Inventory Management 101: How Much Wholesale Confectionery is Too Much?

During the normal course of business, inventory management is one of the most crucial components in retail. 

The purpose of managing inventory is to minimise the cost of holding inventory, while keeping stock levels consistent and getting the products delivered to your customers faster. Simply put, inventory management is the heart of a successful retail business.

However, many businesses struggle with efficient inventory management as a consequence of lack of knowledge, resources and staff.

With unfulfilled inventory requirements, you may face delayed deliveries, piling up stock, understocking or maintenance of proper records. 

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What’s Inventory Management & Why’s it Important Than it Sounds?

It’s simple. 

Inventory management is the process of organizing and managing stock throughout the supply chain. Additionally, in context to wholesale confectionery, managing inventory becomes a pioneering concern. 

Yet, it takes a lot more than accurate reporting and finding the right confectionery distributors to get inventory management right.

Seasonal Demand: A product category like confectionery has fluctuating demand throughout the year. For instance, candies might sell more during holidays like Halloween and Christmas. Managing inventory to meet these seasonal spikes while avoiding overstock during off-peak times is crucial.

Product Shelf Life: Many confectionery items have a limited shelf life, and freshness is paramount. Proper inventory rotation is necessary to ensure older stock is sold before newer stock, reducing the risk of spoilage and wastage.

Variety of Products: Confectionery businesses typically offer a wide variety of products, each with different flavors, sizes, and packaging. Keeping track of the inventory for these diverse items can be complex.

Promotions and Marketing: Special promotions, discounts, and marketing campaigns can impact inventory levels. Managing these effectively is crucial to avoid overstock or stockouts.

Storage and Handling: Proper storage conditions are essential to maintain confectionery quality. Inventory management includes monitoring storage facilities to prevent damage or spoilage.

Types of Inventory Management 

Retail inventory management

Inventory management for retailers refers to keeping track of the merchandise you want to sell to your clients. As a retailer, your first responsibility is to guarantee that you have adequate inventory to meet orders and consumer demand. However, because inventory storage is expensive, you also want to prevent overstocking your warehouse.

Multi-location inventory management 

Multi-location inventory management is a tad complex concept, especially when the inventory must be managed across numerous locations, warehouses, or sales channels. This form of inventory management needs monitoring at the local level as well as a holistic view of all your inventory to guarantee you have enough stock everywhere you sell. 

Thus, maintaining an accurate, centralised view of inventory is essential within this system.

Benefits of Inventory Management 

Inventory management helps your firm perform a number of critical tasks, whether you’re a small business or a large retail outlet:

1. Prevents spoilage

If you’re selling a product with an expiration date, such as coffee or tea, there’s a good possibility it’ll go bad if you don’t sell it quickly. Effective inventory management allows you to reduce wasteful spoilage and enhance inventory control.

2. Avoid dead stock 

Dead stock is inventory that can no longer be sold, not because it has expired, but because it has gone out of season, out of style, or has somehow become obsolete. You may handle this costly inventory error by using a meticulous plan.

3. Reduce storage expenses

Warehousing is frequently a variable cost, which means that it varies depending on how much merchandise you store. Your storage expenses will rise if you store too much stuff at once or wind up with a product that is difficult to sell. You will save money if you avoid this.

4. Increases cash flow

Inventory has a direct impact on both sales (by determining how much you can sell) and costs (by prescribing what you must purchase). Both of these factors have a significant impact on how much cash you have on hand. Improved inventory management leads to improved cash flow management.

5. Improves fulfilment

In a few ways, good inventory management may aid increase order fulfilment. To guarantee your items are close to your clients, you may utilise methods such as inventory distribution, which entails holding inventory in different fulfilment centres. This reduces transportation costs while also shortening delivery times, which helps keep consumers pleased.

Proper inventory management also entails providing a smooth return experience to buyers while ensuring that useable goods is rapidly reentered into circulation

Inventory Management Systems 

An inventory management system is typically a software that monitors and organises all the everything related to inventory at your store. This includes tracking orders all the way from suppliers through to customers.

Perpetual inventory system

A perpetual inventory system is remarkeed as the most precise choice for managing inventory. It excels in accuracy by constantly monitoring inventory in real-time, thus providing you with the latest updates in your inventory. 

Periodic inventory system

Within a periodic inventory system, you take physical counts of inventory at the beginning and end of a specific period. While this system is not as accurate as a perpetual system, it can be done without having to purchase software.

Manual inventory system

A manual inventory system is more of a pen on paper approach. This could work for very small businesses with monthly sales in 2 digits, but most stores need a more reliable system.

Techniques for Efficient Inventory Management

No matter which inventory management system you employ, the following strategies can enhance your inventory control and boost your cash flow:

1. ABC Analysis 

Using ABC analysis, categorise your inventory. Organising your items into categories allows you to see which ones need to be ordered often and how quickly they run out of your inventory. 

An ABC analysis report may be used to assess the worth of your stock as a percentage of your revenue:

A =% of stock that accounts for 80% of your revenue

B = % of stock that accounts for 15% of your revenue

C = percentage of stock that accounts for 5% of your revenue

Your A stock is made up of your most lucrative and valuable items. You’ll want to keep these items on hand at all times so you don’t lose out on future bargains.

Your slow-moving or lifeless stock is your C stock. This is stuff you may wish to sell at a discount in order to clear it from your shelves and free up cash in your inventory.

2. Adopt the LIFO Method for Inventory Movement

Also known as the last in, first out (LIFO) this inventory management strategy assumes that the most recently bought product was also sold first. The last item purchased is believed to be the first item sold. It is essentially the inverse of FIFO.

This assumes that prices are continually growing, so the most recently acquired stuff will also be the most expensive. That means that greater inventory costs result in reduced earnings and, as a result, lower taxable income, which is pretty much the only reason to employ LIFO.

3. Try the just-in-time (JIT) method

If you consider yourself a risk taker, Just-in-time, or JIT inventory management might be the perfect pick for you. With JIT, you preserve the lowest possible inventory levels in order to satisfy demand and restock before a product runs out of stock.

This necessitates careful and accurate planning and forecasting, but it works effectively for quickly developing firms with scheduled product releases and line extensions.

4. Practice Regular Auditing

Inventory reconciliation should be done on a regular basis. Most of the time, you’ll rely on software and reporting from everything related to bulk buy confectionery to your warehouse management system to determine how much inventory you have on hand. However, it’s critical to double-check the facts. There are various approaches to this.

Physical inventory: A physical stock count, also known as a stock take, is the practise of counting all of your stock at the same time. Many stores do this towards the end of the fiscal year since it is related to accounting and income tax filing.

Spotting Errors: This entails selecting a product, counting it, and comparing the result to the expected value. This is not done on a regular basis and is in addition to physical inventory.

Counting in cycles: Cycle counting, as opposed to a full count at year end, distributes reconciliation over the year. On a daily, weekly, or monthly basis, a different SKU is examined. 

5. Prioritise Accurate Forecasting

Accurate demand prediction is a critical component of effective inventory management, although it’s undeniably challenging. While you may not achieve absolute certainty, you can strive to come close. Here are some factors to consider when forecasting future sales:

Market Trends: Study ongoing trends in the market that could impact your product demand.

Historical Data: Examine sales data from the same period in the previous year to identify patterns.

Current Growth Rate: Analyze your current growth rate to estimate future sales.

Contractual Sales: Consider guaranteed sales resulting from contracts and subscriptions.

Seasonal Fluctuations: Account for seasonality and overall economic conditions that may influence demand.

Upcoming Promotions: Evaluate any planned promotions that could affect sales.

Advertising Budget: Factor in your planned advertising spend and its potential impact on sales.

Taking Control of Your Inventory

By implementing a solid inventory management system, you can lower holding costs, enhance your profits, analyse sales trends, forecast future sales, and be ready for the unexpected. 

Efficient inventory management will increase your wholesale confectionery business’s chances of success and profitability. It’s time to take charge of your inventory management and put a stop to financial losses. Select the inventory management techniques that suit your business and put them into action for the best results.