Warehousing is often a variable cost, meaning it fluctuates based on how much product you’re storing. 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. In markets with high demand it is important to ensure fulfillment, otherwise the company will be giving up free money by losing orders and losing customers. But holding inventory ties up a lot of cash and that's why good inventory management is crucial for a growing company in high demand markets.
Not only does good inventory management minimize costs, it also improves cash flow in other ways because it affects both sales (by dictating how much you can sell), and expenses (by dictating what you have to buy).
One inventory managing technique can be setting Par Levels. Par levels are the minimum amount of product that must be on hand at all times to control when the inventory stock dips below the predetermined levels, and have to order more. Ideally, a company will typically order the minimum quantity back above par, but Par levels will vary by product based on how quickly the item sells, and how long it takes to get back in stock. If it is the case that demand is high the company must increase the safety inventory.
It is a big problem if the business does not have the desired product on hand or staff to provide the desired service so another way of handling the inventory is having a good contingency planning as it can happen that there is a cash flow shortfall to buy products needed, a miscalculation in inventory meaning there is less than expected, a slow moving product taking up storage space of high demand products, a manufacturer runs out of a product and you have orders to fill…
In high demand markets where companies have high par levels and safety stock is important to make sure the reports from your warehouse match reality by spot checking. Full physical inventory at the end of the year may rise problems so it is useful to spot check throughout the year, in particular problematic or fast-moving products. Some businesses use cycle counting instead of doing a full physical inventory, to audit their inventory.
In many cases when demand is very high, responsibilities are split between members of the team, so that a particular person or group will be in charge of a certain market or markets. Dropshipping can be considered in high demand markets. Instead of having to carry inventory and ship products the manufacturer or wholesaler takes care of it, which helps managing storage and fulfillment.
Part of successful inventory management is being able to adapt quickly. Whether you need to return a slow selling item to make room for a new product, restock a fast seller very quickly, or temporarily expand your storage space, it’s important to have a good communication and frequent contact with upstream and downstream partners. That way they’ll be more willing to solve problems. For example, if a company is expecting an increase in sales, the supplier has to adjust production.
Not only does good inventory management minimize costs, it also improves cash flow in other ways because it affects both sales (by dictating how much you can sell), and expenses (by dictating what you have to buy).
One inventory managing technique can be setting Par Levels. Par levels are the minimum amount of product that must be on hand at all times to control when the inventory stock dips below the predetermined levels, and have to order more. Ideally, a company will typically order the minimum quantity back above par, but Par levels will vary by product based on how quickly the item sells, and how long it takes to get back in stock. If it is the case that demand is high the company must increase the safety inventory.
It is a big problem if the business does not have the desired product on hand or staff to provide the desired service so another way of handling the inventory is having a good contingency planning as it can happen that there is a cash flow shortfall to buy products needed, a miscalculation in inventory meaning there is less than expected, a slow moving product taking up storage space of high demand products, a manufacturer runs out of a product and you have orders to fill…
In high demand markets where companies have high par levels and safety stock is important to make sure the reports from your warehouse match reality by spot checking. Full physical inventory at the end of the year may rise problems so it is useful to spot check throughout the year, in particular problematic or fast-moving products. Some businesses use cycle counting instead of doing a full physical inventory, to audit their inventory.
In many cases when demand is very high, responsibilities are split between members of the team, so that a particular person or group will be in charge of a certain market or markets. Dropshipping can be considered in high demand markets. Instead of having to carry inventory and ship products the manufacturer or wholesaler takes care of it, which helps managing storage and fulfillment.
Part of successful inventory management is being able to adapt quickly. Whether you need to return a slow selling item to make room for a new product, restock a fast seller very quickly, or temporarily expand your storage space, it’s important to have a good communication and frequent contact with upstream and downstream partners. That way they’ll be more willing to solve problems. For example, if a company is expecting an increase in sales, the supplier has to adjust production.
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