3 Reasons Why Your Inventory Cost You Money in Wholesale Distribution

  • Published : Dec,25,2019
  • By: Kunjan Jasani
  • Updated: May 11, 2023
3 Reasons Why Your Inventory Cost You Money in Wholesale Distribution

Inventory analysis plays a vital role in the wholesale distribution business. It involves the analysis of various aspects like existing inventory, customer demand, purchasing history, and market trends. It can help wholesale distributors in two ways- One, it prevents the situation when the warehouse has a lot of space occupied by inventory that you cannot sell, and two, it assists you to get rid of an ‘Out-of-stock’ situation. Thankfully, if you have implemented the right wholesale distribution ERP software, you can easily manage and analyse inventory for your business.

The wholesale distribution includes import and export of products and it is highly vulnerable to fluctuations in market prices, various costs like shipping and import or export tariffs, etc. Ideal ERP software like SAP Business One can help you manage any inventory issues and reduce losses by enabling you to make informed decisions in real-time. Such software can enable you to set minimum or maximum stock levels, manage pricing and discounts, and track the product movement in the warehouse. Barcode scanning, location finder, and separate accounts are other characteristics of this software.

In this blog, we are going to discuss three common mistakes related to inventory management that may cost you money.

  1. Poor Stock Management
  2. Excessive stock is like a nightmare for wholesale distributors. It is a result of over-delivery from a supplier, poor inventory management, or other factors. It can impact a lot on your bottom line by blocking your capital and occupying physical space in your warehouse. It closes the doors for high-profit, fast-moving products.

    To get rid of excess stock, most wholesale distributors either return products to the supplier or sell them to customers with heavy discounts. Some distributors opt for liquidating items to other companies or giving these products to a charity. In every case, the excessive stock is a loss for your business. This loss is even bigger when it comes to perishable or seasonal products.

    You need to organise the warehouse by implementing proper management of fast-moving and highly profitable products along with slow-moving and less-profitable items. You can start by considering inventory turnover ratios to determine how often your company sells and replaces specific products in a particular time limit. You can make better decisions regarding pricing, warehousing, and marketing of products on the basis of this analysis.

  3. High Volume of Obsolete Products
  4. We can count a product as obsolete when it has reached the end of its lifecycle. Obsolete product or inventory is an outcome of various factors including-

    • Change in market trends or customer behavior
    • Technological advancements or arrival of better products
    • Improvements or new version in existing products
    • Competitor’s product that offers better value
    • It is necessary for you to remove obsolete products from your warehouse. As a rule of thumb, any inventory items that have not turned over for at least 12 months become obsolete. Even if you cannot sell them, you have to remove them from the warehouse to leverage any carrying cost and free space for new products.

      The right wholesale distribution ERP software can help you reduce the risk of having an obsolete inventory.

  5. Lack of planning for seasonal stock
  6. Seasonal products can make the inventory management and analysis process complex and complicated. For example, wholesale distributors who sell toys have to deal with increasing demand around the holiday season. In the rest of the year, the demand remains low to normal. For any seasonal products, drastic increase is generally followed by a drastic decrease. While dealing with seasonal products, you need to focus on both overstocking and under stocking of products to grab sales opportunities.

    You can attempt to follow market trends, go through historical data, or focusing on international markets for upcoming events can be some good ways to predict the demand for seasonal items. Some businesses take orders from customers months before sending goods. These are seasonality goods for them. It is easy for them to avoid excessive storage of goods for months. They can stock up high-demand products when delivery time comes near.

    Also, you need to work on resource availability for seasonal products. For example, if your product’s demand remains high in the winter season, it is advisable to hire part-time employees as helpers during this time of year. Lack of seasonality planning can cost your business a lot because of the rise in obsolete inventory or excessive stock conditions.

    Key Features of Advanced Wholesale Distribution ERP Software

    You can get the following features related to inventory management in advanced wholesale distribution ERP software. These features assist you to get rid of excessive or no stock situation.

    • Forecasting Tools–

    They provide insight into current sales and projected sales on the basis of history and various known patterns

    • Barcode Scanning–

    It ensures every item in the warehouse is recorded. It reduces the need to check the items when customers place orders thereby removing the situation where inventory is missing. It also enables you to receive, pick, pack, and dispatch orders with minimal human errors even during high demand.

    • Minimum or Maximum Reorder–

    It assists you to decide the right time to order products along with their quantity. It also considers the time necessary to get items to the warehouse. You can get a notification when the stock of particular items goes too low or too high after setting levels.

    • Real-time Reporting–

    It shows you reports of purchasing and selling patterns of various products and provides actionable insights to find opportunities and address threats effectively.

    • Product tracking–

    It tracks the movement of all the products in the warehouse based on barcode scanning.

    • Pricing Contracts–

    Your sales representatives can sell excessive stock or obsolete products by offering heavy discounts and various incentives to customers.

    SAP Business One has many other features also that make it a perfect ERP solution for the wholesale distribution business.

    Concluding Lines

    SAP Business One can provide you an excellent solution to all your inventory management requirements. This robust ERP software can take your wholesale distribution business to the next level by improving inventory analysis and simplifying product management. Send us an email at info@silvertouch.com to know more about customised ERP solution for your wholesale distribution business. Our expert business consultants will get back to you soon.