For any rental business, the actual rentable inventory is the most important component of the organization’s capital. The inventory’s scope and availability is the primary driver of rental revenues and these are a top priority for efficiently managing the inventory with rental inventory software. Reducing stock-outs and overstocks can lower inventory costs by 10%.
The two-way circular flow of goods changes the nature of inventory management for rental businesses. When a bulldozer is rented out, for example, it may be checked out of the warehouse to be delivered to the customer site. Once the rental period is complete, it’s imperative that it gets back to the warehouse at the agreed time to be serviced and rented out for the next customer. Even a small delay in delivery can lead to late order preparation, and dissatisfied customers–resulting in a reputational loss for the business.
An automated rental inventory software solution can help streamline rental inventory, from organizing the warehouse and tracking inventory to streamlining stock counts, reviews, and analysis. Here are ten inventory methods and best practices that will help your business optimize inventory:
1. Focus on specific business needs
Most rental businesses have thousands of assets in inventory to keep track of. A run-of-the-mill job would be to track all inventory items whether old or new regardless of the demand for particular items. While this is a straightforward approach to stock management, it comes at the cost of losing focus and not prioritizing as required.
Even before starting with inventory tracking, rental businesses need to focus on categorizing inventory items according to their specific business importance, based on customer demands and satisfaction. It is unlikely that every inventory item to face the same level of customer demand.
Only with that sorting by demand can stock managers use rental inventory software to identify hot-selling items, organize these toward the front in the warehouse, and concentrate on stocking the most-demanded rental inventory items on first priority. This will ensure inventory is always on hand for renting out to customers.
2. Organize your warehouse by inventory categories
Most businesses consider inventory tracking a crucial part of managing stock and thus only focus on its effectiveness. This can only be successful if all other parts are well in place. A disorganized warehouse, for example, might lead to delays in tracing specific items and shipping to customers.
Organizing your warehouse by inventory categories can help optimize storage space and streamline order fulfillment. A helpful tool is ABC analysis, an inventory categorization technique that helps rental businesses value inventory based on sales volume and profitability. Inventory items are divided into three categories: 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 order, with intermediate value and less stringent tracking requirements. Class C items are the least expensive inventory items. Rental businesses can organize warehouses with these categories. Class A should be located in easy-to-access, close-to-dispatch areas to speed up the order preparation process.
With an effective location barcode management system, managers can also keep up with complex location labeling practices. Large warehouses or storage facilities, for instance, demand comprehensive ID systems for efficiently locating items in stock. An identifier in the software 20.101.898.2.59, for instance, could indicate warehouse #20, aisle #101, rack #898, stack #2, and position #59.
3. Relationship between rentals and inventory
Equipment rentals and inventory are correlated with profitability. 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.
It’s critical that there be enough stock on hand at the right time: the original capital investment only contributes to the bottom line when items are actually rented out. The cost of scheduling, tracking, and maintaining inventory is necessary to make that happen, which is why rental inventory controls stringently track items’ availability, location, and condition. Rental inventory software can also help you manage items, with tools like alerts for the delivery and pick-up of items. When you first log in, you can mark and highlight important dates on the dashboard to serve as a reminder.
4. Leverage rental inventory software for inventory cost valuations
Inventory valuation is an effective method to calculate the value of unsold inventory items at the end of the financial 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.
Complex calculations for inventory’s worth might result in erroneous valuation, which can have an obvious negative impact. Leveraging technology can help understand inventory flows. 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 re-stock. Based on this information, the software can automatically calculate the expected valuation at the end of the period and generate reports for analysis.
5. Utilize real-time data
Real-time data can help rental businesses achieve their objectives more effectively. In order to help with route planning, delivery and logistics operations can use traffic or weather data streams, which enables them to respond to changes in the environment as they arise. This may help prevent unforeseen mishaps and incidents or even let a business add value by alerting its customers to adverse conditions.
6. Automate inventory management
The process of managing inventory evolves with time and needs. Increasing customer expectations for quicker order processing and faster deliveries has stimulated the growth of automated inventory management.
That change applies across the rental industry, too. Every rental business is unique: a small bike rental shop in a tourist area will have different inventory, customers, and needs than a global construction rental business spread across multiple countries. Automation, though, effectively evens the playing field for businesses of all sizes. Small rental businesses can finally take advantage of the same resources available to big enterprises. Automated rental inventory software can provide the right solution, by scaling with the number and complexity of orders to process.
7. Manage inventory across multiple locations
Being unable to predict stock demand across multiple locations can be frustrating. One of the key challenges for managers is to maintain optimal stock levels at all of their locations. Carrying too much stock ties up capital or running short on inventory might lead to declining sales and customers.
Multi-location inventory management is a continuous process of streamlining warehouse operations, forecasting re-order stock points, and efficiently managing the delivery. Utilizing real-time data on buffer stock can help easily identify excess inventory in one location so it can be redistributed to another location to fulfill orders. This can help maintain balanced inventory levels, accurately meet demands, and control costs for the business.
8. Key business insights to forecast demand
Setting inventory-related key metrics can help rental businesses measure inventory’s impact on business operations. That matters because when it comes to rentals, different items carry vastly different qualities.
A construction rental business operates on a prudent stock replenishment to maintain just a few excavators or forklifts in stock: they require large amounts of warehouse space, and just one forklift can be moved to support a renter’s multiple sites. Smaller tools, meanwhile, are likely to be used by more employees at a time and remain on-site. This means a slight change in inventory on hand can have a huge impact on rentals.
Businesses 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
A proactive inventory management approach requires managers to perform periodic or regular stock reviews to reduce stockouts and fulfill orders on time. Rental businesses performing quarterly or mid-year reviews can analyze which types of inventory were in demand and which items were rented only infrequently. This can help them decide how to keep the inventory moving to maximize profits.
Construction and many other specialized rental businesses have seasonal demands. Summers may be very busy, while winter business is sparse. Given that schedule, conducting inventory checks in winter can help the business devise a better rental plan. If there is less demand for brick hammers in February or March, then they can be bundled with Items in higher demand and rented out at an attractive price.
10. Reports analytics for informed decision-making
Large inventory datasets can be tiring to create—and even more tiring to analyze. Automated rental inventory software makes it easier to produce reports and present them as eye-catching graphs and charts for better analysis. Stock managers can access information about stock levels and understand data to make informed decisions about the rental inventory.
In short: Without rental inventory software that does more than keep track of what’s in stock, rental managers are flying blind. But with the right tools in place, you can unlock the strength of your existing inventory, manage tasks beyond simple check-ins and check-outs, and maximize rental profits.
EZRentOut, a cloud-based equipment rental software can help. EZRentOut offers companies in numerous industries seamless rental management along with a host of other features. You can integrate your website with our EZR plug to keep track of all your rental Assets and operations. Try us out today!