When you take stock of your inventory, you count everything you have on hand so you can figure out which products you need to reorder. Instead of doing that, right now we’re going to take stock of your inventory management. This means we’re going to delve into how you’re currently managing your inventory and see what’s working and what needs to be fixed to make your company even more successful.
1. Inventory Turnover Ratio. Do you know what your inventory turnover ratio is? To calculate it, divide the total cost of all the products you sell annually by the average value of your inventory. This tells you how many times you sell your entire inventory in a year. If this number turns out to be small, like four or less, you know you’re probably keeping too much inventory in stock. The higher the ratio, the better. However, you don’t want it to be too high because if you’re replacing your entire inventory every other week, you risk running into product shortages.
2. Supply Chain Management. Are your suppliers doing a good job for you? Do they deliver on time or are they sometimes late, causing you to have production delays? If you notice that one or more of your suppliers are not always dependable, you should look into alternatives. Weigh the costs and benefits of choosing different suppliers for your most popular products. You can’t afford to run out of those. It’s always good to have a backup plan, especially in the winter months when snow and other poor weather make it harder for deliveries to come in on schedule.
3. Order Fulfillment. How quickly are you fulfilling customer orders? From the moment you receive a purchase order to the moment your customer receives a product, you have the opportunity to either wow your customer or disappoint them. It’s all a matter of timing and accuracy. You need to know how many products you have in stock and where they are in your warehouse to quickly pick, pack and ship them to your customers. Anything you can do to speed up the order fulfillment process could make a big difference in customer satisfaction and retention.
4. Time Management. How much time do you spend on inventory management? As a business leader, you’re probably always looking for ways to free up time to focus on the most important parts of your business. Trying to manage inventory in Excel spreadsheets or on paper is usually tedious and wastes a lot of precious time. You should consider using Fishbowl’s inventory control software. This affordable solution can pay for itself within just a few months of being implemented.
After taking stock of your company’s inventory management, you’ve got a better idea of how your company is doing. Fishbowl can help you improve your inventory turnover ratio, supply chain management, order fulfillment and time management. Check it out!