Whether you own an enormous warehouse or operate an online store, overseeing the constantly changing flow of items coming into and going out of your possession is the foundation of a profitable company. If you sell physical inventory, you must maintain that inventory. Coming out of the inventory management process with a clear perspective on how you might be able to improve sales is not a goal that’s difficult to achieve.
Location, Location, Location
Strong inventory management – with the help of intuitive inventory software – should help paint a clear picture of the regional dispersal of your products. When you see a complete portrait of where your inventory is going, you can identify which parts of the country – or state or region – are responsible for the majority of purchases of each specific item. This can be the basis for any structural changes in your regional ad campaigns, as it becomes clear which areas are saturated with your products, where they’re starting to catch on, and which areas simply aren’t buying.
Find Your 80/20 Sweet Spot
Every company has a particular product or set of products/services that gain the most business; this is where your main focus should lie. As David Kiger at Worldwide Express says, “Stick to your knitting. Really focus on that one thing that you think you can do well, and do it really, really well.”
So many businesses do 80 percent of their business through 20 percent of their product that the 80/20 sweet spot has become a cliché. Inventory management and analysis can help you see if this concept applies to your business, and if so, exactly where this ratio comes to life. Through inventory analysis, you can identify the products that are the foundation of your revenue – and which items are close enough behind that they’re worth stocking more of.
Getting stuck with inventory you can’t move – especially if you sell something like electronics, whose popularity wanes and retreats with the release of each new or updated item – is the dread of anyone who sells a physical product. The temptation is to overcompensate by stocking too little.
Unfilled orders and backlogs, however, can directly affect revenue by forcing you to buy in less bulk than is profitable to fill individual orders on the fly. It can affect revenue indirectly by aggravating potential repeat customers because they’re forced to wait for out-of-stock inventory to arrive. Additionally, it can take away from customers’ impulse purchases, which can be quite profitable.
Safety stock – or the amount of surplus inventory needed to mitigate risk – is directly impacted by your desire to eliminate backlog. Consistent, accurate inventory management is the key to staying within the comfort zone. The longer a sold-out item takes to replenish (depending on how well it sells, of course) is directly proportional to how prudently you have to overstock it. Inventory management is the key to this formula.
Inventory and sales are directly linked. The process of maintaining and analyzing your inventory is intertwined with your marketing and advertising strategies, as well. Master inventory management and increased sales are not far behind.