Inventory is a major part of current assets, particularly in the manufacturing industry. A large portion of cash flow is allocated to inventories to ensure a smooth flow of output so that a high level of customer service can be achieved. Maintaining inventory, on the other hand, includes both keeping and carrying costs also opportunity costs. As a consequence, assessing inventory reduction strategies is challenging.
Inventory: A Boone or Bane
Depending on who is looking at inventory in a manufacturing business, it may take several different identities. Inventory is regarded as an asset by an accountant, a liability by a director, a safety net by a supervisor, and a tightrope by a materials manager. However, the only aspect where everyone sees it with the same lens is that holding it can be a burden.
Inventory is indeed an integral part of supply chain management. However, most of the time it is a catalyst for a slowdown and frustrating transition to a genuine supply chain management. As described by Tim Cook, CEO of Apple;
In a nutshell, “inventory” is the one factor that can determine organizational sustainability. Talking about the unyielding, unshakable, and sometimes fanatical effort to eliminate excess inventories. Now you have a basic understanding of why inventory management is that crucial. However, understanding is not enough to make it work. Adopting and executing a manufacturing execution system will be the next step for you to take.
Eight Smart Inventory Reduction Strategies
Efficient inventory management plays a vital role in reducing cost and increasing productivity, that’s where stock reduction strategies come into play. Some are given below,
Selling through a website page,
Selling through a website seems to be a self-evident method of inventory reduction. However, several stores avoid doing so. Simply build a page on your website dedicated to discounting particular products for which you want to reduce the amount of stock available. Make a product tab called “Available Offers” that runs across the top of your website. People tend to browse through your website and the last thing you want them to have a glance at your products and services.
Don’t you like to save some extra bucks while shopping? Who doesn’t??
Discounts and sale offers are a classic way to lure your customers. It’s all about mind game. Most of the time, discounts make your customer purchase something he or she does not even need at that particular moment. Reduced prices will result in an increased sales volume, and ultimately it will clear off your surplus stock.
Run a Competition
A giveaway or competition is a perfect way to reduce inventory because it generates new interest in surplus stock, which can lead to increased consumer demand. However, it can help you gain more connections and develop your social media following. To spread the word, include graphics on your website, send an email to your client list, post it in your shop, and other social media channels.
If you do not already have a reward or loyalty program in place, you can dig into it as soon as possible. Some great apps, such as Smile.io, Five Stars, and Belly, can increase a customer’s lifetime value by up to 40%. They can, however, be used as part of your stock reduction strategy. Simply providing double reward points on unique products is an excellent way to increase demand and revenue.
Create a Pop-Up Store
Pop-up shops are a low-cost way to obtain visibility and useful consumer input. You can put these up anywhere as a perfect way to get rid of your old inventory. Pop-Up Republic and Go Pop-up, for example, will work with you to coordinate the whole process- including space, physical address, and inure costs. As a result, you will concentrate on selling your goods. Decrease lead times and increase orders with a Pop-up store.
Approach Famous Influencers and Bloggers
A review from a well-known blogger in your field will help you save money on inventory. Sending them an item and asking them to review it on their social media pages is sure to reignite their interest in it. These bloggers and influencers have a great fan following, and their fans simply go by their word of mouth.
Donations & Charity
Donating your excess stock to charity can prove to be a very smart strategy. It will not only make a space in your warehouse but also put your contributions towards a noble cause. Participating in any charity and donation campaign can also win you free publicity on different media platforms.
What if you completely remove your stock from your sales channels?? Well, it will surely create a buzz among the masses. Announce “Restocked” with a gap of a week or two. It will make a strong psychological impact as if these goods were selling like hot-cakes, and went out of stock due to popular demand. Having all these products back in stock will attract those who have yet not bought them.
Bundle up products
Product bundles are a very popular trick to grab customer attention. Consider grouping some of your slow-selling items with a fast-selling one. That popular item will attract the customer and hence somehow your slow-selling products will also find their way towards billing counters.
Adopting theses above-said strategies over the next few months will significantly help you reduce your inventories to the level where businesses achieve lower operating costs. It will improve customer service. Furthermore, inventory reduction strategies ensure a smooth and efficient supply of goods and services. These strategies will give a boost to business profitability, quality of service, and liquidity ratio of the business.