As we enter the fourth quarter (and with it, the anticipated/dreaded holiday shopping season), a lot of warehouse managers like to take this time to review their current expenses and costs to see where they are.

It’s a good time to do it, for a number of reasons – year-end performance reviews aren’t far out, and getting on top of your inventory spending now can prevent further problems with inventory expenses and shortages as the holiday season rolls on. If you’re finding that your inventory costs could get normalized a little better than they are, or if you just want to get some ideas on how to reduce costs overall, here’s a few things to try to watch your inventory overhead shrink:

Eliminate obsolete inventory

One of the best places to start (and the best way to keep an eye on it going forward) is to identify and reduce obsolete inventory. Many inventory management specialists define obsolete inventory as items that have not been sold in at least 12 consecutive months, whether it’s due to seasonality, lack of customer demand, or obsolescence of the product (in the case of things like outdated electronics). Starting with your oldest in-stock items (usually identifiable by either SKU records or sales records to show when your last one was sold) check to see what hasn’t been sold within the last 12 months and start figuring out how to purge them, either via selling them to a wholesaler or selling it yourself at a reduced cost. This will help free up space on your warehouse storage and wire shelving and will get you some short-term financial gains while you wait for new product to roll in.

Reduce Supplier Lead-Time

Another big contributor to overall inventory cost & overhead is the lead-time generated by suppliers that replenish your current stock. Work with your suppliers to negotiate faster lead-times and shorter replenishment times, or identify additional suppliers that can help with product replenishment for particularly fast-moving products. Try to stick with smaller, more frequent orders – these can give you a little more flexibility when planning for variations in demand.

Avoid being a hoarder

When it comes to identifying which products move and which products don’t, you might have a temptation to try and bring in additional storage or rent warehouse space somewhere else to stash inventory until you can sell it again. Don’t bother with this – if your products aren’t selling, dump them as fast as you can. Trying to keep them will only increase costs and headaches.

Consider “just in time” delivery for certain products

Finally, if you have products that are steady sellers but are never available in large quantities, consider trying to get a “just in time” delivery option from one of your suppliers. If your suppliers are reliable enough to get products direct to your customers as ordered, or can get them to you on a per-order basis, consider this system instead of sacrificing more time and space on long-term item storage.

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