If you're an eCommerce business owner, you know how vital Inventory is for keeping your business running smoothly. When it comes to the success of your store, many factors must be taken into consideration; finished goods inventory is undoubtedly one of them. Having a well-managed and accurate finished goods inventory can mean the difference between winning or losing customers and fulfilling orders on time or missing deadlines. In this blog post, we'll look at what exactly finished goods inventory is, some tips on proper management strategies, and advice on why having an organized system can save time and money. Let's get started!
Finished goods inventory refers to products that have completed the manufacturing process and are ready for sale. Properly managing your stock of finished goods is crucial for meeting customer demand, controlling costs, and ensuring efficient operations.
Finished goods are products that have passed through all stages of production and are ready to be sold to customers. This includes all items available in your warehouse, stores, or other retail outlets. Some examples of finished goods are clothes, electronics, toys, and packaged foods.
Monitoring your finished goods inventory allows you to plan production schedules, budget for expenses, identify slow-selling items, avoid overstocking or understocking, and ensure you can meet customer orders. It provides vital insight into the health of your operations.
You can calculate finished goods inventory using this formula:
Finished Goods = (Cost of Goods Manufactured - Cost of Goods Sold) + Prior Year's Finished Goods
Where:
Follow these steps:
This gives you your current finished goods inventory valuation. Compare to sales data, production capacity, and storage space to identify any excess stock.
Several key factors can influence the ideal amount of finished goods inventory to keep on hand:
Consider these elements when planning inventory and production schedules to ensure optimum stock levels.
If you end up with too much finished goods inventory, you have several options to clear it out:
Avoid accumulating excess finished goods by accurately forecasting demand, coordinating with suppliers, and tracking inventory turnover.
With an effective finished goods management strategy, you can optimize cash flow, reduce carrying costs, and improve customer service. Partnering with a 3PL logistics provider can also give you greater visibility and control over your finished goods inventory.
Recommended: eCommerce Inventory Management Tips & Tricks
Finished goods refer to products that have completed the manufacturing process and are ready to ship to customers. This includes all items stored in your warehouse, retail outlets, or other facilities awaiting sale.
Tracking your finished goods inventory allows you to coordinate production schedules, meet customer demand efficiently, identify slow-selling products to discount, and avoid overstocking or stockouts.
Use the formula: Finished Goods = (Cost of Goods Manufactured – Cost of Goods Sold) + Prior Year’s Finished Goods. Determine the manufacturing and sold costs for the period first.
Key factors like demand forecasts, lead times, seasonal fluctuations, and supply chain disruptions can all influence appropriate finished goods stock levels.
Accurate demand planning, coordination with suppliers, monitoring inventory turnover rates, and partnering with a 3PL for oversight can help minimize excess finished goods.
Liquidate through sales and promotions, return to vendors, donate, sell to liquidators at a discount, or salvage usable components if possible.
A third-party logistics provider can give you greater visibility and control over your entire inventory with warehouse management and order fulfillment services.