Your inventory is a part of your everyday operations. While most business owners understand the importance of inventory, it's also important to understand why you need to manage it. It is not enough to have inventory on hand for your clients. You need to be able to plan your finances. If you don't manage your finances, you are more likely to be in the dark about how your business is doing and what you can change to increase your future profits.
The following is what you need to know about the importance of inventory management.
Your Inventory Is Your Profit
To make money, you have to have inventory. Businesses that offer services do not need to worry about inventory. Still, if you sell a product, such as medical supplies, auto parts or any other product, you have to have an inventory to make a profit. Even if you make all of your own products, you still need inventory if you own a clothing company. You always want to have inventory available to the customer.
Managing your inventory is the only way that you can really maximize your sales. When you have enough inventory, you can make a solid profit. However, if you have too little product, you could lose customers. On the other end, if you have too much inventory, then odds are you overspent and need to cut back. In the case of businesses in the food industry, you have to worry about your product going bad before selling it.
There are a variety of systems and software to help you track your products. One of the most well-known tracking systems is UDI. When dealing with medical supplies, a UDI is a unique device identification system. This allows you to identify devices within the healthcare supply chain quickly. If you are selling medical supplies in the United States, you must have a UDI on your products.
Your Inventory Encourages Customer Loyalty
While your customers aren't going to know the work that you put into inventory management, they will know that you have a product when they need it. If a client comes to your company searching for a product but you don't have it, he or she will probably seek a different company out. You could lose your clients permanently to a competitor because they had a product when your client wanted it. Most customers don't want to wait.
If you have loyal clients, you can keep them through proper inventory management. If a business comes to you for supplies for their store and you're all out, they may come back to you later if they like your product. However, if it happens more than once, odds are the company will seek out a more reliable supplier. When you manage your inventory, you can be more reliable.
Your Inventory Management Can Make You More Efficient
When you have an inventory management system in place, you will figure out the different trends in your business. For example, if your sales slow down during specific times of the year, you can prepare for it. You can make sure that you do not overspend on inventory during those months. Likewise, you can prepare your inventory for times when you are likely to get more sales.
Inventory Management Allows You To Track Supplier Performance
You rely on your suppliers to help you conduct business. If you have an often late supplier, this will translate to a loss of sales on your end. If you do not have adequate inventory for your clients, you will lose sales. It doesn't matter if it is because your supplier was late.
When you manage your inventory, you have a record of how your suppliers perform. If you have a supplier who is habitually late, you can address it. You can sort out the issues and hopefully resolve the problem. In some instances, the supplier may not be a good fit for your company and you may have to look into finding a new supplier.
When you switch suppliers, keep in mind that this can damage your inventory at that time. You could be short on product until you find a supplier who can fit your business needs. Sometimes, you may have to decrease your demand if it is difficult for suppliers to keep up with your business or maintain your orders.
Running a business is full of strategizing. You have to know how much inventory you have and the trends in sales to maximize your profit. When you leave your inventory in a warehouse, it is not making you any money. Likewise, if you do not have a product when your customers need it, you lose cash flow. Inventory management is the best way for you to earn a profit and to make sure that your clients are always satisfied.