Tired of losing money to stockouts and excess inventory?
Every growing business will eventually reach the same conclusion. Sales are booming. Customers love your products. Then…inventory management becomes a nightmare.
Spreadsheets become cumbersome. Manual recordkeeping is a joke waiting to hemorrhage cash.
The problem is
Bad inventory practices don’t just create inefficiencies. They steal your profit.
Inventory inaccuracies cost U.S. businesses anywhere from $412 billion to $626 billion each year, according to Meteor Space. That adds up to roughly $1.6 trillion globally.
$1.6 trillion!
But here’s the good news…
Smarter inventory management practices don’t just save growing companies money. They set you up for scale.
In this post:
- Why Inventory Management is Important
- Inventory Management Tactics that Actually Work
- How ERP Improves Inventory Management
- How to Choose the Right System
Why Inventory Management is Important for Growing Companies
If your inventory is out of control, that creates problems.
Imagine you’re growing. Business is good. Then you run out of a hot product. That’s bad for sales. Worse yet…you’re left sitting on shelves of slow-selling products.
If that scenario sounds familiar…welcome to growth.
Here’s the issue with excess inventory:
Having too much stock on hand costs companies up to 30% of profits each year. Cash tied up in inventory means less cash to invest in new opportunities. Not enough inventory leads to stockouts which funnel sales straight to the competition.
Consider this
Customers come to you expecting to find the products they need. When you run out of stock or don’t have the right items on hand, customers take notice. Sure they may buy from you this time. But will they remember your store next time they need something?
Bet.
Implementing smarter inventory management processes AND coupling that with implementation from an experienced provider like sap business one specialist can make all the difference to your growing business.
Inventory Management Tactics that Actually Work
There’s a lot of advice floating around on inventory management.
Some good. Some not so much.
But these tactics work if you’re a growing company…
Track Inventory in Real-Time
Do you still count your stock at the end of the month?
That’s not a winning strategy.
But that doesn’t mean you should have a false sense of confidence in your inventory levels either.
Real-time inventory tracking allows businesses to know exactly how much of what they have. Where it’s located. And how long it’s been sitting in a warehouse.
Businesses that leverage real-time data to track inventory saw their stock accuracy increase by 35%. Meaning less errors and less time spent digging your business out of inventory holes.
Automation is key here. Scan with barcode scanners and sensors. Let technology give you accurate counts 24/7.
Forecast Demand
Flip a coin every time you need to reorder stock.
Just joking.
But that’s essentially what most businesses do. Make an educated guess. Throw in some seasonality. And hope for the best.
Demand forecasting takes the guesswork out of inventory management. By analyzing historical sales data ahead of peak seasons and lead signals from the market. You can better predict how much stock to order and when to place that order.
When companies used demand forecasting tools correctly, they saw overall inventory levels decrease by 10-15%.
Here’s the kicker…
Perfect forecasting isn’t the goal. Being close, consistently, is.
Over time small improvements equal big savings.
Use ABC Analysis to Determine Stock Priorities
Simply put. Not all products are created equal.
ABC analysis is an inventory categorization technique. Where your products are grouped into three categories based on their importance.
- A items are the most valuable. The top selling products that bring in the most revenue.
- B items fall in the middle. Solid products that sell steadily.
- C items are your low performers. Products that still sell but don’t bring in much revenue.
Focusing on your A items is where you should spend the majority of your time. Where possible. A items usually make up 20% of your products. But account for 80% of revenue.
With ABC analysis businesses have seen excess inventory drop by up to 25%.
Determine Reorder Points and Set Safety Stock
Running out of your best sellers is never fun. But keeping too much safety stock just slows you down.
Ideally, you want to know exactly when to reorder products. Automate this process with reorder points.
As soon as inventory hits that trigger. A purchase order is generated.
Safety stock covers you while waiting on that order to arrive from the supplier. But how much depends on the product. Supply lead times. And demand forecast.
How ERP Helps with Inventory Management
Sure, these tactics help with inventory accuracy. But what about your team?
How do you manage inventory across multiple locations? Track inventory spending? Processing purchase orders manually?
Enterprise Resource Planning (ERP) software streamlines inventory management as your business scales. Systems like SAP Business One link inventory control to sales, purchasing, finance, and operations. No more siloed departments that don’t communicate.
Here’s why that’s important:
Say your sales team closes a big deal. They might not know there’s already a shipment on the way. Which means your purchasing team may very well order more inventory that won’t arrive for weeks.
Maybe your accounting department is having issues calculating proper COGS. They push that burden onto warehouse staff.
Either way, your systems don’t talk to each other. So inventory issues are inevitable.
SAP Business One helps streamline growing businesses’ inventory management. Implementing it allows your team to enjoy the benefits of real-time inventory tracking with built-in automation for inventory management, reporting, and controls.
Increase your ROI
ERP technology isn’t cheap. But the right system pays for itself over time.
ERP greatly reduces purchasing and inventory management costs by an average of 30%. Businesses also report improved internal processes by up to 95% after implementing ERP software.
The more your team uses the technology. The more efficient your processes become.
How To Choose The Right System
Every growing company has different needs.
And not every system is made for every business. When evaluating different software options. Here are some questions to ask yourself:
- Where are you struggling with inventory management today?
- Where do you plan on growing your business in the next 1-3 years?
- How does this system integrate with your current tech stack?
- Do you have support during implementation?
Cloud-based platforms are ideal for growing companies because they’re easy to scale. As your business expands, you can add more users and bump up your plan. All without installing any onsite hardware.
Make sure you partner with a company that has plenty of experience implementing ERP software. It’s easy to get lost in the shuffle. An experienced provider will keep you on track and working quickly so you can start seeing results.
Wrap Up
Staying on top of your inventory is critical to operating a growing company.
The tactics discussed here work. From tracking your inventory in real-time to implementing ABC analysis. Smarter inventory management strategies reduce excess inventory and improve cash flow.
But when you connect your inventory management efforts to the rest of your business with an ERP solution. You’ll start to see the magic happen.
Ready to take control of your inventory?
Quick recap:
- Inventory inaccuracies cost businesses up to $626 billion each year
- Real-time inventory tracking increases accuracy by up to 35%
- With ABC Analysis companies can reduce excess inventory by up to 25%
- ERP implementations can save businesses up to 30% on inventory management costs
- Implementing ERP allows businesses to improve internal processes by up to 95%
