The inventory for a rental business differs from the inventory of a conventional ecommerce business. For the latter, once the inventory item is sold, it frees up space for the ecommerce business to buy more inventory.
To understand what makes a rental business different, you must first understand what rental inventory is. Rental inventory refers to the items a rental business owns and rents out to its customers. This means that the business should be able to track the availability, condition, maintenance, utilization and overall working order of these items to minimize losses and damage.
Furthermore, delays in the checking out and timely return of rental items can lead to a backlog causing unavailability of equipment for your future customers. It can easily lead to dissatisfied customers, resulting in a loss of reputation and trust.
When you manage your rental inventory optimally, you can avoid loss of revenue and business opportunities. You can also keep your inventory up to standard, ensure nothing is lost, and avoid double bookings or overbooking.
In essence, managing your rental inventory is the key to running a successful rental business.
Streamline your inventory with powerful rental software. It can help with rental inventory tracking, reservations, billing, and customer management.
Make the most of rental inventory management in the North American industry which is projected to increase its revenue by 7.9% in 2024.
Key challenges to managing rental inventory
The constant logistics and utilization of rental inventory can present unique challenges for big, medium, and small rental businesses.
A systematic approach to rental inventory management can ensure a healthy lifecycle for your rental equipment.
Here are a few challenges you may face when rental inventory isn’t managed ideally:
1. Keeping inventory stocked and maintained
Depending on the equipment you are renting out, your business can face fluctuating demands, seasonal peaks, and varying customer preferences.
Balancing the supply of most rented-out items with underutilized items requires strategic planning and diligent research on your market preference and customer orders.
Not only is it important to ensure your rental inventory has the right quantity of items, but also the right variety of items. This will ensure you get business all year.
Additionally, all equipment must be regularly serviced and maintained to guarantee it functions properly when it is rented out by a customer.
2. Tracking inventory and preventing overbookings
Overbooking or double bookings occur when a piece of equipment is mistakenly rented out to multiple customers simultaneously.
Use rental software for rental inventory management and book orders according to the availability of your equipment. As a result, avoid lost business, disappointed customers, and reputational damage.
Overbookings and double bookings can easily be prevented by using rental software equipped with real-time inventory tracking, an integrated booking calendar, RFID tagging, and automated alerts.
Other strategies include setting clear availability buffers, implementing a centralized booking system, auditing inventory regularly, training your staff, and communicating clearly with your customers.
3. Managing damaged or lost items
Always account for damaged or lost items in your inventory, otherwise, it can lead to significant losses for your business. You may also end up mistakenly renting out inventory that is lost or damaged to customers.
Preventing scenarios like this requires effective inventory management practices such as timely inspections, maintenance, and addressing damages promptly to minimize disruptions to future rentals.
4. Scheduling and logistics management
Ensuring seamless logistics, optimizing routes, and managing multiple rental orders can be challenging during peak periods when demand is high. This requires highly coordinated delivery, pickup, and maintenance schedules.
Utilizing rental inventory management software with integrated features for scheduling, inventory management, and logistics can ensure that all your equipment is where it is needed, at that particular point in time.
Best practices to optimize your rental inventory system
Having a properly optimized inventory is crucial for the viability of your rental business. Without proper inventory management, your business may face reduced efficiency, higher costs, and dissatisfied customers.
Make use of the following best practices to help your rental business achieve full inventory optimization:
1. Focus on specific business needs
Most rental businesses have inventories consisting of thousands of assets. A straightforward approach to managing such an inventory is to track all items, regardless of how old or new they are, or their demand. While this is a simple approach, it can lead to a lack of proper prioritization.
Categorize your rental items according to customer demand. Your rental business can use inventory management software to place assets with higher demand at the front of the warehouse and focus on stocking the most rented-out inventory on priority.
This will avoid inventory stockout and ensure that you always have equipment to rent out to customers.
2. Organize your warehouse by inventory category
Organizing your inventory by category can help optimize your use of storage space. A disorganized or poorly optimized warehouse space can lead to shipping out delays and difficulties in tracing assets.
A technique that can help in warehouse organization is the ABC analysis. It divides the inventory into three classes; A, B, and C.
Class A items include all items with the highest dollar value, tight inventory controls, and the most accurate tracking and reporting.
Class B items are next in line, with intermediate value and less stringent tracking requirements.
Class C items are the least expensive inventory items. Managers can also keep up with complex location labeling practices using an effective barcode management system.
3. Monitor the rental-to-inventory ratio
Rental inventory management is a two-way circular flow of inventory items.
Equipment is rented out to customers for a limited period and then returned to the warehouse to be prepared for the next rental.
Even a minor delay can impact the next rental orders, frustrate customers, and lead to losses for the business.
As such, there needs to be enough stock on hand at the right time.
Your rental business can only make a profit when items are rented out. This is why rental inventory controls stringently track items’ availability, location, and condition.
Rental inventory software can help manage items using alerts for the delivery and pick-up of items.
Within the software, you can use the availability calendar to mark and highlight important dates on the dashboard to serve as a reminder.
4. Leverage rental inventory software for inventory cost valuations
Running a rental business requires calculating the value of unsold inventory items at the end of the year.
Rental businesses can either apply first-in, first-out (FIFO), or Average Cost (AVCO) inventory valuation. Either method would comply with typical rental business regulations and help determine financial position.
Rental inventory software automates inventory costing; all you have to do is choose the best method for your business.
The system also keeps track of item-specific details that are processed with advanced tools to determine when inventory was purchased, rented out to customers, or due for restocking.
5. Utilize real-time data
Real-time data can help your rental business achieve its objectives more effectively by leveraging meaningful insights.
For example, to help with route planning, delivery, and pickups, you can use traffic or weather data streams to cut costs and choose the optimal route and time.
It can help prevent unforeseen mishaps and incidents, and even let your business add value by alerting your customers to adverse conditions.
6. Automate inventory management
A rental inventory software equipped with rental workflow automation can offer the ability to scale with an increase or decrease in order frequency.
You can automate stockout alerts by defining how low your inventory should be before you are reminded to replenish it.
You can define rental workflows like sending a returned item straight to servicing and maintenance once it has reached a limit you predefined.
7. Manage inventory across multiple locations
One of the key challenges for rental businesses is to maintain optimal stock levels at all of their locations.
Excessive stock ties up capital. Conversely, running short on inventory leads to lost business.
Multi-location inventory management is a continuous process of streamlining warehouse operations, forecasting restocking points, and efficiently managing the delivery.
Real-time data can help easily identify excess inventory in one location so it can be redistributed timely to a second location to fulfill orders.
8. Assess core business insights to forecast demand
Monitoring key inventory-related metrics helps rental businesses gauge the inventory’s impact on business operations. It can help in determining the specific nature and requirements of different rental items.
For example, a construction rental business operates on a stock replenishment to maintain a few excavators or forklifts in stock. A slight change in inventory on hand can have a huge impact on rentals.
You can check how frequently inventory has been replaced or rented out by setting inventory days on hand as a KPI in rental inventory software.
9. Conduct regular inventory reviews
Proactive inventory management requires you to conduct regular stock reviews. It is mandatory to prevent stockouts and conduct timely order fulfillment.
Conduct quarterly or yearly reviews and analyze what inventory items are overutilized and which items are underutilized.
Make informed decisions based on these meaningful insights to keep your inventory moving to maximize profits.
10. Analyze reports for decision-making
Rental inventory management software lets you generate customized reports that present your data in easy-to-read graphs and charts.
These exhaustive reports will give you access to information about stock levels and other key metrics of your rental inventory.
Analyze and understand the presented data to make informed decisions about the rental inventory of your business.
Optimize your rental business via inventory oversight
Running a rental business requires constant inventory oversight as you need to know which inventory items are currently in stock, and which of them have been rented out.
Proper rental inventory management requires predicting the utilization of equipment and planning its rental availability accordingly.
Proper inventory management impacts every facet of your business, from profitability to customer satisfaction.
Using rental inventory management software can help you properly optimize your rental inventory.
It will help you monitor your stock, provide critical insights, and highlight challenges you may face soon.
