Your inventory is practically a hot egg. You have to pass it over pretty fast or it starts burning. It does not just burn your fingers, but also your wallet.
How to look at your inventory
It is vital to reduce the execution times within your business. If you spend more time than what your client is willing to wait, you will lose the order. From that point on, you will need to block a particular part of the inventory in order to keep the other customers happy.
The part of your inventory that is not contracted by your customers is a solid risk for your business. Some managers might think that they are safe, only because their orders are continuous. But what do you do if their firms go bankrupt? What if they go out of business?
If you have to give up a part of the inventory because it becomes useless, the costs must be deducted from your profits.
When too much is too much
As a general rule of thumb, you should always keep an eye on your inventory. Try to get rid of the products on the shelf first, then refill the shelves. Standardising the models can also contribute to risk reduction. Do not forget about random design changes. Some of them are implemented only to bring something new to the market, while others are caused by defects or technological improvements.
Identifying the moving markets
The more time you need to transfer inventories from one compartment to another, the higher your chances to be left aside are, especially if the market changes. For instance, many of these changes are driven by trends and tendencies in the fashion world. Direct sales are often full of various challenges coming from fashionable customers, especially if you address yourself to the market responsible for these trends. On a different note, this industry is dramatically influenced by the off season climatic changes.
Other than that, both positive and negative publicity can determine how quickly your products fly off the shelves. Your market segment can disappear overnight if your only client stops buying. All in all, time is the only factor that can dictate these risks.
Time means money
The lower the execution time is, the smaller your inventory is. Keep in mind that the clock starts ticking as soon as you contract a provider. It ticks until the respective products reach to the actual customer. When you have to boost your inventory and gather some extra products, the clock keeps ticking until the acquired products are billed. Can you understand the risks? With these ideas in mind, it is clearly worth adding some small clauses in the contract for your personal protection.
A quick beginning
In my opinion, reducing the execution time will not reduce the risks only, but it also gives you the possibility to react a lot faster when handing contracts. There are two main reasons for such benefits. First, the market might take a positive evolution. Second, you are given the chance to take advantage of your competition’s problems.
Practising in handling potential risks
When not sure how to handle your inventory, a few tips and a little practice will ensure some excellent results.
- Understand the risks you are exposed to and try to clear the time spent by your company while blocking goods in your inventory.
- Always doubt the need to block goods for your clients. Perhaps their demands are old, while your delivery speeds have increased since then.
- Think about attenuating the inventory blocking risks before signing a contract. Get a reservation fee or negotiate some high cancellation costs.
- Your staff must be fully aware of the impact their design changes might have, especially since they can actually stick your inventory.
- Keep in mind that risks exist even after you bill. They are gone once you get the money though.