- Reid Hanson
10 Ways an Inventory Management System Will Save You Money
How Does An Inventory Management System Save You Money?
According to Investopedia, “inventory costs run generally between 20 percent and 30 percent of the cost to purchase inventory,” If you do the math, this means that a company might spend approximately $20,000 to $30,000 to store $100,000 of inventory items. What exactly does these “inventory costs” cover? According to the article, it might include: “taxes, employee costs, depreciation, insurance, the cost to keep items in storage, opportunity cost, the cost of insuring and replacing items and the overall cost of capital for the company as a whole.” This all adds up quickly, especially if your company’s budget climbs into the millions.
Since a reduction in inventory costs can potentially save your company a significant amount of money, it is critical that you pay close attention to your inventory processes. Here are a few ways that an inventory management system will make a positive impact on your company’s ROI:
Decrease Inventory Waste – An inventory management system allows you to reduce inventory waste since accurate forecasting and better production planning reduce the amount of finished products and raw materials languishing on the shelf. Inventory management systems, including TRXio, have robust reporting tools to improve inventory planning and decrease inventory waste.
Reduce Dead Inventory – For products with a limited shelf life, including perishables and pharmaceuticals, an inventory management system ensures that they are consumed prior to their expiration dates, so they are unusable. An inventory management system reduces the amount of “dead inventory,” which can be burdensome to a business’s bottom line since it results in increased storage costs, increased labor costs and higher insurance premiums.
Prevent Inventory Loss – Multiple studies have revealed that regardless of industry, businesses lose or misplace 6% to 10% of their inventory each year, which greatly impacts profitability. An inventory management solution will track products and foster employee accountability to prevent loss.
Reduce Administration Costs – Like it or not, a company will face frequent inventory audits, potentially resulting in many headaches. An effective inventory management system takes the legwork out of manual audits, allowing you to easily generate accurate reports.
Improve Order Accuracy – An inventory management system systems will prevent errors to boost in order accuracy. Not does order accuracy lead to happier, loyal customers but it means that your company will issue fewer credits and returns and face fewer late payments and nonpayments. This will all boost your bottom line.
Increase Employee Productivity – An effective inventory management solution allows your employees to be more productive and fill orders more quickly. This will ultimately reduce your labor costs and maximize employee productivity.
Eliminate Manual Systems – Inventory management systems allow organizations to eliminate time-consuming, labor-intensive, and error-prone physical inventory counts, which will save time and money.
Improve Cash Flow – Inventory management systems will improve your business’s cash flow since holding too much inventory for too long is detrimental to a company’s cash flow and bottom line.
Reduce Supplier Lead Times – An inventory management system allows you to effectively manage supplier lead times, which will save you money, even if you are able to reduce them by a day or two.
Take Advantage of Tax Credits – Did you know that there is a tax credit, which is specifically aimed at encouraging and rewarding investment in R&D? There is one and this credit could potentially used for an inventory control system.