Your small business can lose a lot of profits to mismanaged inventory. Having too much on hand uses up cash unnecessarily. Having too little on hand means running out of products when customers want them and losing sales. In addition, a business can simply not know where its inventory is and be unable to function. Having your inventory managed for you prevents a lot of headaches.

Reducing Inventory Leaks

When you have a vendor manage your inventory, you receive exact reports on how much has moved throughout your company. You can match this to your sales report to see if you're selling exactly what you're ordering. If your sales and inventory figures do not match, you have a leak somewhere. The problem could be theft or damage. This leak is simple to spot once your inventory manager reports concerns.

Identifying Demand Changes

One of the benefits of managed inventory is you get frequent reports. You can spot demand changes in these reports. If you're ordering more inventory week after week, for example, you can see that demand is rising, and you can plan your staffing and marketing accordingly. If you see less and less inventory going through, you know that demand is dropping. This may cause you to change your marketing strategy or switch to a new product to sell.

Minimum Ordering

You don't have to carry as much safety stock when you have someone managing your inventory. Safety stock is excess inventory to protect you in case you run out. Because your inventory is professionally managed, the manager will set re-ordering triggers when inventory comes down to specific levels. Your ordering becomes automatic and your need for safety stock is eliminated. This saves you money you would have been spending on excess inventory.

Reduced Administrative Costs

With a professionally-managed inventory, you save on the time and money it takes to reconcile inventory received with purchase orders. This is all done for you by a professional manager. In addition, you don't have to spend time calculating the cost of each batch of inventory. The total cost and per-unit costs come to you automatically in your inventory management reports.

Eliminating Rush Orders and Cancelled Orders

Because your professionally-managed inventory never runs out, you won't find yourself in a position of having to place emergency orders for customers. Rush orders tend to come at a premium and customers often won't pay extra to cover your higher expenses. In addition, when you back-order, a percentage of those orders will get cancelled as customers change their minds. You eliminate such lost orders with a well-managed inventory system.

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