If you own a services that sells any type of product and have ever run into this predicament, you know how frustrating it can be. Every month you have to come up with the money and then go purchase inventory. The problem is that most businesses don’t put any stock on hand at all because they think they’ll have plenty of time to get it. This is definitely not the case.
The obvious answer for most new businesses who don’t know where to start their inventory storage needs was to simply use supply chain as an inventory storage warehouse system. Traditionally in manufacturing, most manufactured goods requires some type of down payment and once the entire balance has to be paid off and the product is no longer available, the inventory is sold. For foreign goods, often the terms on the inventory storage are 30% down and 80% upon delivery and completion. In addition to shipping, there is also a fee for every item the company sells.
This method has been the industry standard for years but it has a number of flaws. Most importantly, there is no flexibility built in to allow for re-supply to be as timely as needed. Inventory turns over daily and if your warehouse does not have enough inventory at the end of each day you run the risk of being sold the same items that you purchased the day before. It is much better to find out what your current inventory is and use that as a guide for future purchases.
There are other warehouse methods that are more versatile and can be used with any inventory management needs you may have. The biggest problem with this method is the upfront cost. The warehouse usually needs to be built and there is a fair amount of money invested to rent a large warehouse with multiple uses. This may not be feasible for smaller businesses. If it is a possibility for you then you should be aware that there is an additional monthly fee that is associated with utilizing the warehouse. This will make it far more cost effective for you to simply order supplies when they are needed.