How Much Inventory Should You Carry: Products and Packaging Supplies
Posted on October 22 2021
All stable buildings begin with a strong foundation built on a good cornerstone. For e-commerce businesses in Singapore, that cornerstone is inventory management. In the process of organising and managing stock including packaging supplies across the whole supply chain, this facet of e-commerce – though not as glamorous – is core to the success of the organisation.
Common wisdom tells us more is better, and over-preparing is usually better than being caught off guard. This isn’t necessarily true in every instance. Some businesses may benefit more from carrying less inventory compared to others, which provides more liquidity and breathing room for needless expenses. The question is, how do you determine if you should carry more or less inventory? Let’s calculate that together.
How do I calculate how much inventory I need?
1. Type of product
The first step is to objectively categorise your inventory based on the type of business you have. An online wholesaler of fresh fruits and produce might want to restock their inventory frequently to ensure freshness. However, given the fragile and perishable nature of those goods, the runway for sale is extremely tight. Expired and unsold goods become a sunk cost and end up burning precious equity.
On the flip side of the coin, non-perishable and durable goods can naturally last a long time on the shelf. Missing windows of sale becomes less of a concern, and it stands to reason that online businesses can stock more of these goods.
Ultimately, the best way to find the midpoint of how much inventory you should stock based on the type of product is to account for your overall volume in sales. Quick turnarounds mean fewer worries for stocks that live on borrowed time. Consider using X by 1 or 2 as a rule of thumb, where X is the average sales of goods per cycle.
Aside from the type of product itself, e-commerce organisations must also account for the amount of space their inventory takes up. In most cases, items are packaged wholesale in cardboard packaging with the intention of conserving space.
However, if sales turnaround slows down and management fails to account for the influx of new stock, storage space will inevitably run out quickly. Depending on the scale of operations, this might be a non-factor for multinational corporations that have seemingly endless reserves of space in their warehouses. Small and medium enterprises (SMEs), however, don’t have that luxury of space - which makes the cost of space a premium.
For startups, homes may double up as a place to store inventory. Making do with whatever one might have at the moment, only consider renting a warehouse or employing a drop shipper once the business scales up exponentially to a certain degree. Remember that the goal of staying in the black is easily achieved by reducing frivolous expenses that don’t contribute to actual revenue.
Relative to the idea of keeping costs low, a tip for startups and SMEs alike would be to keep an eye out for deals on packaging supplies for cost-effective decision-making. Supplies such as adhesive tape and bubble wrap can come at a lower price when purchased wholesale with a reliable packaging material supplier in Singapore.
If anything, businesses might end up purchasing double the amount in bulk, surprised at how much money that actually saves them.
Optimise the Success of Your Online Business
Optimise for efficiency by taking note of key dates in the monthly and yearly calendar, and have sufficient inventory and packaging supplies prepared. In Singapore, annual events such as Christmas and monthly sales like the upcoming 11.11 deals are particularly popular occasions for a mass online shopping frenzy. Leverage those days to prep your logistics, expedite your turnover and enjoy the most value when you can.
If you’re looking for where to buy gift boxes and other packing supplies, head over to MillionParcel today and select from our wide variety of packaging materials. Don’t wait till it’s too late, get ahead of the curve and upgrade your customer fulfilment experience today.