4 Places Wholesalers Lose Money in Their Stocked Inventory
Posted on: June 29, 2016 | By: Craig Thompson | Acumatica, Wholesale Distribution
As a wholesale distributor, managing your inventory in a cost-effective and revenue-driving manner can be difficult. Especially for distributors who don’t have access to an effective distribution planning software to automate these inventory processes. Having accounting software that helps save you money in inventory is crucial. However, sometimes dated software can do more harm than good. Knowing when your accounting software is hurting your business rather than alleviating some expenses is the first place to start.
One of the biggest places that wholesale distributors lose money is through their stocked inventory; not having enough of the right products, excess waste and even having disconnected data are all areas that can lose your distribution company money and impact customer relationships. Finding the sweet spot of inventory control is difficult, but not impossible. With proper planning and management, you can stop the cycle of revenue loss and help your wholesale distribution business thrive.
1. Disconnected Data
Outdated wholesale distribution management systems and business processing cannot provide the insight into inventory across multiple locations that your wholesale distribution company needs to grow. Disconnected data leads to variation between recorded on-hand inventory and actual inventory and can often leave distributors spending time searching for missing stock that is “out there somewhere” but is difficult to be found. Not only does this miscommunication waste time, it also can lead to backorders and vendor lag time; damaging your business's reputation and financial standing.
Rather than waste resources pouring over mismatched data and losing customers due to unorganized warehouse operations, implementing an automated ERP system can help identify seasonal trends and keep real-time views of inventory status, allocations and shop floor capacity. Optimize your purchasing power to limit the financial burden of having to rush orders and turn away customers due to lack of inventory.
2. Uninformed Purchasing Decisions
Without have clear insight into your warehouse, knowing just when to add to your stocked inventory can be tough, especially since the range of variables that affect these purchasing decisions are so wide. Making mistakes can lead to waste or shortages that will ultimately lose your wholesale distribution business money. However, it is not a complete shot in the dark. Of course wholesale distributors can dedicate more time to manually analyzing forecasts to enhance their MRP process. However, automating this step through distribution management software systems like Acumatica cloud ERP can take some of the load off of your plate.
Through the use of automated MRP, purchasing recommendations will support the most complex supply chain schedules and help balance capacity and inventory levels so you are only restocking when you need to. Automation gives forecasts based on sales trends and seasonal variations, outsource production schedules, expiration data tracking and more to help you both save money and improve customer satisfaction. With more reliable material requirements planning, you will be able to optimize cash flow, production schedules and provide on time delivery to your customers.
3. Limited Visibility
The quality of your customer service depends greatly on knowing what stock is available to promise, what is in production and where the finished goods are warehoused. Consumers have come to expect a higher quality of service from distributors through immediate and accurate updates, and it is your responsibility as a distributor to give it to them. Having limited visibility of your inventory levels can make customer service increasingly difficult. Consolidate your inventory information to take advantage of online order placement to help automate responses shipping and order confirmation responses and allow for further communication with your customers through the entire process. Not only will this increase customer service, but it will also save you money
4. Lack of Prioritization
Without a clear image of your most profitable items, prioritizing your inventory can become increasingly difficult and a large source of lost funds if done incorrectly. Assuming that your most expensive items in your warehouse are your most profitable may may not always be the case, especially when lower cost items may have a higher turnover rate. Wholesale Distribution management software can help prevent cash flow problems by identifying your most profitable items for you. Which makes it easy to determine which items to keep a higher stock of.
Understanding how to balance your inventory levels within your wholesale distribution business can be beneficial to your budget. Knowing to order fewer unimportant items and more of your best-sellers will promote a steady cash flow and eliminate unwanted excess and limit shortages.
Planning inventory levels doesn't have to be difficult. In fact, once you figure out a wholesale distribution planning system that works best for your business, losing money in your stocked inventory will soon become a headache of the past. For many distributors, automated wholesale distribution management software is an effective solution to this problem. If you think that this might be a good place to start, read more to calculate the ROI of your new ERP system and just how to minimize the cost of your ERP implementation.
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