Being an owner of small business, it requires a lot of management skill. You need to manage finance, secure the manufactured products and raw materials, look after the inventories, evaluate the profit margin etc. Indeed, the list would run long as all of the factors are important.
When it comes to the matter of inventories, there require strong management skills. Besides, the number of inventories must be adequate enough so that a company may fulfil its customer’s needs. This is also true that holding a large number of inventories may put you into financial crisis because there is a good amount of fund to maintain them.
Therefore, you need to stick to a particular number of inventories that will perfectly suit the company. To know the perfect number, the supply chain may help you. This is because your supply chain is the only one equipment that can provide you with a fair idea about the demand for the product within the market.
Therefore, on the basis of demand, the number of inventories can be determined. Apart from that, several other factors can also influence the desirable number of inventory for maintaining the business.
Factors that determine the ideal number of inventories
- Think about the demand of buyers
A company is all about demand and supply. When the demand is at the peak, gradually, the supply should also reach its apex point. But to understand the behaviour of demand, a businessman must crack two important hints of consumers, i.e. nature of order and upcoming demand of the new product.
Now, this upcoming demand may give you either positive or negative vibes about buyers’ necessities. In spite of financial crisis buyer class still orders from your company then undoubtedly it is a piece of very good news. At the same time, cancelling orders certainly will not sound good. Cancelling orders multiple times point out to another supplier like you who is also trying to boost his inventories.
On the other hand, the forecast of future demand can cause the more confusing and uncertain situation. Even after forecasting to purchase more than 10000 units, it may happen that a buyer does not even order a single unit at the time of order. Therefore, you must remember that on the basis of forecast and order nature, you should not select the number of inventory.
- Assurance of purchase
Although there are whimsical buyers, it is not entirely true that every consumer is just like them. However, when consumers assure that they will continue a long-term relationship with your company and will be buying units, it is known as blanker orders. If you think about what is blanket order, then a simple example may clarify the concept.
Perhaps your consumer may order 100000 units that need to be delivered within frequent intervals. It means your company needs to provide 10000 units each month. Therefore, you need to increase the production and on this note, if you are worried about funds, then apply for guaranteed loans for bad credit.
It will mitigate your financial need and help you to optimise the number of inventories as well. Every month when your company needs to produce 10000 units then certainly it requires increasing production. There is no doubt. It will not only increase the production. Moreover, it will also scale up the business.
- Information collected from buyers and market
Only after the brief analysis of data, you will become able to make out the demand of consumers. Being a businessman, when you understand the demand of buyers, then it is your strength. On the basis of that, you need to plan how to increase the demand for products within the market.
In order to plan the demand you need to analyse these factors,
- What is the order history of your consumers in the past few years?
- What are your consumers doing during the holiday? Is the shop during seasonal holidays?
- Companies who produce supplementary products, the level of quality they maintain with production.
- Are those competing entities providing any sales? Sometimes, to bring huge competition generally, these supplementary product manufacturing companies used to offer unthinkable offers. So, you need to understand their sales strategy.
All these factors can help you analyse the demand of consumers, and as per the analysis of collected data, you may plan how to increase the demand. Generally, to create demand within the market, you need to hold some inventories. Therefore, it is necessary to analyse data and improve the number of inventories as much as required.
- On the basis of delivery time
Business does not end at selling the goods. Instead, the process remains to continue until the package reaches the consumer. Therefore, you need to make sure how much time it takes to reach a package to the consumer.
For instance, if a consumer has ordered 100 pieces of units and at the same time another one orders for another 100 pieces, then you need to produce more inventories.
This is because you need to keep it back up so that when other consumers will order, you should provide him service. However, how much inventory you need to stock from previous depends on the time of delivery.
- A suitable number of inventory
There is no doubt that when there are a suitable number of inventories, a businessman will face fewer problems to deliver products to its consumers. In order to keep an adequate number of inventories, all you need is to maintain a proper quantity of inventory. However, no doubt, keeping inventories will require a good amount of money. Therefore, by borrowing bad credit loans with no guarantor facility, one can quickly drive out the fund problem.
Holding more than 1000 inventories will definitely be adequate for a small business. However, there is no doubt that the number also varies on several factors. Therefore, a businessman should always analyse those external factors to determine the adequate number of inventory.