Businesses everywhere are looking for ways to trim costs and improve their margins. With an uncertain economy and supply chain issues, many companies are looking into bulk inventory purchases for discounted pricing.
According to the U.S. Census Bureau, manufacturer and trade inventories were 15.8% higher in January 2023 than in January 2022. This article will look at the common pitfalls of bulk storage and solutions that enable larger orders.
Can You Overorder on Inventory?
First, it’s important to note that you can overorder on inventory. If your turnaround time is longer than the recommended shelf life of a product or material, then you risk wasting inventory or selling low-quality goods. Items that have sat in storage too long may become discolored, brittle, outdated, or show signs of deterioration.
You can reduce large inventory turnover issues by following a first-in, first-out stocking system and knowing the best-before and best-by dates. Some products are perishable with a shorter shelf life than other products.
You should also carefully choose storage solutions that enable the longest shelf life possible for the products or materials you need to store. The storage environment can impact the shelf life of your inventory, with many products sensitive to extreme temperatures, light, or moisture.
But, most importantly, excess inventory levels shouldn’t be higher than what you expect to sell within a reasonable period. Inventory management software can help you analyze your typical turnover trends and choose the best inventory rates to meet demand and keep pricing as low as possible.
What is Overflow Inventory?
You only have so much space in any given warehouse or storage facility. The ideal amount of inventory for your business may change throughout the year — especially if you sell seasonal products, expect supply chain shortages, or have an increased demand during holiday shopping.
Your storage constraints may not align with your ideal inventory purchases. Overflow inventory is the goods you have on hand but don’t have space to store.
You might also run into overflow inventory issues due to overshipment, high buyer return rates, inaccurate inventory data, or items selling slower than forecasted. Inventory overflow is a common problem for many businesses that deal with bulk purchasing.
What Happens if You Don’t Have Space for Inventory?
Without enough space to store your inventory, you may run into inventory management problems.
Some businesses might promote a blowout sale to clear out the excess at rock-bottom prices. Other companies may prematurely increase their warehouse size, leading to excess space and high overhead costs down the road. Businesses might also decide to donate excess inventory and benefit from the tax return.
It's important to handle excess inventory before it loses value. Indecision or a lack of accurate insights might mean inventory goes bad, forcing you to throw out your excess and contribute to the total loss.
If you can’t adapt quickly to overorders or inventory surplus, you may have an expensive problem on your hands. Therefore, it’s important to have a contingency plan in place for agility, allowing you to pivot as things change and unexpected events occur.
How Bulk Storage Allows Companies to Manage Bulk Purchases
Once you have a good idea of your typical product turnover and ideal shelf life, you can consider bulk storage solutions to help you manage overflow inventory. If there are times throughout the year when you want to hold a larger number of products or materials, bulk storage may offer the right solution.
Making bulk purchases often allows you to get a better price. Bulk storage enables companies to store a large amount of inventory in bulk format. You can use bulk containers to reduce the number of physical storage bins needed. This might include:
- Super sacks
- Industrial storage bins
- Bulk containers
In many cases, bulk inventory will be stored on a pallet for easier movement and efficient use of cubic storage space. While floor stacking is the most basic form of storage for a warehouse, rack and shelving options can help you get more out of the vertical space.
Ideally, you will be able to form a relationship with a bulk storage warehouse that allows you to rent only the space you need to manage your inventory overflow or bulk purchases. Flexible, on-demand warehousing offers agility outside of your current space constraints.
Pinpoint Ideal Inventory Levels and Bulk Pricing Opportunities
Before you can make the right call on bulk storage solutions, you need clarity from a robust and accurate warehouse management system.
Materialogic can help you with order management and sales forecasting to pinpoint what bulk pricing deals will truly save you money and help you avoid stockouts. Custom metrics and solutions enable our software to fit the unique needs of your business.
If you are considering larger purchases for bulk pricing, you need to increase inventory visibility. Talk to our team today to learn what Materialogic can do for you.