CONTROLLING CASH OUT
TIPS ON INVENTORY MANAGEMENT
Robert Inkaka Kanyamanza
Here are some often-over-looked tips on inventory management from ROBERTKA Business Solutions specialists.
Þ Tie inventory levels to predicted sales levels. Go back regularly to your sales forecast and cash payments forecast. Then monitor stock levels to meet the changing demands of the business.
Þ Know which items in your product line are contributing the most to turnover, not just profitability.
- High-volume, high-margin items are obviously keepers. Always consider just-in-time delivery.
- Low-volume, high-margin items may be candidates for reduction of stock levels or just-in-time delivery.
- High-volume, Low-margin items may be candidates for reduction, just-in-time delivery or elimination.
- Low-volume, low-margin items may be candidates for elimination.
Know your suppliers’ delivery schedules.
If they can reliably handle quick turnaround, consider a just-in-time arrangement where you carry less stock and order more frequently in smaller quantities. At the very least try to schedule inventory deliveries as closely as possible to the time when you will use it.
Do not over buy
Know your cost per square foot of warehousing. Calculate your borrowing cost per quantity of inventory. Weigh these cost against discounts for large orders.
Develop an inventory schedule that includes a definition of obsolete inventory.
Move unsold goods and regain use of the working capital. It is a lot like personal investment: do not be afraid to say you have bought a loser. There comes a time to sell, take the loss and concentrate on the winners.
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