How to Boost Your Retail Business in China: Benefits of Inventory Management


A retail business’s inventory is among its most precious assets. In China’s ever growing economy, for inventory-intensive industries such as retail, hospitality, and manufacturing, an entity’s finished products, raw materials, and other components are at the heart of its business. Therefore, a shortage of inventory at critical times can have devastating effects on the business. Therefore, if you want to optimize your retail business, you should first turn to the fundamentals of how to set up a company in China.

Even though inventory is usually classified as an asset, it can also be considered a liability. This is because the stock may get spoiled, get affected by shifts in demand (particularly valid due to the impact of COVID-19 in China), get stolen, or even damaged. It is therefore important to ensure that the inventory is properly insured. If a retail company fails to find buyers in time, it may be forced to destroy the inventory (especially in the case of perishable commodities) or sell it at throw-away prices.

It is important for businesses that operate in other industries to formulate and implement good inventory management strategies.

What are the benefits of good inventory management? 

The following are the reasons why organizations should put in place proper inventory management systems:

1. It enhances the accuracy of orders.

A good stock management system can help you establish precisely how much inventory your business should have at hand. It can help prevent cases of product shortages and also enable you to maintain adequate stock, without necessarily having too much stock in the warehouse. Remember that spare capacity in terms of warehouse space is just as important as avoiding running into product shortages.

2. It attracts and retains customers.

Proper management of stock plays an important role in attracting and retaining customers. There is no doubt about that. Customer loyalty is what every business yearns for, especially in terms of brand building and identity. Organizations that wish to make their customers keep coming back for more, must have the will and capacity to efficiently fulfill their often varying demands over time.

Proper stock management can help businesses meet their customers’ needs by enabling them to have the right commodities at hand if and when the need arises.

3. It means a more organized warehouse.

A proper inventory management system can help your business have a more organized warehouse. An organization with a disorganized warehouse facility can create a very difficult work environment for employees stationed in the procurement and supplies department. A disorganized warehouse will ultimately compromise your productive efficiency.

“Many organizations optimize their warehouse facilities by ensuring that fast-moving commodities are put together in locations that are easily accessible. This strategy speeds up the whole process of order fulfillment and makes customers happy” explains Shop375.

4. It boosts productivity and efficiency.

Computer software, barcode scanners, and other inventory management tools can significantly enhance productivity and efficiency. The tools can help minimize or completely get rid of manual processes. As a result, employees can concentrate on more important and urgent issues affecting the entity.

5. It saves valuable resources such as money and time.

Good inventory management can offer significant monetary and time-saving benefits. You can eliminate the need to recount stock to ensure the accuracy of records by taking real-time stock of all products that you have ordered for as well as stock-at-hand.

A good strategy can also help save time and money that would have otherwise been spent on slow-moving or unpopular products.

What are some inventory management techniques?

The following are effective and efficient strategies that organizations in China have used to manage their inventory.

1. Setting per level: involves setting a minimum volume of products that has to be readily available at all times.

2. Drop-shipping: an arrangement whereby the whole inventory process is taken care of by wholesalers or manufacturers.

3. First In First Out (FIFO): selling goods in the order in which they were procured from primary producers. FIFO is suitable for goods such as food products and prescription drugs.

4. Accurate forecasting: involves the projection of future sales while accounting for factors such as market trends, the overall state of the economy, past sales volume, seasonality, and assured sales from subscriptions, among other factors.

5. Proper relationships management: it is important to establish healthy relationships with suppliers because you may need to return slow-moving commodities, suspend the procurement of certain products or re-stock fast-moving commodities.

“If things are moving south and you don’t know how to handle the situation, always ask for advice. Hiring the services of a business or life coach could help” said Animas Coaching when asked how to act in tough situations.

6. Using an Intermediary: Foreign companies also have the choice of selling products electronically through an intermediary. If a company does not want to have to handle inventory, this technique is preferred. This liability and allocation can be transferred to the intermediary.

Other effective inventory management techniques are: prioritizing with ABC, contingency planning, and regular auditing (using methods such as physical inventory, cycle counting, and spot checking).

Good inventory management is without a doubt an important practice for retail companies as well as businesses in other sectors of the economy.

An organization that fails to keep a keen eye on its inventory, or fails to take stock of its accounts is undoubtedly setting itself up for myriads of possible challenges and errors related to inventory.

Inventory management can easily break or make a business. Keep the benefits described above in mind as you consider the cost of establishing or failing to establish a good inventory management system.