![]() Now that you understand the theory behind inventory management, it’s time to step into the practice. Understanding who you are selling to is crucial to defining your business model and eventually how you manage your inventory. ![]() The supply chain of a wholesaler looks different than that of a retailer. The way you manage inventories will depend on your main business approach. Any other business that sells products to standard usersīut there’s also a hybrid approach that brings both worlds together.įor instance, SAM’s Club or Costco sells products in bulk to both local small businesses and standard consumers who prefer buying in larger quantities.Merchants: companies that buy merchandise in large quantities and sell them to smaller retailers.Brokers: middle distributors that often work on behalf of manufacturers.Manufacturers: companies that not only produce goods but also sell them in bulk to distributors, retailers, and other wholesalers.Some examples of wholesalers may include: Retailers buy products from manufacturers or distributors - including wholesalers - and resell them at a higher price. Retailing, on the other hand, targets B2C (Business-to-Consumer) markets, meaning retailers have a more direct relationship with the end-user. That is, wholesalers sell products, merchandise, and goods in bulk to other businesses. Wholesale is primarily focused on B2B (Business-to-Business). The main difference between retail and wholesale lies in the role they plays in the supply chain. What’s the difference between retailing and wholesaling?īefore we step into the different methodologies to manage your inventories, it’s crucial that we talk about the differences between retailing and wholesaling, as your process might differ depending on the approach you take. Whether you run an e-commerce business, a local shop in a small town, or a global manufacturing company, inventory management is essential to balance your production with market demand, reduce costs, and optimize your value chain. You could’ve prevented it with a bit more organization and strategy.Ī well-structured inventory management system isn’t an option. That’s pretty inconvenient for both you and your client, as you’ll cause a delay in their production too (and a potential financial loss). But there’s a little problem they’ll take 3 weeks to deliver your order, which will cause a delay in production. So you call your supplier to order more materials. When you start producing those airbags, though, you realize the material you have in stock isn’t enough to produce the whole batch. ![]() You accept the order and give your client an estimated delivery date of 1 month. Let’s say you’re the owner of a company that produces different parts for automobiles, and a client orders 10,000 airbags. Why is inventory management essential for any business? So now that you understand the basics of inventory management, let’s answer a vital question. Keep in mind that your business might not use all the types of inventory.įor instance, an e-commerce business that doesn’t produce its own goods might not need to include MRO supplies in the inventory. Finished goods: products that are ready for sale.MRO (Maintenance, Repair, and Operations) supplies: components that support the production process but aren’t necessarily part of it (e.g., gloves and security masks).Packing material: items used for product packaging (e.g., boxes used to ship products).Work-in-progress: unfinished products or products that aren’t yet ready for sale (e.g., products that need a final decoration or finish). ![]()
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