Inventory tracking software can help companies achieve significant cost savings while enabling the right balance between fast item availability and lower inventory carrying costs.
A major balance sheet item for any company that sells products, inventory can tie up significant capital while it sits on the shelf waiting to be sold. A company with 40 percent margins shells out 60 percent to cover the cost of goods sold. That means 40 percent of the organisation's net sales are spent on shipping and inventory. Those items also need to be ordered, stored and managed—all of which are labour-intensive processes.
“The problem we see most frequently with inventory is that companies have too much of it, and rarely too little of it,” Ian Hobkirk, President at Boston-based Commonwealth Supply Chain Advisors, told Logistics Management. “We can show them, mathematically and six ways to Sunday, how to reduce those inventory levels, what the stocking levels should be for each SKU and so forth. However, at the end of the day inventory is a security blanket that's largely rooted in emotional decisions—logic just doesn't apply.”
Companies are avoiding this challenge by using inventory tracking software that provides real-time inventory visibility, demand planning, automatic reorder points and more efficient procurement. By effectively removing the “emotional” component of inventory management, and by putting real data and insights into the warehouse manager's hands, these solutions enable a more streamlined, reliable inventory management approach.
When they converge, these individual “wins” translate directly into cost savings for the companies that are using the inventory tracking software. Wholesale distributors that implement and use such solutions, for example, have been known to reduce their inventory carrying costs by an average of 30 percent. Here's how they're doing it:
Ultimately, companies need to know that the right product is available when a customer wants it. They also want to reduce the costs of ordering and maintaining those items while minimising the carrying costs of stocking those items for sale. Using inventory tracking software, organisations can check off all three boxes (and more), while also streamlining their overall supply chains and gaining unexpected efficiencies along the way.
By tracking inventory as it moves between locations, receiving items into the warehouse, tracking sales and inventory levels, and providing intelligent control over inventory replenishment, inventory tracking software ensures that sufficient stock is on hand for filling all anticipated orders—all while keeping excess stock to a minimum and improving the organisational bottom line.
Interested in growing your business with NetSuite?Start chat