With the right proactive measures in place, purchasing and inventory control can become a more cost-effective process
Lars Hundley was one of the pioneer entrepreneurs of the eCommerce market…
Hundley is the founder and owner of CleanAirGardening.com and YoyoPlay.com, both of which he established in the late ‘90s during the first eCommerce wave. At Practical Ecommerce’s Ignite 2015 conference, Hundley shared a story about dealing with dead inventory. At first, Hundley believed dead inventory to be a dead-end for profit. However, by leveraging Amazon to sell non-moving inventory, Hundley was able to sell off half a million dollars’ worth of products in dead inventory in one year – and all at near cost.
Reactive versus proactive approaches to surplus inventory
Hundley had an effective reactive strategy for dealing with dead inventory. But just as there are reactive strategies for handling dead inventory, there are also proactive measures to reduce the amount incurred. Of course, some surplus inventory is needed, as it provides security for large, unexpected sales or supplier issues. Without causing an unmanageable amount of backorders and out-of-stocks, having a surplus of inventory is inevitable. However, smarter purchasing and inventory control decisions can help prevent the amount of inventory that may never make it off shelves or out of the warehouse. The end result is the reduction in the amount of cash and space tied up in surplus inventory, freeing up resources for more profitable inventory.
How a purchasing inventory management solution can help take proactive measures against dead inventory
Purchasing is an integral part of the equation when it comes to inventory control. Having a solution that is able to integrate workflow and data for purchasing and inventory control is a valuable tool for reducing the amount of excess inventory purchased.
Here are five ways that a purchasing and inventory control solution can help your business be proactive in reducing the amount of dead inventory that will make it to your warehouse or store…
1) A purchasing and inventory control solution provides both real-time inventory and purchasing information
A purchasing and inventory control solution is a great asset to have because it provides current inventory and purchasing information. When using a system that does not provide real-time information, such as pen and paper or several versions of spreadsheets, the procurement process and inventory management become hindered.
Say the amount of Product X on-hand is getting low. Person A may have just made a purchase for 50 units of Product X. Person B, in another location, has outdated information that doesn’t include the most recent purchase orders and ends up ordering 50 more of Product X. Now the company has 50 extra units of Product X than originally intended.
A purchasing and inventory control solution prevents this problem by providing the most current inventory and purchasing information. This means no need to double-check inventory levels or purchases and no uncertainty when making purchasing decisions. It helps keep everyone in your business up-to-date on purchases and inventory, which is especially helpful when you have staff members in multiple locations or can’t afford for employees to spend additional time to make phone calls or emails to confirm purchases and inventory levels.
A bonus of a purchasing and inventory control solution is that it can keep accurate inventory and purchasing information even when the situation is complex such as backorders, drop shipments, and special orders.
2) A purchasing and inventory control solution helps you decide what to order and what not to reorder
Reports are a valuable source of information to make more informed purchasing decisions. Using the data available from a purchasing and inventory control solution, you can run reports to help determine where your inventory levels are at, which products should and shouldn’t be reordered, and how much to reorder. This is a great objective, data-backed way to gauge what inventory is stagnating in your warehouse or store versus what inventory needs to be replenished.
3) A purchasing and inventory control solution will let you know exactly when it’s time to reorder a certain product
One of the most convenient features a purchasing and inventory control solution offers is a reorder alert and reorder tool. Say Product Y’s turnover rates are stable and there should always be 25 of Product Y available at any given time. You can set a reorder alert when levels for Product Y reach below the predetermined level. That way, you know when it’s truly time to reorder more of Product Y. When you receive a reorder alert, a reorder tool can create a purchase order that includes the desired amount of product that needs to be reordered. This makes purchasing accurate and efficient because you know exactly how much of the product needs to be purchased and when.
4) A purchasing and inventory control solution lets you utilize drop shipping and special ordering
A great way of alleviating surplus inventory is to consider drop shipping or special ordering for items that may not be sold or requested frequently. A purchasing and inventory control solution is able to create drop shipments or special orders as necessary, so there’s a reduced need to store those goods physically in your warehouse or store. That way, these rarely requested items don’t take up space in your store or warehouse.
5) A purchasing and inventory control solution integrates accounting and other organizational information to help understand purchasing decisions better
With a purchasing and inventory control solution that integrates and works with other data such as financial information, purchasing can be kept closely monitored. By keeping tabs on the amount spent on inventory, more informed purchasing decisions can be made from the product level. Perhaps too much money is being invested in Product Z than intended. With an integrated purchasing and inventory control solution to show you pertinent information, you can see what purchases and products can be reduced or kept on a budget.
Being proactive with a purchasing and inventory control solution = reduced hassle in the future
In addition to the five ways mentioned above, a purchasing and inventory control solution is an overall valuable tool to help reduce the amount of unnecessary inventory and make smarter purchasing decisions due to the greater amount of visibility and efficiency in workflow. This reduces the amount of hassle and reactive measures your business will need to take later on down the road. To maximize the amount of visibility and efficiency in your business, look into a purchasing and inventory control solution that provides inventory, purchasing, sales management, and other areas integral to your business.