Poor inventory management is a silent killer of businesses. Last season’s SKUs remain as active inventory and compete with new items for consumers’ attention, tie up capital and accumulate storage charges. Most often, organizations allow their inventories to grow out of control due to inaccurate forecasting, aggressive purchasing and the fear of brand dilution through discounting.
Despite inventory’s direct relationship with financial success and the overall customer experience, 46 percent of small businesses do not track their inventory at all or rely on outdated manual methods. Poor management practices are especially common among emerging brands experiencing rapid growth, many of whom add new products frequently or dramatically increase the volume of their existing lines.
Inventory transparency across channels is the first pillar of successful omnichannel deployment and that much sought after unified brand experience. Solid inventory management ensures products are available at stores, with the wholesaler and online despite the challenges of promotional sales or seasonal shifts.
Tracking inventory should always be a priority for growing brands. Assess your readiness for expansion by answering these three questions:
[ctt tweet=”Tracking inventory should always be a priority for growing brands. via @MakersRow” coverup=”Pd9Sb”]
Do You Currently Track Inventory In Real Time?
As your inventory and SKUs grow, you need to track products more often. Proper management includes knowing what items you have available in real time and how quickly you can package and ship them. This is particularly important if you sell online and have a brick-and-mortar presence. A single, holistic view of inventory must exist across all sales channels. Brands lacking this kind of oversight risk miscommunicating with shoppers and negatively impacting their customer experience.
Additionally, thorough inventory reporting gives brands the language and data to clearly talk with partners and upper management. This makes it easier to finesse existing business relationships and to form new ones. For example, when you store accurate inventory information in a digital system, you can quickly communicate product availabilities with larger retail partners and make the most of new sales opportunities.
Do You Track In Terms of Velocity?
Other than the cost of products themselves, inventory velocity is a key metric in determining brand health. Knowing how quickly SKUs move can help you decide if a product is worth keeping or if it should be removed to make room for something else.
As a part of inventory tracking, you should weigh any profits made from selling a SKU against incremental fees like storage costs and transportation expenses. Even if a product is consistently selling, it may not necessarily be profitable when the management costs incurred are too high. The velocity of a product is a cost driver and can help brands quantitatively evaluate which products are turning over fast enough and which products need to be liquidated.
Finally, knowing how quickly products sell can reveal what customers enjoy most, and what they are likely to buy again in the future. By tracking, reporting and assessing your inventory more frequently, you can gather a greater volume of sales data and predict upcoming inventory needs with greater confidence and financial success. This ultimately offers your customers a more fruitful shopping experience and positively impacts your brand’s reputation.
[ctt tweet=”Knowing how quickly products sell can reveal what customers enjoy most. via @makersrow” coverup=”Lcfa7″]
Do You Compare Your Performance to Industry Benchmarks?
No two businesses are the same, but the smartest brands compare their practices with other companies within the same vertical or of a similar size. For instance, if your company is being outperformed — perhaps paying far more for warehouse storage fees — evaluate your partners and find a more cost-effective solution. Quarterly industry benchmarks can reveal areas of opportunity that your brand might otherwise miss when focused solely on itself.
If you aren’t sure how to answer these three questions on your own, work with a reputable partner that specializes in inventory management. For example, an eCommerce fulfillment company has the tools, experience, infrastructure and expertise to keep your inventory tracking up-to-date and flawless. A fulfillment partner can also help you more accurately determine and record key metrics like the velocity of product lines, SKUs and your overall business margins.
While inventory is just one part of your overall brand, understanding how your products are moving — or not moving — can help you make smarter financial and customer experience decisions moving forward. If you’d like to learn other ways to improve your emerging business, download “Emerging in eCommerce: A 360° View From The Inside,” here.