So you didn’t buy enough Halloween candy. The neighborhood children are out in droves and they keep ringing your doorbell and reciting the obligatory “Trick or Treat,” and you keep answering the door with a sad face and look of shame. Just turn out the lights already. You are closed for business. But it’s okay. It’s just one night. It’s not like it’s your real business and the shelves are empty. Or is it? If you don’t stock appropriately and have a handle on supply and demand, you may be turning out the lights and closing the door to your livelihood. And it may not be for just one night. It may be permanently. Now that’s a spooky thought.
How do you prevent this frightening thing from happening to your small business? There are no tricks to it, really. It’s easy. Invest in an inventory management software system. According to the 2016 State of Small Business Report, some 48 percent of small businesses do not track their inventory, or for that matter, use a manual process. If you fall into that category, your business could soon don a R.I.P. sign.
What can happen if you don’t track inventory?
According to U.S. Small Business Administration, poor inventory management is one of the top eight reasons why small businesses fail. Without a good system, the business is likely to encounter unhappy and frustrated customers due to the inability to fill orders, deteriorating, damaged and obsolete products, and loss, either due to simply not being able to locate product, or theft. Let’s look at them all:
Wicked Customer Service
There are three words customers loathe especially during the holiday season – out of stock. When a customer purchases online or in-store and encounters those three words, it causes stress not only for the buyer, but also the retail outlet. Once a customer is unhappy and dissatisfied with their shopping experience, they often take their business elsewhere, and do not return. Inventory management systems allow you to track products, realizing best-sellers that will need to be reordered. It will also afford you the opportunity to know when the re-order should be placed and when to expect delivery. Businesses are able to manage inventory, making projections based on past sales and lead times, which is especially beneficial during peak seasons, as it is not only inventory that needs to be increased. Labor will need to be increased to handle the volume received both in the warehouse and in-store.
Creepy Financial Loss
While not having enough product in stock can lead to lost sales, having too much in stock can be just as scary. When you don’t know what you have in stock, it is difficult to know what products have been sitting too long. It is quite possible that you have ordered more of a product that you already have too much of simply because you didn’t realize you were overstocked. Had you known items were sitting in the warehouse collecting cob webs, you would have known to mark said items down or run a promotion such as a buy one get one free sale. There are several disadvantages of carrying too much inventory, yet they all lead to one thing – loss of money.
Related Article: 6 Kinds of Inventory Control That Work BestTracking your business’ inventory will likely help you avoid paying excessive storage costs or housing products that are either ruining or becoming obsolete, such as last year’s computer models. Additionally, the shift in customer demand can leave a business with items they can’t sell, such as a company that stocks too many coats in the winter may find themselves with an excess supply when the temperature starts to rise.
Businesses in the U.S. are currently losing some $45.2 billion due to shrinkage, with retail theft accounting for the vast majority. This leaves small business retailers at risk. According to a 2016 study by the National Retail Federation, there are three main reasons for retail loss. Shoplifting accounts for 39 percent of shrinkage and employee theft ranks right up there with 35 percent. The remaining is accounted for through contractor and supplier theft and management and administrative error.
If your business does not have an inventory management system in place, it’s virtually impossible to know what is being stolen, how much is being stolen, or how much of an impact retail theft will affect your company’s bottom line. Simply putting one in place will afford you such reports on loss, but to reduce and/or eradicate it, employees must be informed that such a process allows for tracking of loss. This may deter their bad habits, but they also must be schooled on how to help spot and prevent shoplifting.
Terrifying Tax Records
When April 15 rolls around and you have no idea what you’ve purchased, sold or lost, it will be next to impossible to file an accurate income tax return for your small business. That, in and of itself, is just plain spooky.
How to launch your inventory management system
Most all inventory management software packages will come with tutorials, as well as online customer support, however, it is important to try it out before you go live. Train employees on how to utilize the system for best measure. Just because you install it doesn’t mean you are up and running. Learn the ropes.
In 1999, Hershey’s Foods was a $5 billion company, however they had failed to invest or innovate in the use of their information technology systems. They succumbed to retailer demands for better tracking and delivery systems, but due to that pressure, they rolled out their management system too hastily against the manufacturer’s guidance in order to meet the Halloween rush. Consequently, there were issues. Hershey’s was not able to fulfill critical Halloween orders resulting in a $150 million loss in revenue, and their stock dropped 30 percent.
Thankfully, due to their long history of success, they were able to bounce back, but a small business may not be as fortunate. In fact, it just may have been the nail in the coffin.
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