Inventory Management - The Cost of Doing Nothing
Paul Trudgian Ltd | Supply Chain & Logistics Consultancy No Comments

Do you want to grow your business? Great! I bet you have an ambitious business plan detailing marketing campaigns, product releases and partnerships. But did you know that poor inventory management can ruin all your efforts and put your business growth at risk? This guest blog post, from Peter Drakeley at EazyStock, will help you identify some areas where poor inventory management can hinder your growth and how taking control can instead turn inventory into your advantage.

The status of inventory management in 2018

The big giants like Amazon, M&S and Primark have spent years building up their supply chains. They have invested heavily in complex solutions to help them optimise their growing inventory ranges to be able to deliver faster and keep prices down. They often have specialised teams constantly fine-tuning their processes and systems. Small- and medium-sized enterprises on the other hand have traditionally excelled in customer service with unique customer insights and niche market knowledge. They build networks and relationships and therefore know their customers and the market better than any large corporation could possibly do.

In 2018 this is no longer 100% true. Larger players are expanding so that customers can discover their options on their own. A quick search on Google will give plenty of information and enough knowledge for customers to make informed purchasing decisions. Ratings and reviews play a large part as well as delivery times and price. If you have great ratings, can deliver fast at a low price, then why would anyone want to buy from someone else?

Does this mean game over for SMEs?

No, we don’t think so. We believe that niche players are still needed and if you can use your unique expertise to educate your users and develop your product range to fit their needs, you have a pretty solid foundation to thrive in today’s digital environment. But you need to invest in good inventory management today in order to keep your place in the lead. Here are 7 costs of “doing nothing” in terms of inventory management:

  1. Lost sales: The most obvious one. If you don’t have a product in stock, you will not be able to sell it. In fact, not only will you lose out on the sale of a single item, but often a customer will take their entire order elsewhere when they aren’t able to get everything they need at once.
  2. Lost customers: What would you do if your supermarket was out of eggs and you had promised your kids pancakes for breakfast? You would probably go to another place and buy those eggs. A lost sale is potentially also a lost customer when you give your shopper a reason to try out one of your competitors. And if they get a great shopping experience elsewhere they may not come back to you the next time. This is even more true for companies selling online where the competitor is just a click away. So if you want to keep your customers, make sure you have the right products in stock.
  3. Costly rush orders: Your most loyal customer needs a product now. What do you do if you don’t have it in stock? You probably jump on the phone and order the stock with express delivery. Great if you can save the sale and the customer, but this method becomes pretty costly in the long run.
  4. Bad reputation – online and offline: 20 years ago, an unhappy customer could at worst become a lost customer. In today’s connected world, consequences can be much bigger with online reviews, ratings and discussion forums being more important for businesses’ and consumers’ decision making.
  5. Holding costs: Shelf space costs money, regardless if you have your own warehouse, lease one or use a distributed warehouse solution. Costs include warehouse staff, security personnel, insurance, and cost of damages when goods are handled and moved around the warehouse.
  6. Opportunity costs: This is often overlooked by inventory managers but your CFO probably has an eye on the opportunity cost. Where could you invest that money tied up in excess inventory? Will the capital be put to better use elsewhere, e.g. in marketing investments, product or just assets that give a greater return?
  7. The cost of pain killers for your CFO’s headache due to elevated risk: Yes, buying in bulk comes with an enormous risk as products may go obsolete sooner than you expected. The world around you is changing at a blistering pace, and you need to be agile in your product strategy and keep an updated inventory at all times.

Automate more for quality and efficiency

Automation is on everybody’s lips and concepts like Industry 4.0 are discussed everywhere. But this is more than just a fad; in fact the automation and cloud computing trend have been going on for many years now and if you’re not already on it, it’s time to take some action. By automating your processes, you will not only save time and money but will also minimise human errors and improve quality. No matter how smart the human brain is, computers are able to make more precise, complex and fast calculations. Not long ago, integrations between systems had to be custom built, were clunky to use and took forever to implement. While this is still sometimes the case, powerful but easy to use tools are now available to SMEs, making inventory optimisation easier and more accessible than ever before.

Take control and stay in the forefront

The fact that the eCommerce sector is booming is no news. But the big boom in 2018 will be seen in the B2B eCommerce sector. As a wholesaler you have an amazing opportunity to get ahead of your competition. 10 years ago, most buyers had their selected suppliers who they would always turn to replenish and gain product or domain knowledge. Today many buyers take their personal consumer behaviour and habits to work with them – if something isn’t available they will start shopping around online.

Do you want to win market share? Then make sure to be best in class when your competitor can’t deliver. Want to keep your customers? Don’t give them a reason to Google someone else. How do you do this? By taking control of your inventory.


Article contributor – Peter Drakeley

As the Head of Customer Success for EazyStock, Peter is ultimately responsible for the success of EazyStock’s prospect and customer base worldwide. EazyStock is a powerful, easy to use tool for inventory optimisation and automation. Small and medium distributing companies use EazyStock to achieve better product availability, lower inventory levels and streamline processes. EazyStock’s intuitive software is easy to implement and gives fast, measurable results. Read more at: eazystock.co.uk.​

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