Inventory service costs include insurance, IT hardware and applications, and tax in some countries, but also physical handling with the corresponding human resources and management personnel. Also in this category are the expenses related to inventory control and cycle counting.
4 Ways to Reduce Inventory Costs
Count Everything in Stock
It’s tempting to maintain a cushion of inventory in the event that demand for a particular item spikes. But this usually leads to overstocking, which can cause unnecessary cost overruns. Conducting regular inventory counts can help you determine which items could be discounted (in order to clear your shelves) and replaced with more popular merchandise that results in active sales.
Get Rid of Excess Merchandise
Your inventory count will likely turn up excess merchandise. Instead of paying costs to maintain inventory with little or no chance of sale, bite the bullet and get rid of it.
Purchase the Right Quantities
Your ongoing inventory count can help guide the decision on how much of a product to buy. Whenever possible, avoid succumbing to large-volume discounts that only add to existing inventory. Instead, seek out the best deal with the smallest quantity your business must keep on hand.
Set Up Reorder Alerts
Of course, you also want to avoid running out of popular items. One solution to this problem is to integrate bar-code scanners in your point-of-sale system with inventory control software. This way, you can program software to issue alerts when merchandise is running low so you can reorder before your supply gives out.