Did you know that businesses spend an average of 25% to 35% of their budget on inventory costs? This means that when inventory management is not optimized, costs will grow and resources wasted.
If inventory is incorrectly managed, not only does it result in profit loss and lost sale opportunities, stock-outs, and overstocks but also in big reputation damage as customers won’t have a pleasant experience and might end up purchasing from the competitor.
How Poor Inventory Management Costs Companies Billions
The importance of having an efficient inventory management system in place, properly tracking inventory, and having visibility on real-time inventory is crucial for business success.
Wrong or poorly informed inventory decisions, such as overbuying, buying the wrong type of products, and misallocating inventory—account for an estimated 53% of unplanned markdown costs for retailers.
In contrast, when a product is out of stock 9% of consumers will simply not purchase that item, and the risk of clients buying from the competition increases up to 26% of them switching brands or providers.
Common Inventory Management Errors
Most inventory management mistakes can be avoided with proper planning, strategy implementation, and advanced systems to enhance the process. The most common inventory issues are:
- Storage Inefficiencies: This happens when a company stores excess inventory. Not Maximizing storage solutions results in slower sales and additional warehousing expenses as more space is needed to store the goods.
- Obsolete Inventory: An incorrect forecast or analysis of the market often results in goods that are not being sold as expected. This causes products to stay in storage for too long and often become obsolete as trends pass, and they become outdated.
- Hidden Costs: Both overstocking and stockouts mean there’s profit loss at some point. Either by losing the customer who can’t find the product they’re looking for or needing to apply unplanned markdown costs that often eat up the profit margin.
What a 3PL Partner brings to the table
For a business to thrive in the nowadays highly competitive commerce world, the importance of inventory management must not be taken lightly.
This is why working with a proven, experienced 3PL like EP Logistics can help you maximize the benefits of inventory management and make it easier for your company.
Ensuring your logistics partner can offer you warehousing solutions that include a real-time inventory management system, will greatly benefit your profits in the long run, as it will allow you to:
- Efficiently track inventory levels
- Reduce the risk of excess stock and stock-outs
- Do a better forecast of the market trends
- Streamline your overall operations to avoid inventory challenges.
Learn more about our warehousing solutions at EP Logistics.
Inventory Management Techniques That Save You Money
The main purpose of having good inventory management is to prevent losses ensure your supply chain runs smoothly, and keep your customers happy.
Here’s some inventory management techniques that help you achieve this:
ABC Analysis
The ABC analysis method consists of categorizing your inventory into three groups based on their value and turnover rates.
- A Items are high-value products with low turnover rates.
- B items have moderate value as well as a moderate turnover rate.
- C items are low-value and usually sell quickly.
The idea is for businesses to focus on high-value items first to better control their inventory, reducing the risk of excess inventory. This strategy helps businesses use their resources more effectively, maximizing their profitability.
Economic Order Quantity (EOQ)
Another effective method is known as Economic Order Quantity (EOQ). This method focuses on helping businesses find the ideal order size according to their need.
This allows companies to have optimal inventory levels and avoids unnecessary carrying costs, additional storage fees, and waste of resources.
As a committed Logistics partner, we make sure that our inventory solutions are customized to your business and its unique needs so that the implemented order and stock management strategies maximize your profits.
Best Practices for Optimizing Inventory Across Industries
In order to boost the power of proper inventory management, it is important to take into consideration the requirements and needs of your specific industry. Some common practices to keep in mind are:
E-commerce
E-commerce moves along with customers’ great expectations regarding speed of delivery, ease of ordering, and item’s soonest, almost immediate, availability. It is a high-demand and fast-paced industry.
Since e-commerce has become so popular around the globe, there are more and more businesses selling online every day, which results in more competition. This is why having efficient control of stocks is key.
The best practice to have in place for this industry is to implement a real-time inventory management system that keeps an accurate eye on inventory levels and allows the business to make informed decisions regarding orders and behavior trends.
Manufacturing
Just-in-time (JIT) inventory methods, where goods are received only as they’re needed, are the best-recommended practice for manufacturing industries, as they can help:
- Align stock levels with real-time demand
- Reducing costs
- Keeping production lines running smoothly and without delays.
With this method, companies receive only the amount of materials or goods at the moment, which prevents excess stock, minimizes warehousing costs, reduces waste, streamlines production, reduces waste, and optimizes costs.
Retail industry
Making use of analytic data to predict market changes, and anticipate shopping trends, seasonal peaks, and sale events is always very beneficial regardless of the industry.
This practice is commonly known, and Demand Forecasting and implementing it comes in handy to keep storage levels on point in spite of shopping changes. Especially during holidays!
Staying ahead of the game, allows retail businesses to boost sales, stay competitive, and earn customer satisfaction and loyalty.
Big Data and Predictive Analytics in Inventory Management
Because in our modern, nowadays very technological world, everything is driven by big data, taking advantage of technology tools that help your business improve inventory management can bring great benefits.
Analyzing data will help your businesses forecast both current market and future trends, to make better decisions and maintain adequate inventory levels resulting in your business:
- Being accurately informed
- Make better decisions regarding market trends
- Analyze and understand your customer’s consuming behavior
- Provide you with insights of the rights size order to prevent overstocking or stock outs.
- Measure your customers’ satisfaction levels.
- Better adapt and respond to inventory management issues that might arise.
AI-Powered Demand Forecasting
Artificial Intelligence (AI) plays an important role in helping a business optimize its data analysis and allows companies to be better prepared and quickly respond and adapt to market changes as needed.
AI-powered demand forecasting is an advanced and highly beneficial tool for inventory management, improving the tracking inventory processes and enhancing productivity.
How EP Logistics Helps You Optimize Inventory and Boost Your Bottom Line
By choosing to work with a logistics partner like EP Logistics, your business can optimize inventory management processes, and strategies and boost its profit.
We recognize the importance of inventory management and that’s why our services include:
- Real-time inventory tracking systems so that you can monitor at all times your stock levels accurately and effectively.
- Solutions that are specifically tailored to meet your business’s unique needs.
- A team of experts to optimize your storage solutions with the goal of reducing your costs
For more insights and tips on how to improve your inventory management and keep your costs low, check out our blog How to minimize costs on inventory management.
Working with an experienced logistics third provider, implementing effective inventory management practices, and making use of technologies to analyze your data will ensure your business stays ahead of challenges and competition, especially during sudden and unexpected market changes.
Having EP Logistics as your trusted logistics partner increases your profits and optimizes your operations.
From inventory management, warehousing strategies, freight services whether air, road, or ocean, we have you covered! Contact Us today and ask about our customized solutions!
