4. How to reduce excess stock?
Excess stock takes up space in your warehouse and requires you to spend money on storage and other holding costs. By reducing excess stock, you can free up space and reduce these costs. This helps improve cash flow: Having excess stock ties up your capital, which could be better used elsewhere in your business. By reducing excess stock, you can free up cash that can be used to invest in other areas of your business or to pay off debts.
There are several ways to manage excess stock, depending on the specific situation and the needs of the business. Some potential options include:
- Apply Stock Markdowns: Stock markdowns are reductions in the price of a product that are used to clear out excess inventory or to make room for new products. Stock markdowns are a key approach for reducing excess stock. Stock markdowns can be an effective way to reduce excess inventory and generate some additional revenue, but they can also hurt a business's profitability if the markdowns are too deep or if the products don't sell quickly enough.
- Liquidate Excess Stock: This is a more extreme option if Markdowns are not effective -it may be possible to sell it to another company or through a liquidation sale. This can help the business recoup some of its costs and reduce the amount of excess stock on hand.
- Donate excess stock: In some cases, it may be possible to donate excess stock to charities or other organizations that can use the goods. This can be a win-win solution, as it allows the business to get rid of excess stock and support a good cause at the same time.
- Optimize inventory controls: Once you've gone through the above steps, it's important to begin optimizing your Inventory Controls to better manage your ideal stock position and minimise the risk of further excess stock. It's always better to prevent the problem beforehand rather than having to discount products to get them to sell.
5. How to optimize my inventory controls and planning?
Optimizing inventory is important for several reasons. Here are a few:
- Reduced holding costs: When you have the right amount of inventory on hand, you can avoid holding onto excess inventory that you don't need, which can save you money on storage and other holding costs.
- Improved customer satisfaction: Having the right amount of inventory can help ensure that you have the products that your customers want, when they want them. This can help improve customer satisfaction and reduce the risk of lost sales.
- Reduced risk of stockouts: If you run out of a product that your customers want, it can lead to lost sales and damage to your reputation. By optimizing your inventory, you can avoid stockouts and keep your customers happy.
- Increased efficiency: When you have the right amount of inventory, it can help make your operations more efficient. For example, you can avoid having to constantly restock items that are running low, which can save time and labor.
There are a number of ways you can Optimize your Inventory:
- Invest in Inventory Optimization Software: Inventory optimization software helps businesses manage their inventory levels. It will help you determine how much inventory they need to keep on hand, when they need to order more, and what products they should prioritize.
The leading Optimization Softwares automatically recommend actions to improve your Supply Chain efficiencies and minimise risks of cost blowouts. This can help businesses reduce excess inventory and avoid stockouts of important items.
If you'd like to learn more about Best-Practices in Inventory Optimization, see this guide here.
- Use Simulation: Digital Twins enable you to test different approaches with your Inventory Controls. This is a risk-free way of testing different strategies and finding inefficiencies in your network.
6. Focus on the Key Products
It’s challenging to view hundreds, or even thousands, of inventory items and make informed decisions that effectively manage volume and purchasing – determining precisely what to buy, what’s running short, and what’s overstocked.
The best way to establish these parameters is to classify items correctly, as this will allow you to focus on the 20% that gives you 80% of your sales.
Classifying your products with ABC classification can help you make more informed decisions about how to manage your inventory. Here are a few reasons why this is important:
- Better allocation of resources: ABC classification allows you to divide your products into three categories (A, B, and C) based on their value and importance. This can help you prioritize the products that are most valuable and allocate resources accordingly. For example, you might focus more on managing and stocking A-class products, while giving significantly less attention to C-class products.
- Improved inventory management: By understanding which products are most important to your business, you can make more informed decisions about how much inventory to keep on hand and how to manage it. This can help you avoid stockouts of important items and reduce excess inventory of less important items.
- Increased profitability: By prioritizing your most valuable products, you can focus on maximizing their sales and profitability. This can help you generate more revenue and increase overall profitability.
Tools such as Remi AI automatically classify your products for you, enabling you to quickly focus on the Products that matter the most.
6. Reduce Warehouse Costs.
There are several ways that you can reduce your warehouse costs. These are the key suggestions:
- Improve inventory management: as mentioned earlier in this guide, by better managing your inventory, you can reduce the amount of excess stock you have on hand, which can save you money on storage and other holding costs. This can also help you avoid stockouts of important items, which can save you money on lost sales.
- Use space more efficiently: Make sure that you are using your warehouse space efficiently by optimizing your layout and implementing storage systems that make it easy to find and access items. This can increase efficiencies, reducing picking times and reduce labour times. It will also help you make better use of the space you have and reduce the need for additional storage.
- Apply a Warehouse Management System: A warehouse management system (WMS) is a software program that helps businesses manage and track their inventory, orders, and other warehouse operations. A WMS can help businesses with tasks such as tracking and locating products in the warehouse, fulfilling orders, and managing stock levels. It can also provide valuable data and insights that can help businesses improve their operations and make more informed decisions. Some common features of a WMS include inventory tracking, order management, and pick-and-pack functionality. Many WMS systems also integrate with other business systems, such as accounting and enterprise resource planning (ERP) software.
6. Collaborate with your Key Suppliers.
Suppliers represent a key cost across your supply chain. By collaborating with them more closely, especially by sharing information of your upcoming requirements, it can help them better anticipate your needs, consolidate orders and potentially reduce costs.
There are several ways that you can collaborate with your suppliers to improve your operations and achieve your business goals. Here are a few suggestions:
In summary, reducing costs across your Supply Chain and increasing general efficiency is an important objective. But you need to ensure that you do so while maintaining a fantastic customer experience. If you focus on improving Supply Chain Visibility through a data driven approach, then technological improvements will enable you to reduce costs while maintaining the customer experience.
- Communicate regularly: Keep in touch with your suppliers and let them know about any changes in your business, your forecasts or your product needs. This can help them better understand your business and your needs, which can help them consolidate their deliveries, production and the timeliness of their deliveries.
- Negotiate discounts for bulk purchases on Key Products: This is a key approach in supplier collaboration.
- Share your forecast: Provide your suppliers with information about your products and your forecasts. This will give them visibility into your expected demand and will help them better plan for your upcoming purchase orders.
- Develop joint plans: Work with your suppliers to develop joint plans for improving your operations, such as reducing lead times, reducing freight costs and consolidating shipments. This can help both parties reduce costs effectively.