Setting up, setting up and maintaining inventory management is a big job. But if it's all set, you'll benefit from it for a long time. Good inventory management reduces your inventory costs and can even increase profits. In this article, we share 5 tips for optimizing your inventory management.

The risks of inventory

Having inventory involves risks and costs. You can divide these into three categories, also known as the 3 Rs. We'll highlight all three of them below and give you a little tip on how to limit costs and risks.

1. Space costs

These are all the additional costs you incur to store your inventory. Think of renting a warehouse and the associated energy costs. But also maintenance of machines that are used when moving inventory.

Sales space is always more expensive than storage space. So always consider renting extra storage at a physical store. It gives you the opportunity to present more product range in the store. But you can also purchase a large bulk inventory, which is in most cases cheaper.

2. Interest costs

Inventory is an investment. If you finance this investment, you will have to deal with interest costs anyway. But even without financing, you have to deal with interest costs. The assets are tied up and inventory yields nothing as long as it is not sold. It can even cost money if you don't get the inventory sold.

Make sure you buy just enough inventory. And that you know how long it takes for all products to be sold. This way, you can easily calculate what it will cost you (space, interest and value) and what it will bring you.

3. Risk costs

This is the cost of the risks associated with inventory. Like food that's out of date, a new smartphone coming out or the end of a clothing season. These are all situations that affect the value of your inventory.

Also, pay close attention to what your competitors are doing. If they offer the same product for less, you should actually go along with it to sell your inventory.

Tip 1: Inventory management completely online and in real time

To make it easy for yourself, it's nice to keep track of your inventory online. You then always have it at your disposal and can't just lose it. Nowadays, you have various inventory management apps and software that make it easy to keep an overview. From a small entrepreneur to an entrepreneur in a national chain, there is suitable software for every type of company.

Do you have a physical store and a webshop? Then it's nice that the inventory is updated in real time with your cash register system. Is this not the case? Then it is possible that someone buys one last item in the store and half an hour later someone orders exactly this item in the webshop. Of course, this can happen once in a while, but you don't want to disappoint every time. People are less likely to order from you because they're not sure if they'll get the order.

Examples of inventory management software:

• Silvasoft
• AFAS Order Management
• Exact Online Trading
• Webship

Tip 2: Make an ABC analysis

If you're already busy managing inventory, you're probably familiar with the ABC analysis. This is a method for identifying which products generate the most and least turnover. You have A, B, and C products.

A-products:

These are the products that generate the most turnover. These are the company's main products, the core business. The 80/20 rule is often used here. This means that 20% of the range accounts for 80% of the turnover.

B products:

These are products that are part of the main products. They are often ordered in combination with the main product or as a reorder. This often involves 30% of the products and 15% of the total turnover.

C products:

This is the group that generates the least turnover. This concerns 50% of the products and only 5% of the total turnover. These are products that are rarely ordered.

By determining which products receive an A, B or C status, you can organize your warehouse efficiently. And you now know which products to focus on, because they generate the most sales. This can boost your sales, marketing, and overall presentation.

Tip 3: Maintain a good relationship with your suppliers

First of all, it's good to see how the relationship is with your current suppliers. Can you trust your suppliers and do you have good contact? Then that's all right! But it can also happen that it does not run so smoothly. You may wonder if this contributes to the effectiveness of your inventory management. There is a significant optimization to be made here. Look for nice suppliers who keep their agreements.

Are you completely satisfied with your suppliers? Make sure you work with them. Can you indicate early on when you are going to place your orders or is there regularity? Then, in exchange for that certainty, you can make good price agreements. Or maybe the delivery time can be shortened. In the long run, this can give you a competitive advantage.

Tip 4: Plan for different scenarios

When you work with stocks, you also depend on them. It is therefore possible that you have obsolete inventory or that your inventory sells out too quickly. And what do you do then? Preparation is half the work! If you've already come up with a plan, you can switch quickly if one of these situations occurs.

Selling obsolete inventory

Do you still have inventory that isn't selling or is becoming less valuable? Then think about how you can still sell this inventory before it's really too late.

You can give a discount on the product. Or you can give away the product if you order over a certain amount. This allows you to increase the order value even more, so you can still make a profit.

Inventory sold out too quickly, but there is a lot of demand

Have you ordered too little stock and is your product sold out in no time? To stay ahead of your competitors, you have to come up with something. If you are still able to order the product, you can gift a product with the order as a compensation. The delivery time may be longer, but you will give a free product or discount in return.

Stockless business model

Do you have no space for (extra) stock? For some products, you can set up an inventory-free business model. Think about what Boldking and On That Ass do. They work with a subscription structure. Every month, their customers receive razor blades and boxer shorts sent home. They know exactly how much they have to send each month and what the costs and revenues are.

Is your product perfect for this too? Then you could do this via dropshipping. This means that the manufacturer or supplier manages the inventory. They send the order directly to the end customer. As a result, you have no inventory costs. Only the shipping costs and costs of services provided by the supplier. This is usually cheaper than incurring all the costs yourself.

Tip 5: Invest in inventory and management

After this article, are you ready to optimize your inventory management? Great! You really want to do it right now, because this can increase your profits. However, redesigning your warehouse, making an ABC analysis and purchasing and setting up new software costs time and money. Time and money that you don't have immediately available at the moment.

Fortunately, there are plenty of ways to finance your investment. One of these ways is a business loan via direct lending. One business loan with Swishfund from €3,000 to €1,000.00 has been arranged within three days. Curious how this works exactly? Check it out here.

Do you still have no idea which form of financing suits your company? We have created an e-book in which we highlight various alternative forms of financing. Including the pros and cons. You can download the e-book here.

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