Avoiding a bloated inventory is one of the best ways to remain nimble (and in the black) in today’s commerce climate. But what are some of the risks of high inventory, and what can you do about it?
What is Inventory Risk?
The term inventory risk describes any material or financial liability caused by an overstuffed inventory. Some of the most common risks include:
Shrinkage and Theft – When you’ve got tons of inventory lying around, it can be costly to store it safely. Without secure storage, you risk shrinkage, loss/damage, or theft of unsold product, which is brutal for your margins.
Frozen Assets – When your company’s cash and resources are tied up in inventory, you’ve got less to spread around for payroll, overhead, or the myriad other costs associated with running an apparel business. In accounting terms, assets that are frozen in inventory might as well be dead weight.
Markdowns – Excessive inventory – or overstock – can force companies to mark down unsold product to get it off racks and shelves. It goes without saying that you’ll lose profits this way.
Brand Dilution – The law of supply and demand frowns upon markets saturated with one brand’s product. To keep demand high, you need to keep supply in check with a leaner inventory.
So what are some steps your company can take to reduce inventory risk? Scroll down to find out.
Trade Choice for Quality and Precision
Quality does not equal quantity: reduced demand variability is your friend. Consumers no longer want a little bit of everything – they want highly particular brands to sell them a lifestyle, experience, or ideal they identify with. Sure, Amazon’s doing fine as a one-stop-shop, but smaller brands will do better to specialize.
With highly customizable products like the socks, hats, pins, and other apparel from The/Studio, companies can use that customizability to go deep rather than wide in terms of the brand they’re carving out. Products that can fill a unique, niche demand will create smaller inventories that sell better.
Once you’ve honed your brand, curate a lean, precise product line that reflects it.
Reduce Order Quantities
One of the easiest ways to create an overstocking problem is ordering too much product. Shocking, we know.
Luckily, with agile manufacturing services like The/Studio, you can order only what you need, exactly when you need it.
At The/Studio, you don’t have to worry about prohibitive MOQ’s. Our on-demand manufacturing platform lets you produce quality products in small batches, so you can not only test markets, but keep inventories low throughout the product lifecycle.
Reduce Supplier and Manufacturing Lead Times
When it takes six months to a year for a new product to hit your shelves, you’re forced to over-project order sizes to avoid stock-outs. Unfortunately, you then risk the abovementioned problems of overstocking and mark-downs.
On-demand manufacturing significantly reduces lead times with smaller order sizes and faster, more efficient production. At The/Studio, our average production cycle is just four weeks.
Simplify Your Supply Chain
Tightening up your supply chain is about more than just reducing order size, lead times, and costs. To stay nimble, you’ll want to make the design, sourcing, production, and delivery processes all more efficient.
The/Studio’s expert design team will work with you to create the perfect design and prototype at no extra cost. Then, we pair you with carefully vetted factories you can trust. Deliveries are fast and free, and you’ll be in contact with your team throughout design and production through our cloud-based platform.
With that kind of efficiency and transparency, inventory control becomes that much easier.
Cut the Fat with Custom Manufacturing
Traditional manufacturing models can lead to bloated inventories and higher inventory risk. On-demand manufacturing helps you cut the fat with an overall more agile system. Visit The/Studio today to learn more about how our end-to-end software is making manufacturing more accessible.