Why do I need an item management system?
Many store owners are content with earning a modest profit and just getting by. They make enough money to pay the bills and operating expenses, while keeping a little bit for themselves. And there’s nothing wrong with that.
But if you want more– if you’ve dreamed of something bigger, you need to be better than your competition. And one of the first steps in that process is knowing more about your inventory. To know more about your inventory, you need an item management system that provides real-time information about your inventory.
With this up-to-date information, (e.g. what customers are buying and what they’re not), you can make decisions that maximize the efficiency of what’s sitting on your shelves. And that’s the goal. The less you money spend on inventory, the more money you have to spend on other areas of your business. Start a new advertising campaign, hire someone to improve your social media presence, or offer higher quality products.
Apple CEO Tim Cook is a master of inventory efficiency. “Inventory is fundamentally evil,” he says. “You kind of want to manage it like you’re in the dairy business. If it gets past its freshness date, you have a problem.” Clara Lu, tradegecko.com.
To get rid of that “evil” inventory, you need great inventory management software. Software that provides the information you need to make the best decisions for your company.
Here are the 5 features features that your item management system must have:
1. Stock Levels
Being able to view real-time stock levels at all of your stores is a must-have feature of any good small business inventory software. For example, if a customer comes in and requests an item that you don’t have, you need the ability to see if any of your other stores have the item. If they do, and it’s a low demand product, it might make more sense to transfer it to your store, instead of ordering a new one.
2. Min/ Max Levels
Setting minimum and maximum levels for your items, and maintaining them based on demand, is a major part improving your company’s inventory efficiency.
When managing inventory, you want to have enough product to meet the needs of your customers, but not much more than that. Maintaining the min/max levels helps you understand the optimal stock level for each of your products. A good item management system uses this information to suggest the products that you need to include on your next purchase order.
3. Top Selling Items and Dead Stock Reports
With the Top Selling Items report, you’ll know exactly what items are selling the best over a specified time period. View the best sellers for the last week, the last month, or the last six months.
On the other side, with the Dead Stock report, you’ll know the unpopular items that you have onhand. Items that you spent money on that aren’t selling.
With top inventory management software you can pinpoint where you’ve been successful and where you need to improve, and then act accordingly.
4. Item Gross Margin Report
This report is used in conjunction with the Top Selling Items and Dead Stock Reports, and allows you to view at a deeper level, how your inventory is performing.
For example, from the Top Selling Items report you see that Item 456 is just flying off the shelf. But looking at the Gross Margin for the item, you realize you’re only making a little money from each sale. While it’s great that customers are buying it, you’re not benefiting as much as you could.
By slightly raising the price or negotiating a lower cost from your supplier, you could significantly increase your return from the item over the long term. Without an item management system, you wouldn’t be able to make these types of discoveries.
In another scenario, you might have an item that is not a top seller, but is being sold occasionally and making a lot of money per unit (high gross margin). In this case, maybe people aren’t buying the item simply because it is priced too high. A slight drop in price might increase sales while still providing a large return.
5. Flexible Pricing Options
Good inventory management software is dynamic. At times, you’ll want to set a simple fixed cost for an item. But you also need the ability to set a product’s price based on a changing factor like cost. The best inventory management software lets you set the price as a percentage of MSRP, a percent markup from the cost, or a percent markup from the last PO cost.
As we talked about earlier, how much you’re making on each sale of an item (gross margin) greatly affects your bottom line. The best item management systems allow you to set the price of an item based on a desired gross margin percentage.
To run a great business, you need to be better. Better than your competition and better than you were in the past. A critical part of that process is improving the efficiency of your inventory. A top-notch item management system will help you do just that.
To learn more about how an inventory management system like Smartwerks can help your business, download your free guide below.