The Real Cost of Carrying Too Much – or Not Enough – Inventory

The hidden costs of carrying too much - or not enough - inventory

Another problem many merchants encounter on a daily basis is poor visibility. They don’t have a dependable real-time view of their – or their suppliers’ – inventory, therefore they can’t manage it effectively. Having this visibility is critical to preventing stockouts and overstocks, and to increasing selection.

The Headache of Stockouts & Overstocks

You’ve probably already found out the hard way how stockouts result in lost sales. You don’t know exactly when you or your suppliers will run out of a certain product. There are so many to monitor! So you keep selling – overselling – and then you find out you’re out of stock and can’t deliver. What’s worse, you probably received negative feedback and your account might have been suspended.

Check this out: statistics published in 2015 by IHL Group – a research firm for the retail industry – show empty shelves and other inventory problems led to a 4.1% revenue loss for the average retailer, and $634.1 billion was lost to stockouts. Even though these numbers are referring to brick and mortar retailers, it’s reasonable to assume it’s the same story online – if not worse.

If you buy inventory before it has sold, the pendulum can also swing the other way and you end up with
too much stock. The same study found that forecast failures and suppler issues led to a loss of 3.2% for the
average retailer, with $471.9 billion lost to overstocks.
The high cost of stockouts & overstocks.png

You don’t know right away when a product’s not selling well. When you do find out, everything slows down. Your working capital is trapped when you can’t turn over inventory quickly. To get rid of that overstock you offer steep markdowns, which in turn, eats into your margins. You’re not only losing money – you need more money to regain the ground you lost!

The Real Cost of Dead Inventory

Here are some more eye-opening stats: when factoring in additional expenses like financing, insurance, taxes, and warehouse overhead, the total cost of dead inventory can be 25-30% more than its original per unit cost. When your cash is tied up for too long, you also miss opportunities for potential sales and profit on newer products. Ouch!

Of course, when you’re busy dealing with fallout from stockouts or overstocks, you have no time – or money – to seek out new opportunities to increase your SKU count. Not knowing how much inventory you have or have access to, and not knowing where it is at all times results in poor and delayed decision making.

Having real time inventory visibility means you order less inventory, more frequently and more reliably. It also means you use less capital to generate the same gross profit. You free up capital that you can either
reinvest or save, and you avoid high interest debt.

The Wrong Way to Prevent Stockouts & Overstocks

You need to effectively track and measure those key metrics: what’s selling, what’s not selling, and what’s new to add to the roster. Not only that – you need to know about it at the time it is happening to react effectively. How are you going to do this?

Some online sellers try to address these challenges by buying more software applications and tools.
Unfortunately, this not only fails to solve the problem, it compounds it. They pay an arm and a leg for tools
designed to operate on their own. The systems aren’t connected and require even more time to ensure they work properly.

Maybe you’ve invested in ecommerce software labeled as ‘integrated’. But after all was said and done, you
had to manually enter data into the system multiple places, multiple times. You’d need an extra pair of hands to be able to do this efficiently!

The Benefits of Getting Inventory Management Right

You can’t solve problems you can’t see, and you can’t take advantage of opportunities you can’t see. You need to quickly and easily see problems – like dead inventory and slow sellers – and opportunities – like high demand and fast moving inventory – to be able to act accordingly.

Inventory inefficiencies are everywhere. The total cost of stockouts (-4.1%) and overstocks (-3.2%) equate to
losses that would be the same as increasing top-line revenue by 7.3%. The right technology and better
forecasting can help recapture 50-70% of these losses. Best of all, this revenue increase doesn’t come at the expense of acquiring more customers or opening a new sales channel.

It comes down to doing things you’re already doing – but smarter.

17 Comments

  1. descargar facebook on December 4, 2018 at 5:13 pm

    Yes! Finally someone writes about descargar facebook.



  2. descargar facebook on November 22, 2018 at 9:27 am

    Good blog you have here.. It’s hard to find good quality writing like yours nowadays.
    I really appreciate people like you! Take care!!



  3. descargar facebook on November 21, 2018 at 9:46 am

    Howdy would you mind letting me know which hosting company you’re utilizing?
    I’ve loaded your blog in 3 different browsers and I must say this blog loads
    a lot faster then most. Can you recommend
    a good hosting provider at a reasonable price?
    Cheers, I appreciate it!



  4. What Equipment is Needed for Sling TV on November 19, 2018 at 10:23 am

    I am not sure where you’re getting your information, but good topic.
    I needs to spend some time learning more or understanding
    more. Thanks for excellent information I was looking for this info
    for my mission.



  5. What Equipment is Needed for Sling TV on November 18, 2018 at 10:02 pm

    I believe this is one of the most significant information for me.
    And i’m satisfied studying your article. But should statement on some normal things,
    The website taste is wonderful, the articles is truly nice :
    D. Excellent job, cheers



  6. What Equipment is Needed for Sling TV on November 18, 2018 at 9:57 am

    Hi to every one, the contents existing at this site are in fact awesome for
    people knowledge, well, keep up the good work fellows.



  7. What Equipment is Needed for Sling TV on November 18, 2018 at 9:37 am

    Hi! Quick question that’s totally off topic. Do you know how to make your site mobile
    friendly? My site looks weird when browsing from my iphone 4.
    I’m trying to find a template or plugin that might be able to correct this problem.

    If you have any recommendations, please share. Many thanks!



  8. What Equipment is Needed for Sling TV on November 17, 2018 at 8:20 am

    Genuinely when someone doesn’t know then its up to other viewers that they will help, so here it occurs.



  9. What Equipment is Needed for Sling TV on November 12, 2018 at 8:58 am

    This paragraph is actually a good one it helps new
    net people, who are wishing in favor of blogging.



  10. Sling TV on November 11, 2018 at 11:04 pm

    An impressive share! I’ve just forwarded this onto a colleague who has been doing a little
    research on this. And he in fact bought me dinner
    due to the fact that I discovered it for him… lol. So allow me to reword this….
    Thank YOU for the meal!! But yeah, thanks for spending the time to talk about this topic here on your blog.



  11. Sling TV on November 11, 2018 at 5:38 am

    Hello every one, here every one is sharing these familiarity, thus it’s nice
    to read this blog, and I used to pay a quick visit this web site all the time.



  12. piezas de fundicion blanca on November 10, 2018 at 8:59 pm

    La empresa Utillajes Y Mecanizados De Precision Avila Sl se dedica a Fabricación instrument.precision, medida y control. Si bien los requisitos del mecanizado de precisión pueden aplicarse a casi cualquier industria, hay 5 tipos que son principales. Hoy en día, sistemas basados en la inyección permiten obtener piezas de apenas 10gr con una precisión y homogeneidad mucho mejor que otras tecnologías convencionales.



  13. cnc acero inoxidable monterrey on November 10, 2018 at 8:26 pm

    El equipo de diseño técnico de Mecaformatos crea y reproduce cada proyecto, utilizando para ello software profesional de diseño 3D y equipos de CAD-CAM altamente precisos, que aseguran una gran fiabilidad para posteriormente dar paso al proceso de producción.



  14. What Equipment is Needed for Sling TV on November 10, 2018 at 3:14 pm

    This is really attention-grabbing, You are an overly skilled blogger.
    I’ve joined your rss feed and stay up for searching
    for extra of your great post. Additionally, I’ve shared your website in my social networks



  15. Si después de reiniciar el problema continua, llama al teléfono del Servicio Posventa que aparece en el manual de instrucciones de tu electrodoméstico. Después de ponerte en contacto con el Servicio puede que te pidan que envíes el Indego al Servicio Técnico de Bosch.



  16. historia de cada electrodomésticos baratos on November 10, 2018 at 11:49 am

    Empresa dedicada a la reparación e instalación de gas, calefacciòn y aire acondicionado. Después de perder mucho tiempo navegando por la complicada web de asistencia de Sony VAIO, dí con un un número de teléfono. Inocente de mí, al no haber pasado dos años de la compra, llamé al nº de teléfono para equipos en garantía. Ahí, un ordenador me dijo al introducir el nº de serie que ya no lo está, que es sólo de un año: primera ilegalidad: en España la garantía de los productos electrónicos es de 2 años por ley. Creo que no compro nada SONY , en mi vida y; !Ojo a navegantes¡si compras tecnología desde luego piensa en el servicio de postventa, no en SONY.



  17. What Equipment is Needed for Sling TV on November 9, 2018 at 10:27 pm

    Simply want to say your article is as astounding. The clearness for your submit is simply nice and that i could think you’re an expert
    on this subject. Well with your permission let me to
    grasp your feed to keep up to date with imminent post. Thanks one million and please carry on the gratifying work.



Leave a Comment