The problem business owners run into with inventory is simple: As the demand for each product rises and falls, it can be difficult to order just the right amount of product, especially if it’s perishable. This drives owners mad because it’s so easy to lose money on product.
The obvious dilemma is that having an excess of product results in a loss because money was spent needlessly; not enough product means missing out on sales you would have made if there was sufficient product. There are techniques, however, which can help to minimize loss on both fronts.
Simple, Accurate Tracking
It doesn’t matter what tool or method you use to track your sales, so long as it is simple for you to use and produces accurate records that you can use for projections of future sales. It’s a given that if you’re running a business, or multiple businesses, you don’t have a lot of extra time; so the temptation is strong to skip your homework and just wing it when you order inventory.
To make sure you’re not overspending or running out of product, it’s imperative that you take the time to look at the data to make accurate projections of how much you will need.
Look at the Big Picture
You want to look not only at the previous day of the week when estimating how much inventory you will need, but it is also useful to take into consideration the broader picture by looking at total sales for the month, quarter, and even the previous year.
This is a very good way to understand trends and patterns in your overall sales, as it relates in combination with immediate and recent demand.
Is it OK to Run Out?
The common dilemma that many businesses face is deciding whether it’s better to buy too much product, or to be forced to tell customers that you are out of stock.
Many businesses will err on the side of caution and buy a little more inventory so that they will never have to tell customers that they are out of something, which is wise, but the cost of that extra inventory adds up and may threaten to blow out your budget.
Sell Overstock Online & Elsewhere
No matter how carefully you dial in your inventory, there will be times when you end up with a little extra product that can’t be recycled back into inventory. To minimize loss of revenue, try to find alternate channels where the surplus product can be resold, such as an online platform.
Of course, it all depends on what type of product it is, but you may be able to earn back a good portion of your loss by selling overstock from an online store at a discounted price.
When the overstock items are perishable, it becomes a little more complicated because you obviously can’t shelf it for very long. This is where close relationships with other local businesses may come to your rescue.
If you take time to research what other businesses are in your same locality, then it may very well pay off; those businesses may be in need of exactly what you want to get rid of. Mark your surplus down to wholesale prices or even less, put it in the hands that need it, and everybody’s happy (under ideal circumstances).
Stephanie is the Marketing Director at Talkroute and has been featured in Forbes, Inc, and Entrepreneur as a leading authority on business and telecommunications.
Stephanie is also the chief editor and contributing author for the Talkroute blog helping more than 100k entrepreneurs to start, run, and grow their businesses.