Can You Run a Business without Inventory Management?

Inventory management is an essential component in orchestrating the balance between supply and demand. It is a systematic process of procurement, storing and distribution a company’s goods. It directly impacts a company’s bottom line, customer satisfaction, and competitiveness. As the backbone of supply chain, it helps businesses forecast and fulfill customer demand in a timely manner while maintaining optimal stocks at lowest possible cost.

In this article, we will explore the question of: Can You Run A Business Without Inventory Management?

Can a business operate profitably without inventory management? This depends on a number of factors. If the business has few competitors, it can run in a less than optimal fashion with too little or too much inventory, as long as it makes a profit. Some small start-ups with few customers can also do without formal inventory oversight for a while at least.

Obviously, businesses that don’t require inventory don’t require any form of inventory management. These include businesses that place orders with their suppliers only after their customers make a purchase order. One example of this is e-commerce stores that place orders with drop-shippers only after an online purchase is made.

For businesses that relies on an inventory to operate, and losing customers to competitors is a real possibility, then your inventory requires management. Customers will get unhappy when you can’t deliver within your promised time frame because of a stock out. Exorbitant pricing that pass the costs of maintaining an exorbitant inventory on to your customers will also cause dissatisfaction.

Service companies that require extensive equipment inventories to provide their services, must manage them. If equipment is lost, damaged, or stolen, the company can’t provide their service in a timely fashion. Businesses that manufacture products to their customer’s specifications, must keep inventories of raw materials and sub components on hand to respond quickly to customer orders. They also require inventories of spare parts for maintaining their manufacturing facilities.

For many businesses, an inventory provides a safety buffer against uncertainty. Perhaps demand for your products is highly unpredictable, or your suppliers can’t reliably deliver your orders on time. This can be the case for suppliers located on the other side of the globe, or when seasonal weather causes significant shipment delays. Perhaps an important supplier expects a worker’s strike. In any case, when you face ongoing uncertainties, keeping an inventory of safety stock is vital for your business survival. Keeping it at the right level requires ongoing management.

For many competitive businesses, profitability isn’t possible without some form of inventory management. In fact, the most successful businesses take their inventory management to the next level by using specialised software that automates many important aspects of it. For more information and how it can help your business, please contact us.