controlling inventory

Tips on How Businesses Can Reduce Inventory Handling Costs

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Businesses, especially those involved in selling merchandise, can tie a lot of their working capital in inventory. Furthermore, the stock will bring about other costs, such as warehousing costs, labor costs, and insurance, among others.
Proper inventory management can free up working capital to enable expansion and reduce cash flow challenges for daily operations. By stocking only the target inventory, so the customers do not miss any item or production is not hampered. By having the right quantities of such merchandise, a business can save so much.
So, what are some of the ways through which a business can save inventory handling costs?stock management system

Determining the correct reorder point

Your business could save a substantial amount of money if you could identify the right reorder point. What is the appropriate time to reorder certain goods, and what is the correct volume to order? Answering these questions will avoid you holding excess stock or selling out to the extent of not fulfilling the demand.
Demand forecasting tools can help to arrive at the best reorder points, and they consider sales data over some period, like several years to unravel some patterns. They also consider other factors like seasons, the channels that customers prefer to use to buy, and so on. Besides, businesses could check how others in the field and affected by the same factors are setting their reorder point.

Investing in an inventory management system

Investing in inventory management software is one of the best decisions your business could make. Surprisingly, only 22% of small companies have software for managing inventory, and they indicate that it enables them to save a lot of time- 16% of those who use them say they manage to save one day or more.
The systems play some crucial roles:

  • Availing real-time update on stock movement for all the sales channels removing the manual updating of inventory record which is also prone to a ton of errors
  • Easing collating of monthly, annual or any period sales and inventory reports
  • Integrating the inventory management system with other business systems such as accounting, all the sales channels, dispatch, and others, which saves time, labor costs, and money.

Eliminating dead stocks

There are those items that business stocks in huge volumes anticipating high sales or due to impressive quantity discounts from suppliers, but the products fail to sell as fast. These products end up piling in the stock rooms or warehouses incurring storage and other handling costs besides tying working capital.

Businesses can eliminate them by bundling them with fast movers, selling them at a discount, returning to suppliers if their terms allow, or donating them to charities to get a tax reduction for the cost of the donations where this is applicable. Space to hold profitable products will be availed, and carrying costs for the dead stocks eliminated.


Businesses can reduce inventory handling costs significantly by working out the correct reorder point. Also, using inventory management software and doing away with dead stocks can help.…