Getting into ecommerce, most merchants undervalue the importance of stock management. That doesn’t come as a surprise, because managing inventory is more of a chore, rather than a goal. However, if we attach the right definition of stock management to it, it may become more apparent how it influences your business health and performance.
The right definition for stock management
There are many ways to define inventory. Some definitions are more useful than others. The most useful way to look at it, we believe, is as tied-up capital. As a business, you’re putting in labour and capital to produce profit.
As previously mentioned, merchants who recently got into the business seem to focus most on profit. While stock management almost exclusively exists on the other side of the equation. However, sellers quickly learn that a healthy business needs to optimize both sides of that equation.
Stock is tied-up capital
This definition is most useful, because it naturally begs the question: how do we untie it? This is exactly the mindset a merchant has to have. It’s a balancing act. The ultimate goal is to have just enough inventory to meet customer demand.
This way you max out profit, because you don’t lose business due to being out of stock. But also, you tie up the least amount of capital to achieve this. These couple of sentences can, of course, expand into great lengths because many questions remain.
For example, what should be the periods you restock? Because, obviously, you need a time frame to meet customer demand, otherwise it’s infinite. Well, the answer depends on a few factors. Most importantly – on the lead times.
This is the time it takes for your supplier to deliver goods to you after you raise a purchase order. Let’s assume you sell 10 units per week, and the lead time is also a week. So, you should order more supplies every time your stock is at or close to 10.
Ideally, you’d order supplies frequently and in low quantities, to keep the least amount of tied-up capital. Simply because that allows you to use the rest of it for other purposes, other than collecting dust in your warehouse. However, it’s inefficient for suppliers. So, they have minimum quantities per order. This is becoming increasingly complex, isn’t it?
If you’re interested in how you can affect lead times and other supplier-related factors in your favor, check out MCL’s article.
Some manufacturers simply accept long or delayed lead times as a normal part of doing business and believe there isn’t much they can do about it. Not so. – MCL
Proper stock management
As you’ve probably figured by now, proper stock management is quite the rabbit hole. There are endless ways to optimize. However, you’re limited by time and capital.
If you’re always burdened with inventory tasks like stock control and other programmable, mundane operations – you’ll never have the time to optimize. This means, you’ll continue to run your business sub-optimally. Then again, there is a way to escape this cycle without losing profit.
If you don’t use it already, you should consider stock management software, like Multiorders. It’s a powerful tool to streamline your business. Basically, it automates the majority of inventory tasks.
This leaves you with more time to manage capital more carefully. In other words, the software optimizes labor and as a result of that, you’re free to optimize capital. Not to mention profit.
You’re welcome to give Multiorders a try for free. The set up is quick and easy. As is the use itself. If you’d like more details on it – visit Multiorders and we’re sure you’ll find all the answers. If not – our customer support team is always ready to help you.