Best Practices to Avoid Overstocking

Have you ever had this experience? Last season your best-selling product sold out quickly because of supply chain issues and inadequate stock levels that couldn’t meet demand. You determined to avoid making the same mistake this year and ordered double the quantity. Customer trends shifted, and your best seller just became a slow-mover. Now, you are sitting on a pile of product that is not selling. Overstocking is ordering more inventory than you can sell. It can be costly and cause major headaches for business owners. It can lead to a surplus of unsold, unusable items and a loss of profits. To avoid overstocking and ensure your business’s long-term success, here are some best practices to follow:

1. Analyze your inventory data.

Analyzing your data will help you determine how much inventory you need to keep on hand and when to order more. To effectively analyze inventory data, deciding on the key metrics that require tracking and monitoring, such as sales, costs, inventory levels, and customer demand is essential. Once these metrics have been identified, the data should be organized into categories that can be easily compared, such as product type, region, period, and customer. With this data, trends, and correlations can be identified and further analyzed. Additionally, it is important to keep track of any changes to inventory or sales over time, as well as any changes in customer demand or pricing. By tracking and analyzing these data points, organizations can gain valuable insights into their inventory performance and make more informed decisions.

2. Monitor customer trends.

One of the best practices to avoid overstocking is knowing what products are trending can help you identify which items to stock and which to avoid. To do this effectively, businesses should look at customer data and feedback gathered through customer surveys, website analytics, and social media analytics. This data can be used to identify which products are popular and in demand and what kind of customer service they need. Additionally, businesses should explore emerging trends in customer buying behavior to keep up with changing customer needs and preferences. Tracking these behaviors over time and each season is crucial to avoid overstocking. Finally, businesses should use this data to create marketing campaigns and offers that target customer trends and ensure customer satisfaction.

3. Track inventory levels.

Monitor your inventory levels to ensure you always have the items your customers need. To track inventory levels effectively, companies should use a comprehensive inventory management system that tracks each item from when it is purchased to when it is sold. This should include a detailed record of all purchases, sales, and shipments. Companies should also use barcode scanners to scan and record all items entering and leaving their warehouse. Companies should also set up a system to regularly audit their inventory to ensure accuracy and identify potential issues. Finally, companies should use a reliable forecasting system to anticipate future demand and accurately plan their inventory levels. You can restock quickly and avoid overstocking if something is about to run out.

4. Utilize inventory management software.

The arduous task of inventory management can be streamlined by using technology. This best practice to avoid overstocking begins with implementing inventory management software can help you track and manage your inventory levels, eliminating a great deal of manual work. This can help you determine the right amount of stock to keep on hand and when to order more. When choosing an inventory management system, ensure they offer barcoding, inventory control, inventory tracking and reporting, alerts, and the ability to forecast. Here are a few of the industries leading inventory management programs. Each offers unique capabilities that cater to individual business needs.

• Netsuite
• Zoho Inventory
• Cin7
• Fishbowl
• Shipstation

5. Outsource inventory management.

If you don’t have the time or resources to manage your inventory, consider outsourcing it to a third-party supplier. Most 3PL companies can include this aspect as part of their service offering, and they have extensive experience. Partnering with a solid 3PL can allow you to focus on other aspects of your business while ensuring you always have the right amount of stock.