August 12, 2021Inventory
Scrutinizing your business with a fine-tooth comb to identify unnecessary costs is a key step when it comes to improving your profitability. But one area that is often overlooked is inventory.
There are plenty of improvements businesses can make when it comes to cutting inventory costs, and many strategies you can implement today to put more money into your pocket.
Simple ways to reduce the cost of inventory
If you’re thinking of cutting inventory costs you might be wondering how on earth you can achieve this.
Here are a few pointers to get you started:
- Ask your vendors if they’d be open to providing discounts for certain inventory they provide
- Search around to see if there are cheaper alternatives to the inventory you’re currently purchasing
- Ask yourself if you’re making a sufficient return on each item of inventory that you carry
- If your inventory purchases have a short shelf-life, make sure they enter and exit your facility as quickly as possible
Review your business processes
For more comprehensive strategies to reduce the cost of your inventory, start by reviewing and optimising your internal business processes. We’ve listed a few practical activities below.
Streamline your team
Whenever you bring on a new employee, that’s a new wage, superannuation, sick leave and holiday leave. Before making your first, second or tenth hire, consider automation.
For example, a cloud-based inventory management software might be able to take over the tasks of a new hire, at a fraction of the cost. Technologies like this can also drastically reduce costly human error and save your existing team an enormous amount of time that they might otherwise spend on manual tasks.
Get greater inventory visibility with management tools
Another strategy for cutting down your cost is to review the tools you have access to.
Inventory management software can help you see the big picture by providing you with visibility on all your inventory coming in and going out.
Inventory software enables you to maintain accurate stock levels at all times ensuring you always have enough stock to fulfil customer orders, while also eliminating excess stock and wastage.
Know your reorder point
Knowing when to reorder ensures you don’t over-order and risk waste or under-order and risk running out of stock when sales come in.
By accurately setting these reorder points, you can save money by reducing carrying costs on excessive stock, while also keeping your stock levels at an optimum level to maintain sales and not leave customers unable to buy your products.
Make use of excess stock
If you’ve forecasted incorrectly and now have excess stock, here are a few ways you can make use of it:
Bundle up your old stock with current best-sellers. This can put money back into your pocket.
Who doesn’t like free stuff? You can include products as a gift in orders over a certain amount of money. It’s a good way to make use of excess stock, while also creating goodwill with your customers.
Donate the goods to people or organizations that need them.
If you have the option, returning unused stock to your suppliers is a great way to get some of your payment back. Although you might do so at a loss, this lessens your loss on paper.
Streamline your inventory management with PencilPay
One final strategy to consider is streamlining the way your people manage your inventory. If you’re using several different technologies in your business, your team could be spending hours manually transferring data from one system to another. It’s not only a waste of time, but the labour is yet another inventory cost.
One way to streamline this process is to integrate your business tools so that information flows smoothly between them. If you’re a PencilPay customer, or you use any of the major inventory management systems, you’ll be pleased to know that Pencil integrates with both DEAR Systems and Unleashed.
Once a new customer is approved in Pencil, their records are auto-populated into your inventory system. Streamlining this process is yet another way to cut back on inventory costs and boost the profitability of your business.