The definitive guide to wholesale inventory management

By: Jul Domingo

As a wholesaler, you connect manufacturers and retailers on a financial and geographical level. Being in the go-between means buying in bulk and pricing your products just so, putting you at significant economic risk.

Marking your products a little higher could cause your retail partners to turn to your competitors.

Pricing your goods at pennies on the dollar means you won’t turn a profit.

While finding a middle ground on pricing can keep your business afloat, taking your business to the next level requires greater efforts—especially in the area of wholesale inventory management.

As a supply chain mediator, you don’t have the same safety net as retailers. You need to predict demand in large quantities, negotiate with manufacturers, build retail partnerships, and assume risks from price fluctuations.

Add to that, you must consider the needs of your customers (retailers or industry) and their customers.

Drop this weight off your shoulder with effective wholesale inventory management. Reexamine your procurement strategies and implement these best practices today to streamline your distribution process.

What are the common inventory challenges for wholesalers?

Holding excess inventory can take up valuable warehouse space, while not stocking enough can result in lost sales and poor customer experience. These situations however are outcomes of the following wholesale inventory challenges you constantly face:

• Poor purchasing decisions. The lack of real-time data can lead to rushed, panicked bulk orders. Without anything concrete, it’s easy to fall for discounts from suppliers. But unlike your customers, your bulk orders refer to tens to hundreds of boxes rather than dozens of units. Over time, this inept practice can result in overstocking, budget overspending, and compromised quality.
• Supply-demand mismatch. The imbalance of supply quantity to fulfill market needs (i.e., less or slow production; higher demand) results in disrupted order fulfillment. To keep retailers from waiting or moving to competitors, wholesale traders must learn the exact supplier lead times and consumer demand.
• A high volume of obsolete inventory. In the wholesale sector, obsolete inventory is often a result of surplus inventory, unreliable manufacturers, shifting economic trends, and most of all, returns by retailers. Unfortunately, wholesale returns are part of the business because without having a policy in place, your customers won’t be as inclined to partner with you.
• Excessive storage costs. During the periods when excess inventory boxes (not just inventory units) sit idle in the warehouse waiting to be sold, wholesalers incur unnecessary storage expenses. Several factors can contribute to this, including the use of floor space, manpower, and maintenance tools. This inventory problem yields no return, while also upsurging your expenditures.
• Relentless fuel price changes. Fuel price fluctuations have a direct negative impact on a wholesaler’s profitability. So even if it’s the government’s job to stabilize the price of petroleum products, you must still learn how to maximize your purchasing and delivery efforts to reduce fuel consumption and expenses. For instance, due to the recent price spike, some wholesale firms in the food industry get their diesel delivered in bulk, while others consider adding a surcharge on every delivery.
• Direct and indirect competition. Aside from fellow wholesalers, the trend of manufacturers and retailers selling directly to consumers undermines your customer base. With fewer suppliers and weaker market attraction, it gets harder for wholesale traders, particularly small scale ones, to keep up with the competition.

By keeping these challenges in mind, you can develop processes and practices to reduce costs, keep stocks at reasonable levels, and increase sales.

Here are five tips for better wholesale inventory management

Stock management across multiple SKUs can help wholesalers save money and boost productivity. However, with the challenges mentioned above–not to mention, the customer demands and supplier issues in the mix–it becomes more difficult to achieve.

1. Streamline inventory management

With advanced inventory management software, wholesalers can view balances in real-time to avoid shortages and overages. The tool can also handle labor-intensive and repetitive tasks, such as manually updating the inventory levels of thousands of SKUs.

Nevertheless, not all software tools are designed to produce the same results. Decide on a budget and find a service provider capable of doing the key features mentioned above and can also provide the following:

• Product line distribution: Helps you focus on more profitable items and reduce least-selling items
• Reorder point notifications: Alerts you with customizable purchase orders
• Pre-scheduled replenishment: Automates daily order lists recommendations
• Automated and customizable reports: Saves your time in generating accurate, real-time inventory reports
• Third-party software integration: Expedites data transfer of past sales and updated inventory balances across all selling, accounting, and marketing platforms

Take advantage of these features and more.

2. Optimize warehouse space

The global cost of warehousing is approximately 300 billion euros per year. The figure does not even factor in the expenses associated with a disorganized warehouse, which inevitably result in errors, inefficiencies, work-related accidents, and returns.

The goal of warehouse optimization isn’t just to create more room by narrowing your inventory, but also to maintain control and safety for your workers and your stocks. Identify which steps need to be followed in the warehouse. It’s also helpful to break down the aspect of logistic operations for multiple warehouse locations, such as:

• quality assurance upon receipt
• distribution of goods
• storage and inventory control
• documentation flow
• detecting damage and losses
• safety disposal of obsolete items (especially in the medical and industrial sector)

When you plan how each stock enters and exits the warehouse, you can save time and resources from inadequacies and wastage in the long run.

3. Track and improve the flow of goods

Distribution logistics oversees inventory movements from inbound to outbound deliveries. Receiving deliveries, storing stocks, packaging orders, and shipping sold items to customers are all part of the process. And it’s your job to remove bottlenecks in these areas to increase overall productivity.

If you can’t fulfill your orders because of long supply chain lead times, your efforts will be for naught. To ensure on-time deliveries and maintain customer satisfaction, your suppliers must sign a lead time contract. Penalties for late or delayed shipments will likely encourage them to ship your wholesale inventory based on your time demand. You can use a tool like Inventoro for tracking lead times for your suppliers. Staying on top of this information can help you find a workaround, such as expanding your network and partnering with different suppliers.

Another best practice is to list and track your in-transit orders using your inventory software. These are products arriving at the warehouse from suppliers or shipments moving from a warehouse to retailers or distribution centers. Your tracking information would make it easier to hold the logistics team accountable. With Inventoro, you can automatically create purchase orders, send them to your suppliers, mark them as in-transit, and set the delivery date following the lead time you’ve agreed upon.

If you have the resources, you can also acquire in-transit inventory insurance or third-party logistic servers to increase confidence in your logistic operations.

4. Train and equip warehouse workers

Training your warehouse staff strengthens your wholesale inventory management. You can only hold your employees accountable if they’re properly trained and equipped to fulfill their responsibilities. Try to observe how they perform in person. How can you minimize product damage by training your team? Is there a team of highly experienced individuals who can facilitate inventory training for their colleagues?

Even if your employees perform well, they can still benefit from additional knowledge and skills. It’s entirely up to you to determine what relevant programs should be implemented and who should undergo such training.

5. Become better at forecasting inventory

Accurate inventory forecasting is the cornerstone of wholesale inventory management. As a wholesaler, you’re not only catering to end-consumers who can tolerate minor order delays for their personal orders. You’re selling to businesses that are in direct contact with customers. Thus, you are liable to satisfy their retail demand on time and avoid stocking out.

By using a tool focused on inventory forecasting, you can interpret historical sales data, current events, and a host of other variables to analyze future demand. It provides a reliable estimate, if not 100% accurate, of the optimal product range and safety stock levels in the foreseeable future. Inventoro, for one, forecasts your sales over a two-year period.

For better results, you can opt for a demand forecasting software tool like Inventoro that allows smart forecast adjustments. Not only does it consider historical demand, season averages, and external market factors. It also corrects forecast errors due to unanticipated supply chain changes, such as the current stagflation. To further understand its importance on wholesale inventory, let’s discuss how you can use it to maximize efficiency and profitability.

The benefits of forecasting for wholesalers

Almost every wholesale inventory issue stems from a single, underlying factor: inaccurate forecasts. Forecasting isn’t linear because of traditional forecasting errors and new demand trends you must consider in subsequent time periods. With inventory forecasting and xxx software, you can update these variables and maintain your safety stock—thereby, sparing you the odds of losses and sale trade-offs. Along with this main benefit, you also get the following:

• Increased order fulfillment. Forecasting allows you to maintain optimal inventory levels even during sudden demand fluctuations and fleeting seasonal trends. Thus, you can mitigate the consequences of unanticipated disruptions in advance (e.g., Covid-19, transport strike). With the proper tool, you can also reduce stock shortage and sustain that practice in the long run with automated replenishments.
• Better deals with suppliers. The more accurate your predictions are, the easier you can negotiate with suppliers. It makes it possible to communicate to your suppliers how much inventory you’ll need ahead of time. With the promise of a longer partnership, you’ll be better positioned to negotiate more favorable terms with your suppliers.
• Better warehouse planning. When you know the demand for each SKU and warehouse, you can purchase the right quantity without sacrificing your storage space. This well-optimized stock distribution across all channels improves warehouse organization, smoothing out the overall process flow. It can also help prepare your warehouse for big events, such as seasonal and holiday sales.
• More satisfied customers. A sophisticated demand forecasting can help you navigate around short shipments, back orders, and delayed order fulfillment. By continuously addressing the needs of your retail partners, you’re more likely to retain them.
• Increased revenue and sales. Fewer stockout situations, 100% fulfilled sales, reduced inventory costs, and more purchases from happy customers—all these add up to a higher net profit. It doesn’t happen overnight, but the right tools and consistent team discipline can help you achieve it in no time.

Improve your wholesale inventory strategies by using proper forecasting tools and strategies. You can fulfill customer demands without putting your resources at risk, including your cash flow.

An easy way to optimize your wholesale inventory

As you strive to improve your inventory management practices, using an advanced inventory tool is a smart move. Inventoro can give you the forecasting prowess, automation, and insights needed to take your wholesaling business to the next level. If you’re ready, you can request a demo today.