Choosing how much inventory to keep on hand, how much to store, and how much to order again requires careful consideration. To make sure you can constantly provide for your consumers, it might be tempting to have extra stock on hand. But is keeping too much inventory really a good idea? Let’s discuss pros and cons of stock out options.
Pros of stock out options
Better response time
You can promptly complete all customer orders as soon as they get to you. There’s no need to wait for your product to arrive. If you are unable to dispatch an order swiftly, you will lose those valuable consumers.
Less danger of shortages
By maintaining stock on hand, you may ensure that you will not run out of a certain item. You’ll also be less concerned if a product is withdrawn. If demand for a product changes, you’ll be able to match (or even surpass) the competition, which means you’ll be able to sell your extra inventory at a good price.
You may endeavor to ensure that your shelves are constantly stocked by storing surplus inventory. It will keep your store looking nice and tidy at all times.
Cons of stock out options
Inventory at risk of becoming outdated
The longer you keep your goods in stock, the lower their value and quality. You must make it a point to sell your inventory while it is fresh on the market.
Smartphones, for example, are upgraded every six months or so. As a result, you must sell your inventory before future versions come. You may have to sell them at a lower price since they have become outmoded or obsolete.
The possibility of an item not selling
It’s likely that by having excess goods on hand, you’ve underestimated what will and will not sell. As a result, you may wind up having a big number of things that consumers do not want to buy. To get the product out of your warehouse, you may need to sell at a severe discount or sell below cost.
Increased storage costs
Surplus inventory needs additional storage space. More room equals higher expenditures, and because you must reflect those extra costs in your pricing, you may wind up losing to competitors because your price is too high.
Even if you have your own warehouse, you will incur additional maintenance fees and risk not having enough capacity for new things.
In conclusion, how can you maintain the ideal inventory balance?
When considering the benefits and drawbacks of stock-out options or keeping excess goods, it’s all about comparing your carrying costs against the potential expenses of stock-outs. Carrying expenses include the cost of capital, insurance, storage fees, material handling, administration, and any other fees you may spend for storing goods in your warehouse.
Using warehouse management software is one approach to assist guarantee that you always have a solid balance of goods. BackOrder, for example, can notify you when your stock reaches a specific level and will allow you to make a purchasing order with a few clicks. Want to learn more about this advanced software, contact us today!