Want to Skyrocket Your Sales? Use Inventory Management! In sales, success hinges on keeping the right products on hand and in the right amount. This minimizes the cost of carrying excess stock, and helps you avoid costly and embarrassing out-of-stock scenarios. Inventory management is the process of ordering, storing and using your inventory, including receiving, warehousing and processing items.
Inventory management help you answer questions like these to skyrocket your sales,
- What are your best and worst selling products?
- What amount of a product should you be buying?
- Are you losing sales opportunities due to out of stock?
- Are you losing money due to carrying excess stock?
Here are the 5 steps to skyrocket your sales with inventory management,
Audit Your Stock
Taking a count of inventory isn’t fun but it’s important. You can’t improve what you haven’t measured, right? A stock audit helps you see what you have on hand, what’s sold, and what hasn’t. It’s also the first indicator if something is amiss in the stocking process, or you’re experiencing theft or loss.
It’s recommended that you count inventory annually, quarterly and sporadically for optimal accuracy. You can audit your stock using several methods, including,
Visually – Count up the stock at a glance (if small enough).
Tickler Files – Maintain an ongoing count across all sub-sections of inventory throughout the year, which eventually returns an accurate count for all inventory.
Master list – Tick an item of the master inventory list whenever it moves out of inventory.
Counting stock is the foundation of inventory management. When used alongside overhead cost and labor analysis; It’s an insightful practice that highlights where you can save money and maximize your returns.
Identity Your Best & Worst Performers
Your audit will indicate what’s been selling and what hasn’t. You’ll want to repurchase your top sellers regularly, and abandon items that haven’t been selling well. This helps you maximize returns, increases cash flow and capitalize on market trends in real-time.
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Consider why your items are turning over or not. Seasonal variance? Poor quality? Unpopular colorways? It’s important to note the low-turn items because they waste capital and storage space. Try to account for the influencing factors, and avoid purchasing similar products in the future. You can use marketing incentives like discounts and promotions to unsold old stock. The faster you free up capital, the sooner you can experiment with new items and repurchase top-sellers.
Rank Your Inventory
It makes sense to pay closer attention to your high-value items. And if you group high-value items together, they’re easier to focus on. The Inventory Categorization Method, or the ABC Analysis, helps you better manage your inventory by grouping like with like.
Segment your items into three categories based on their value and stock volume – low, moderate, or high. This allows you to prioritize the re-ordering and stock reviews for A-category items over low-value inventory in groups B and C. Also subcategorize into, Category / Value / Stock Volume / Re Order Frequency & Stock Review to easily rank the inventory.
- Category A are Your best-selling, high-value or priority stock. You make the most revenue from these items but they may cost more, meaning you want to keep fewer on hand. Perhaps you keep these items secured because they’re at risk of theft. Category-A items require the most attention in terms of stock reviews and reordering to ensure adequate supply.
- Category B are your moderate sellers that need moderate attention.
- Category C items of higher volume but lower value, which require less reordering and oversight.
Thinking of inventory in terms of its priority can help you gain clarity into how best to manage it at scale, and how best to manufacture or reorder.
Forecast Your Demand
Imagine being able to buy exactly the right amount of stock to sell without wasting a dime on unsold stock. Now consider that the estimated yearly cost of holding excess inventory is between 25-30%.
This goal is achievable if you forecast demand, or use past sales data and market trends to predict how items will sell in the future. Model your projections using the historical sales data. But also factor in market trends, customer feedback, seasonality – even growth in the larger economy.
While sales is more an art than a science, the practice of forecasting demands will pay dividends over your business lifetime. Your predictions will improve as you get a better sense of your niche and your customers. Fortunately, even a moderately correct estimate can help you cut your future losses on overstock.
Use FIFO
First-in, first-out (FIFO) is an inventory management method in which you sell goods in the order they were received. In other words, the first item you receive from the supplier is the first sold to customers, and vice versa. FIFO helps you reduce loss and waste if you’re selling perishable goods like food or items that depreciate quickly like fashion.
Best practices suggest that you place the oldest items in the front of the queue, and store incoming inventory in the back of storage. Chronological sorting helps you maintain a clear sense of what’s new and old, but also makes it easy to spot theft or inventory manipulation.
Lastly, FIFO keeps your balance sheet closer to the actual market value. You’re selling stock received months ago today so you get the going market rate. This approach is helpful in times of inflation, when you want to get every dime back on your spend as prices rise.
Track Your Inventory
Inventory tracking is the process of monitoring the SKUs in your possession, including the location and quantities of each item. This provides real-time visibility of inventory, helping you get a clear sense of your business health, performance as well as product availability.
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Most importantly, tracking inventory helps you avoid disappointing customers. Say a shopper orders an item but it’s out of stock. Frustration sets in and you lose that customer. You can avoid this scenario by knowing how many SKUs you have in stock at all times, plus the manufacturing and delivery lead times for your incoming inventory.
Inventory tracking systems show you what inventory is coming, going, and when it will arrive, including:
- On route from the supplier
- In transit to customer
- Returns from customers
The manual process of tracking inventory gets more complex and time-consuming as your business grows. Look to tools like spreadsheets, apps and shipping software to help you maintain a bird’s eye view of your SKUs and costs at once.
Inventory management can help you skyrocket your sales and profits in your business. You want to effectively regulate sales flow, and doing so requires visibility. Inventory management systems enable you to track, control and forecast your optimal stock and sales.
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