When you're in the business of supplying goods and services, proper inventory management strategies can separate smart franchisees from rest of the pack.
How closely a franchise monitors, attends to and adjusts its inventory impacts its success greatly. An economic forecast for the International Franchise Association Educational Foundation reported that the steep 5 percent increase in gross domestic product in the third quarter of 2014, while positive, was largely due to a deficit caused earlier in the year by "severe weather and a sharp inventory correction." Because of logistical hiccups caused by things like slick roads and heavy precipitation, businesses couldn't coordinate customer demand with ample storage.
However, this is just one of many issues franchises can experience when it comes to stocking their shelves. Franchisees should learn from this lesson and take the steps necessary to maintain and manage an inventory as smart as they are.
"Franchisees should try to negotiate flexible inventory management during the signing process."
Better from the beginning
For franchisees still in the preparatory stages of purchasing their own businesses, franchisors may spell out inventory management obligations in the fine print. According to the National Federation of Independent Business, some franchises allow franchisees to select their own inventory strategies like delivery times and quantities. Others don't.
While there are many advantages to assuming a franchise's branded identity, individual franchise locations are not created equal and as such, they require finely tuned inventory management to suit their unique needs. Franchisees should try to negotiate flexible inventory management during the signing process or choose a company that provides that freedom from the start. Doing so reduces the risk of costly waste, saving franchisees money.
Bring marketing into the mix
Modern franchises should keep troves of data on what's being sold, what's in storage and how those two factors align. Customers aren't the only things rocking the economic teeter totter of supply and demand. As mentioned earlier, weather can have an incredibly detrimental impact on both sales and inventory. Accurate and up-to-date data on inventory affords franchise owners the opportunity to do something about these issues quickly and intelligently.
More to the point, inclusive inventory management systems, by their nature, encourage interdepartmental communication that could lead to surprising solutions to problems on the back end. For instance, a strong sales initiative can relieve a congested inventory, so long as the franchise's marketing team has access to the right kinds of data at the right moment. A well-timed discount could prevent franchisees from losing out considerably on overstocked items that would have otherwise been sent for liquidation or into the trash.
Understand the truth behind well-balanced inventory
Franchisees and their employees are charged with serving customers during daily operations, handling transactions and returns as they occur. But while inventory management strategies should assist and report on these customer interactions, they should also help franchisees see the bigger picture in terms of cost.
When a business serves a consumer to his or her liking, there's more than an 80 percent likelihood that he or she will return for similar services in the future, according to a Trackur poll. Responsive inventory management systems tell franchisees more than just what's sitting in the stockroom, but rather, the panoramic impact of their customer-facing operations. Is a franchise selling more of a single product because of popularity or excellent service? While both may make franchisees leap for joy, differentiating between the two can provide valuable perspective.
Equipment and franchise industry piece brought to you by Marlin Equipment Finance, a nationwide provider of commercial lending solutions for small and mid-size businesses. Marlin's equipment financing and loan products are offered directly to businesses, and through third party vendor programs, which include manufacturers, distributors, independent dealers and brokers in the security, food services, healthcare, information technology, office technology and telecommunications sectors.