The importance of a balanced inventory management system (infographic)

By Mariana Vieth
Small businesses supplying products to customers have a lot to deal with when managing inventory. You want to always have enough products to prevent backorders and dissatisfied customers. Yet you also don’t want to order too much inventory that leads to waste. Having a balanced inventory management system allows you to have the right number of products at the right times while running cost-efficient operations.

Issues with inefficient inventory levels
When talking about inefficient inventory levels, most business owners understand how important it is to keep the shelves stocked with the items that their customers want. It’s been found that 7 out of 10 shoppers will go to another company to make purchases if they find out an item is out of stock. Also, with the pandemic creating supply-chain disruptions, having reliable supply chain management is essential. Running out of products leads to missed sales, negative PR and a disruption to manufacturing processes.

However, overstocking on products can also have devastating effects on business operations. A McKinsey report found that 47% of executives made plans to increase their inventory levels of critical goods during 2020, according to FinancesOnline. Due to the worries of supply-chain disruptions, a small business may try to stock as much inventory as possible to have a steady supply as a backup just in case an item doesn’t become available in the near future. Too much inventory that isn’t moving off the shelves to fill orders takes up unnecessary warehouse space.

You are generating revenue from these shelved products. It also creates larger overhead costs when maintaining this inventory. If a product becomes obsolete, you have to spend money for disposal or offer discounts to get the products sold off.

Seeking out inventory management solutions allows you to strike an efficient balance your inventory levels. Here are a few strategies to implement to create a balanced inventory management system.

1) Create a visible supply chain
A major issue for small businesses is not knowing where products are in the process. Transportation delays, damaged products or products placed incorrectly on shelves may lead to inaccurate inventory levels inputted into warehouse and sales systems. Improving the visibility in the supply chain allows you to better track product movement from the moment it leaves the manufacturer to when it reaches the customer.

2) Promote inventory organization
You may find that products become lost when entering the warehouse. Workers may place the items on the wrong shelves or push boxes into the back where they are out of reach. You may end up reordering more inventory believing that you are running low only to later discover the missing shipments. Inventory organization helps you place the products in the right locations to fill orders. Popular items with higher turnover rates become placed in the front for easier access. You are able to locate and fill orders quickly, cutting down on warehouse overhead costs.

3) Invest in inventory management software
Inventory management software allows you to track the sales history of products. Understanding product transactions lets you identify purchasing trends so you can adjust how many products to order at a given time, so you can order more products by anticipating a spike in sales orders, and cut back on purchasing products that are slow movers.

You have different options on how to pursue better inventory management systems in your small business. Selecting one or several methods provides you with the proactive tools to have stable supply chain operations. You can pursue the solutions that best fit into your warehousing needs and that will help lower inventory costs while improving customer satisfaction.

Mariana Vieth is director of Marketing at WSI, a leading third-party logistics provider that specializes in fulfillment, chemical warehousing, transloading, transportation, and more. Having the 17th-largest 3PL network in the United States, spanning more than 15 million square feet, WSI delivers tailored end-to-end supply chain solutions to customers who seek to increase efficiency, shorten lead times, deliver more reliable performance, and minimize costs.

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