How to Maximize Profits off Your Inventory

Linda Morrect

Updated on:

How to Maximize Profits off Your Inventory

How much capital is tied up in your inventory?

If you’re anything like the average business, the answer is either shocking or sobering. While it’s true that inventory drives your business, management inefficiencies can hurt your cash flow and ultimately, the bottom line.

As a savvy business owner, you need to be able to maximize profits from your inventory. But this isn’t going to happen if your business strategy focuses on procuring the goods and selling them as quickly as possible.

Read on for tips and strategies for inventory management practices that will drive profitability.

Prioritize Fast-Moving Goods

When you sell a range of products, having a well-stocked business is a good sign. Stockouts will not catch you unprepared and your customers will have greater confidence in your business.

However, products sell at different rates. Some fly off the shelves and others gather some dust before they’re sold.

As such, having similar stock quantities for every product at any given time is bad practice. Prioritizing fast-moving goods not only frees up space in your warehouses but also unlocks your cash flow.

Consider Handling Costs

One of the primary supply chain finance objectives is to minimize operating costs. The cost of production and transportation of your goods can put a big dent in your profits if you’re not keen on optimization.

Implement strategies to, for example, reduce the cost of transporting goods from the manufacturing floor to the warehouse. If you have a bulky product, explore the possibility of delivering it from the factory to the customer. Another strategy is to produce only on order.

This way, you will keep warehousing/storage costs at a minimum.

Strengthen Vendor Relationships

If you’re selling goods manufactured by other companies, you don’t have any control over production costs. However, this presents an opportunity for you to pursue other profit maximization strategies.

Are your suppliers giving you the best possible deal? Building strong working relationships with vendors can benefit your business goals in a couple of ways.

One, timely deliveries. If you’re getting fast-moving products on time, you’ll make more sales. Delivery delays when a product is out of stock hurt customer experience, and you could lose some of them to competitors who have the item in stock.

Two, the possibility of discounts. Vendors are usually open to offering attractive discounts to select clients. A good relationship is sometimes all it takes to get such discounts.


Consider this example:

Your business sells toothpaste and dental floss. Toothpaste moves thrice the speed of dental floss. What can be done to boost dental floss sales?

Bundling could be the answer. Offering toothpaste and toothpaste bundles at a price that’s say, 15% less the combined cost of both products when bought separately can give your customers an incentive to purchase the bundle.

If the strategy delivers, your inventory will move faster. A moving inventory is good for business.

Maximize Profits with Clever Inventory Practices

Your inventory is the heart of your business. And like all hearts, it needs to be fit and efficient. With these key tips, you’re now ready to enhance inventory performance and maximize profits.

Explore our blog for more informative business content.

Leave a Comment