If your business involves selling a product instead if providing a service your ability to make a profit depends on three factors:
- Your cost.
- The selling price
- How long the inventory stays in your possession.
    Let’s take a look at item (3). Your primary objective is to minimize the amount of time the inventory is in your possession; the longer you hold it, the more it costs you. So what can you do to reduce your inventory holding period?
    It is common to first consider using pricing or credit terms to move the inventory. While these certainly are effective methods, they do have their drawbacks. If you try to move inventory by reducing your sales price, you sacrifice some of your profit margin; you are effectively paying your customer to buy from you.
    If, on the other hand, you try to encourage your customer to buy by offering credit terms you will also sacrifice your profit margin unless you pass the additional cost of financing along to your customer.
    Instead of a financial solution, why not a process solution? Take a look at your warehouse and see how you have your inventory organized. Is it set up for the most efficient inflow and outflow of goods? For example, are the items that you sell the most located in an easy to reach place or do you just put things wherever there is a space for them?
    I don’t know about you, but I hate wasting time looking for something I’ve misplaced. In my personal life, the worse that can happen is I’m late. But in your business, time is money and the longer it takes for you to locate something the greater the cost to you; it’s time you could be spending in more productive, income-earning activities.
    When you receive goods, do you check the packing list against the purchase order right away or do you leave it for another time? Remember the old adage: “If you don’t have time to do it now, how will you have time to do it later?” Check the order immediately upon receipt so you can catch errors and defects. Again, the longer you leave these unresolved, the greater the expense.
    When you have a planned shipment do you lay out the items ahead of time so everything is ready to go when the truck comes or do you wait until the truck comes to get everything off the shelf?
    If you have only one loading dock door do you receive and ship at the same time? Having all the items on the floor at one time will only slow down order processing and cause delays and errors. If you can’t afford more than one shift, then consider limiting receiving and shipping to specific times and dates.
    Have you taken time to talk with your employees to see what they think you might do to improve the current operating process? The reality is that the person doing the job on a daily basis is in the best position to know what works best. Consider offering performance-based bonuses to the shipping/receiving department employees if they meet or exceed certain metrics: time to receive, time to ship, time to stock, inventory errors, etc.
    Improving the efficiency of your operating processes can have a dramatic impact on your bottom line. What can you do today to make that change happen for you?