Did you know that there are 32.5 million small businesses in the US?
As a small business, it can be hard to know how much inventory you should keep on hand. You don’t want to have too much and waste money, but you also don’t want to run out of stock and lose sales.
Not sure if you’re making the right decisions about your inventory? This can be a huge source of stress for small business owners. You’re always worried about whether you have enough product on hand, and if not, what that means for your bottom line.
But don’t worry. Keep reading because by consuming this article, you’ll learn all about supply and demand and how to use that information to make smart decisions about your inventory levels. You’ll also get the answer to the question, “how much inventory should I have?”
1. Know Your Customer Demand
As any business owner knows, customers are the key to success. Without them, there would be no revenue and no company. That’s why it’s so important to know your customers and their needs. What are they looking for? How often do they need it? What is their budget?
Answering these questions will help you determine how much inventory you need to keep on hand to meet their demands. It’s also important to stay up-to-date on trends in your industry. What are your customers’ changing needs? What new products are they interested in?
By keeping a close eye on your customers, you can ensure that you always have the right products in stock to meet their needs.
2. Consider the Cost of Inventory
When deciding how much inventory to keep on hand, it’s important to factor in the costs associated with inventory. These costs can include storage, insurance, and shrinkage (the loss of inventory due to theft or damage).
By taking these costs into account, businesses can make sure that they are keeping enough inventory to meet customer demand without tying up too much capital in stock. In some cases, it may even be possible to negotiate lower insurance rates by keeping a smaller inventory.
Ultimately, by considering the cost of inventory, businesses can make more informed decisions about how much stock to keep on hand.
3. Understand Your Lead Time
Most businesses understand the importance of keeping enough inventory on hand to meet customer demand. However, what many businesses don’t realize is that lead time plays a critical role in determining inventory levels. Lead time is the amount of time it takes to get the product from your supplier to your store.
This can vary depending on the product and the supplier, so it’s important to factor in lead time when deciding how much inventory to keep on hand. If you don’t factor in lead time, you may end up with too little inventory when demand spikes or too much inventory when demand slows down.
By understanding your lead time and factoring it into your inventory decisions, you can help ensure that you always have the right amount of product on hand to meet customer demand.
4. Use Technology to Help Manage Inventory
Technology can be a valuable asset for any small business, and that includes helping to manage inventory. There are several software programs available that can track inventory levels and send alerts when stock is low. This can help businesses avoid the cost of overstocking, and it can also help to ensure that customers always have the products they need.
In addition, these programs can often be integrated with other business software, such as accounting and point-of-sale systems. As a result, they can provide a comprehensive view of the business that you can use to make informed decisions about inventory levels. Technology can help small businesses save money and keep customers happy, making it an essential tool in the modern marketplace.
5. Review Your Inventory Regularly
Reviewing your inventory regularly is a crucial part of running a successful business. By keeping track of your sales patterns and inventory levels, you can ensure that you always have the right amount of product on hand to meet customer demand. This will help you avoid overstocking or running out of items, both of which can hurt your business.
Additionally, regular reviews will allow you to spot any emerging trends so you can adjust your stock accordingly. By taking the time to review your inventory regularly, you can keep your business running smoothly and avoid potential problems down the road.
The Best Ways to Track Your Inventory
There are several ways to track your inventory, and the best method will vary depending on the needs of your business. Let’s look at them now:
1. Use Inventory Software
While manual inventory management can be time-consuming and prone to error, using inventory software can help businesses to keep track of their stock levels with ease. These programs often come with a range of features that can be tailored to the specific needs of the business, such as the ability to send alerts when stock is low.
In addition, they can often be integrated with other business software, such as accounting and point-of-sale systems. As a result, they can provide a comprehensive view of the business that can be used to make informed decisions about inventory levels.
Not only can this save businesses time and money, but it can also help them to avoid the frustration of running out of items or overstocking items that are not selling.
2. Use Barcodes
Barcodes are an easy way to track inventory levels and can be scanned to check stock levels. This information can then be stored in a central location, such as an inventory software program, for easy reference. Additionally, barcodes can be used to track items when they are shipped from the supplier to the store, which can help businesses keep track of their lead time.
By using barcodes, businesses can efficiently manage their inventory and ensure that they always have the products they need on hand. Furthermore, barcodes can also be used to track sales data and customer purchase history, which can be helpful for marketing purposes. Ultimately, barcodes offer a wide range of benefits for businesses of all sizes.
3. Use Physical Counts
Physical counts are a more traditional way of tracking inventory levels, and they can be done manually or with the help of technology. With manual counts, businesses will physically count their inventory regularly and compare it to records of sales and purchases. This information can then be used to adjust inventory levels accordingly.
Technology-assisted physical counts use sensors to automatically count online store inventory and send alerts when stock is low. This can help businesses save time and ensure that their inventory is always accurate. The main advantage of physical counting is that it provides a high degree of accuracy.
However, it can be time-consuming, particularly for businesses with large inventories. Technology-assisted physical counts can help to reduce the time needed for counting, making this method more efficient.
4. Use Supplier Information
Supplier information can be a valuable tool for tracking eCommerce inventory levels. By keeping track of when items are shipped from the supplier, businesses can estimate their lead time and plan accordingly. Additionally, many suppliers offer real-time inventory updates that can be used to track stock levels and make sure that businesses always have the products they need.
By using supplier information, businesses can ensure that they always have the products they need on hand and avoid stock outs.
5. Use Customer Data
As any business owner knows, customer data is essential for understanding your target market and meeting their needs. However, customer data can also be used to track inventory levels and forecast future demand. By analyzing purchase patterns and trends, businesses can estimate how much stock they need to maintain to meet customer demand.
Additionally, this information can be used to create marketing campaigns that target specific products or groups of customers. As a result, customer data is a valuable tool for businesses of all sizes. By utilizing this data, businesses can increase sales, improve customer satisfaction, and better manage their small business inventory.
How Much Inventory Should I Have?
So, how much inventory should I have? It’s important to understand your industry and the needs of your customers. You also need to be realistic about what you can sell and when.
Keeping costs down is essential for small businesses, so make sure you are only stocking the items that will sell quickly and at a profit.
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