Inventory control can be one of the most challenging parts of a wholesale business, yet it is a task that is critical to maintaining and increasing your net profit margins. Inventory is an asset type that is inherently difficult to manage and ascertain its value. For businesses of every size, maintaining inventory accuracy requires steady, consistent attention, smart processes, and an ongoing commitment to evaluating and improving processes.
Within this challenging environment, companies can work more effectively with less effort and avoid significant issues like short shipping that causes retailer chargebacks and erodes your wholesale company’s standing with a crucial buyer. This is why it’s imperative for you to have controls at the inventory level. They can also reduce inventory markdowns by diligently watching inventory aging on a style/item level. Fine-tuning inventory reporting and processes will decrease various kinds of risk and minimize the chances of errors throwing a wrench in your operations.
When shipping and fulfillment problems threaten your wholesale business, it’s a good idea to act quickly and brainstorm ways to enact the right solutions. Rapid response helps you to become stronger for next time and helps hone in on success.
For example, compliance chargebacks can be costly. They can also be one of the most frustrating parts of a wholesale executives job. And too often they are cause by inventory inaccuracies.
On a basic level, a chargeback is when a retailer claims the seller made a “mistake.” But decision-makers sometimes struggle to come up with the “why” or whether the retailer claim is even accurate. If the chargeback was in fact legitimate, decision makers wonder whether it was it a production issue, a systems issue, a sales team issue, lost freight, or a simple data entry error. Good software helps but is often not enough.
When you add in long-term strategy and the task of projecting how inventory will be disbursed and utilized, the problem becomes even more complex. Forward looking inventory projections impact decisions of what you ship now. If your wholesale company is borrowing against inventory, executives also wonder how inventory inaccuracies may suddenly arise and impact your borrowing base and negatively affect cash flow.
All of this underlines the need for comprehensive organization, which is where enhanced inventory control and support come in. These three tips will help you maintain inventory accuracy:
1. Outfit Teams Well
One way to look at this is to think about the front line workers who manage the physical inventory. Do they have what they need?
Here, there’s a two-fold mandate for improving inventory accuracy: user-friendly tools and adequate training.
A good software system includes a good employee interface. A system that requires multiple keystrokes and several open windows is inefficient and will lead to errors. An intuitive system improves inventory accuracy and ultimately helps you deliver to your customers. Good, user-friendly business processes, boost productivity, turning every mistake, hiccup or bottleneck avoided into extra dollars in your bottom line.
By contrast, a resource that confuses or hampers your frontline crew is a net negative, since it can have a profoundly adverse effect on the wholesale company as a whole, particularly with logistics and operations management. It doesn’t take much to sink a company’s efficiency with poorly performing or hard to use systems.
2. Provide Intuitive Controls
Let’s talk about some of the user interfaces that succeed. First, there is the idea of intuitive controls—how you show people how to do things. Transparent interfaces with cutting-edge automation accurately forecast future item availability. They immediately alert all the necessary parties when delivery delays impact order delivery windows. This lead time can be used to make adjustments and avoid chargebacks, dissatisfied buyers, and lost future business that come with them.
Inventory alerts and strategic reporting encourage lean inventory models that will cut down on what’s sitting in your warehouse, help increase your cash flow, and help wholesalers maintain healthier margins..
Beyond that, it will also help your teams to achieve better distribution and more accurate order fulfillment.
3. Utilize Consulting Power
Many companies lack the in-house power to get these things done, so they go to outside consultants. When seeking the help of consultants, it’s imperative that you evaluate how they work.
Consulting can have a negative or positive impact on inventory accuracy, depending on its application to your business. Do the consultants have your best interests in mind or do they just want to sell services? Do they have the necessary tools and knowledge base to deliver? Are they cost effective?
The bottom line here is that an active partner benefits more from consultants and outsourcing than someone who just relies on outside help to do all of the work for them. Brainstorming at an internal level helps you to build a framework before seeking services. Knowing more about the industry as a whole helps the client company to be the ‘master of its domain’ and practice more of a self-service model toward vendor offerings. It takes more work, but it often produces better results.
When you learn from the past, you build a better future. Your inventory control benefits from continual benchmarking, evaluation, and analysis of what your fulfillment teams are doing right or wrong. By using smart automation and implementing new technology accurately, you improve what you offer to your customer base, and it shows.
Remember, it can take years to master an ERP and, even then, most wholesalers aren’t able to fully utilize an ERP to its fullest potential. Then the ERP releases a newer version and the learning processes and customization begin again. This is why so many wholesalers aren’t getting the most from their software systems. It is also the reason why outsourcing the entire process to a trusted service could be the best solution for a wholesale company.
A service provider that has proprietary software with developers on staff and personnel to use it may accumulate a deeper knowledge of the software’s capacity. Whichever direction you go in, it is critical that you make sure that you profit from having a master plan in place for inventory.
Wholesale Executive Insider is a publication dedicated to helping wholesale company owners stay up-to-date with the latest industry insights to improve their operations and increase their bottom line.
Our team has deep industry knowledge, and a network of solution providers that help wholesaler’s maximize their profits. Want free advice and recommendations on inventory accuracy and more? Feel free to book a time to speak 1-on-1 with one of our knowledgeable industry advisors.