Thinking of ways to save money and increase your business profits can be draining. When it comes to a more complex business with an e-commerce site, multiple store locations and the inventory to stock them all, cutting corners is easier said than done.
We’ve compiled six inventory management tips that will cut costs and up your revenue, no matter your business size.
Eliminate Providers and Integrate What You Need
Whether you manage a small shop or a large corporation with various warehouses, it’s likely that you have multiple providers to fulfill your business’s many needs. Of course, with every additional provider comes more fees, so wouldn’t it make sense to use as few providers as possible?
An inventory management software is a natural first step to streamlining, but you need to accept payments for the inventory you’re selling. Enter a Merchant Account Provider. Selling your goods online alongside your brick-and-mortar store? Now you’re looking at a Payment Gateway, too.
Make use of softwares that integrate to eliminate multiple bills and the manual work of double entry. This will help you understand your effective rates, and give you more time to put toward bettering your business. To name a few, Jigoshop, 3dcart and Fishbowl integrate with all-in-one payment providers to streamline your day-to-day and monthly bills.
Regularly Assess Your Providers
A provider you choose when you start your business may not be a good fit five years later. It’s important to regularly assess your vendors to ensure that you’re getting your money’s worth. Consider it an annual checkup for your business.
We work with a wide variety of clients, many of which manage large warehouses and a significant amount of inventory. One of the biggest mistakes we see clients make is that they don’t reassess their vendors frequently enough. Reassess your vendors — their prices, how quickly they deliver, the quality of their products, the quality of their customer service, etc. — and do this on a regular basis.
Donate Excess or Unwanted Inventory
What business hasn’t had excessive or unwanted inventory? Use this helpful tip to earn back your spend on extra inventory when tax season comes around.
You may have never heard of IRC Section 170(e) (3), but it’s a key piece of tax code. It states that when C Corps donate their inventory to qualified nonprofits, they don’t just receive a tax deduction: they can receive a tax deduction equal to up to twice the cost of the donated products. A gifts-in-kind organization should accept 100% of your overstocks, at any time throughout the year. It’s particularly helpful when consolidating a warehouse, transitioning between selling seasons or dealing with a run of returns.
Utilize the GMROI Technique
Making a business profitable can come down to the margins. The GMROI method can help you maximize business profits by minimizing inventory losses.
To increase profits dramatically with inventory management, I advise using the Gross Margin Return On Inventory technique. GMROI measures how much money you get back for every dollar of inventory you have. The lower you keep your inventory (while still catering to customer's needs) the better your GMROI is. Also, the higher your pricing is, the better your GMROI and thus, the higher your profits. It's one of the simplest but most powerful tools for increased profits.
Stick to your ABCs
How many times in life have your heard the trope “Get back to basics”? You guessed it, the simple acronym ABC can be an effective trick to smarter inventory management.
ABC Analysis is one inventory management technique that every retailer should consider using in some way. It enables analysis of all current on-hand inventory by dividing it into three categories:
- A Items: Are of high value with low sales frequency.
- B Items: Are of moderate value with moderate sales frequency.
- C Items: Are of low value with high sales frequency.
This allows you to prioritize different items in your inventory. For example, A items are of high value but stock levels will be kept lower, so maintaining a close eye on these is essential. Whereas C items are relatively high in number, so they don’t need such tight observation.
Rework Old Inventory
It’s no secret that many goods come back into popularity over time; consumer trends are cyclical. With that said, old inventory could be resurfaced and be successful. Explore remarketing old inventory to sell during busy-buying seasons or when stock of other, current items is lower. With enough customer loyalty, you may be able to sell that older inventory and still make a profit.
Do you have any inventory management tips to share? Tell us about them, we’d love to hear from you!