Are you one of the 7% of small businesses that don’t perform any sort of inventory management at all?
If your answer is “Yes” or starts with “Well...”, this article is for you.
In case you are still wondering why inventory management is so important, check this fact: Not keeping track of stock is among the top 10 killers of new businesses.
And I will not lie to you — it is a hell of a job.
On average, American stores invest $1.43 in stock for every $1 they make.
It does sound scary at first glance.
But let me also tell you, if you learn how to do inventory management properly, you can benefit greatly from it.
Thus, this article is dedicated to business owners and merchants struggling with where to start and how to successfully do inventory management to get the income they strive for.
Let’s start with some basics, shall we?
Inventory management is the process of monitoring and regulating the flow of your products and materials (into, within, and out of your business).
Inventory management aims to ensure that the right products are available on customer’s demand while lowering storage costs and increasing supply chain effectiveness.
Did you know that human error is the main problem in 46% of warehouses today?
Because inventory management has a massive impact on various business outcomes (satisfaction, efficiency, cash flow), it is an essential component of your business strategy.
So, if you want your business to succeed, it is crucial to have a strong and efficient inventory management system in place.
Several different activities are included in inventory management, such as:
🔨Inventory planning – figuring out how much inventory to keep on hand to meet customer needs and keep costs as low as possible.
🔨Purchasing and receiving – Coordinating the purchase and receipt of goods and materials from suppliers.
🔨Inventory storage and handling – receiving goods and materials from suppliers and ensuring they get to the right place (storage management).
🔨Inventory tracking – monitoring the inventory levels and how it travels, using barcodes, RFID, and other technologies.
🔨Order fulfillment – ensuring that orders are handled and shipped correctly and on time.
🔨Stock control – controlling stock movement within the organization (systems like just-in-time [JIT])
🔨Reporting and analysis – Making reports and analyzing the data to improve how inventory is managed.
As you can see, handling inventory management manually is labor-intensive.
And, unless you are aware of what comes with the job, you can easily fall into the pit and make mistakes that can cost you a lot of nerves, money, and reputation.
Despite the time and effort required for proper inventory management, which includes much monitoring, tracking, and delivering, the process is not without its benefits.
Let’s check them out!
Profitability, customer satisfaction, and operational efficiency can affect how well a company manages its inventory.
Because of this, inventory management is important for the following reasons:
🏆Cost control – Effective inventory management helps businesses keep costs down that come with having inventory (storage and handling costs). It also helps businesses avoid the costs of having too much or too little stock (lost sales, stock that goes out of date, or inventory write-downs).
🏆Improved customer satisfaction – Inventory management ensures that customers can get the right products when needed. This helps businesses keep customers happy, reduce back orders, and build their reputation.
🏆Increased operational efficiency – Businesses can improve their operational efficiency by using less time and resources to manage their inventory. This includes cutting down on time spent on manual tasks, the chance of stock shortages, and the need for fast shipping.
🏆Better planning and decision making – Inventory management give businesses accurate, up-to-date information about how much stock they have and how it moves around the store. With this information, you can make smart choices about ordering, pricing, and positioning your products.
🏆Better cash flow management – Effective inventory management helps businesses cut down on their stock, which frees up cash that can be used for other things like buying new products or growing the business.
Overall conclusion? If you manage your stock correctly, you should be able to select the kind of “fruit” you've budgeted for.
And how to do it? Let’s find out!
Here, you can find the top 4 inventory management best practices.
One of the most important aspects of inventory management is knowing how much of a certain product is “hot” (highly requested).
Understanding the market and its trends can help you meet your customers' needs better.
And obviously, meeting their needs in a timely manner is a top priority. They are, after all, the ones bringing in the cash.
You can look at the customer experience this way: 91% of unhappy customers will stop buying from your brand without ever raising a complaint.
To better grasp product demand and ensure that you never lose a sale or satisfied customer, consider the following steps in your inventory management strategy:
✅ Analyze sales data – Examine past sales figures to learn how demand has fluctuated for the product in question. This will allow you to determine which items are in high demand, which are moving slowly, and which are seasonal.
✅ Monitor customer behavior – It's important to keep records of how customers use your products, from purchases and preferences to reviews.
✅ Stay informed of market trends – Keep up with market trends, such as changes in consumer behavior, the economy, and the release of new products, which can all affect the demand for your products.
✅ Engage with customers and suppliers – Talk to customers and suppliers to find out what they want and expect, as well as learn about changes in product demand.
Following these tips will help you stay on top of product demand, leading to better inventory management and planning.
As a result, you can easily reduce inventory costs, boost customer satisfaction, and streamline operations throughout the supply chain.
Be honest. When a customer purchases on your ecommerce site, your job is far from done.
Customers must be happy with how their orders are processed to keep your brand's reputation at a high level.
Let's assume, for instance, that you do not regularly update your website's stock.
Your client suddenly decides they need 3 laptops, but you only carry 2 in stock. What would you do?
Let's go back to the data on satisfied customers – once a customer has a bad customer experience, 51% of them will never do business with that company again.
And we did mention that inventory management is labor-intensive if done manually.
If you need help with tracking your stock, it is a good idea to check for some solutions that can improve that part of management.
For example, Wirepas and Blits platforms offer excellent solutions for asset automation.
Now that you've been hit over the head with the reality that you need to manage product demand and your customers simultaneously, it's time to get to the most important step.
Start thinking about how you can anticipate their needs in the future.
In Stage 1, we mentioned a potential answer for this step.
To determine the top-selling items, it is important to keep an eye on market trends and conduct extensive research on your customer’s shopping behavior.
This information can help you in 2 ways:
🎯 You can keep up a constant demand for high-quality goods.
🎯 You will gain deeper insight into the products in which to invest.
Of course, this raises the question of storage space for all these goods.
You need high product demand and a surplus of inventory for your business to thrive.
However, storing products in multiple locations can jeopardize customer satisfaction and on-demand delivery.
You'll need some setup to keep tabs on product deliveries, stock levels, and manufacturing times.
Therefore, if you have the financial means to do so, consider implementing an ecommerce inventory management software to manage your warehouse operations.
Even as a brand-new company, there are challenges to overcome on the way to prosperity.
And yes, you're right that completing all these steps will take a significant financial commitment.
First and foremost, a stable cash flow and cash conversion cycle are required to carry out the 4 steps of effective inventory management.
However, there is good news. Even small startup companies are eligible to get credit to boost their business.
You wonder how? Have you ever heard of one of the most popular types of inventory financing for startups — asset-based financing?
Well, Myos is one such growth partner that helps merchants and ecommerce business owners to get their funding based only on goods as collateral.
Asset-based finance company Myos can help sellers all over the world grow faster.
They offer working capital loans from £100,000 to £2,500,000, with a monthly fee of 1% to 3% of the loan.
When you do business with Myos, it's especially helpful that you can:
🎯 Pay back the loan in any way you want in 24 months.
🎯 Apply for a financing loan without credit history and personal guarantees.
🎯 Get a loan without annuities and a flexible repayment whenever you need to release a new portion of secured goods.
🎯 Use your goods as collateral.
🎯 Apply with a quick 3-step procedure and get a reply within 24-72h.
Myos uses machine learning and artificial intelligence to evaluate the value of your inventory and decide how much money to lend you without subjecting you or the seller to additional credit checks.
The reason we don't need your credit history is that Myos only predicts how your product will perform in the future and not your default rates, which is the case with traditional lenders. This allows us to eliminate all personal risks and guarantees and use a part of your inventory as collateral. There are multiple ways how you can use your Myos money:
💸Cross finance — Increase your capital while waiting for a sizable payment from a client.
💸Purchase finance — Receive money for your upcoming purchases.
💸Stock finance — You can leverage the stock you already have to expand your business.
To apply for a loan with Myos, you first need to make a funding request using a 3-step application form:
✔️ Step #1: Specify the kind of loan you're looking for.
✔️ Step #2: Either manually add products that need financing via the app form or apply the file format of your sales data.
✔️ Step #3: Fill in your account data and confirm the request.
Loan applications typically receive a decision from Myos within 24 hours to 72 hours.
Your online store must meet a few minimum standards before we can accept your application:
📌 Your business is based in the United Kingdom or a European Union country.
📌 A minimum of six months have passed since you opened for business.
📌 You had a web store up and running for at least 50 days (e.g., on Amazon, eBay, online shop, etc.).
📌 The shelf life of your goods is at least a year.
📌 There is a minimum price of 5 Euros (EU) or 5 Pounds (UK) for a product.
📌 Products are now available for purchase.
📌 You left out COVID-19, the branded watches, the ammunition, and the weapons.
Does your business meet the basic requirements?
Get a non-binding, free offer today to get a general idea of what it will cost to expand while maintaining adequate stock levels and a well-organized warehouse.