Many businesses struggle with understanding the most efficient inventory levels. Several factors determine how much inventory to carry of a product and the required levels may change dramatically throughout the fiscal year. The advantages and disadvantages of maintaining low inventory levels as opposed to high levels can be influenced by internal and external factors. These factors include everything from carrying costs to the locale and reliability of the supplier.
Lower Inventory Levels Advantages of maintaining low inventory levels are: manageability, low carrying costs, and minimal space constraints. Fewer quantities of inventory are easier to count and ensure no product is missing. Lower quantities require less of a carrying cost, which can save money for your organization. With fewer products, there’s also less need for space in which to display or store the quantities. This means your business can have a smaller retail space, which can save money on your mortgage or lease. Disadvantages of maintaining lower inventory levels are: potential customer service concerns, increased re-order costs, and more time spent managing the product levels. If your business runs out of the product because there was not enough on hand, you run the risk of losing customers, who may become frustrated with having to wait. Ordering in fewer quantities may also lead to increased fees because distributors may charge more for making smaller batches. You will also run the risk of spending more time trying to manage the fewer quantities, constantly counting and watching to determine if a re-order is needed, which takes time away from customer interactions. Higher Inventory Levels Advantages of maintaining high inventory levels are: customer satisfaction, less time worrying about ordering, and potential bulk order cost savings. Having larger quantities of inventory on hand means that customers will never feel the frustration of having to wait for the next shipment to arrive. Increased inventory also frees up time that would otherwise be spent constantly monitoring the stock levels to determine when to re-order. Most significantly, increased savings are realized when ordering large quantities, or ordering in bulk. Disadvantages of maintaining high inventory levels are: increased carrying costs, possible space constraints, and the risk of the product becoming obsolete before your business can sell through the units. Maintaining high inventory levels means increased carrying cost and the need for a larger storefront and/or storage space. Your business may have to pay high rental fees or pay a larger mortgage to maintain the space required to house the entire inventory. There is also the risk of the product becoming obsolete or having no further customer value. If a clothing store orders a large volume of the latest fashion trend, there’s a great risk that the clothing will become unfashionable before the store can sell through their inventory. This will leave the clothing store with obsolete product. The Big Picture There are several ways to determine the most efficient inventory levels for your business. Your responsibility as a business owner is to choose the best inventory management model based on researching the cost savings and liabilities associated with each model. The goal is to know how much inventory is required for optimal customer service, the right times to re-order, the right quantities to reorder, and how much savings can be gained within the ordering process. Get help for your business today! Visit DEWBusinessSolutions.com to learn more.
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The delicate balancing act of managing employee development and sustaining morale can be challenging to managers and entrepreneurs. Whether you’re just beginning your business and have less than ten employees, or you have over one hundred workers, understanding that immediately correcting undesired performance, while reinforcing positive actions with reward and recognition are important components to healthy company growth. Here are some key points to consider when recognizing good performance and addressing performance concerns:
Recognize good performance early and often. It is true that employees will remember criticism more often than numerous accolades. This is why it is important to give recognition for good performance as soon as it occurs and as often as it takes place. Immediate acknowledgement of a job well done adds value to the employee’s morale and motivates them to continue exemplary performance. Reward in public, but reprimand in private. Rewarding an employee for great performance in the midst of their peers reinforces positive behavior and boosts morale. It’s also an incentive for the other employees to improve their own levels of performance. While it’s beneficial to recognize exemplary performance publicly, the opposite is true for corrective action conversations. Managers should have private conversations with employees who are under performing; reprimanding a worker in front of other employees leads to low self-esteem, decreases overall morale, and serves to demotivate other workers. Rewards don’t always have to be monetary. Employee recognition can take many forms, often having very little to do with money. There’s no argument that monetary compensation for outstanding performance is appreciated, but many leaders would be surprised to know that employees can derive just as much satisfaction from public recognition, sincere thank you emails and cards, and other non-monetary rewards. A coupon for a free lunch, employee of the month parking, a wall of fame, and certificate awards are also ways that leaders can recognize a job well done. Have a uniform expectation of performance and reward accordingly. Reward and recognition should always be based on qualitative performance, never on personality. This can be a difficult task for leaders, as it is human nature to perceive that an employee is performing better than others because of their amiable personality. The truth is simple, if two employees are providing exemplary performance equally; both should be recognized, regardless of the manager’s personal preferences. The same concept applies to under performers; any unacceptable practice should be addressed and corrected equally and fairly, even if the manager “gets along” better with one employee vs. the other. Encourage peer to peer recognition. Great leaders know their employees are the backbone of the company’s success. However, recognition of great performance does not always have to come from the top. Allow employees to recognize each other’s good deeds and stellar performance. Maybe in your organization, the sales team would like to recognize the accounting team for their dedication and quick turnaround when deals are closed. Perhaps the entire workforce would like to recognize the maintenance team for keeping their offices and public spaces neat, clean, and organized. Encourage this behavior and reinforce peer to peer recognition when it is given. Enlisting these key practices will increase morale, empower employees, and make your company a great place to work! Get help for your business today! Visit DEWBusinessSolutions.com to learn more. |
AuthorDiana White has over 30 years in sales, retail, consumer psychology, and marketing experience as just a few of her skillsets. She established D.E.W. Business Solutions, LLC in 2014 to provide business consulting for small businesses. Archives
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