Use Your Inventory To Maximize Your Business Know-How

Inventory can refer to:

  • The list of merchandise or material held in readiness (storage) for delivery or distribution, as well as the actual units themselves.
  • It can also refer to the ongoing record of any units held in stock.

When approaching inventory as a business tool, you’ll see it’s a numbers puzzle: you need the context, the data and the experience to make sense of the pictures that come out from those numbers and columns, and accurate, timely inventory-keeping gives you the following advantages:

You know when you’re running low, or running high.
With a record you get historical data. You can compare and contrast the figures from year-to-date, or week-to-date, for example, so you can discern trends emerging or reappearing, and start thinking things out when the numbers seems to be showing you a different picture from what you reasonably expect this time around. You have an idea about what’s been going on, and how much has changed or not compared to a week, a month or a year ago.

  • Why are you running low, and will this be likely to happen in other areas, or is it happening already? Why? What caused it? If you’re running low here, does this mean that the item in question is a hit with customers — and you can pre-order more — or were you not able to stock up properly the last time?
  • What are the reasons for these changes? A delay in shipping? Switching to a new supplier?

The answers to the questions that come up help you do better next time. Any information you can use to make your business better, use it.

By tracking your inventory, you keep on top of the situation.
Knowledge is power. Accurate, timely information in the form of inventory tells you how much you have to work with at any given time.

  • You don’t run out at a critical point. You have an advance warning system to tell you what needs attention when.
  • You can batch orders and in the process save money on delivery costs, as well as have some reassurance that you’ll get what you need when you need it.
  • Just-in-time production helps on shipping and storage costs — you skate on the edge of overstock, you pay for the storage and the shipping costs to get it in, but it’s not making money for you sitting idle. What if you have only what you need, only when you need it? (Building in acceptable leeway, of course.)

Data, over time, can show you a bigger picture than what you see ‘at a glance’–when you learn to read the numbers. It’s a little like being psychic. You can predict things before they’re most likely to happen.

  • When do flower sales surge ? The weeks before Valentine’s day, and another surge before Mother’s Day.
  • When does chocolate sales dip? Peak at Easter, then up again at Halloween, but down at Lent? (Guess what you’re giving up? And no, Lent doesn’t affect chocolate sales that much.)

The results of these questions may not likely affect you personally, unless you screw up sending flowers to your mother, or getting them for your date (with our without a box of chocolates) but for flower growers, delivery and shipping companies, cacao growers, chocolate manufacturers, specialty retailers, these trends are vital.

So…in your industry, what are the benchmarks? In your business, what are the patterns? Finding out gives you experience, getting information gives you knowledge. Knowledge times experience is power. You have information at your disposal that will help you navigate the tides of the economy, keep your business stable, and tell you how healthy it is, or how much more healthy you can make it.

Turnover‘ also refers to how long your products stay on the shelves, or in the warehouse.

  • If you keep running short, the first thought is that demand exceeds supply, so when you make or order too little , you can decide if you really need to make more, or place a bigger order from your suppliers.
  • You may also need to check if there’s a bottle-neck in the supply or manufacturing chain to lessen any more untoward incidents in the future. Running out means disappointed customers and missed sales, and if your customers can’t get it from you, they’ll go somewhere else. Determine the cause and address the situation.
  • If your items aren’t moving, you have to find out why — no movement equals no money coming in, plus storage costs (unless you’re running a business out of your home, and use the spare bedroom as your storage-slash-production facility.)
  • If you’re not selling enough, find out what you have to do to sell more — maybe hold a clearance sales, for example, just to get the old stock out — OR if you find that you’re making too much — pull back and make less.

Tracking and keeping records tells you how much you have, while trending tells you how much you may need — and then you can decide how much to get and when to order, and so take advantage of your billing by using your payment-scheme to make your money stretch.

 

You have to pay attention to the up-ticks and down-ticks –they’re like little warning lights, asking you to keep on top of the game and consider what to to next: stop this, make more of that, look a little more carefully on where to get material cheaper here, or save on delivery costs there…or even stop this entirely, it’s not working and you’re wasting time, try something else.

Look, when online businesses study the traffic and clicks, and analyze their conversion rates, it’s not to show they know how to calculate the numbers. Calculation is easy when it’s done by automated systems, but it takes human analysis of the results to best choose what to do next.

It’s not enough to be good if you don’t know how it works, or how to make it work better, or how to scale it up if you can and how to keep it running on its own momentum.

Brick and mortar stores are closing down as more and more people are relying on the speed, ease and convenience of the internet to make many of their purchases. So while an online business makes sense, it also has to make cents, get it?

Just because something seems to make sense doesn’t mean it will automatically succeed without any input from you. You have to have an active hand in it and know the numbers, and inventory is an essential part of the whole process.

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