Inventory Management Systems

Written by Patricia Skinner
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One of the main reasons inventory management systems can add to a business's profitability is their ability to pinpoint stock that moves well. However, there's a little more to it than that. Most businesses sell a lot of different kinds of items, but the age old problem is not having enough shelf space to stock as many items as they'd like. So certain items are chosen, usually on the basis of how well they sell, or how fast they move. While this is usually a good indicator of profitability, it isn't always. Some items may sell well but the profit margin is so small that the profit is eaten into by the cost of moving them.

Improving Profit Margins

Picking the most profitable items is also an important issue that can be easily deduced by an efficient inventory management system. Selling slightly fewer products with a larger profit margin will often give better overall profits, even if the actual sales volume is slightly smaller. Again, analyzing sales in this way is so easy when they are monitored through a computer software program.

There are some items that you may not even need to stock if you can locate a supplier who is close by and willing to cooperate with you on immediate deliveries. This will save on shelf space--a valuable commodity in itself. Knowing which items bring you the most profit, and which items are the most likely to move fast is an important part of predicting how your business is going to perform in a given period. You can only make improvements if you can accurately assess how things are going.

For some businesses who only deal in a small number of very large items, for example a small car showroom, keeping track of inventory is not going to be such a huge undertaking. Even they can benefit, however, as keeping inventory records will allow the sales of past years to be referred to for benefit at a later date. Companies who will really benefit from a top notch inventory management system, though, will be those who stock a high volume of very small items. For them, manual stock taking methods can be a nightmare, and very costly in terms of manpower.

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