subject: How Can You Reduce Inventory? [print this page] Inventory is not desirable for any company hence it is feasible to tame the beast as soon as possible. The inventory can be a big obstacle in the way of profit and cash flow of the company. This is because possessing huge amount of inventory is associated with huge amount of expenses.
Many companies fail to realize the significance of having inventory and sometimes it is because they fail to locate the inventory in the company itself. The inventories cannot be considered a non- issue for they can lead to many extra costs some of which are even hidden costs.
Once the company is under the burdens of these costs it will become less profitable and less competitive. So it is very essential to get rid of the inventory before it becomes a cause of great concern.
How to Get Rid of it?
Often it is seen that inventories are created due to excess production either in anticipation of price rise or for the fear of uncertainties. So be practical and dont order more that you need for it can lead to the growth of inventories in the future. If you have already placed the order, try to ship the excess products if possible in full price.
Try to make the inventory reusable as much as possible so that you can get rid of it. But even after much effort the inventory cannot be sold off just dump it. It is because the inventory holding cost can be too high and prove to be even more burdensome than dumping the inventory.
Get Rid of inventory
Getting rid of inventories can be a key to making profits so dont just think; try ways to dispose it off. Inventory management is a good way of reducing inventory; so make your employees both in the sales and production departments aware of necessities of inventory management.
If your company all ready has inventory assets try to cut on the new on the emergence of new inventories. Often it is said that short- term activities can reduce the chance of growth of inventories; so aim for short term profits and go for it.
The inventory if is there for a longer period of time it would be more difficult to get rid of it. This is because the inventory might become obsolete with the passage of time and it would be simply impossible to get rid of it. For example, in the clothing industry the inventories can depreciate as style keeps changing.
Similarly in the electronic industry the inventory can even become obsolete due to changing technologies. These were just a few examples of how inventories can affect ownership, so it is feasible to go for inventory management for inventory reduction.
