5 Ways 3rd Party Inventory Management Can Help Increase Your Profits

Businesses today are facing unprecedented challenges as the costs of raw materials, labor, and shipping increase. Managing your inventory effectively is critical to combat these rising costs and maintain profitability. Holding too much inventory could tie up your capital while having too little could end up costing sales. With that in mind, here are 5 ways that utilizing a 3rd party inventory management system and warehousing services can assist in increasing your company’s profitability.

Save Time and Hassle

When you have a third-party inventory management system, you don’t have to spend hours inspecting your inventory, writing out detailed reports, or trying to determine the accuracy of your inventory. That can free up your schedule to focus on other aspects of your business.

Quality Supply Chain Management

Supply chain management is a critical function for managing your costs. When using a 3rd party inventory management system with warehousing services, you can forecast demand, track sales, and ensure orders go out promptly to your customers. You also only need to reorder inventory when certain parameters are met, so you are tying up capital needlessly. Your inventory management software also incorporates the ABC analysis, which ranks inventory items based on their importance to your company. Another benefit is the reorder points can be put into place, as well as PAR (periodic automatic replenishment) levels to track the minimum and maximum levels of inventory to be maintained for each item.

Increases Revenue

Effective inventory management with warehousing services can ensure you have the right products on hand to meet customer demand and avoid potential shortages. When you rush shipping to resupply and address inventory shortages, your business and its profitability are impacted. You could also opt to put just-in-time inventory management methods in place, allowing you to order and deliver products at the exact time you need them. But to put this in place, you should work closely to track inventory levels and work closely with suppliers. Warehouse services also can offer drop shipping, working with your 3rd party inventory management software to maximize the benefits to your business financially.

Reducing Costs

Holding inventory costs your business money because you have to pay for warehousing services, handling costs, and costs resulting from obsolete or spoiled inventory. Effective 3rd party inventory management reduces these costs by minimizing the inventory you hold at one point in time. Additionally, with the right inventory management system in place, you can meet demand and be accurate about what is available on your website. Plus, you get a clear idea about what products are popular, what is being returned frequently, and what isn’t selling at all. Having this information means you can address issues and streamline your inventory to maximize your company’s profitability.

Improve Customer Service Overall

Having the right inventory to meet customer needs can minimize potential complaints while also meeting the demands of your current customers. Plus, if your customers want to make additional purchases, your inventory management system can help your customer service team determine whether the inventory is available to fulfill their orders.

There are also plenty of other benefits that come from using a 3rd party inventory management system, including demand forecasting, ensuring that you have the right amount of inventory on hand to meet customer demand. You can incorporate a moving average, exponential smoothing, time series analysis, and judgmental forecasting. The right technique depends on your business model. However, it is important to note that demand forecasting is not an exact science, so stockouts and overstocks can happen from time to time.

Clearly, there are a variety of processes that you can put into place with third-party inventory management software. Combining it with warehousing services can maximize your profitability and help your business grow.

Share the Post:

Related Posts