Inventory turnover: 5 tips to avoid losing control

Inventory management is a very important variable for the profitability of the business; but it is often neglected by many SME entrepreneurs and businessmen by giving more focus to sales, billing and even the search for savings . In recent times it has gained more weight after the growth of electronic commerce.

Let’s consider two scenarios. When we buy excess merchandise and turnover is slow, the problems are shrinkage and product expiration, “ant theft”, maintenance costs and the impossibility of investing that capital in a more productive way. On the other hand, when we underestimate the demand, the lack of stock delays and stops sales, and can even paralyze operations.

As you prepare for the holiday sales season and define your business strategy for 2022, it’s key to keep these five tips from the experts in mind to manage an ideal level of inventory turnover, but without losing control. In addition, with the focus on customer service and profitability.

What is inventory turnover?

Also known as “turnover rate” , it is an operational and financial indicator that indicates how many times, on average, a company sells and replaces its stock of products during a given period . It is closely connected to the turn of the business: in a grocery store, for example, movement in the warehouse will be faster than in the case of a bakery equipment vendor.

In other words, inventory turnover shows how quickly a business is selling , so it is also an indicator of the performance of marketing and sales teams , as well as profitability .

Tip #1. Work on demand projection

The better we work on the sales forecast, we will make better purchasing decisions and we will have a “lighter” and more efficient warehouse. In addition to making periodic reviews every three months, it is essential to have a business administration system   that allows recording the company’s purchase-sale cycle , detecting which are the months with the highest demand and what is the average purchase per customer or point of sale. .

Tip #2. Classify the merchandise

In addition to an analysis and a projection of the demand in general, it is necessary to focus on each product; in order to be able to classify the articles between those with the greatest demand and that mean, for example, 80% of sales , with those that register a slower movement or that sell more at a certain time of the year.

Tip #3. Design a good promotions strategy

In order not to accumulate merchandise that is out of season or that is about to expire (as in the case of food), the launch of special offers and promotions must be included in the marketing plan . This way, you will not only get rid of the accumulated stock, but you will also reduce maintenance costs, reduce losses and the danger of “ant theft” .

Tip #4. Optimize purchasing management

In order not to lose control of the stock, it is also essential not to fall into temptations such as volume purchases to take advantage of discounts or some kind of special offer from a supplier. With a good analysis of the demand and the financial cost of your stock, you will avoid damaging profitability and you will ensure customers the delivery of products in the best conditions.

Tip #5. Invest in the right technology

It is essential to equip the business from the start with software with an inventory management module that allows you to manage stock efficiently. You need, for example, to put together a catalog with a photograph of each article or product; include details such as size, weight, or colors; and number of batches, petitions and series. When looking for options, ask that it be able to connect to a point-of-sale management system .