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February 23, 2022

Managing Your Inventory is Made Easy With These 5 Tips

From an inventory management perspective, being out of stock is one of the worst positions to be in. To keep your business operating without shipping delay or interruption, you need to anticipate this situation when stock is low, and have a game plan on how to get your stock moving again.

We've moved past the days of issuing backorders to customer purchases. Things have changed, and customers no longer want to wait on companies to manufacture more goods; they want their products within days—sometimes hours—after placing an order, naturally putting stress on your fulfillment process. Retailers like Amazon, Zappos, and the like have made 24-hour processing, prompt shipping, and 2-day delivery the norm. And, for most products, there is a huge amount of competition. If your operation can't deliver the desired item promptly, the consumer will look around and find someone else who will.

In this fast-paced shipping environment, how can you manage your inventory to avoid any backorders? Follow these tips on how to create a solution for your organization.

Know your items’ demand or speed

Items in an inventory naturally have a “velocity”—a speed at which they move off the shelves. Some items sell quickly, and some sell more slowly. Once you know an item’s velocity, you can represent your stock levels in terms of how long that stock will last. For example, you might know that you have five weeks of smartphone covers in stock. If it takes four weeks to get a new order in, things are fine. If it takes eight weeks, you know that a backorder situation is imminent and can begin to prepare.

Keep trends and seasons in mind

Velocity is not constant, of course. Velocity for items changes over time. For example, ornaments and gifts sell a lot faster during the Christmas holiday season. Barbecue grills and bathing suits sell better when summer approaches. Keep track of sales data over time, year after year, to find these seasonal patterns and learn from them. This also lets you track trends: if you sell fewer and fewer of those smartphone cases year after year, the demand is waning and you can probably get by with less stock with the next order.

Get low stock reports in a timely fashion

You can have all the data in the world, but unless that data is collected and understood, it cannot be used. Make sure that you are getting the right reports about item velocity. If these reports are not in real-time and occur frequently, you should also see if you can set up alerts that inform you when items are in a low stock situation.

Trigger reordering when stock levels get low

Ordering new items or parts when stock is out creates backorder situations. So ordering needs to occur in anticipation of running out of stock. If your warehouse (or your 3PL partner’s warehouse) has the right technology, they can track inventory and trigger automatic reorders when items achieve “low stock” status. These "Dynamic Reorder points" can help organizations get the stock they need just in time to fill the demand.

Automate and outsource

The more the above steps can be automated, the better. This cuts down on human error and helps ensure smooth operations.

While there is software that can help with this, many of the best-in-class solutions cost hundreds of thousands of dollars. Even if you spend that money, you will need trained staff and rigorous operating procedures to get everything to work.

For this reason, many small-to-medium-sized businesses outsource these functions to a 3PL. However, no two 3PLs are the same, and some don't have strengths in monitoring and reporting on stock levels. When looking for a 3PL partner, be sure to keep your organization's priorities front of mind.

A good 3PL will have invested in the technology for:

  • Measuring stock levels and item velocity
  • Keeping track of inventory in real-time
  • Generating reports and ending alerts
  • Automating and triggering reorders
  • And more!

All this investing and planning ahead will mean that you don’t have to worry about fulfillment and reordering, allowing you to focus on your business and your brand.

Prepare with the right partner

The right partner will not only help you in managing inventory but provide you with the best possible tools for you to stay prepared for your whole operation. If you would like to hear more about this kind of technology and how modern 3PLs are using it, reach out to our team. We can show you how Materialogic leverages technology to give you information when you want it, and automation when you need it.

 

Fulfillment Operations

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