An inventory management system is a set of tools and procedures that your workers use to track and manipulate the items you have on hand for your company. Its effects are long reaching, stretching into virtually every department within your enterprise and influencing how you work with your customers. Although there are dozens of benefits to these systems, these three stand out.
You can improve cash flow and your profit margin.
As John Schreibfeder of Effective Inventory Management, Inc. states, “the total extra cost a firm incurs from having inefficient warehouse operations can have a significant effect on overall corporate profitability.” When you have a system in place to manage your inventory well, managers and other inventory workers can either alert suppliers or your production staff when items needed are low. You also don’t waste money buying or making items no one wants to buy, because the inventory history shows you where consumer interest is. With the right type and amount of inventory, you often can reduce storage costs. At the same time, you don’t have to spend as much time looking for items if they’re properly identified and tracked.
The system also allows you to better estimate how much income you’ll likely have based on how inventory is being sold, which makes it easier for you to do general financial planning and manipulate the funds you have or expect. You can keep track of past and current pricing in order to set future costs, and you will know how much your employees will need to be on the clock in order to fill orders well, too.
Another big financial benefit of an inventory management system is that, because you can fulfill orders quickly and with fewer delays or errors, you don’t have to put as many resources into compensating your customers. For instance, you might not have to offer discounts on future purchases, or you might be able to reduce how many customer service workers you need to handle inquiries or complaints.
Decision making becomes easier and faster.
In most cases, an inventory management system works in real time, letting you get an as-is picture of what you have. With your information up-to-date and often accessible online, you can look at what is happening and communicate your situation to anyone involved in your business, including investors and shareholders. This facilitates collaboration on new projects or goals, allowing workers to identify and solve problems before they balloon out of control. In the increasingly competitive marketplace, the ability to move fast in this way is essential to staying on top and remaining customers’ top choice.
Your customers like you better.
Inventory management systems let you have the items customers need and want when they are most in demand. Customers who can get their orders filled quickly and on time usually respond positively, often communicating their satisfaction through repeat sales or referring you to others. Your customer service representatives also can stay familiar with what you’ve got in stock or what you plan to produce or purchase, so when customers do have questions or complaints, resolutions go quicker and are more consistent.
Guest Author: Jack Bishop values business technology. He frequently blogs about their practical uses and effective strategies to help business owners run more smoothly and successfully.