4 Hidden Costs of Excess Inventory

Carrying too much inventory is a cost that most businesses don’t even think about. As long as there is inventory available to fill orders the actual cost of that inventory isn’t really considered. Manual inventory counts can lead to inaccuracies and write offs that lead to big costs that make a big dent in your profitability.

costs of excess inventory

Hidden Costs of Excess Inventory

When you are paying to keep a warehouse full of stock you are paying a lot more than just the cost of the actual items. You are also paying for things like:

Cost of Utilities

When there’s more product on the floor you are paying more for things like electricity and temperature control to keep those items in good shape. If the items are perishable you are going to be paying more to have more refrigerated or frozen space to store the items.

Cost of Labor

When all that inventory comes into the warehouse you have to pay your employees to unload it and put it all away. That means your employees are taking time away from other tasks to process items that you might not even need. This cost can be avoided by only carrying the inventory you need.

Cost of Discounts

If you have too much inventory sitting in the warehouse for a long time, you will have to discount it heavily to get it sold before it expires. When you have to sell stock at or below cost just to move it your inventory management processes are just not working. Switching to an automated warehouse management system will give you the data and metrics you need to make smarter decisions when it comes to deciding how much inventory to keep in the warehouse.

Cost of Shipping

The shipping costs for all that extra inventory can add up quickly. And if those items don’t sell and you end up shipping them back to the manufacturer or if you sell them at a steep discount and then have to ship them to customers you’re paying shipping on those items a second time. All of these extra costs can become a big burden on a business and significantly increase your operating costs. When you switch to an automated warehouse management system you can stop paying for all that extra inventory and keep just the right amount of inventory in stock.

How Automated Warehouse Management Eliminates Excess Inventory

Every business has to be able to find a good balance when it comes to inventory management. Manufacturers need to have enough inventory on hand to fill orders that come in, but they don’t want to have a warehouse filled with inventory that ends up being sold at a discounted price in order to move it out of storage. Finding that balance can be tricky if you’re still using manual inventory management and counts. An automated warehouse management system will streamline the inventory counting process and give you the kind of real time updates and accounting that will eliminate overstocking and the business costs associated with it.

Automated Warehouse Management System for SAP Business One and Macola Software

WiSys Agility solutions have been designed to achieve efficient warehouse management and automated inventory management. Are you trying to cut costs in your warehouse? Contact us to learn more about automated warehouse management.