Startups often operate with razor thin margins, which makes it imperative for them to avoid wasting money. This is the primary reason that new businesses typically have a barebones staff and keep a minimal amount of inventory on hand. However, as your startup begins to grow, it may become necessary to bulk up your inventory so that you can meet the increasing demand. This is a good problem to have, but you must keep a close eye on your inventory or else you could end up losing so much money in this area that you eventually go out of business. At this stage in the game, acquiring solid inventory management systems for your business becomes imperative.
Harnessing the Power of Inventory Management
When you hear the phrase “inventory management,” you might automatically think of cataloging everything that is in a warehouse. Although this is correct, it is only part of what solid inventory management systems should accomplish. In fact, this aspect of your startup should also include managing the flow of items in and out of your fulfillment center, along with ensuring that items are properly stored. After all, if something is put in the wrong place, you may have to replace it to fulfill a customer order, and this will hurt your profit margins.
Controlling Inventory Shrinkage with Software
One of the best ways to keep track of your inventory is through using inventory management software such as Vend or QuickBooks. Each of these options has a variety of features that can make the software an all-in-one solution for your inventory tracking needs. For example, Vend can take care of everything from placing automated stock orders to filling in customized taxes for each city, county and state.
As you can imagine, doing all of this tracking by hand is a time-consuming process, and it’s also likely to lead to costly mistakes. Inventory shrinkage can be a big issue that eats up 10 percent or more of your potential profits. Shrinkage occurs as the result of administrative issues, damaged or lost merchandise, theft, sales or shipping errors and expired items.
The Large Cost of Inventory Issues
With a proper tracking method in place, it will be easier to ensure that you don’t lose money to lost inventory. Retailers in the U.S. lose a combined $32 billion every year due to external and internal theft. This may not be as much of a concern for your startup, depending on your particular setup and industry. However, the potential for internal theft is always high, especially if workers know that you don’t have a comprehensive inventory management system in place.
On the plus side, having immediate access to inventory numbers will help you more quickly determine if your startup has a theft issue. If you discover inventory discrepancies, you can take action immediately instead of finding out only after you’ve lost thousands of dollars in merchandise. Expired items will also become less common because you can track this information and rotate your stock as needed.
Customer Service Aspects of Inventory Management Systems
Keeping a tight inventory may be the best way to help your startup stay in the black, but failure to restock regularly will ultimately hurt your profits and reputation. Studies have found that consumers become discouraged very easily if items are out of stock. As many as 43 percent of customers will abandon their entire shopping cart in favor of selecting a new store that has everything available. This highlights yet again the importance of a tightly controlled inventory management system, and it also makes automated stock refills a very wise choice.
Overall, your ability to keep items in stock without losing them to theft and other shrinkage issues will be one of the main factors that makes or breaks your startup. With this in mind, an inventory management system becomes a smart investment that should ultimately save you a lot of money and help you maintain a higher caliber of customer service.
Image by official Navy Page, via Wikimedia Commons