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How to Reduce Inventory Costs

Yitz Lieblich
February 18, 2020

Inventory is one of the largest investments a company can make. What many owners don’t account for is the carrying costs of that inventory. Carrying costs (interest, storage, damage) can be almost 30% of the total value of your inventory. 

 

How can you reduce inventory costs?

  1. Just enough inventory
  2. Just in time inventory
  3. Drop Ship
  4. Use technology
  5. Train your employees

 

Just Enough Inventory

As we have discussed in previous articles, there is one extremely important inventory management technique that can help reduce inventory costs - “just enough inventory.” “Just enough inventory” means you keep exactly the amount of inventory that you need, no surplus. You walk the fine line between having excess inventory and not enough inventory.

 

Just in time Inventory

Another method that can be used to reduce inventory costs is “just in time inventory.” This means that you keep very little inventory in your warehouse. Inventory comes in “just in time” to fill your orders. This reduces your carrying costs because nothing is sitting on shelves in the warehouse.

 

Drop Ship

Drop shipping is when the retailer does not keep inventory in its warehouse at all. When an order comes in, it is pushed to the vendor or manufacturer. The manufacturer then ships the order directly to the customer. Again, this reduces inventory costs because nothing is sitting in your warehouse.

 

Use Technology

Investing in a robust inventory management system will help you maintain “just enough” or “just in time” inventory. Using an inventory management system to automate the restocking process will ensure that you will always have the right amount of inventory at the right time. This will in turn reduce inventory costs because there will be little to no inventory sitting in the warehouse.

 

Train Employees

As much as you plan on using inventory management techniques and invest in inventory management software, it is all for naught if you do not train your employees in the correct way to implement your warehouse processes and use your inventory management software. The most important part of implementing change in the warehouse is properly training your employees.

 

SkuNexus is a fully customizable commerce operations platform. Using our easy to use technology will help you implement change in your warehouse processes that will lead to a reduction in overall inventory costs. 

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