Kickstarting your inventory turnover journey
Inventory turnover ratio is a key metric for any business dealing with physical products. It measures how often inventory is sold and replaced over a period. A high ratio indicates efficient inventory management, while a low ratio suggests overstocking or weak sales. Here at iWeb, we understand the importance of optimising this ratio to boost profitability and streamline operations.
To kickstart your journey, it’s essential to understand your current inventory turnover ratio. Calculate it by dividing the cost of goods sold (COGS) by the average inventory during a specific period. This will give you a baseline to work from. For example, if your COGS is £500,000 and your average inventory is £100,000, your turnover ratio is 5. This means you sell and replace your inventory five times a year.
Once you have your baseline, set realistic goals. Aim to improve your ratio incrementally. If your current ratio is 5, aim for 6 or 7 in the next quarter. This gradual approach allows for sustainable growth without overwhelming your operations.
Streamlining your supply chain
A streamlined supply chain is crucial for optimising your inventory turnover ratio. Efficient supply chain management ensures that products move smoothly from suppliers to your warehouse and then to customers. The team at iWeb, with our 29 years of e-commerce experience, can help you achieve this.
Start by evaluating your suppliers. Are they reliable? Do they deliver on time? If not, it might be time to look for new partners. Consider using an ERP integration to automate and manage your supply chain processes. iWeb are expert Akeneo PIM Integrators, and our end-to-end ERP integration services can help you streamline your operations.
Next, focus on your warehouse management. Implementing a robust warehouse management system (WMS) can significantly improve efficiency. A WMS can help you track inventory levels in real-time, reduce errors, and speed up order fulfilment. This, in turn, can lead to a higher inventory turnover ratio.
Leveraging technology for better inventory management
Technology plays a vital role in optimising inventory turnover. With the right tools, you can gain better visibility into your inventory levels, forecast demand more accurately, and automate routine tasks. Our expert developers at iWeb can help you leverage technology to improve your inventory management.
One of the most effective tools is a Product Information Management (PIM) system. A PIM system centralises all your product data, making it easier to manage and update. iWeb’s e-commerce expertise includes integration with Akeneo PIM, a leading PIM solution. With Akeneo PIM, you can ensure that your product information is accurate and up-to-date, which can help you avoid overstocking or understocking.
Another valuable tool is an inventory management software. This software can help you track inventory levels, set reorder points, and generate reports. By using inventory management software, you can make data-driven decisions that improve your inventory turnover ratio.
Implementing demand forecasting
Accurate demand forecasting is essential for optimising your inventory turnover ratio. By predicting future demand, you can ensure that you have the right amount of inventory on hand. This helps you avoid overstocking, which ties up capital, and understocking, which can lead to lost sales.
Start by analysing historical sales data. Look for patterns and trends that can help you predict future demand. For example, if you notice that sales of a particular product spike during the holiday season, you can plan to stock up on that product in advance. Adobe Analytics can be a powerful tool for analysing sales data and forecasting demand.
In addition to historical data, consider external factors that can impact demand. These might include economic conditions, market trends, and competitor activities. By taking these factors into account, you can make more accurate demand forecasts.
Optimising product assortment
Your product assortment plays a significant role in your inventory turnover ratio. By offering the right mix of products, you can meet customer demand more effectively and improve your turnover ratio. iWeb’s talented team can help you optimise your product assortment to boost sales and profitability.
Start by analysing your current product assortment. Identify which products are top sellers and which ones are slow movers. Consider discontinuing slow-moving products and focusing on high-demand items. This can help you free up capital and improve your inventory turnover ratio.
Next, consider adding new products that complement your existing assortment. For example, if you sell electronics, you might add accessories like cases and chargers. By offering a wider range of products, you can attract more customers and increase sales.
Enhancing customer experience
A positive customer experience can lead to higher sales and a better inventory turnover ratio. By providing excellent service and a seamless shopping experience, you can encourage repeat purchases and attract new customers. iWeb – an enterprise e-commerce agency, can help you enhance your customer experience.
Start by optimising your website. Ensure that it is user-friendly, mobile-responsive, and fast-loading. A well-designed website can make it easier for customers to find and purchase products, leading to higher sales. Our talented in-house team specialises in Adobe Commerce Web Design and can help you create a top-notch e-commerce site.
In addition to your website, focus on customer service. Provide multiple channels for customers to reach you, such as phone, email, and live chat. Respond promptly to inquiries and resolve issues quickly. By providing excellent customer service, you can build trust and loyalty, which can lead to higher sales and a better inventory turnover ratio.
Utilising marketing strategies
Effective marketing strategies can drive sales and improve your inventory turnover ratio. By promoting your products and reaching a wider audience, you can increase demand and sell more inventory. iWeb’s e-commerce expertise includes a range of marketing services to help you achieve this.
Start by leveraging digital marketing channels. Use social media, email marketing, and search engine optimisation (SEO) to promote your products and attract customers. For example, you can run targeted ads on social media platforms to reach potential customers who are interested in your products. Our team at iWeb can help you develop and implement a comprehensive digital marketing strategy.
In addition to digital marketing, consider using promotions and discounts to boost sales. Offer limited-time discounts, bundle deals, and loyalty programmes to encourage customers to make a purchase. By creating a sense of urgency and providing incentives, you can increase sales and improve your inventory turnover ratio.
Monitoring and adjusting your strategy
Optimising your inventory turnover ratio is an ongoing process. It’s important to continuously monitor your performance and make adjustments as needed. By staying proactive and responsive, you can ensure that your inventory management remains efficient and effective.
Start by regularly reviewing your inventory turnover ratio. Track your progress and compare it to your goals. If you notice any discrepancies, investigate the underlying causes and take corrective action. For example, if your turnover ratio is lower than expected, you might need to adjust your demand forecasting or streamline your supply chain.
In addition to monitoring your ratio, stay informed about industry trends and best practices. Attend industry events, read relevant publications, and network with other professionals. By staying up-to-date with the latest developments, you can continuously improve your inventory management strategy.
Get in touch
We know commerce, let us help you improve customer experience, increase conversion rates, and make that digital change.
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