A Numbers Game: Why Tracking Inventory Makes a Difference
Inventory management is an important area for any company. There are many people in business that do not put the emphasis on this area that they should. However, there are many examples of companies in the industry today that have had issues in this area because there is a lack of importance placed on it. Many companies have had reduced earnings and profits because they have not managed their inventory properly. Here are three reasons why tracking inventory makes a difference in the bottom line of a company over the long term.
When a company has too much inventory on an item, they will eventually have to reduce the price on the product in order to get it sold. Although this may not seem like a big deal, markdowns erode the gross margin of a company. There are few companies that would not be hurt by this over the long term. Companies generally do everything they can in order to get gross margin up, so having more markdowns due to high inventory levels works against the goals of a company. Any business that wants to reduce markdowns should inventory in managing inventory in a more efficient way.
Another important aspect of inventory management is the customer experience. Many companies will experience some sort of seasonal spike during certain times of the year. In order to capitalize on all of the sales available, it is vital that companies have the proper amount of inventory out in the stores before the seasonal spikes take place. When companies do not have the inventory that is needed, not only do they lose sales but they also degrade the experience of the customer. There are many companies that could do a better job with how they manage their store inventory at certain times of the year.
There is a cost to carrying too much inventory for a company. Cash that is used to purchase inventory is money that cannot be invested in to other areas of the business. Companies that want to be as efficient as possible should not have a lot of money tied up in inventory that is not selling to customers. There are many small businesses that have a huge percentage of their capital tied up in inventory. Better inventory management practices help companies to have more working capital to invest in the company over the long term. Proper inventory management practices can mean the difference between running a business at a profit or at a loss. Take the first steps in making a company better today by tracking inventory in a more efficient way.