The most successful of businesses are best run through the repetition of past strategies that might have once proved economically viable. Proactivity in business practices is often about the ability to successfully replicate a once successful strategy into a better version of itself. Thus, the market is a constantly churning mechanism that is always seeking to rebuild itself in its own past image. The importance of viable inventory management in such a dynamic market ecosystem cannot be emphasised enough. This is because even after the implementation of the most diabolically clever marketing strategy; your profits and losses are still directly linked to the idea of optimal inventory management.
An inventory is typically seen as an investment that is going through the production process to eventually turn into a marketable end product.
Here are a few ways to better manage inventories to maximise your profits:
Inventory Optimisation Tools
Cloud based systems offer a means for companies to access real time data from multiple devices in regard to their inventory. This approach helps to significantly reduce time lags and help project delivery timelines better. Software tools like ERP and WMS can help in speculating on the ideal volume of inventory acquisition that holds the lowest risk factor in accordance with the underlying market trends. This data can prove to be absolutely crucial in avoiding losses for any company.
Service Level Differentiation
In an ideal market, demand is complemented by supply and businesses, in turn, end up making capital. In the real world, however, this particular chain of events is not an absolute. Consumers are known to offer differentiated levels of demand for products and this realistically creates varying degrees of demand for specific products. It is only practical to keep replenishing stacks of inventory for products that are typically seen as highly mobile in the market. In essence, studying the market that you are catering to is a very important step to maximising your profits.
Also read: 5 Ways To Improve Your Business’s Cash Flow
Buying the Economic Order Quantity
Excess stocks are wasteful in the worst of ways in a consumer oriented market. The loss of money and time added with the disuse of raw materials will amount to tremendous losses for any manufacturer big or small. A simple way to avoid this is to buy specific quantities of inventory that are in standard with the Economic Order Quantity* (EOQ). The Economic Order Quantity refers to the ideal amount of stock a company should purchase given its cost of production, holding costs, demand rate etc. Adopting this equation into your company’s production curve will not only prevent wastage but also improve inventory turnover.
Maximising your inventory output is a dynamic process. Sustainable inventory management can be only be achieved through consistent planning. An added advantage would be an implicit need to be on top of emerging market practices. Early adoption of technological trends can give you the edge over your competition who might be slower to evolve. Bottomline being, when it comes to reaching the very zenith of your inventory turnover margin, proactivity is key.