Inventory management is balancing demand and supply so that the right levels of products can be kept while maximizing both sales and profits. In this article, let’s see about the benefits of inventory tracking for a business.
Inventory management is needed for every business to keep inventory at the optimal level. The process involves everything from purchasing stock to storing it, selling it as per order or demand, and finally ordering more when inventory starts to run low. Inventory tracking ensures everything that a business will need to run smoothly is available at the right time. Appropriate inventory levels ensure sales obligations are met and costs are minimized. An inventory system can be managed with some simple tools. It can be recorded in an Excel spreadsheet or written in a notepad with a pen. The track can be maintained daily, weekly, or monthly.
Different types of businesses need to manage their inventories differently. Some of the features are similar for each type of business-
Real-Time Inventory Recording
To keep track of all your stocks regularly, real-time inventory tracking is necessary. This method is much needed for businesses with high turnover. The system will allow them to sell more quickly and reorder stock before it is too late. Moreover, you will be aware before a particular item runs low. By following the process, you will not miss out on sales.
Inventory Analytics
Proper track of inventory will allow the owners to identify an overview of everything going in and out regularly. Moreover, the process will help to find out places where inventory management should be improved. For example, if you are losing money on unsold items, it can be lessened through efficient inventory management.
Conducting Stock Count
An important part of the inventory management system is stock counting. To prevent any confusion, record every item individually in separate count sheets.
Inventory tracking helps business owners and managers get a better idea of stocks, which will be needed after a certain time. In addition to that, the demand can be predicted without having too many leftover or unsold items.
Is Inventory Tracing Necessary For Every Business?
The benefits of inventory management depend on the type of business you run and the size and amount of stock you deal with. For example, supermarkets or restaurants that sell different types of perishable items may achieve remarkable cost reduction benefits by executing an effective inventory management system. If you want to know about the system in detail, search on trackahaul.com. Some of the major benefits are discussed below-
Waste Cost Reduction
If you track inventories regularly, it will help you reduce costs brought on from excess stock that cannot be sold. Waste cost can be minimized by knowing the optimal ordering amount.
An example is given to explain the concept in a better way- Imagine you run a grocery shop. Ordering more items than usual will turn into waste as soon as they reach their expiration date. If the waste cost can be reduced without losing out on sales, more cash will be saved. This cost reduction method is not applicable for perishable goods only; reduced direct cost is beneficial for every business.
A good example of non-perishable items can be a clothing store. If most of the winter clothes remain unsold by the end of the season, then the stocks will be kept until the following year or will be sold at the season end at a lower price. Any of these situations cannot bring any profit to the business.
Minimum Storage Cost
Another cost-related to inventories directly is storage cost. Inventory cannot be stored properly without warehousing, monitoring, and upgrading. Furthermore, some of the inventory needs to be kept frozen to keep fresh. Mostly, these jobs are done by different staff who manage everything constantly. So, the staff’s salary, warehouse rent (if not owned by the business owner), and electricity bill are all counted as inventory storage costs.
If the required inventory amount can be identified, some of the costs can be reduced at this level. For example, smaller warehouse space and comparatively less electricity will be required to store a smaller amount of inventories.
Sales Maximization
Excess stock can turn into waste. Similarly, supply shortages can also result in losses for the business. When you are out of stock, your business becomes incapable of fulfilling demand and runs the risk of losing sales opportunities. However, the system will help you identify the required inventory amount and you will not run out of stocks.
Free Up Cash
If more money is stuck in the inventory than necessary, it means it cannot be used for other business works, such as marketing or research. An efficient inventory management system will help the owner to identify the exact amount of any particular item that will be needed at the end of each business period. If everything is purchased in the right proportion, the remaining amount of money can be used to cover other costs.
Increase Customer Satisfaction
A business can lose one of its potential regular customers when the customer wants to buy something and the item is not available in the stock. If you can analyze the demand precisely, you will be less likely to run out of products.
Furthermore, having sufficient stock means your customers will have a better experience with your business. There will be less chance of customer disappointment due to product unavailability.
Increased Productivity
If you spend less time managing stocks, productivity will undoubtedly increase as compared to the past. Inventory tracking will help in keeping your inventory organized, allowing you to make better and faster decisions.
After reading this article, you will realize that if inventory can be traced properly, it can save both costs and time effectively. The benefits brought by reducing inventory cost, enhance the opportunity to make more profit and save more for further investment.