Inventory Know How!
A lot of the conversations we have with our customers here at ION is around inventory. Inventory is a window, that without proper procedures and guidance, will slowly chip away at bottom line. Being from an industry of wireless, we were always centered around operations and keeping track of inventory daily. There are some key points that pertain to keeping a grasp of your inventory.
One key point that allows everything here forward to move along is organization. So many times, we have walked into the back room of a client and wondered how they keep track of the sometimes 10s of thousands of dollars in inventory. Coming from a background of operations this just gives me the sweats. Organizing a backroom is a matter of will. One must believe that organization is the cog to everything running smooth in your store. This has been shown to be effective when organizing by model, color, and an alpha numeric basis. Even developing your own SKU systems helps POS systems work more efficiently, so it even trickles down to the sell.
Organization requires the implementation of process that you and your techs can adhere to. Monthly inventories, receiving a broken display as inventory for selling later, and receiving RMAs from customer’s devices are must to keep this window closed. These items are assets in your business and should be treated as such.
There are some fantastic inventory management systems out there that make this a breeze. Yes, they cost money, but the ROI for these products are understated. IMSs allow you to track a multitude of facets toward your business that will ultimately help you save money from overspending and unfulfilling. Using these systems, allows you to track products received and products sold. This gives you the ability to project and forecast inventory on a more microscopic level, thus saving you money from having too much of one SKU or too little of another. Using a system like this, also helps you determine a moving average cost of goods, so you’re able to factor that into the part cost of jobs.
We decided to give you a visual look at the cost of not having inventory and being overstocked on certain products:
The cost of being understocked
Sales, Sales and more Sales: You not only miss out on the first sale but you miss out on all the potential attachments, future business and referrals. To avoid outages, you should have safety stock/buffer stock on the most commonly used components. This should probably look like 2 weeks of inventory when you receive your next parts order. One week of that two-week stock is your buffer. When you start consistently using your buffer during week one then you probably need to increase your sku minimums. It's also vital to perform regular stock checks every morning before opening or every evening after closing and to maintain regular order cycles. If you time your order cycles properly then you can save on shipping as well.
The cost of being overstocked
We have outlined 4 risks of being overstocked. Budgeting / Unbalanced Spending:Cash flow is king, and you want to make sure you are not over leveraging on parts that won't sale. You never know when that business account you have been working on will come in, and you want the cash flow to be able to service that account. Shrinkage:Theft is an unfortunate part of any business and the more stock you carry the higher the potential for something to grow legs and walk away. Obsolescence:Another detriment to overstock is potential obsolescence. You should be aware of market trends and product life cycles to avoid sitting on stock that you will never use. (We know this first hand because we still have more than 3k iPhone 4s displays) RMA/Deterioration:The more times something is handled and the longer it sits on a shelf the high the likelihood of and RMA. It's important to properly cycle using a first in first out method.
This is where monthly and sometimes daily inventories are vital to keeping an organized handle on current inventory to avoid disappointing a customer of not have products when they come into your establishment. Teach each employee the process of how you’d like to execute this and hold them accountable if you’re not there. The importance of knowing the current inventory status of your store cannot be overstated. It is vital to truly know what that profit and loss statement looks like at the end of the month.
If you would like to talk more about making your business becoming more organized from an operational standpoint. Please reach out to us at email@example.com!