Wondering whether ordering inventory in bulk is a good idea for your business? In this article, we’ll review the pros and cons of ordering inventory in bulk, and how to buy in bulk for business in three simple steps.
What is bulk ordering?
When a business places a bulk order, it purchases inventory in large, wholesale quantities at a discount. Also known as mass buying, this strategy is usually offered by wholesale merchants willing to sell inventory at a lower unit price to customers so long as those customers purchase a greater quantity of units.
Traditionally, bulk purchasing fit neatly into economy-of-scale models. Wholesalers moved massive quantities of product at a lower price, profiting from the bulk sale. The retailers purchasing bulk inventory could then resell smaller batches of these products at a higher per-unit price, securing their own profits differently.
Today, direct-to-consumer brands, open-to-the-public wholesale clubs, and other pricing strategies have changed how businesses and consumers think about bulk purchasing. Still, one thing’s for sure: if bulk purchasing makes sense for your business, it can help your company spend less cash on the inventory it needs.
How to determine if ordering in bulk is right for your business
Not sure if bulk ordering is right for your business? Deciding whether to make wholesale purchases doesn’t need to be complicated, especially if you are already aware of your inventory needs and practice solid inventory control.
Start by forecasting demand. Review your inventory records—this should be easy if you use modern inventory management software—and determine how many of your most-used products you expect to need over the next little while. Then, assess risk. If you ordered enough inventory to meet your demand for the next year, would that leave your business vulnerable to inventory obsolescence or poor cash flow?
The next question is whether your business can physically handle an influx of bulk inventory. Do you have the suitable storage space and the correct organizational best practices to maintain that inventory? For example, if you are a construction company, do you have the warehouse space to keep raw materials safe, dry, and secure?
Next, consider whether your team is logistically prepared to manage this inventory properly. Does your business have a solid inventory management system in place? Does your team know how to manage large quantities of inventory remotely? Can your inventory management infrastructure, as it exists today, scale to track these bulk purchases accurately? If not, can you pause to implement a better, more scalable inventory system—such as an inventory app—that can prepare your team to track supplies more swiftly and accurately?
How to buy in bulk for a business
Once you’ve determined whether your business is prepared to order bulk inventory, follow these three steps to optimize your process.
1. Figure out what you need
Sure, there may be tons of products your business could order in bulk. But what actually makes sense? What are the lowest-risk products your business can certainly use or sell before those items expire or grow obsolete? Stick with products for which you can forecast demand easily.
2. Talk to your suppliers
If your suppliers don’t offer good deals on bulk purchasing, now’s the time to pick up the phone and discuss your purchasing agreements with them. In a perfect world, you’ll determine mutually-beneficial bulk pricing for the products you’re ready to purchase in large quantities. If you feel that certain suppliers aren’t providing a discount that makes sense, hold off on those purchases or search for a new, trustworthy supplier that offers better bulk prices.
3. Prepare your team for bulk inventory
From reordering processes to accepting deliveries to storing and tracking bulk inventory, your business’s inventory management standard operating procedures (SOP) must be updated to reflect new best practices. Everything from how often your business reorders to how inventory is stocked on shelves to reduce the risk of spoilage and shrinkage will change.
You’ll want to ensure all employees implement a first-in, first-out (FIFO) strategy when stocking inventory on shelves, that inventory is managed perpetually, and that your inventory management software clearly states what inventory you have, where it is, and when it expires.
Finally, you’ll want to connect with your accountant about this change in inventory control strategy. In the past, your business may have kept shelves lean. Now, your business has changed direction, attempting to pay less for inventory it’s sure it will use later. So keep an open line of communication with your financial expert (and the rest of your team) to ensure bulk inventory purchasing remains a wise choice for your business.
Experience the simplest inventory management software.
Sortly is a top-rated inventory management app that helps businesses, especially companies that purchase inventory in bulk, track their stock. With features like in-app barcode and QR code scanning, customized alerts for dwindling stock quantities and expiration dates, and detail-rich reporting, there’s no shortage of ways Sortly can help your company better understand what it has on hand.
Moreover, Sortly can help your business track bulk inventory across multiple locations across the country. Sortly customers who stock bulk inventory remotely rely on the Sortly app to visualize their inventory, understand its market value, and keep tabs on their stock as it approaches expiration or obsolescence.
Curious whether Sortly is a good fit for your business? Whether or not you purchase bulk inventory, Sortly can help your team get a handle on its inventory, make smarter purchasing decisions, and speed up everyday inventory-related tasks. Claim your free, two-week trial today.