INVENTORY MANAGEMENT   |   10 minute read

8 inventory management wins to give thanks for this year

As the holiday season draws closer, kicking off with Thanksgiving and the yearly shopathon of Black Friday, Small Business Saturday and Cyber Monday, it seems a good time to take five minutes to give thanks for all your inventory management wins this year. Take a well deserved break, enjoy a moment of peace, and kick back with a drink in hand while listening to your favorite song. After all, once the seasonal sales kicks off, you’ll be super busy with the constant influx of sales orders from bargain hunting customers.


We’re hoping you’ve achieved the following inventory management wins this year. Give yourself a pat on the back and reward yourself for a job well done if:

1. You’ve labeled your products with human-readable SKUs

Choosing to use the barcode as your SKU sounds like the easier option - it’s readable with a barcode scanner, and it means you don’t need to think up new product codes. But the catch is that your manufacturers might decide one day to change the barcodes, or one day you’ll be looking through your inventory lists to check up on items, only to be greeted with a never-ending stream of numbers. Not fun.

Human-readable SKUs - Easy to understand

Human-readable SKUs are very important. Your SKU system should denote defining characteristics like the year/season, colors, size and type. This way, if you’re ever searching for a specific item in a sea of hundreds because someone has just requested it, you want to be able to know at a glance what to look for. When you’re describing a red dress, size medium, for Spring/Summer ‘15, isn’t SS15DrRM easier to understand than 151930205?

Plus, when you’re checking through your inventory to see how your different products are performing, the relationships between these will be easier to discern. If it’s a long string of numbers, you’re going to look it up in a database - which means more work. And if you have employees managing the pick/pack/ship elements of order fulfillment, they’ll thank you too. After all, less hassle means improved efficiency for all!

RELATED: SKU Generator

2. You’ve managed to clear all your dead stock

Remember that range of glittery purple clip-on cat ears you thought were going to be really popular this year? Which didn’t quite take off with your usual clientele...
Dead Stock

It’s become dead stock: languishing, forgotten, in a bin at the back of your warehouse on the lowest level, out of sight and out of mind. There’s the opportunity cost of using your space to stock these has-beens/never-beens. Just think about how that space could be put to better use! And the money you’ve already spent to upkeep these items - they’ve not been pulling their weight when it comes to paying for carrying costs!

If you’ve not cut yourself loose from these items just yet, seize the coming holiday season as an opportunity to create product bundles. Slash prices, put them into mystery bags for sale, and even donate to charities! After all, the holiday season is the time for generosity. So be generous; even if you’re making a loss now, the long term gains will make it worth it!

3. Your carrying costs are 25% or less of inventory value on hand

When you buy an item, you’re not just paying for the item. You’re paying for shipping, for taxes, for storage, for utilities - all of which are part of your carrying costs. So the more you’re spending on carrying costs, the less profits you pocket.

Other contributions to your carrying costs would be anything that would deplete the value of your inventory - after all, inventory can get damaged or go missing, or become obsolete. There’s also the opportunity cost aspect: how else could you have spent this money? If you’d invested it, would you be enjoying higher returns?

A general rule of thumb is to keep your carrying costs at about 25% of your inventory value. If you’re spending too much on carrying costs, it could be time to do some spring cleaning and reduce the size of your inventory. Less inventory means less storage space and decreased inventory risks as you’ve got less to take care of.

RELATED: How to bust the ghost economy costing your $1.75 trillion

4. You’ve managed to set the right reorder point allowing for maximized inventory turnover

Setting the right reorder point means getting your items to arrive at just the right time. Too early, and your carrying costs will increase. Too late, and you’ll be facing disappointed customers who’ll just look to your competitors instead.

Your reorder point is closely related to your safety stock levels. Safety stock is essentially stock that’s there to prevent you from suffering unexpected stockouts. To get your reorder point just right, you’ll have to fight off the temptation to prepare for the worst. Give in, and while you’ll have enough to last through a zombie apocalypse, it’s going to come at a cost.

So if you’re able to estimate your lead time (along with the corresponding demand) and the appropriate safety stock level, you’ll be all set to maximize your inventory turnover - meaning you’re doing well enough to have sold off your entire inventory!

RELATED: Reorder Point Calculator

5. You’ve scaled your business by adding a new sales channel

Are your sales on Amazon marketplace going really well? Maybe it’s time to start selling independently on your own site and build your own brand. Are you looking to expand your customer base and reach out to new prospects? Maybe it’s time to open your first ever pop-up store.

Studies have shown that retailers who sell on two marketplaces in addition to an eCommerce store earn, on average, 120% more than those who only have an eCommerce store. That is to say, there are quantifiable benefits to going multichannel with your business.

Pop-up store

If you already have more than one retail channel, why not give wholesaling a try? Going wholesale means you’ll be able to get your products out on a whole new level. After all, if your customers are already loving your products, you’ve got proof that what you’re selling is THAT attractive, so what’s going to stop you from becoming a wholesaling success?

RELATED: Guide to building an omnichannel strategy

6. You’re turning a net profit margin of about 5%

Why is turning a net profit margin of 5% something to celebrate? Well, for one, you’ll be enjoying higher net profit margins than the largest e-retailer in the world (Amazon’s profit margin sits at around 3.7%). So that’s definitely something to reward yourself for!

After all, your net profit margin is what you earn after deducting carrying costs, inventory costs, and all the other miscellaneous costs associated with your business. A net profit of about 5% is about right for most small retailers - although this depends on the industry you’re in.

7. You have a SSOT (Single Source of Truth) for all your business data

If you’ve not done this yet, consider automating your inventory management to take a load off your shoulders! Getting a cloud-based software solution like TradeGecko to take care of your inventory needs will change your business. Integrating with your accounting, shipping, and eCommerce platforms means you can manage all your business data from a single location. No more poring over spreadsheets, no more unexpected server crashes… just a cloud-based SSOT (Single Source of Truth), which can be accessed anywhere, at any time.

If you need intelligence reports, inventory management software can take care of generating these for you, providing you with overviews of your business’s performances in a variety of fields whenever needed. With these, you’ll have better visibility into how your products are selling.

RELATED: The ultimate guide to becoming a data informed merchant

8. You’ve developed a smart demand forecasting strategy

If you’ve embraced the world of demand forecasting, congratulations – you’re ahead of the game! From maintaining cost efficiencies to keeping customers happy, demand forecasting is a key element of inventory and supply chain management, helping you fill orders on time, avoid unnecessary inventory expenses and plan for price fluctuations.

But many businesses overlook this critical step because it’s time-consuming to manually trawl through volumes of historical data to predict future trends – and what busy business owner has time for that?

This year, though, we have plenty to be thankful for on the forecasting front because automated demand forecasting is now available to businesses of all sizes. TradeGecko’s demand forecasting functionality, for example, uses key sales and inventory data to identify patterns and generate predictions about future demand by product, variant, warehouse location, etc. That equals time saved, smarter insights, and better planning capabilities. Cheers to that!

Even if you didn’t manage to achieve everything this time around, there’s always next year! Once the holiday shopping season has worn itself out - hopefully allowing you to clear a good chunk of your old inventory - it’ll be a lot easier to work on incorporating these into your business.

Whatever your score is, enjoy the holiday season! And we give thanks to you for letting us help you grow your business :)

Happy Thanksgiving!


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