Inventory management plays a big role in customer satisfaction. Inventory management should be designed to monitor product availability, but thanks to advanced technology, it can do so much more than that. Inventory management can tell you when to reorder products, help fulfill orders faster, identify what’s selling fast, and so much more. All the benefits of inventory management can improve the customer experience, ultimately driving sales. While you may need to invest in inventory management, it’s a worthy investment. To free up cash to improve inventory management systems, you may need to get funding for inventory. Continue reading as we delve into inventory management and funding.
What is inventory management?
Inventory management is the process of ensuring you have sufficient inventory to sell while maintaining a stable cash flow. It involves tracking inventory from the manufacturer to the point of sale. The purpose of inventory management is to ensure the right products are in the right place, at the right time. Furthermore, it allows retailers to ensure they always have enough inventory on hand.
Inventory management involves the following:
- Keeping track of inventory allows you to know exactly how much of each product you have in stock.
- Ordering more products to keep up with demand and cutting down on products that aren’t selling as well.
- Make sure you have backup plans if you are low on a product that’s in demand. For example, you may have a variety of wholesalers you use, so if one is out of a product you need, you can order from another supplier.
- Managing inventory from raw materials to finished products.
- Efficiently streamlining inventory to avoid shortages.
Why is inventory management important?
Inventory management is important for a variety of reasons, including the following:
- Inventory management and customers: The main reason inventory management is important is that it increases customer satisfaction. If you are on top of your inventory, you will be less likely to sell out of products or promise an order that you can’t deliver. This means customers will get their products without having to wait for backorders. It will also make them less likely to go to a competitor for the products they need.
- Helps grow business and reputation: Keeping track of your inventory will help you determine which products are selling and which are not. As a result, you can invest in the products that sell and spend less on the products that don’t. This should result in higher income and reduced losses, allowing your business to be more profitable overall.
- Minimizes shrinkage: Shrinkage occurs when items of inventory are recorded in accounting records but are no longer present in the actual inventory. This is typically due to clerical error, damaged goods, or theft. Inventory management helps companies account for shrinkage. It allows them to identify the source of shrinkage, so it’s less likely to occur.
Types of inventory
A company can have several types of inventory. They will vary depending on the type of goods you sell, but can include the following.
- Finished goods are finished products sold to customers.
- Raw materials are the materials used to produce finished goods.
- Work in Progress (WIP) refers to unfinished goods that have not yet progressed through the manufacturing process.
- MRO goods: MRO stands for Maintenance, Repair, and Overhaul (MRO). MRO goods refer to the inventory used to support the manufacturing process.
- Safety stock refers to the additional inventory a business maintains in stock to mitigate supplier shortages and address demand increases.
How does inventory management influence customer satisfaction?
Inventory management influences customer satisfaction in several ways, such as:
- Fulfillment of orders: Inventory management ensures that orders are fulfilled, allowing customers to receive their items quickly and avoiding the need to visit another furniture retailer for the items they require.
- Customer service: When furniture warehouses are well organized and products are in stock, goods can be shipped to customers quickly, providing a high level of customer service.
- Seasonality: You must consider seasonality in your inventory management processes. For example, you may want to increase your stock on casual patio sets when temperatures heat up and order more dining sets when the holidays arise. Having the right products when you need them will help capture more sales while delivering what customers want, when they want it.
- Preventing stockouts: A stockout occurs when a customer orders a product, and you don’t have it in stock. You must then inform your customer that the item isn’t available and either refund their money or place the item on backorder. Stockouts can negatively impact your store’s reputation and reduce customer acquisition and retention rates.
- Returns: A straightforward return process can significantly enhance customer satisfaction. If a customer receives an item that arrived damaged, they may want to exchange it for a product that’s in good condition. If you have sufficient inventory, you can swap it out quickly, providing a prompt return process that makes the customer happy.
How can inventory management tools help?
Once upon a time, inventory management meant retailers had to count their products manually, which was extremely time-consuming and produced a high margin of error. Today, inventory management tools are available that make the process easier and more accurate. You can even automate inventory management, accounting for products that are bought and sold in real time.
Tools that are commonly integrated into the inventory management process include:
- Data analytics: Data analytics involves using real-time data to scale your inventory up or down in a timely manner, thereby boosting profits and reducing expenses. Data analytics will also provide insight into trends and market opportunities.
- Product Segmentation: Product segmentation involves categorizing your products according to characteristics such as market appeal, profitability, and supply and demand patterns. This will enable you to determine when inventory needs to be replenished. It will maximize profits, reduce operational costs, and enhance the overall efficiency of your inventory management processes.
- ABC Analysis: ABC analysis involves categorizing products based on their sales performance. Products in the A group will be those that sell the best. Products in C groups are those that aren’t selling well. Products in the B group are products that are selling, but not as well as those in the A group. B group products should be monitored to determine which group they ultimately fall into, A or C. ABC analysis ensures that you are investing in products that sell, rather than spending money on those that don’t.
Part of an effective inventory management process is maintaining an adequate stock level. Losing a customer or sale as a result of not having a product in stock once or twice may not be the demise of a business. But when this happens regularly, it can be. Customers need to know they can count on your store. From an initial order to a return or exchange, furniture stores should maintain sufficient inventory to fulfill orders. Furthermore, you should have an easy ordering process. With inventory management tools in place, customer processes can be simplified, and fulfillment can be expedited.
Inventory Funding
Inventory funding can free up cash flow, allowing retailers to enhance their inventory management. It also ensures that retailers have a wide selection of products to sell. At the end of the day, customers are the lifeblood of your furniture store. Retail owners should strive to deliver unmatched service. Disorganized internal operations will be reflected in the customer experience. Retailers with organized and effective inventory management systems in place can improve customer satisfaction.
How Kickfurther can help
Kickfurther is the world’s first online inventory funding platform, enabling small businesses to access funds they would otherwise be unable to acquire through traditional sources. For companies that sell physical products or non-perishable consumables and have revenue between $150k $15mm over the last 12 months, Kickfurther can help. We connect brands with a community of backers who help fund inventory on consignment, providing brands with the flexibility to repay their backers as they receive cash from sales.
Kickfurther can help startups and small businesses fund millions of dollars of inventory at costs up to 30% lower than the competition. With more than $100 million in inventory funded to date, Kickfurther can help you get funded within a day or even minutes to hours.
