This is why it’s important to factor inventory into your cash flow management. But while it’s sitting in your warehouse, it’s definitely not cash.
Remember: inventory is product you’ve likely already paid for with cash (checks and electronic transfers included), and you’re going to sell it for cash. Not only is good inventory management more cost efficient it improves cash flow in other ways, too. When you store too much product at once or end up with a product that’s difficult to sell, your storage costs will go up. Warehousing is often a variable cost, meaning it fluctuates based on how much product you’re storing. By adopting a diligent strategy, you can address this costly inventory mistake. Avoid dead stockĭead stock is stock that can no longer be sold-not because it's expired, but rather because it may have gone out of season, out of style, or otherwise become irrelevant. Managing inventory effectively helps you avoid unnecessary spoilage. If you’re selling a product that has an expiry date, like coffee or tea, there’s a very real chance it will go bad if you don’t sell it in time. Whether you’re a small business or company using enterprise resource planning (ERP), inventory management helps your business do a number of important things: 1.
Benefits of inventory managementĮffective inventory management is essential for ensuring a business has enough stock on hand to meet customer demand. Poorly-handled inventory management can result in a business either losing money on potential sales that can’t be filled or wasting money by stocking too much inventory. Below are some of the benefits of inventory management, as well as the challenges. However, inventory management grows in complexity as your business scales.Įffective inventory management requires a delicate balance of not having too much inventory (leading to overstocking) or too little inventory (causing stockouts). Inventory management is a critical part of any successful business, ensuring your store has enough of the right inventory at the right time. Because of this subtle distinction, all stock is included within inventory, but not all inventory is referred to as stock. Stock refers to the finished goods that you have available to sell to your customers, while inventory might include materials used to create the finished goods, as well as the finished goods themselves. Inventory control refers to the process of regulating, monitoring, and handling the inventory that you already have at your store, while inventory management also accounts for demand forecasting, ordering, and receiving inventory. Inventory control is contained within inventory management, but it is slightly different.
Inventory management vs inventory control This helps you maintain optimal inventory levels and minimize costs. The goal of inventory management is to minimize the cost of holding inventory by helping you know when it’s time to replenish products or buy more materials to manufacture them. It also tracks your company’s stocked goods and monitors their weight, dimensions, amounts, and location. It covers everything from raw goods to finished goods, storing, and selling. Inventory management is the systematic approach a business uses to source, organize and move inventory through their supply chain.
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