Welcome to our 4-Part blog series on Drop Shipping. We want to show you how your business can start utilizing Drop Shipping as a Lean way to grow your product line and bring greater value to your customers.
- How Drop Shipping Will Help Your Distribution Grow
- Triple Your Product Line the Lean Way
- Managing Drop Shipping and Your Own Warehouse
- Don’t Waste Warehouse Space on Slow-Moving Inventory
Don’t Waste Warehouse Space on Slow-Moving Inventory
Slow-moving inventory is frustrating for a number of reasons. Not only does it hurt your sales totals and bottom line, but it also eats up warehouse space that could be utilized to stock faster-selling SKUs.
If you’re a business owner or warehouse manager, it’s vital to find a way to get rid of these slow-moving items as efficiently and profitably as possible.
The Problem with Slow-Moving Inventory
Slow-moving piles of stock can be lethal. Consider an analogy to see how important this aspect of your business is.
Picture your warehouse as a human heart and the inventory as the blood. In order for the heart to continue beating and effectively supply the rest of the body (your business) with life, the blood must flow.
When there’s a blockage or congestion, blood (your inventory) can’t move and trouble ensues. The key to running a successful warehouse is ensuring inventory comes in and leaves in an efficient manner.
When you have slow-moving inventory on your shelves, it has an impact on everything behind it. You get a bottleneck situation where you’re increasingly unable to meet customer demands.
The problem is that companies don’t necessarily recognize when they have slow-moving inventory. According to Maria Haggerty of Dotcom Distributions, slow-moving inventory can be defined as SKUs that haven’t moved in 90, 120, or 180 days.
This obviously depends on the products you sell, but Haggerty’s numbers provide at least a time frame for you to analyze.
Strategies for Combatting Slow-Moving Items
Depending on the number of slow-moving SKUs you have, your firm’s overall health could be in dire straits. The key to getting out of the situation is identifying and homing in on strategies to combat the root problem.
Consider the following three:
- Better forecasting. In some cases, preventing slow-moving inventory from halting your business operations is as straightforward as adopting more accurate forecasting models. By increasing your ability to project your inventory level needs, you can avoid unnecessary congestion in your supply chain. Make sure you are using QStock Inventory’s Inventory Demand Report to get accurate inventory recommendations.
- Leveraging BI data. Better forecasting is often made possible by leveraging the right business intelligence (BI) tools. The term may sound foreign or complicated, but BI data helps bring clarity to complicated supply-chain issues that aren’t so readily resolved through the use of human analytics. If you’ve never considered giving BI tools a shot, now may be the time to look harder at them.
- Revamp marketing efforts. It’s very possible your sales strategies aren’t working. If your competitors aren’t struggling to move similar inventory, then the fault lies in-house. It’s time to head back to the drawing board and brainstorm new marketing and advertising strategies that will empower you to reach your target market more effectively. Sometimes a simple tweak in messaging or shift in marketing channels is enough to enjoy immediate and quantifiable results.
The Real Answer: Drop Shipping
Though all three of these strategies can help you push slow-moving items, they still might not put a significant dent in your inventory congestion. If you really want to stop wasting precious warehouse space on slow-moving inventory, you need to establish a better inventory management plan for the future.
Though different options exist, drop shipping may turn out to be the most effective answer for you. If you’re unfamiliar with drop shipping, it’s a simple-to-understand yet extremely valuable supply-chain technique that eliminates much of the risk associated with carrying large volumes of inventory.
Here’s how it works. Instead of purchasing a large amount of inventory and storing it in your facilities, you partner with drop-shipping suppliers and list their merchandise for sale. Once you receive an order from your customer, you forward it to the supplier so it can fulfill and ship it. The drop shipper takes some of the profit and passes the rest along to you.
It should be obvious that this supply-chain technique can relieve a lot of pressure from your business. You only pay for the products you sell and don’t have to keep excess inventory on hand.
This ultimately eliminates the risk of slow-moving items piling up on your hands, and allows you to make quick pivots and test new products without taking an expensive gamble. While you may not want to use drop shipping for every product line, it’s effective when leveraged in the right situations.
For example, let’s say you have a product that retails for $399 and has a 75 percent profit margin. While that would seem like an extremely profitable product to carry, the item also happens to be very large and you sell only a couple per week. This means you’re using up valuable warehouse space on a product that doesn’t move fast.
By using a drop shipper, you can still sell the item without having to worry about keeping it in your own warehouse. You won’t get a 75-percent profit margin, but you’ll still see healthy returns every time a unit sells.
This is the value of drop shipping. It allows you to stop worrying about slow-moving items and focus more on your core business activities. The result can be incredible growth and bigger monthly revenues.
QStock Inventory: Your Source for Inventory Management Solutions
At QStock Inventory, we’re proud to be one of the premier providers of inventory management solutions that afford businesses across a wide variety of industries a number of distinct advantages in their approach to inventory control and visibility.
We’re a company that’s always on the cutting edge of new supply chain and inventory management strategies. We recently hosted a webinar on Drop Shipping for Ecommerce and how it allows businesses to scale at rapid rates while simultaneously increasing both efficiency and accuracy. You can sign up to receive a recording of this webinar, by following the instructions here.
For any other questions regarding your inventory management needs, please contact us today! We would be more than happy to provide you with a free demo of our robust solutions that easily and effortlessly integrate with both Intacct and QuickBooks.