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Balancing act: cashflow and inventory levels

Inventory_management

Due to the amount of cash that can be tied up in stock, inventory-carrying small businesses must carefully balance the need for adequate cashflow against the need to invest in stock that will drive growth – not just to succeed but to remain viable.

Dynamic Business spoke with Stephen Canning, CEO of JCurve Solutions, a provider of cloud-based ERP software, about effective inventory management. He revealed some of the key inventory trends small businesses should consider this financial year and identified some common mistakes they need to avoid.

Key inventory trends:

  • Accurate real-time reporting: Access to real-time data on inventory, including stock levels, expiry date information and inventory to sales ratio, provides businesses with actionable insights that enable them to improve stock turnover and replenishment and otherwise be leaner and more efficient.
  • Visibility across multiple channels: Whether you’ve got a sales rep who’s out on the road, people phoning orders into a sales office or orders being made online, having visibility across inventory levels will help ensure a seamless customer experience and a seamless reorder process.
  • Mobility: small businesses increasingly expect to be able to use tablets and smartphones, no matter where they are, to access inventory information, including supply chain interruptions.
  • Traceability: There is growing demand for traceability, particularly in the food industry where there are standards around tracking food from the primary manufacturer through to the plate. People want to know about a product’s history, where it came from, how it got here and whether or not it has been modified.

Common mistakes:

  • Overstocking and understocking: If your business is overstocked, cash is being tied up and it could experience serious cash flow problems – you might even end up having to write off stock as a loss if products expire or become obsolete. Conversely, if you understock, you run the risk of losing customers by not being able to meet demand.
  • Lack of accurate inventory availability information: This leads to missed opportunities for sales reps to upsell and cross-sell. It may also cause customers to cancel an order if it has to go on back order. If sales reps have access to accurate inventory availability information, they can give a firm commitment in terms of a shipping date or recommend an appropriate substitute if an item is out of stock.
  • Inefficiencies during picking and packing: Often, when an order is being processed, a picker discovers that an item, which is necessary to complete the order, is missing. Having to put an order to one side while a missing item is being located, uses up warehouse space and is inefficient.
  • Failure to pursue cost-saving opportunities with suppliers: Small businesses are failing to get the best process from their suppliers by not consolidating their purchases for a volume discount.