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Looking to Reduce Inventory Costs? 5 Ideas That Work

We are all trying to find ways to reduce our running costs as commerce becomes more and more competitive, in an effort to get ahead of our rivals. When we take a look at inventory costs, there are ways that we can reduce our expenses.

Having good inventory management can be a daunting task, but in the end, it will help you save time and money. For instance, VMI provides a streamlined system tailored to significantly improve production performance, delivering exactly what you need when you need it

Before we look at some of these strategies, let’s first define inventory costs.

What Are Inventory Costs?

Inventory costs relate to the cost of storing inventory over a period of time. It includes the cost of renting the place and other overheads, i.e. electricity, cleaning, and if the products require additional protection etc.

Better inventory management can help you reduce a lot of these costs and as a result your profit margin increases, which ultimately contributes to the overall growth of your business.

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Following strategies can help to bring down these costs.

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Image Source: Unsplash

1- Re-Organize Your Warehouse

Re-organising your warehouse might make it easier to locate certain stock, especially when frequently ordered stock is located a long way from central warehouse locations, and those valuable extra minutes do add up.

If you take a look at 3PL warehousing, you will notice that inventory locations are carefully thought out, reducing the travel time it takes to recover popular stock items.

2- Remove Obsolete Stock

This is a common area that causes inventory costs to rise, as stock that is not ordered takes up valuable space that could be put to better use. If your inventory costs are very high, you might want to consider outsourcing the entire operation to a third-party logistics provider, as this will release valuable staff, plus it will mean you no longer have to concern yourself with order fulfilment.

If you would like the opinion of a logistics specialist regarding your warehousing, an online search will help you to locate a nearby company that would be happy to help you find ways to reduce your inventory costs.

3- Selling on Consignment

If you allow retailers to carry your stock on an approval basis, this will certainly free up some much-needed warehouse space. Yet, the downside is that the stock will not be paid for until the retailer has sold it.

Many wholesalers operate this way to ensure that a portion of their inventory is shipped to the retailer without having to wait, which reduces stock holding time.

If you sell online, dropshipping is the way to do this.

Accurate Forecasting

This helps to know when you are running low on stock and what your best and worst selling items are. Correct inventory forecasting enables you to order the right amounts, which means you won’t have stock sitting around for long periods of time.

Centralizing Inventory Control

This is one way to reduce costs, and with some great stock control software available, redesigning your inventory control is not a difficult thing to achieve. This is more important for larger organisations that have multiple warehouses across the country, where optimizing stock movement can save you a lot of money.

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Image Source: Freepik

The Bottom Line:

Many smaller businesses decide to outsource their logistics to a 3PL specialist, as this greatly reduces costs, and if you would like to discuss this with a leading 3PL company, they can be found with an online search. With their considerable resources, they can help you to reduce your order fulfilment costs by taking the pressure away and handling everything on your behalf.

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Get the latest news, resources and tips to help you and your small business succeed.