Inventory Optimisation and Why It Matters For Your Business
Inventory is money. If you manage it properly, you’ll improve your cashflow, increase revenues and keep your customers happy. Here’s some thoughts to consider when it comes to inventory optimisation and how it can help your business run efficiently.
The basics of inventory optimisation
Managing your goods well is a trade off. You must balance the real cost of holding it with the opportunity cost of sales. For example, high levels of it can help you meet customer demand. But they also mean:
- higher handling and storage costs
- higher rates of obsolescence and wastage
- higher risk of theft
- slower cashflow with more tied-up capital
On the other hand, low goods levels can keep costs down but they also mean:
- missed sales opportunities
- more time to fulfil orders
- lack of flexibility when demand varies over time
- unhappy customers
So getting the balance right is vital. Inventory optimisation done well, will:
- improve cashflow
- reduce wastage
- reduce opportunities for theft
- improve customer relations
Be intelligent about your business
More than ever, the management of goods is built on business intelligence. That means analysing data to find patterns that help forecast demand. This gives you an even clearer idea of which items you will need, and how many of them.
It’s hard work and requires careful thought. But the rewards are immense. An agile business that can scale up without losing control of inventory is one to be envied. There are a number of great cloud based applications which can integrate with Xero and other accounting platforms. These products can not only help you value your closing stock, but give you great insight into trends, stock levels, obsolete stock, fast moving items etc.
If inventory optimisation is something your business can benefit from we can help guide you in the right direction.