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What Is Inventory Management?

A retail business is a lot like a grandfather clock—what you see on the outside seems so simplistic, it’s impossible to imagine how many little pieces are hiding just under the surface that bring the whole thing to life.

One of those very important parts is inventory management, a cog in the machine that you’d never give a second thought to unless it wasn’t working right. When it’s working beautifully, inventory management is practically invisible, but when it’s not in sync with the rest of your business it’s like a wrecking ball to the functionality of the whole.

Is Inventory Management Necessary?

Inventory management is more than just counting boxes, but at the same time, that’s really what it is at its core.

The way that boxes are tracked, counted and managed today is a lot different they were in the past, especially in industries where those products have a limited shelf life, like nutritional supplements, cosmetics or even seasonal clothing or decor. Knowing just where these products are, how many remain in the warehouse and how much longer they’re going to be marketable can mean real dollars and cents for your company—that’s why inventory management is such a big deal.

The real trick is to establish a sort of balance with products as they constantly go out and new products come in to replace them. Inventory management is all about having all the pieces in balance, even as order fulfillment is going on around you. Using bar code scanning, advanced inventory management software and highly skilled workers, inventory management in a place like a 3rd party (3PL) fulfillment company can be performed with incredible efficiency.

That’s great news for you and your customers. A well-oiled inventory management system can score you huge points with customers and save you money in these ways:

  • Eliminating backorders. Customers hate waiting for products and sometimes will jump ship simply because they’d rather find a new vendor than wait for a product they really want. A really good inventory management system won’t force them into that position, and you’ll rarely or never have to deal with backordered products.
  • Moving new products into inventory. Part of protecting your business against backorders is moving products that have just arrived at your warehouse into inventory quickly. If your stocks are running low, you can’t wait days or weeks for restocking. It has to happen right away, and a good inventory manager knows that.
  • Cycling merchandise out in order. Merchandise that has an expiration date or is seasonal in nature has only a limited window in which it can be sold for full price, and you need to make the most of that. If your inventory management doesn’t have a good eye on which bins contain the products that need to move first, you’ll end up losing a lot of money on products that have to be thrown away or donated because they cannot be sold at any price.

Whether you do your own order fulfillment or you’ve partnered with a 3rd party logistics company, you should understand what inventory management is doing for you. After all, it’s one of the most important parts of your business that you may never notice.

 

November 24, 2016
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