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How Inventory Piling Can Improve Your Small Business’s Bottom Line

August 12, 2020 | MaxFilings

inventory piling

When you run a small business, your time is a precious commodity. Yet, a recent study showed that the average brick-and-mortar shop owner spends roughly 10 hours a week simply shopping for inventory. That’s time not spent finding new customers.

“Inventory piling” is the way to address this problem.

Inventory piling is exactly what it sounds like—stockpiling the supplies you need. Whether it’s the goods necessary to fulfill orders or simply what you need to make the business run day-to-day, having a lot on hand is a good idea.

Here are a couple of reasons why:

1. You won’t lose sales

You know more than anyone how much marketing investment it takes to bring a customer into your store and have them ready to hand over cash or their credit card. And you probably know how discouraging it is to have to turn them away…

The financial loss is more than the immediate transaction missed out on. Even if the potential customer is understanding and pleasant, there is a good chance that your inability to fulfill the order will rattle around their mind the next time they need to make a purchase. If you’re lucky, they’ll come back and give you another chance. If you’re unlucky, they won’t and they’ll tell a few friends that you didn’t have what they were looking for.

In short, the best outcome in this scenario is losing only the cost of a single sale. And even that’s too much.

2. Improve profitability

Setting up your production line increases costs. That’s true whether your production line is something as intensive as a print shop or as simple as making a phone call. If you’re a labor-intensive business, you’re well aware of the costs that come with making each unit of a product. If all you have to do is place an order you are—at a minimum—likely paying some type of transaction or administrative fee with each order, regardless of size.

So make the size of the order count.

Buying anything in bulk also makes you an attractive customer. Your suppliers may already have discount offers for larger orders in place. If they don’t, you may be able to negotiate one. You know how valuable a customer who buys a lot at one time is for your business, and your suppliers are no different.

Make yourself that valued customer and reap the benefits of reduced supply chain costs.

Is inventory piling right for you?

There are legitimate disadvantages to inventory piling, depending on your storage space situation and possibly higher insurance costs. But it’s likely that when you do serious data analysis, the gains will outweigh the costs.

Take steps now to facilitate inventory piling. If you can set up automated delivery of supplies, take advantage of it. If you get an app on your phone that lets you place orders while you’re standing in line at the grocery store, do it.

Every bit of time and money you save puts a few more dollars in your pocket. And that alone is worth it to a small business owner.

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