3 ways your inventory is shrinking your profits
March 6, 2019
If you’re a business owner looking at everything going on in the world right now, from shifting international relations to rising customer expectations to emerging technological innovations, one thing is clear: the business landscape is becoming more and more complex.
Some of these changes can present new challenges, some new opportunities, but, by and large, they will make your business harder to manage as you grow. The reason for this is that every new process or product introduced can touch multiple parts of your operations, so every additional piece increases the complexity exponentially. We like to call this the “World of Multiples”.
Say you’re a manufacturer looking to add a new product. This can require a number of operational changes: new facilities to store parts and products, new processes to complete the assembly, new supplier relationships, maybe a new sales channel etc. Every new process has the potential to cost you money and create errors and confusion, and without the means to manage this, it’s easy to become overwhelmed. Your fulfillment process can become chaos, your customers suffer, and the costs pile up.
Every new process has the potential to cost you money and create errors and confusion, and without the means to manage this, it’s easy to become overwhelmed.
To grow and manage a sustainable business, you need to have technologies working to make your business simpler. If you’re using the same method for tracking your inventory as you were the day you opened for business, be it Excel, QuickBooks or even pen and paper, your inventory might be costing you more than you realize.
In this complex business landscape, here are 3 ways your inventory can work against you instead of for you:
- The Cost: Over/Under Stock – If your forecasting process is you walking into your warehouse and guessing how much stock you’ll need for the next period, you’re likely to find yourself with too much or too little inventory in stock. And both scenarios are likely to cost you money. Too much inventory puts a strain on your facilities and increases handling costs, while too little inventory can mean stockouts and dissatisfied customers.
- The Culprit – A poor forecasting process
- The Cost: Inventory Waste – While it might seem like a cost of doing business, if you don’t have a tight handle on the materials needed for assembling your products, you’ll find that much of it is going to waste. Not only is this a loss of capital and revenue, but you’ll even have to pay recycling and disposal costs!
- The Culprit – Lack of real-time inventory data.
- The Cost: Inventory Shrinkage – When the stock on the shelves is less than the last count, it means you’ve lost inventory along the way. This might have been caused by administrative errors, or inventory being misplaced, damaged or stolen. But whatever the cause, missing inventory is simply money down the drain.
- The Culprit – Sub-standard tracking and controls.
There are steps that you can take to limit and even eliminate these inventory costs, but, in a general sense, the key is to have a system that offers seamless tracking, real-time information and complete visibility into your supply chain.
Technologies like Veem and AdvancePro serve the same end: to make a big world a little smaller and a complex landscape a little simpler, so you can be agile, make business decisions based on accurate data and simplify your life. To scale your business without adding complexity.
Click here to find out how AdvancePro can help you cut down on your inventory costs and grow your business.
Michael is the Director of Marketing and Communications at AdvancePro.