Every business that sells or manufactures products should implement an inventory risk management system. Inventory risk refers to the possibility that a company won’t be able to sell the goods sitting in its warehouse. This phenomenon might occur as a result of poor inventory management and is sure to leave your business in dire need of a change.
There are many types of inventory risks. To minimize this problem you need to have a clear understanding of your inventory and its contents. Overstocking and understocking are pain points that most businesses will suffer from. Knowing what to restock and when to do it is of primary importance. Moreover, an organized warehouse, where you can easily find what you search for, will save you time and money and will improve your customer service.
There are many actions you can take to manage your business’ inventory risk and these are our suggestions!
1. Just-in-Time Restocking
Just-in-Time (JIT) restocking is a management strategy where you receive items or raw materials as late as possible, but in time to meet demands. JIT is your ally in combating overstocking and understocking, as you can avoid pre-ordering items before you actually need them.
Having the right amount of items for the shortest amount of time possible will decrease your storage expenses as you will need less space to house them. You will lower the risk of items and raw materials going bad or missing. Further, you will free funds that would otherwise be tied up in ordering extra inventory that the one needed, which you could put towards enhancing any other domain of your business.
2. Promote Your Products
Obsolete items sitting in your warehouse for long periods of time will deplete your profits as you’ll need money to store and insure them. To solve this problem you’ll need to promote your products.
When your business has items that don’t sell as much, you need to take promotional actions like setting up special discounts and sales for those certain products. Advertising them will also maximize the possibility of them being sold. Consequently, you will increase your profit and you’ll have the chance to renew your inventory.
3. On-demand Manufacturing
Instead of mass-producing, many enterprises have implemented on-demand manufacturing as an inventory risk management method. This is a system where a business produces its goods only when they are needed and in quantities that are demanded.
Producing on-demand will lower storage costs, save you time and resources, and will minimize the chances of items going obsolete.
4. Monitor Services
Another factor that could lower your inventory risk is monitoring the efficiency of your services. You could be manufacturing and shipping out products on time, but your distributors may delay their shipment. In addition, your suppliers may delay providing the raw materials needed for you to start manufacturing, thus setting back your process.
Examining supplier and distributor data analysis will benefit you greatly. Pay attention to shipment errors, delays, and damaged goods, as well as the frequency they occur. Make sure to review their work and if necessary, make the appropriate changes.
5. Implement an ERP System
Going paperless will make an enormous change in your business. An Enterprise Resource Planning system is focused on organizing and keeping track of your business’s activities and inventory. ERPs like Megaventory can manage tiring day-to-day tasks, saving you time and effort.
This software will offer you data insight, visibility and will manage your inventory by itself. Problems like overstocking, understocking, theft, and items going missing will be largely solved. No more lost revenue or items sitting idly in your warehouse. No more time-consuming inventory takings, just by applying Megaventory to your business plan!
Applying the above changes to your inventory risk management system will surely turn a profit for your company. Identifying your problems and pain points will lead you to change your company’s harmful procedures and set new, more efficient ones.
Remember that not everything works for everyone. Test what is best for you and what profits your business and change what’s necessary.
Zoi Vasileiou works as a Marketing Assistant for Megaventory the online inventory management system that can help businesses synchronize stock and manage purchases and sales over multiple stores. She loves content creation, keeping up with the latest marketing updates, and always enhancing her skills.