How to Save on Inventory Costs and Expand your Market

Running a business may be a hectic job, but expanding it can become even more so if you do not know where your costs and expenses are going. In order to make a profit, you need inventory and sell it without losing your customers. But when the cost of inventory goes up, things can get messed up and your income projections become misleading.

Inventory plays a pivotal role in a business (production, retail/wholesale), but keeping an eye on the fluctuating costs and prices is more important than anything else. People use different techniques to keep a check on their inventory costs, but there many simple methods that can help you manage your stock in an effective way. These methods have been pointed out in this article.

Instructions

  • 1

    Codify all the products/items

    You may be running a large retail store or a small shop selling multiple products, but codifying each item on your shelves can make the process of cost control easy.  First off, you need to make a list of the all the products. Making a list means you should have all the products categorized (it is up to you how you categorize them).

    You can use computer-based record keeping techniques like inventory management software. If you do not want to buy software, you can do it on Microsoft Excel. Be sure to keep all the records on paper as well because it may be used as cross checks.

  • 2

    Buy inventory management software

    Using a inventory management system can make your cost-cutting plans implementable. Companies use highly sophisticated inventory management software to keep a close eye on inventory.

    Software has multiple features like economic order quantity, FIFO (First In First Out) and LIFO (Last In First Out) and vendor records. Buying software can cost you a fortune if your business in on a small scale. If you are running a shop and worried about runaway inventory costs, you need to put all the records on MS Excel and track each item’s price, purchase costs, the date you purchased it.

  • 3

    Do not hold excess inventory

    Stocking up the shelves may sound like a nice idea and a way to manipulate prices and costs, but it can also get you in hot waters if you fail to sell the items on time. Outdated items are bad enough to keep on shelves, especially when inventory prices go up. During economic crunch, you should make sure that you buy inventory on a short-term basis, as selling it will not be uphill task.

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