Inventory management plays a big role in customer satisfaction. Inventory management should be designed to monitor product availability, but thanks to advanced technology, it can do so much more than that. Inventory management can tell you when to reorder products, help fulfill orders faster, identify what’s selling fast, and so much more. All of the benefits of inventory management can improve customer experience which will drive sales at the end of the day. While you may need to invest in inventory management, it’s a worthy investment. To free up cash to improve inventory management systems you may need to get funding for inventory. Keep reading as we explore inventory management and inventory funding.
What is inventory management?
Inventory management is the process of ensuring you have enough inventory to sell while maintaining cash flow. It involves tracking inventory from the manufacturer to the point of sale. The purpose of inventory management is to ensure the right products are at the right place, at the right time. Furthermore, it allows businesses to ensure they always have enough inventory on hand.
Inventory management involves the following:
- Keeping track of inventory so you know how much of each product you have in stock.
- Ordering more products to keep up with demand and cutting down on products that aren’t selling as well.
- Making sure you have backup plans if you are low on a product that’s in demand. For example, you may have a variety of wholesalers you use so if one is out of a product you need, you can order from another supplier.
- Managing inventory from raw materials to finished products.
- Efficiently streamlining inventory to avoid shortages.
Why is inventory management important?
Inventory management is important for a variety of reasons including the following:
- Inventory management and customers: The main reason inventory management is important is it increases customer satisfaction. If you are on top of your inventory you will be less likely to sell out of products or promise an order that you can’t deliver. This means customers will get their products without having to wait for backorders. It will also make them less likely to go to a competitor for the products they need.
- Helps grow business and reputation: Keeping track of your inventory will help you determine which products are selling and which are not. As a result you can invest in the products that sell and spend less on the products that don’t. This should result in higher income and reduced loss so your business can be more profitable overall.
- Minimizes shrinkage: Shrinkage occurs when items of inventory exist in accounting records but are no longer present in the actual inventory. This is typically due to clerical error, damaged goods, or theft. Inventory management helps companies account for shrinkage. It allows them to identify the source of shrinkage so it’s less likely to occur.
Types of inventories
There are several types of inventory a company can have. They will vary depending on the type of goods you sell, but can include the following.
- Finished goods: These are finished products sold to customers.
- Raw materials: These are the materials used to make finished goods.
- Work in progress (WIP): These are unfinished goods that have not made their way through the manufacturing process.
- MRO goods: MRO stands for maintenance, repair, and operating. MRO goods refer to the inventory used to support the manufacturing process.
- Safety stock: This is the additional inventory a business keeps in stock to deal with supplier shortages and increases in demand.
How does inventory management influence customer satisfaction?
Inventory management influences customer satisfaction in several ways such as:
- Fulfillment of orders: Inventory management ensures orders are fulfilled so customers get their items quickly and don’t go to another company for the goods they require.
- Customer service: When warehouses are well organized and products are in stock, goods can be shipped to customers quickly, providing a high level of customer service.
- Seasonality: You must consider seasonality in your inventory management processes. For example, you may want to increase your stock on summer items when temperatures heat up and order more winter items when temperatures drop. Upcoming holidays will also dictate which items customers will want to be purchasing from your store. Having the right products when you need them will help capture more sales while delivering what customers want, when they want it.
- Preventing stock-outs: A stock out occurs when a customer orders a product, and the company realizes that they don’t have it in stock. They must then tell the customer that the item isn’t available and refund their money or put the item on backorder. Stockouts can negatively impact a company’s reputation and reduce customer acquisition and retention rates.
- Returns: An easy return process can greatly increase customer satisfaction. If a customer receives an item that arrived damaged, they may want to exchange it for a product that’s in good condition. If the company has enough inventory, they will be able to swap it out quickly providing a prompt return process that makes the customer happy.
How can inventory management tools help?
Once upon a time, inventory management meant companies had to count their products manually which was extremely time consuming and produced a high margin of error. Today, inventory management tools are available that make the process easier and more accurate. They can even automate inventory management accounting for products that are bought and sold in real time.
Tools that are commonly integrated into the inventory management process include:
- Data analytics: Data analytics involves using real time data so you can scale your inventory up or down in a timely manner to boost profits and reduce expenses. Data analytics will also provide insight on trends and market opportunities.
- Product Segmentation: Product segmentation involves categorizing your products according to characteristics such as market appeal, profitability, and supply and demand patterns. This will allow you to get a handle on when inventory needs to be replenished. It will maximize profits, reduce operational costs, and make your inventory management processes more efficient overall.
- ABC Analysis: ABC analysis involves organizing products into categories depending on how well they sell. Products in the A group will be those that sell the best. Products in C groups are those that aren’t selling well. Products in B groups are products that are selling, but not as well as those in the A group. B group products should be monitored to see what group they end up falling into, A or C. ABC analysis ensures you are investing in products that sell and not spending money on those that don’t.
How Kickfurther can help
Part of an effective inventory management process is stocking enough inventory. Losing a customer or sale as a result of not having a product in stock once or twice may not be the demise of a business. But, when this happens on a regular basis it can be. Customers need to know they can count on a business. From an initial order to a return or exchange companies should keep enough inventory on stock to fulfill orders. Furthermore they should have an easy ordering process. With inventory management tools in place, customer processes can be simplified and fulfillment can be expedited. So how can Kickfurther help?
Kickfurther is the world’s first online inventory funding platform that enables small businesses to access funds that they are unable to acquire through traditional sources. For companies that sell physical products or non-perishable consumables and have revenue between $150k to $15mm over the last 12 months, Kickfurther can help. We connect brands to a community of backers who help fund inventory on consignment and give brands flexibility to pay that back as they receive cash from sales.
Kickfurther can help startups and small businesses fund millions of dollars of inventory at costs up to 30% lower cost than the competition. With more than $100 million in inventory funded to date, Kickfurther can help you get funded within a day or even minutes to hours.
Inventory funding can free up cash flow so that companies can improve inventory management. It also ensures that companies have plenty of products to sell. At the end of the day, customers are the lifeblood of a company. Business owners should do everything they can to deliver unmatched service. Disorganized internal operations will reflect through customer experience. Businesses with organized and effective inventory management systems in place can improve customer satisfaction.
Interested in getting funded at Kickfurther? Here are 3 easy steps to get started:
#1. Create a free business account
#2. Complete the online application
#3. Review a potential deal with one of our account reps & get funded in minutes