Why inventory management? Other than employees, inventory is a company’s largest asset. With carrying cost of inventory averaging 15 to 25 percent, reducing inventory levels and increasing inventory turns can lead to immediate savings on a company’s bottom line. Also, it’s important to consider the “landed cost” of your products. While your supplier may have a book price with bulk discounts, consider how much the product actually will cost you from the time you purchase it to the time it lands at your warehouse dock. Cargo fees, customs and transportation add up quickly and can shrink profit margins. To navigate this challenge, I offer the following tips to help you.

1. Reduce compounded safety stock. Most companies keep an extra cushion of inventory to account for unexpected demand. The problem is that when every vendor in a supply chain – raw material supplier, manufacturer, retailer – maintains that extra five to 10 percent of cushion, it adds up to unnecessary costs for each organization. The key is to communicate closely and often with your suppliers and trading partners to prevent overproduction and increased carrying cost for them. Find ways to collaborate and eliminate excess safety stock.

2. Give employees tools to make them more efficient. In tough times, high quality employees that you strive to retain can get burned out. They likely will absorb the duties of their more expendable colleagues. One way to keep them happier and more productive is to give them the technology tools that will make their jobs easier. Technology that automates tasks or offers predictive models about supply and demand will help reduce the manual aspects of their jobs, so they can focus on driving sales or broader strategies to help grow your business.

3. Optimize your inventory. Simply said, you need to get rid of the inventory you don’t sell and get more of the inventory you do. The concept sounds straightforward, but many small and midsize businesses have the wrong mix of inventory. While it may be painful to liquidate the inventory you spent precious resources to secure, having it take up warehouse space and require your team to manage it will cost you more in the long run. That space and mindshare could be spent on the inventory that is hot and will turn over quicker, and that means more profit in your pocket. Take the short term hit and implement a system that sheds products that don’t sell and invest in those that do.

4. Focus on banner products. Growing up, there were just three kinds of soap on the soap aisle of the grocery store - Dove, Dial and Lava. Now a visit to the soap aisle could add another 15 minutes to a shopping trip because there are just too many choices. By adding variations to your product line versus introducing completely new and different products, you actually cannibalize your own sales and risk confusing customers to the point of apathy. Concentrate on your best products and create customer brand loyalty, which will create “customers for life” versus fickle ones.

5. Manage to the future. Understand that in today’s economic climate, cash is king. If you are sitting in a good position, take the haircuts to your spending that can be made, but invest in tools and people that will help you in the long run to grow your business and drive greater efficiency. With layoffs and companies eager to keep sales high, you can secure some top quality talent and excellent deals on the technology tools you need to manage to the future.