In any industry and kind of business, managing the inventory well is sure to help you reduce a significant amount of your expenses. It can be a challenge though, due to the factors that you need to take in especially when it’s accompanied by the pressure of reducing costs.
The impact of your inventory costs is about 20%-30% of your business. Thus, it is only practical to begin cutting costs with it. To do so, you must first understand the cost of your warehouse inventory.
The cost of inventory is the cost of holding and storing items or products over a certain period of time. Types of inventory costs include:
Costs of capital – this is how much money you used to purchase stuff in your warehouse without the return-of-investment yet;
Costs of obsolescence – costs coming from excess stock that has not been sold over a certain time period;
Taxes and insurances;
Out of stock costs
Track down these things first, then proceed to cut down. These are some great ideas to reduce warehouse inventory costs:
Enhance order management
Managing orders is an integral part of inventory management. Managing orders mean keeping track of orders and organizing data all about your customers.
In doing so, you can now determine what quantity of items you need to fulfill your customers’ orders in a timely manner to meet their expectations.
You may choose to partner with a supplier depending on your industry, to keep stocks under control. In relation to this, you can also use a perpetual inventory system. That allows you to keep an eye on your purchases and sales in real-time and automatically order stock to preserve a healthy inventory.
Control your excesses
One of the pains of inventory management is excess stocks. They are a perpetual source of extra costs and in most cases bring more expenses than gains in the long-term.
Here are some practical means to get rid of excess items in your inventory:
- Donate – a win-win situation as you dispose of your excess stock to help those in need.
- Return to supplier – Return the item to your supplier and maybe even get a refund or a discount on your future orders. Don’t mind covering the shipping costs as it can result to a smart investment.
- Trade with competitors – Find a competitor that is in search of your excess stock and see if you can have a fair exchange with something from their inventory that you can profit from.
- Transfer to another facility – for those that have other warehouses, see if another warehouse needs your inventory. Through this, you recover most of your investment.
- Liquidate – Contact a liquidator and sell your excess stock under market price.
Make data-driven choices
Owners of industrial spaces also take advantage of the latest technology. Use inventory management software to make it easier for your workers to do inventory so you can collect data for future predictions that you can use to be more efficient.
Lower shipping costs
Shipping costs also contribute to a lot of your inventory expenses. Try negotiating with your carriers and see what you can do to lower the shipping cost.
In finality, you need to effectively manage your inventory to lessen it’s contributions to your expenses by optimizing your order process, having accurate data, taking care of excess stock and making the possible arrangements to lower shipping costs.
Darrent is a digital marketer, tech enthusiast & blogger.