, you can use them in the future. But if you are bare-handed in a desperate situation, it will be a rough spot for you.
Keeping track of your inventories will help you analyze and order the needed raw materials accordingly to ensure that your customers have a regular supply of goods and products.
5. Utilize Resources Effectively
Staying on top of the competition is not an easy task, especially when too many competitors. One of the easiest ways to improve your business is by including an inventory management system, as it will help you utilize resources effectively.
Be it material resources or human resources, the functioning of an inventory management system ensures that these resources are used substantially. With proper inventory planning, you can save time, space, and money while promising your customers a regular flow of supplies.
6. Reap Revenues
While it might seem repetitive, it is important to press upon the significance of inventory control and how it affects the revenue of a business. Superior operational efficiency can be achieved when things are in order, and that’s what an inventory management system exactly does for you.
By cutting down on storage costs, reducing wastage, and speeding up the processes involved in manufacturing, you can produce quality goods with increased efficiency. This paves the way for reaping higher benefits with reduced input.
7. Better Environmental Choices
Good inventory control choices lead to sustainable use of resources. In one way, when overstocking is avoided, a series of actions reduce waste disposed of. Less packaging, less plastic, less wastage, less pollution.
Also, a stuffed warehouse is not the best place for workers to move around. Too much physical strain can cause their health to dwindle, which is definitely not something any business owner wants.
8. Make Proper Use of your Warehouse
What’s worse than an overstocked warehouse? Well, it is an unorganized warehouse. Think of all the chaos that would ensure if you own a large warehouse that it is in disarray.
Implementing effective inventory management strategies lets you utilize the space in your warehouse properly. When the inventories are organized, packaging becomes a simple task, and you can save time.
9. Accounting is now made easier.
Maintaining the activities related to inventories, like checking their inflow, is a good part of inventory management. Naturally, when a well-managed inventory storage unit is easy to account for, compared to a chaotic warehouse.
As it is surprising, inventory planning plays a major role in determining cash flow. Also, a proper inventory management system helps the people working in the accounting department to have a peaceful day – when an order is established in the system, accounting is made a bit easier. It helps to use accounting software to automate the process and ensure accuracy. There are many to choose from, like this list of accounting systems, so it’s best to choose a tool that integrates with your existing inventory management system.
Start your Inventory management planning today!
One thing is for sure – the importance of inventory management cannot be overstated because it has many advantages. Also, work is made easier when a good inventory management tactic is in place. So what are you waiting for? Start planning your inventory control strategies today!