4 Key Questions To Ask Retailers For Efficient Inventory Management
Updated: Feb 12, 2022
Is having inventory a waste to business? Or is it a safety net for business so that they have enough stock to supply to customers?
One of the biggest issues for retailers in order fulfillment is that there is not enough or too much stock in the warehouse. Why did it happen?
Overestimate market needs? Overproduction? Poor quality of products due to lack of quality control? No systematic way to manage inventory? Fluctuation in sales order?
This led to businesses stuck with their cash flow, bearing the higher cost to invest and manage warehouses, and putting businesses at the risk of depreciation of raw material and inventory value.
How could we manage these inventories more effectively? Using these 4 key questions, it will guide you to a more cost-saving, resources-saving way to manage inventory.
1. Implement demand-based control
Does your inventory have a peak season? For example, for retailers who sell hampers, the festive season like Chinese New Year, is the peak season. Allow a higher volume of raw material to be purchased during the peak season. During non-peak season, purchasing and storing the materials must be strictly controlled.
2. Determine the baseline of inventory level
Do you know what is the minimum and maximum quantity of each of your stock? There is no hard or fast rule to answer this. It depends on the market needs, business model, production turnover time etc. If the product is highly popular, you may set your baseline to have a minimum of 10 products in your warehouse. Whereas for your less popular products, you may keep only 1 product as a safety net. If your supplier or your own factory could supply the products in a shorter timeframe, you can even consider keeping less stock in the warehouse, and only order the stock after getting the purchase confirmation from customers.
3. Set the mechanism when to restock
As you have already decided on your baseline of your inventory level, when do you decide to restock, and when not to? Do you have an expert to decide on this, or are you using system or tools to decide on your behalf? And, of course, without data, it is even harder to make the right purchasing decision. The best advice is to get your data right, get your merchandising team to analyze the patterns, and set a benchmark, so that if your inventory level falls under the benchmark, your system could automatically start the process of purchasing.
4. Decide how many to restock
When your raw materials or stock have almost reached the minimum baseline, it is crucial to restock sufficiently, to return your inventory to a healthy level, and of course, it must not exceed the maximum baseline you have set too.
When these 4 steps are followed, even when we face fluctuation in market needs, we are able to cope with the changes and make the prompt decision to minimize the issue of under or over-stock.
Inventory management is a crucial daily decision to make. Why not understand more on how Business Intelligence could help you to manage and track your inventory data with just a few clicks?
Together we make inventory management easy.