Nearly half of U.S. small businesses don't track inventory. Easy-to-use inventory management tools can monitor sales, stock, and demand.
Does it make sense for your business to monitor inventory in-house or use a drop shipping alternative? Let’s look at the pros and cons of each, so you can see what’s right for you.
In-house team advantages
- You own and control the products and always know how much of each item you have in stock.
- Since you are not dependent on any middlemen to resolve issues, customer service can be taken care of quickly.
- Your own team will better understand the business's values and communication systems. This considerably reduces the chance of important information getting lost.
In-house team disadvantages
- You will have to bear upfront costs including the cost of inventory and the warehouse space before the products are sold. These costs will only increase as your business grows.
- Whether you sell the inventory or not, you will have to pay for the recurring costs like storage fees, labor costs, and loss of liquidity.
Drop shipping advantages
- The biggest advantage of drop shipping is low upfront and investment costs.
- Overhead expenses for inventory you choose to dropship are low because you don't have to purchase inventory and manage the warehouse.
- Drop shipping also allows you to do business from anywhere, provided you have an internet connection to communicate with customers and coordinate with suppliers.
- It is easier to scale with a drop shipping business because, as the number of orders you receive grows, you’ll always be able to take them—most of the inventory management will be done by the suppliers.
Drop shipping disadvantages
While drop shipping offers many benefits, there are some trade-offs to consider. You have less control over product quality, shipping times, and the overall customer experience since you're relying on third-party suppliers. If something goes wrong with an order, resolving the issue can be challenging because you're not handling fulfillment directly.
Profit margins tend to be lower, especially when starting out, because suppliers take a cut and you may need to lower prices to stay competitive. The drop shipping market has also become increasingly crowded, making it harder to stand out. Finally, managing relationships with multiple suppliers can add complexity to your operations, particularly when coordinating returns or handling customer complaints.
The essentials: Tech and tools
Having a payment gateway that dovetails with your inventory management solution makes things much easier to manage. This is where a platform like Authorize.net comes into play. We enable businesses to accept payments online, over the phone, in person, and more. And our payment solutions can be integrated with inventory management tools.
In addition to inventory management, Authorize.net and our partners can help improve the buying experience. If it is easy and convenient for the customer to purchase your product, then you’ll likely retain them.
The audit
Once you have a record of what should be in your inventory, use a physical inventory count or cycle counting to make sure everything is aligned. Choosing a tech solution that provides reporting will help when it’s time to audit your stock.
If you find that the numbers are off, there are a few actions to try before panicking:
- First, do another physical re-count and take your time.
- Make sure to replace any faded labels or product IDs that can easily be misread with new ones to increase accuracy.
- Lastly, ensure that the units of measure you are using in reporting are the same units used when counting.
After the audit is complete, it is time to analyze the results and find trends to determine what stock will be re-ordered.
Conclusion
Having a functioning inventory management system requires a business owner to oversee a lot of moving pieces. But if you choose the right payment management system, track sales, and audit your stock, your business is on the path to success.
Disclaimer: Case studies, comparisons, statistics, research, and recommendations are provided “AS IS” and intended for informational purposes only and should not be relied upon for operational, marketing, legal, technical, tax, financial or other advice. Visa neither makes any warranty or representation as to the completeness or accuracy of the information within this document, nor assumes any liability or responsibility that may result from reliance on such information. The information contained herein is not intended as investment or legal advice, and readers are encouraged to seek the advice of a competent professional where such advice is required.
