It’s time to talk about inventory management. Your business depends on it, full stop. Yet, when the time comes to splurge on innovations that will improve your business, inventory management is often overlooked.
Sure, it might not be as sexy or interesting as marketing—but what’s a good marketing campaign worth if you don’t have enough products in stock? Or way too many—meaning you still lose money?
Inventory management also plays a big role in your strategy. Your warehouse is so much more than just a temporary place to stay for your products. You could make—or lose—quite a bit of money there.
Because whether you overstock or understock, getting your stock wrong is a costly mistake. Nevertheless, 43 percent of small businesses in the US don’t track inventory, or do so by hand.
Even bigger players get it wrong: nearly 46% of SMEs don’t use a strong inventory management systems.
With that in mind, it shouldn’t surprise you to find out the US retail market has an inventory accuracy of only 63 percent.
An expensive miscalculation. In this article, we’ll look at the consequences of bad stock keeping, and the benefits of doing it right—plus some tips to transform your inventory management game.
- What you’ll find out about inventory management:
How having an item out of stock has far-reaching consequences. It’s not just disappointed customers—if that wasn’t bad enough.
- How online and offline retailers are affected by bad inventory management.
- How inventory management systems can help you save precious time spent on busywork. It’s all about automation.
- How inventory management will give you incredibly valuable data that will help you make better business decisions
- How to start streamlining your inventory management if you don’t have a digital system in place.
- Already have a system up and running, but aren’t you really making the most of it? We’ll give you a few pointers that will enable you to fully leverage the power of your data.
Out of stock, out of mind?
Sadly, yes. Customer loyalty only goes so far. It’s a problem for brick-and-mortar stores, but online people can make the switch to the competition even faster. Consumers expect availability, at all times. The numbers speak for themselves.
Not having an item in stock in a web shop costs an estimated $17 billion a year in lost sales opportunities. Which is way less than in physical stores, where the estimated number is—are you sitting down?—1 trillion.
The difference is easy to explain. Online, people just go back to Google and find the product elsewhere. Online shoppers switch sellers in 15% of the cases. 60% of them get a substitute from the same shop.
Then there’s also the 10% that abandons their digital purchase plans and goes to a physical store instead, and finally 15% are patient enough to delay or completely cancel their buying plans.
For brick-and-mortar stores, online sellers are even greater competition. For instance, Amazon Prime members have no time to lose. 24% of Amazon’s revenue comes from people who experienced out-of-stock at a local store.
There’s a real connection between online and offline purchases, and inventory management for both is also linked. Studies suggest that businesses going for omnichannel, trying to serve as many people as possible, are often the ones facing trouble with keeping stock up-to-date in real-time.
But it’s not just about losing one individual sale or even a customer in the long run. You should also add the costs of keeping empty storage space to that—plus the time spent communicating with customers to find a solution.
5 reasons to invest in inventory management
Have you been neglecting your inventory management? If customer walkouts aren’t scary enough, there are enough other reasons to take a good, hard look at your warehouse and how you handle stock. Here are five of them.
1. Inventory management helps you predict demand
Inventory management isn’t a crystal ball, but it’s surely better than nothing. By keeping track of changes in your stock, you will make trends more visible—and next season, you can show up prepared. Of course, demand depends on many other factors, but you will need a baseline. Inventory management could be just that.
2. Automation saves you tons of time
If you invest in a proper POS and inventory management system (more on that later!) You will be able to automate so many things in your business. No more manually counting products, staring at spreadsheets teary-eyed, not sure what you wanted to order. Those tasks eat up so much time, not to mention motivation.
Real-time inventory management tools manage the data you need automatically. Plus, there’s less room for human error. Sold an item? All info will be up-to-date before your customer even leaves the store. That allows you to focus on things that matter most.3.
3. Generate reports effortlessly
Views on Facebook and clicks on Google are great. Sales numbers even better. But to see how your business is really performing, you’ll also need to know what’s happening in your warehouse.
With inventory management tools, you can quickly create reports that show the trends you want to focus on, at any given time. This will also enable you to make better informed decisions regarding buying and replenishing your stocks. Less guesswork, basically.
4. It allows for safe and confident growth
If you’re ready to scale your business, make sure your inventory management is prepared. With real-time inventory management, you can grow steadily and have the peace of mind that everything is in stock—instead of disappointing customers.
5. Good inventory management will help you cut costs
Sure, implementing a new inventory management system will take time and, undoubtedly, money. But you can’t afford not to spend that cash, because it will pay itself back in no time. First of all by saving your employees time, due to automating tasks. Then there’s less canceled orders.
How to streamline your inventory management
Have we convinced you that your next big project shouldn’t be social media, but rather stock keeping? Great! Now, we won’t leave you to figure out where to start on your own. Here are some steps and tips that will guide you towards a more streamlined inventory management.
If you haven’t yet, go digital
If you’re one of the many business owners who hasn’t made the switch to a digital inventory management system yet, now’s the time.
Tracking everything by hand is a thing of the past. Inventory management software helps you make better informed decisions on what to buy and when, and also when you should offer discounts to move stock faster.
You can go for separate software, or choose a system where your Point of Sale (POS) and inventory management are integrated—which we highly recommend.
This is literally the connection between your store and warehouse. No more running to the back to see if something might still be there.
Double-down on data
If you really want to cut costs and save time with automations, use the full power of your POS to maximize the ROI of your inventory. Lightspeed’s inventory management system is a great tool to use.
The data in there will help you see what’s dead inventory and what moves slow. That can go to pop-up stores of flash sales. Other than that, you’ll see what sells well and focus on that—without any guesswork.
The data in your inventory management system will also help you make better-informed buying decisions. Not based on your personal taste, but on what really works.
Communicate on what your stock looks like
Not just when you see that you have to get rid of a lot of stock to make room for new products. By keeping all departments involved in your inventory management, you can prevent any problems, rather than having to come up with last-minute solutions.
For instance, your sales and marketing team will definitely benefit from having insights in how stock develops during the year. With that knowledge, they will know when to allocate their resources to a certain product, target group or sales channel.
Ready to take inventory management seriously?
Next time, some budget frees up for innovation—don’t just look at how you can sell more. Look into how you can improve your ROI by looking at the other side: your inventory. Cut costs there to maximize your margins.