What Is Inventory Management?
Inventory management means handling how you store, order, and sell your stuff.
If you are in the wholesale distribution industry, getting inventory management right with an effective inventory technique is crucial for boosting your profits.
Think of it as finding the right balance: having enough items to sell to customers, but not so much that you are wasting money.
But, many new companies struggle with this. (Continue reading if you are one of them)
Some end up with too little stock and lose customers, while others end up with too much, which can slow down their cash flow.
In this blog, we will explore together how good inventory management can really help your business. We also give you some simple tips to keep your distribution management running smoothly.
6 Benefits of Inventory Management for Wholesale Distribution
Improve cash flow
Meet customer demand consistently
Reduce holding cost
Enhance efficiency and productivity
Better decision making
Minimize the risk of stockouts
Improve Cash Flow
Effective inventory management avoids any unnecessary investment in slow-moving stock.
By effectively managing inventory in wholesale distribution, you ensure a consistent supply of products for customer orders while keeping inventory at an optimal level based on their demand.
This inventory management eliminates overstocking and understocking issues, freeing up capital for other business aspects like marketing and product line development.
While your business is also able to maintain a steady influx of revenue from popular product sales.
Meet Customer Demand Consistently
Effective inventory management keeps your customers happy and coming back for more.
When you have effective inventory management, you make sure that popular products are consistently in stock and ready to ship whenever customers need them.
Remember, customers don't have to wait for you to restock; they can turn to other vendors instead.
So, keep your inventory management effective for timely order fulfillment. This not only leads to customer satisfaction but also builds higher trust in your business compared to your competitors.
Reduce Holding Costs
Inventory storage costs money. Warehousing, shelving, and insurance expenses can add up over time.
By maintaining optimal inventory levels with effective inventory management, you can minimize these holding costs.
Additionally, good inventory management helps prevent obsolete or expired stock, which turns into waste and results in significant financial losses.
Find the best inventory management techniques for your business here.
Enhance Efficiency and Productivity
Inventory management encompasses more than just inventory control; It involves full traceability and visibility of stock movements.
Regardless of incoming or outgoing inventories, all items are allocated to specific warehouse locations and their movements will be logged in real-time.
By having these accurate, real-time stock move reports on hand, the time taken to locate products for picking and packing is reduced, speeding up the entire order processing.
That is why effective inventory management is important as it improves warehouse efficiency and productivity, thereby impacting the entire supply chain positively.
Better Decision Making
When you got your inventory managed effectively, you hold accurate and up-to-date inventory reports at your fingertips.
Accurate, real-time inventory reports provide valuable insights into your current stock quantities, order histories, and demand patterns.
So, when it comes to demand forecasting, you are on point!
With that, you pinpoint exactly which items drive the most sales and know how much to restock in each period, all while minimizing unnecessary expenses!
Minimize the Risk of Stockouts
You definitely want to avoid having too much stock, but running out of popular products is just as bad.
Frequent stockouts can lead to unhappy customers, lost sales, and a bad reputation for your business.
That is where effective inventory management comes in, ensuring optimal stock levels, reducing the risk of stockouts, and minimizing sales opportunities.
This means you won't keep your customers waiting and frustrated, which could send them running to your competitors. It's all about finding that balance!
In summary, inventory management is more than just product organization; it's a strategic approach that significantly influences your business's overall financial performance.
By optimizing your inventory levels, you can improve cash flow, satisfy customers, cut costs, and make well-informed decisions, resulting in a successful and prosperous business.
How To Manage Your Inventory In 7 Steps
1. Define Your Inventory Costing Methods
Designate specific areas for different product categories or types. Organize your inventory in a way that facilitates easy access and quick retrieval. Consider implementing the First-In-First-Out (FIFO) method for perishable or time-sensitive items.
2. Determine Ways To Track Inventory Data
Choose an inventory tracking system that suits your business need to keep a close eye on your inventory level and product demand. You can use manual methods such as spreadsheets or implement an inventory management Odoo ERP software that automates inventory tracking, data entry, and reports all in real time.
3. Adopt an Internal SKU System
Don’t let those product codes confuse you! Create a standardized system to assign unique Stock Keeping Units (SKUs) to each product. SKUs help identify and categorize items efficiently, reducing confusion and errors in inventory management.
4. Data-driven Forecasting
Utilize accurate historical sales data, market trends, and other relevant factors to forecast future demand. Accurate demand forecasting helps you order inventory in appropriate quantities and have the right quantities of stock at the right time, avoiding overstocking or stockouts that affect cash flow negatively.
5. Establish Inventory Receiving Procedures
When inventory arrives, make sure you're on top of it! Promptly receive and check shipments against your purchase orders. Accuracy is key here to avoid over-ordering or dealing with false backorders.
6. Monitor Your Inventory Levels
Count, count, and count some more! Regularly monitor your inventory through cycle counts and spot checks to catch any discrepancies early. This helps you avoid bigger problems down the line and keeps your inventory data accurate.
By implementing these 7 steps in your inventory management, you can bring numerous benefits to your business including improved cash flow, cut costs, and enhanced overall business efficiency.
To achieve that, you definitely need reliable inventory management software that can cater to your business needs. That way, it can streamline all inventory-related processes where you can ensure you always fulfill customers' orders without holding excessive stocks.
Want to know how our inventory management ERP system can help you? Talk to us now!