January 12, 2021 Growing & Complex Businesses en_US Learn how to stay ahead of the latest inventory management trends for wholesalers in this five-step guide from QuickBooks. https://quickbooks.intuit.com/cas/dam/IMAGE/A5bKhKT2k/Wholesale-inventory-management.jpg https://quickbooks.intuit.com/r/growing-complex-businesses/wholesale-inventory-management/ Wholesale inventory management: 5 steps for success in 2021
Growing & Complex Businesses

Wholesale inventory management: 5 steps for success in 2021

By Kristy Short January 12, 2021

While the pandemic caused massive disruption within multiple inventory-driven industries, wholesalers are unique. Orders are larger, daily shipping volumes greater, and long-time customers may be more demanding.

As such, in the wake of disruption brought on by the advent of COVID, wholesalers must now focus on redefining the business model and processes to build lean, mean product turnaround machines.

Like other industries, wholesalers were forced to implement change at a fast-and-furious rate. And while many were able to pivot on a dime and stay afloat, longer-term planning is required to ensure business viability in 2021 and beyond. The following guide will give you helpful tips to jump-start your planning.

Plan for a prosperous future

To start the planning process, consider a few smart tips and tactics collected from inventory management experts Mario Nowogrodzki, CPA.CITP, CEO, and Keith Fileccia, COO, at Mendelson Consulting. The following list serves as a starter guide to help you prepare your business to be more agile and prosperous moving forward.

Step 1: Keep on-hand inventory to a minimum

While running out of stock is not good for business, it doesn’t mean you should keep inventory levels so high that you’re paying in excess to store items that will eventually decay or go out of favor. When stock begins to collect dust, it’s a double whammy for wholesalers because the value of goods depreciates over time, and you’re paying for storage and warehouse management.

To help maintain proper inventory levels, ensure that your inventory management system is best-of-breed. Solutions that use artificial intelligence (AI) can help you predict inventory requirements based on buyer behavior and trends. In simplest terms, the system will tell you how much stock you need in any given time period based on historical sales.

“The longer products sit in a distribution center, the bigger the impact on cash flow,” said Fileccia.

Of course, in times of mass disruption and skewed buyer behavior (as we saw during the pandemic in 2020), data is not enough. The pandemic not only caused major breakdowns in supply chains, but also drastically impacted demand based on consumer perspectives (rational or not). Take paper products as a good example. Consumer panic over the availability of toilet paper cleared shelves and spiked demand—a factor no inventory management system could have predicted despite AI sophistication.

Fileccia explained: “Someone has to take the time to interpret the data and look at all the factors to determine what is going on. Human interaction is necessary because business intelligence alone is not enough.”

Step 2: Get control of your inventory

Many businesses entrust third-party logistics (3PL) providers with full control of their inventory. The time has come to turn the tables. Don’t rely on 3PL providers to accurately report on inventory levels. Take the lead role by regularly monitoring, auditing and managing inventory in your system to maintain an accurate picture of your stock.

“In relation to inventory, the days of guesswork and trusting your gut are long gone,” stated Nowogrodzki. “Businesses must take back the reins and be in control of their inventory.”

Fileccia added: “You have no idea what merchandise is going in and out of the back door if you don’t stay on top of your inventory. It’s your stock; you should always know what you have on hand. Trust your 3PL, but always verify.”

Step 3: Be a good partner to your customers

The success of your wholesale business is contingent on the success of your customers, so be sure to work in partnership with them to foster their long-term growth. This requires you to consistently build upon the wholesaler-customer relationship and serve as a true partner.

Nowogrodzki offered a clear example: “We have a client that produces fishing lures. To help customers extend reach into their target audience, the company provides a representative to attend virtual trade shows with the customer, provides extra products to present, and even accompanies the customer on sales calls [virtual or onsite]. Their ultimate goal is to help customers sell more products by serving as a dedicated partner.”

The goal here is to consistently work with your customers to move them to the next level—helping to ensure long-term sustainability and growth.

Step 4: Create a safe environment for workers and customers

A strong focus on safety has many positive outcomes, starting with making employees feel like they are important to the organization. Employees who feel valued by the company are more inclined to follow safety procedures, which leads to fewer accidents and injuries while also boosting productivity. Consider also providing employees with the proper personal protective equipment required to perform their duties safely and confidently. Taking proper safety measures will help to retain workers longer term.

“Keeping your people safe should be a top priority,” said Nowogrodzki.

Step 5: Automate inventory management

Automating workflows is the key to efficiency across departments, roles, and customers—including distributors, retailers, and other small businesses. Wholesale distribution is unique based on a wide array of challenges from the need to place larger orders (and preorders), greater frequency of sales orders and reorders, shorter lead time, risk of stockouts, the pressure of drop shipping requirements (for e-commerce), and more.

With the mere complexity of running a successful wholesale business, those within the vertical require automated, uniform processes and workflows to handle everything from purchase orders, inventory tracking, and stock levels to sales and work orders. Only when the process is fully automated can you expect to offer a rich customer experience. Also required is full visibility into real-time data to support informed forecasting and smart on-demand decisions.

Automation begins by adopting the right technologies, such as an advanced inventory management solution, enterprise resource planning, or customer relationship management software that can seamlessly integrate with your accounting system. The ability to automatically sync data between solutions better positions wholesalers for more effective performance with:

  • Inventory management
  • Cash flow
  • Invoicing
  • Pricing
  • Order fulfillment
  • Wholesale Distribution

Let the planning begin…

While not an exhaustive list, the tips offered in this guide provide wholesalers with a good starting point to begin planning through 2021 and beyond. With ongoing uncertainty around the pandemic and economy, redefining business models and building an organization that is agile is required if the wholesale industry is to rebound and gain momentum over the next several months.

Learn how QuickBooks Enterprise can help you take control with Advanced Inventory.

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Kristy Short, EdD and Chief Content & Communications Officer at Rootworks offers more than two decades of marketing strategy, marketing communications and content development experience within the accounting profession. She has coached hundreds of firms on marketing messaging, brand presence and how to build a positive online presence in order to compete in today’s competitive and digitally driven landscape. She has been named to CPA Practice Advisor’s Most Powerful Women in Accounting list multiple times and has been a contributing columnist for both CPA Practice Advisor and Accounting Today over her many years in the profession. Read more