The four best ways to reduce inventory carrying costs
To bring down inventory carrying costs, your business needs to reassess its processes and eliminate any inefficiencies. This can be done by using any of the following tips:
1. Improve your warehouse layout
As inventory increases and sales ramp up, a company may not pay much attention to reorganising its warehouse operations. But with warehouses serving as the hub of all inventory, taking the time to improve their layout and workflow can provide a great opportunity to reduce costs and increase overall efficiency.
2. Determine your optimal inventory levels and reorder points
Purchasing large quantities of inventory may save on the initial per unit cost, but end up incurring more expenses in the long run if it ends up sitting in storage.
Instead, look at historical data and calculate optimal inventory levels and reorder points. This information will allow you to still fulfill sales and customer demand, without overstocking more inventory than you need.
3. Accelerate inventory turnover
Carrying costs can quickly increase when any inventory remains unsold and can no longer generate profit. The best guard against this is to reduce the time your inventory stays in storage. This includes only holding the inventory you need for the sales period, negotiating with suppliers for favourable lead times or MOQs, and getting rid of deadstock or excess inventory.
By increasing inventory turnover, a company can decrease its holding costs and sell items at their highest value.
4. Use inventory management software
Instead of tracking inventory by hand and conducting manual cycle counts, consider the benefits of inventory management software. With a digital inventory management system, you can extend visibility across your supply chain to see what’s in stock, what’s on order, and where items are located at all times. Visit our pricing page to view plans or a free 30-day trial to Quickbooks.
With an inventory management system that integrates data from purchase orders, sales fulfilment, and demand forecasting, you can leverage customised reports to optimise stock levels, fine-tune pricing strategies, and determine the best warehousing strategy to reduce holding costs.