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The term “Inventory” is often used to describe all the items, goods, merchandise, and materials that you have in real-time as a business owner.
These are items for sale to your customers in the market to earn a profit.
Most businesses like to term it “Stock’’ as well and this varies from business to business.
An example: Tinuke runs a clothing store, when she gets new supplies of dresses, jeans, jumpsuits, etc, those are items she has in “stock’’ now and are expected to bring in sales = Inventory.
Having an organized inventory process helps your business supply chain process, what is “Supply chain” you may ask? Well, this is the process of coordinating the necessary activities to get your raw materials produced as delivered goods to your customers. This could include designing, manufacturing, packaging, transporting, etc.
This article would focus on what inventory is, why it is important, tips for improving it, and a plug-in of an Inventory Management system. But let us digress a bit and check out the types of inventory in highlights.
Types of Inventory for a small business, and these may vary based on your business type.
You may be wondering why this is important for your business, well, read on. Managing cost is one of the key benefits of managing and tracking your inventory properly. To be able to meet customer demand you must be able to keep track of your inventory to be in the know that you have sufficient supply of products. Imagine being able to save money and properly forecast cash flow, this is what effective inventory management can help you achieve. And you know we are all about effective business management process here at Dillali.
The key to running a successful and profitable business could lie in properly accounting for your inventory through every step. The days of missing parts and runaway costs are over, turn your inventory into your company’s secret weapon.
Inventory control (this is the same thing as having sufficient stock to always meet customers’ demands) plays an important role in determining your business's financial health as well as growth and expansion.
There are a few key reasons why inventory management is important:
1. To help you keep pleasing your customers by stocking the correct products and selling when they need them, this also helps your order management process: Your customers always want to order items because to them you always have those items in stock, so managing your inventory properly helps you keep them happy.
2. To avoid overstocking or under-stocking of products, which can lead to lost sales or excess inventory costs: This informs you want sells fast and what does not, so you re-strategize and stock accordingly.
3. To help optimize stock levels and minimize inventory costs: Managing your Inventory properly helps you avoid unnecessary costs on raw materials and other expenses that could be avoided.
4. Also you can monitor your Inventory turnover ratio with a proper inventory management system for your business. This shows how many times an item has sold out (also restocked) and the time range as you want the data. This would also reflect good inventory (stock).
Now, it may be very tedious to manually manage your inventory effectively, which is why I always recommend these few tips for improving the entire process of inventory. Try these and thank me later:
After taking a look at the levels of inventory, another problem your business could encounter is not inefficiencies because you do not have real-time information on how much inventory you have. This increases the risk of a lot of mistakes in the entire Inventory process.
1) Increased Costs
You’ll incur unnecessary costs that would not profit your business.
2) Impossible to Track Inventory
Without knowledge of real-time data or info on how or where your products move, it may result in theft or loss. And this can in turn harden inventory tracking for your business.
3) Lack of Inventory Balance
This can cause a shortage or overstock and both would lead to profit and cost loss which you can avoid.
You can totally eliminate time-consuming tasks and human capital by automating the process instead. You can put this time into other things instead.
5) Conflicting Vendor Customer Relations
Customers want to put little effort into making sure you’re filling their orders correctly. When customers reach out to make inquiries about a particular good and you say it is out of stock or give them a long frame of being able to deliver, they tend to become discouraged and thus may lose interest. This decreases customer satisfaction and loyalty.
6) Decreased Employee Productivity
Your workers become tired or unproductive easily. Could these processes be quicker and automated? An inventory management system would help to free up time and labor for other activities.
7) Ineffective Decision Making
If you do not take advantage of tools to help with analyzing inventory trends, your decisions may not be informed. And thus an Inventory Management system would give you access to reports and metrics to make decision-making clearer.
8) Decreased Warehouse Organization
Your warehouse may become packed and disorganized when you do not have a fluid system. And this makes it difficult to work within.
9) Increased Lead Times and Stock-Outs
Not having a proper Inventory system makes it difficult for you to track the results of delayed delivery. These delays are caused by a poor restocking process which is often informed by a proper inventory process.
10) Delays in Shipping and Delivery
This can lead to you disappointing your customers. Because it is hard for you to track inventory and know when items are out of stock and need restocking.
This is why you should check out Dillali.
Dillali is a simple record-keeping tool for SMEs in Africa and emerging markets. Business owners on Dillali have access to FREE and unlimited features such as Quotes, Invoices, Record a sale, Send debt reminders, Client management, and Expense and Income tracking amongst other incoming features to ease their business processes.
Get exclusive launch of the cloud-based “Inventory” feature with Dillali (both Mobile App and Web versions). Sign up here and get 50% off. Join other business owners starting here.