Maximize Cash Flow through Proper Inventory Control with Drop Shipping

April 4, 2011 Drop Ship Strategies

An online retailer’s main asset is its inventory. If the retailer does not have any inventory to sell then it is safe to assume that the retailers will not be able to generate any sustainable profits and will surely go out of business. Because inventory plays such a critical role in the profitability of a retail business, it is extremely important that businesses pay attention to the inner workings of inventory control.

More is Not Merrier
Every retailer must have access to inventory in order to conduct a profitable business. However, when companies acquire too much inventory it can put them in an uncomfortable cash position and drastically affect the financial fundamentals of the company. If inventory stays in storage for an extended period of time, it can lead to products reaching the end of their life cycle before ever being sold. This will enviably lead to huge sales featuring these products at clearance prices which will diminish the profit margins of the business.

Plan to Succeed
In order to balance inventory needs, retailers need to plan their product needs in advance. One way to do this is by implementing a cash flow plan. This plan will help the business in the management of its cash and identify times when it is beneficial to scale back inventory purchases. Retailers also need to implement an acquisition plan which will determine how much inventory to acquire in particular buying categories. This type of plan is also beneficial in planning your inventory needs around drop shipper lead times.

Lastly, retailers need to plan their inventory needs on a monthly basis. Every business needs to know at the end of each month as to which product category will need increased inventory levels for the upcoming months. If you make it a habit to replenish your inventory on a frequent basis, you will be less likely to have excessive inventory at the end of its life cycle.

There are numerous small online retailers that are under the impression that they don’t need to plan their inventory needs or budget because they are small companies and drop ship many of their orders. However, in order to be successful and maximize the sales of your company, you will need to know what products to market and how these orders will get fulfilled. Once way to accomplish this is by having a good inventory control plan.

Overall, proper inventory planning will give you an advantage in the marketplace as it allows you the flexibility to change your inventory needs as business conditions change. Any online retailer that takes the time to master this skill is sure to see their profits soar as a result of having a more efficient business.

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Maximize Cash Flow through Proper Inventory Control with Drop Shipping

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