Three Tips for Taking Control of Inventory
Inventory is the lifeblood of a business. Proper inventory control is not just a matter of having an item in stock when a customer orders it. It also factors into your company’s purchase and production trends, ensuring that you have correct knowledge on what product is moving, what’s not, and have enough of what you need without too much of what you don’t need.
But, sometimes it feels less like you control your inventory, and more like it controls you. If that’s you, it’s not too late to stop the cycle and create healthier inventory control habits. Check out these three tips for getting your inventory control under control.
Inventory Control Tip #1: Develop a Stock List
Your company manufactures or orders products for the express goal of selling them but sometimes items just do not sell. Instead, they collect in the warehouse, taking up valuable space that could be dedicated to better moving stock. Separating these items from your salable stock will help you track what you need to keep and what to liquidate. You can do this by developing a stock list.
A stock list is a list of products, annual orders, total quantity ordered annually, and the total annual cost of goods sold. When you begin tracking items in this manner, it’s easy to see at a glance what you should keep more of in your warehouse and what should be liquidated. Seeing the cost of goods helps you keep the cost of your investment into the items in mind. If you must put the item on a discount, you can easily calculate the discount using the COGS as the bottom line number below which you cannot drop the price.
Inventory Control Tip #2: Liquidate What Isn’t Selling
Unfortunately, inventory rarely increases in value. Most inventory decreases in value, and unsold inventory drains valuable capital from your business. It takes up warehouse space, requires inventorying at certain points in the year, and prevents you from stocking more of what sells.
Each business must set parameters for how long to keep items in stock before liquidating them. Some items may be kept even if they do not sell frequently because a valuable customer orders them or because you may be the only company that sells that particular item or part. For the most part, anything that’s been sitting around for months or years is ready for liquidation.
Liquidating stock doesn’t necessarily mean a sale. You can:
- Transfer items to a holding warehouse until you can figure out how to sell them.
- Recycle parts or materials into new products.
- Return items to the manufacturer.
- Use unsold goods as a marketing tactic; add them onto other product sales as a free gift with purchase or freebie to incentivize your customers.
- Offer your sales team an incentive to sell the backstock.
When all else fails, you have two choices: drop the price to get rid of excess inventory or donate it somewhere. While selling below COGS isn’t ideal, sometimes you need to do so to get rid of inventory that’s taking up floor space that could be dedicated to more profitable goods. Some specialized materials cannot be donated to a nonprofit, but many industries can find a willing charity to take their backstock. Building materials can be donated to places like Habitat for Humanity; food can be donated to food pantries. Creative solutions exist for many goods.
Inventory Control Tip #3: Organize Stock According to Frequent Sellers
Once you have a stock list, you can do quite a lot with it. For example, you can use it to reorganize your warehouse, so frequently requested items can be located closer to the shipping center. By relocating popular items closer to the packaging and shipping center, you minimize the time it takes to pick and transport them.
Inventory Control with Mindover Software
Ready to start controlling your inventory? Mindover Software provides integrated business software solutions and strategies to companies of all sizes. Let us help you find the exact technology you need to fully navigate your business and your industry. Contact us now to find out how.