Four Important Ways to Avoid Excess Inventory
Are you storing excess inventory in your warehouse? Have you sacrificed shelf space in order to keep telecom components or products that are obsolete? Businesses of all sizes have faced many challenges managing inventory consolidation, while keeping costs under control. There are some ways to avoid excess inventory – and they are easy to implement!
Manufacturers don’t always monitor their inventory data and because of that, they end up with a significant amount of excess inventory. Often times, it’s just a matter of implementing better inventory tracking to prevent the excess merchandise from building up. However, excess inventory issues can also arise from unforeseen circumstances, which are out of your control. Significant changes in technology, consumer buying trends, or incorrect projections will also impact how much excess inventory you have on hand.
A high level of inventory and poor turnover can influence business efficiency. It’s not just about the money you block in your inventory, but also about the costs of owning space, insurance, maintenance, operational controls, to mention a few.
An efficient inventory management application, custom-made for your business, can help you control your costs better.
No matter the cause, there are four important ways you can avoid keeping excess inventory:
- Track front and back-end inventory costs
- Optimize inventory management systems
- Make decisions based on data
- Reducing expenses by taking action
Tracking Inventory Costs
Some companies often estimate inventory costs instead of tracking exact costs. These untracked costs may not be apparent and you could be ruining your balance sheet without even realizing it. Of course, these costs will vary with the industry you’re in, the size of your business, and your geographical location. Some examples of costs that are often overlooked are; warehouse storage, taxes and insurance premiums, accounting administration costs, and customer service or out of stock costs.
It’s essential to manage and monitor these costs in order to avoid excess inventory.
Optimizing Inventory Management Systems
A crucial part of the ordering process should be to optimize your inventory management system. It’s always a challenge to keep inventory costs low. Investing in an inventory management system that offers smart analysis of your expenses will help you optimize for the future success of your business.
From organizing your customer information to keeping track of orders, it’s essential for you to know what quantities are in your warehouse at any given time. Making sure suppliers are delivering on time, managing your customers’ expectations and avoiding a buildup of excess inventory is something every business strives to achieve.
Data Should Drive Decisions
In today’s digital world, managing inventory is easier because of customized specialized software and apps. Processes are now automated and ultimately help streamline your operations and make your business run more efficiently. Perhaps the most significant contribution technology brings is important inventory data for future predictions. Inventory management software will provide in-depth reports about warehouse movements and predictive data will help you to make better inventory purchase decisions
Reduce Expenses by Taking Action
Excess inventory often brings more expenses than you’d think. If storing it ends up costing your business too much, a smarter solution is necessary. Here are some practical ways to reduce or remove your excess inventory:
- Resell – Depending on the type of inventory, you may be able to regain its value by reselling it to other companies.
- Barter or Trade – they say keep your friends close and enemies closer. In business, you can use this to solve excess inventory issues. Find a competitor that could use your stock and see if you can find something you need in its warehouse for a fair exchange.
- Liquidation – it’s not the most economical solution, as you generally sell the stock a lot under the market price, but it’s always better than adding inventory costs.
- Reuse/Recycle – if you have multiple plants, check if any of them needs your inventory. This way, you recover most of your investment (minus the transportation costs).
If you properly deal with your excess inventory, the savings that you will regain can be quite significant, for instance:
- Not having to pay interest, taxes or insurance on that inventory
- Save on labor costs, delivery costs and material handling
- Renting a smaller warehouse space
Implementing a better inventory management strategy can help avoid these excess inventory issues. Contract warehousing and fulfillment center services are carefully designed to help you reduce your operating costs and eliminate excess inventory. Hiring a third-party to help you manage inventory is a smart business decision.
AECI can help manage your inventory – we take the time to learn your specific needs in order to offer versatile, customized solutions for your warehousing concerns and distribution challenges. Contact us today for more information on our services.