Inventory management systems are probably some of those things you have heard fellow entrepreneurs and consultants talk about. But the natural question is, why should you spend money on one? Is there a way such an acquisition can improve your bottom line? The answer to these two questions is yes.
The following are some of the ways that inventory management systems can help your business.
6 Areas That Inventory Management Systems Can Improve
1. Bring Accuracy to Stocking
Properly functioning inventory management systems ensure that you only stock what your customers demand and in the right quantities. You are unlikely to find yourself in a situation whereby you under-stock or overstock in any area of your business. You will have a well-informed estimate of what you need to satisfy the needs of your customers for a given duration.
The efficiency that comes with these inventory management systems is such that sales orders that fail reduce to a minimum. They can even go to the elimination list. Such an eventuality ensures that you reap the maximum profits from customers who buy from your business. When customers know that they will get what they come to buy in your business, they are most likely to return.
2. Enable You to Organize the Warehouse
One of the most frustrating things for a customer is having to wait for unnecessarily long periods to have their orders filled. It is one of the reasons why customers refuse to go back to a particular company. Inventory management systems provide you with information that helps you ensure that you arrange your warehouse. But do this in such a manner as to make sure that you serve your customers fast.
You may provide quick filling of orders by storing the fastest moving goods nearest to the exit. This way, a majority of clients receive their orders as quickly as possible. You may store products that do not move as quickly in a part of the warehouse where conditions are ideal for them to retain their quality. You can gain from inventory management systems information on approximately how long such an item is likely to be in the store. This information, therefore, saves you money by ensuring that no goods spoil due to poor storage conditions.
Over and above these two advantages, inventory management systems enable you to have a good estimate of how much stock you need to have before reordering. The estimate in turn helps you work out how much warehouse space you need. The result of this is saving. This is because you will not need to hire or build more storage space than you need.
3. Keep You from Having to Do Inventory Recounts
You cannot deny the importance of always knowing what you have in stock. It helps you know when you need to order. Also, it provides you with information that is useful when it comes to determining your business’ financial health. In instances where inventory management systems that reconcile stock in real time are not in place, you will find yourself having to stop other important activities to take stock.
Modern inventory management systems update the list with every restocking and again with every sale. Updating enables you to spend time and money on activities that go directly into serving your customers thus increasing revenues.
4. They Increase Staff Efficiency and Productivity
It takes much less time for an employee to scan a barcode than to key in every purchase in a spreadsheet. Automatic inventory management systems also eliminate human errors in the process of taking stock. A person keying in details in a spreadsheet or otherwise recording the information manually is likely to make mistakes that lead to incorrect information and eventually wrong decisions.
When one has to check inventory manually, it may take some time for the customer to learn if their order cannot reach them. Such delays are usually quite offensive to the client especially if the order had already been taken. A client who goes through such unlikely to return to your business if they can find an alternative. The lesser time you use with inventory management systems leads to happier customers and more productive staff.
If an order cannot be filled immediately, the customer is informed when they are placing the order. This helps them quickly decide on their next course of action. In these two ways, inventory management systems are vital contributors to the growth of any business.
5. Inventory Management Systems Reduce a Business’ Reliance on Certain Staff
In firms where inventory management systems have not been put in place, smooth running of the company largely depends on certain key individuals. Such people would be privy to what needs to be restocked and which customers are likely to buy what and at what time. This is dangerous for any business. Moreover, this is because if such a person leaves or is absent for any reason, the running of the business damages severely.
Where inventory management systems have been put in place, anyone with access to the system can examine the trends and see when orders need to be placed and which other decisions need to be made. The business runs smoothly regardless of who leaves or stays.
6. Ensure There Is Sufficient Management Information
A sound system provides you with information to help you make strategic decisions concerning the business. Information such as which products are the most profitable and which ones are least profitable within a particular period is necessary. It helps you determine what to keep in stock and what to stop selling among other decisions. These decisions are usually difficult to make in absence of inventory management systems.
Even when you eventually make these decisions, they are often late in the day. This is because you make them when you notice problems in the reduction of revenues or a lower number of customers. An inventory management system enables you to arrest the situation before it affects your business in more destructive ways.
To Sum Them Up
For an inventory management system to be useful to your business, it needs to be automated. These systems are now available in the market for businesses of all sizes.
It is always advisable to research different inventory management systems in the market. Then, decide the one that best works for you. This determination is best when you make it at the beginning of the business.