Businesses must efficiently manage inventory turnover in order to optimize cash flow, meet customers’ needs, and maximize profits. Inventory turnover measures the number of times inventory is sold and replaced within a time period. Improving this measurement can lead to better sales strategies, which benefits every aspect of your business.
Why is it necessary to improve your inventory turnover ratio? Typically, the higher the ratios, the better. Companies can suffer when a stock turnover ratio is lower than industry standards. This indicates that the company requires more stocking or that they aren’t stocking products that sell. Furthermore, inventory operation will be more efficient if the product sale is faster. By lowering the blockage tied up in their stock, a company’s turnover ratio can improve.
This is a very important concept when it comes to your sales strategy. When the inventory turnover ratio is effectively managed, it means better cash flow because you’re meeting customers’ needs and easing the sales process. As profits are maximized in this way, you’ll have more resources and flexibility in your sales process. Here are some ways to alter your inventory turnover ratio for the betterment of your sales strategy:
1. Save Time
Time is incredibly important when it comes to sales strategies, and it’s even more important concerning your inventory turnover ratio. Reducing lead time from vendors and suppliers is a first step.
Working with CPQ software to create more accurate and real-time price quotes and projections is also very helpful. With CPQ software from iQuoteXpress, you can shave off as much as 50-75 percent of time spent on processes like writing proposals.
2. Turn to Automation
Through automated software like CPQ, it’s easy to keep track of things like your catalog inventory and client profiles. The information stored and analyzed in the software can be easily customized to fit your company’s needs. In today’s business environment, automation is the fastest and most efficient way to complete any process.
3. Reduce Costs
Most companies can find a purchasing avenue in which their goods and distribution services come cheaper while still offering quality. With a little searching and price comparison, a more affordable distributor will likely appear.
Additionally, businesses can reduce setup and changeover costs from manufacturers. Oftentimes, businesses that employ the services of manufacturers for long periods can negotiate for better pricing. Negotiations often come in handy when looking to switch manufacturers as well.
4. Increase Demand for Inventory
Marketing is very useful for increasing the demand for inventory, as long as it’s well-designed and cost-appropriate. When you spread the good word about your company and it’s products, you’ll be able to move more product while increasing sales. Your return on investment for such a well-organized marketing campaign will be revealed when compared with the higher inventory turnover ratio.
5. Review Business Pricing Strategy
Analyze the business’s strategy for pricing very closely. This can be a very complex process since there are many factors that go into it. Simply lowering the prices on items doesn’t always work for moving product. If customers see no value in a product, they won’t buy it, no matter how affordable it is.
There are a number of pricing strategies you could explore, including seasonal, rush delivery, bargain, and premium pricing for different customers. “I’ve seen the positive impact of this [pricing strategy] within the cycle industry, where shops have stocked an exclusive brand with a high price tag,” says Jonathan Gaunt, managing director of the financial company FD Works. “While the stock turnover was low, customers travelled distances to purchase … [and] once in the shop there was the ability to sell more.”
Another strategy that works effectively is using CPQ software to configure products and quote pricing. With things like discount allowance standards set inside the program, your company can develop more accurate pricing and work with customers to find a price that fits their budget without hurting the company’s bottom line.
6. Better Forecasting
Forecasting techniques are also very important for inventory turnover. With accurate predictive numbers, companies can better determine the kinds of products with which to stock their shelves. They’ll also have a better idea of how much to order and what’s more likely to sell.
Forecasting the demands of the customer isn’t easy, but it becomes a more attainable process when you use an organized system to monitor and track your inventory. The ability to view all of this information on a single dashboard, makes it easier for sales people to anticipate the wants of their clients.
7. Eliminate Stagnant Inventory
Ideally, you’ll sell all the product you purchase, even if it’s at a discounted rate. In reality, not everything will sell. Some items sit on the shelf of warehouses for months at a time. Allowing this to go on is a mistake. You can’t spare the valuable warehouse space. Instead, review the product that hasn’t moved and eliminate the items you don’t anticipate selling to free up space for inventory that will actually sell.
“At Mishy Moo Pets, I periodically review slow-selling inventory, and then do a number of things,” says Laurena Reisman, founder of the online pet retail company. “First, see why they aren't selling by referring to my small network of experts (that is, contacting previous customers of MMP to see if the products are items they would look at buying and, if not, why not). I also regularly review and compare my prices to other online and retail stores to ensure I remain competitive on those items. Most importantly, I would review my SEO on these products to see if it is still relevant and, if needed, adjust to keep it so.”
This strategy is employed by all successful businesses. Keeping product that doesn’t sell on the shelf is only a waste of space that could be costing you big.
8. Optimize Supply Chain
The logistics of your supply chain can also improve inventory turnover ratio, making it easier for your salespeople to develop an actionable strategy. When you expend a lot of resources on tracking, storing, and warehousing inventory, it greatly impacts your bottom line. It’s better to organize your processes so that they work more efficiently.
For example, when you employ CPQ software in your store, the pricing tool can not only be used to move more product, but also to keep a running tally of what’s been sold. That way, it’s easy to see what should be reordered on a regular basis and what should be eliminated from your warehouses. When you eliminate products that don’t sell, your supply chain team can focus more of its energy on effectively organizing its processes.
Try iQuoteXpress Today!
You’ll never fully understand the many ways that CPQ software can automate and improve your sales strategies until you try it. That’s why we’re offering a free, no-obligation online demo. For more information about what the iQuoteXpress product offers and how you can try it, contact us today!