Managing inventory is a key component of any successful business, yet many small businesses fail to practice proper inventory management.
An inadequate inventory can be disastrous – leaving customers disappointed and frustrated. It’s an instant turn-off, sending them off to shop elsewhere or worse yet, never returning at all!
On the flip side, some companies will opt for overstocking of items “as a precautionary measure.” While you can guarantee having your customers’ desired products on hand, this approach carries risks. Not only does it bind up precious cash flow but also entails higher costs in storage and tracking.
Finding the balance between overstocking and understocking is essential to effective inventory management. Although it may require more work in terms of planning and coordination, your effort will be reflected in increased profits.
In this article, we’ll dive into 7 crucial tips that can help optimize your inventory management for smoother processes and minimized stress. Let’s get started!
A reliable supply chain is the foundation of any successful retail venture. Let’s take a look at what happens when you order some denims from your supplier as an example: first, your supplier must obtain enough fabric to make the requested batch; second, there’s time needed for transportation from manufacturer to fulfillment warehouse and subsequently logging them into inventory. When it works smoothly, managing stock levels should be no problem; however, if something goes wrong then staying on top of demand can become quite difficult!
Even when your supply chain is running like clockwork, any number of technical issues may arise unexpectedly. Needless to say, some events are out of your control; but if you’re aware of all the elements in your supply chain and stay ahead of potential disruptions, you can be well-prepared for whatever comes your way.
Both approaches can optimize delivery expenses. Bulk shipment involves palletizing items so that carriers can transport many products in one go. EOQ stands for economic order quantity and is a formula designed to calculate the optimal number of items per individual order, depending upon various factors such as production cost, demand rate and shipping distance. You can also employ various other methods to improve supply processes, here are some inventory management techniques to consider.
If you have groceries or other products with a limited shelf life to sell, the best way to ensure they are sold before their expiration date is by utilizing the first in, first out (FIFO) method. Batch tracking is an easy and effective way to keep track of your inventory that needs to be sold first. By assigning all goods with the same expiration date a unique code, you can easily locate any item’s “batch number” and know how long it has been sitting on your shelves.
Working with a dependable supplier is essential for keeping your inventory levels in check. If you find yourself dealing with one that frequently misses deadlines or fails to deliver complete orders, it’s time to take action. Talk through the issues together and try to get them resolved; otherwise, you may have no choice but to switch suppliers and risk inconsistent stock levels for a while.
Establishing strong relationships with suppliers can greatly benefit your supply chain operations. When you have an unforeseen spike in product demand, they will be more likely to arrange available stocks quickly if there is a good rapport between the two of you. Additionally, having amiable connections allows for negotiating better pricing when buying inventory in bulk amounts – saving both time and money.
Fulfill your contractual commitments by acquiring the products you promised and settling payments in a timely manner. Regular payment delays will generate an undesirable reputation for your business and can damage supplier relations.
To ensure harmony and clarity on responsibilities, make it a point to regularly communicate with your suppliers. By doing so, you can avoid any disputes or misunderstandings in the future – especially during difficult periods.
Prioritizing your inventory into three categories, A, B and C can help you identify which items need to be ordered more often and in what quantity. Generally speaking, the A group includes higher-priced items that are needed in less number; the C category consists of lower-cost products with rapid turnover; while the B group is comprised of moderately priced goods sold at a steadier pace than Category C but faster than Category A. By breaking down your stock this way, it will give you an overview as to where investments should be made accordingly.
As a business owner, it is vital to document the details of every item in your inventory. Make sure to record specific information like SKUs, barcodes, suppliers, countries where items are from and lot numbers. Furthermore – keeping track of how each product’s cost fluctuates over time due to factors such as scarcity or seasonal changes can help you stay informed and prepared for any varying costs that may arise.
With the use of barcoding, stock and inventory traceability is made easier. This process involves affixing black and white images on each product SKUs. Every image contains a unique set of numbers or letters which allow you to monitor that item’s journey throughout its life cycle. To make sure your barcode system runs smoothly, it is paramount to comprehend its fundamentals first before any implementation takes place. Barcoding requires three key components:
Barcode – A barcode is essentially an image that can be scanned and converted into a unique, alphanumeric sequence. Each item you purchase has its own distinctive string associated with it; this code is then printed as a visual representation in the form of a barcode. Every stock-keeping unit (SKU) will have its individualized set of digits. For example, a pack of six bottles of fruit juice and another pack containing twelve bottles, each will use their special codes to distinguish them from one another.
Barcoding hardware – Constructed of physical components like scanners, printers, and power docks plus a variety of cables (depending on your system), barcoding hardware enables you to scan your SKUs effortlessly.
Barcoding software – After you acquire the necessary hardware and a way to read barcodes, your inventory management software will enter the scene and make managing your data hassle-free. Not only will it bring more organization into your inventory, but it will significantly simplify matters as well.
To ensure an accurate inventory count, businesses should take the time to physically tally their stock regularly. Whether it’s once a year or every day for your most coveted products, make sure you are taking consistent steps towards tracking and verifying what you have in store.
To ensure a cohesive and accurate record of incoming stock, it is important to make sure all employees receive new shipments in the same manner. It’s crucial that each box is verified upon arrival, unpacked together, precisely tallied up and inspected for correctness. Otherwise you may find yourself perplexed at month or year end as to why your data does not match with its respective purchase order!
Accurate inventory data is essential for its optimization; however, it’s just as important to audit the records routinely in order to keep them current. Every time an item is bought or sold, the corresponding record must be updated. To make this process easier, why not create a calendar with designated days for audits? This way you won’t have to manually plan each week and/or month!
It might be tempting to permit vendors to do the inventory reordering for you, but it is crucial to remember that their interests may differ from yours. While they seek to move items quickly, your priority should be stocking products that are most profitable for your business. Invest time in regularly assessing stock levels and ordering restocks yourself – this will pay off in the long run!
Inventory management requires a comprehensive approach to all aspects related to your inventory, from initial orders and replenishing supplies through receiving, storing, and filling orders. To carry out this task efficiently, it is essential that ample data be collected – such as sales volume in addition to current levels of stock. This makes the process of inventory management an indispensable component when forecasting needs or predicting future sales projections.
Although this may seem like a given, you must do more than simply summing up your sales at the end of every day. You’ll want to consider what products and how many were sold on each particular day, while also examining such data to comprehend the bigger picture. For example, is there ever an item that sells quickly or slows during certain times? Are any items seasonally-based? Do some things always appear together in a sale?
Gaining knowledge about both your overall income as well as which items tend to sell when and with who is essential for maintaining sound inventory control.
You should always remember the Pareto Principle: 80% of your profits come from 20% of your products. That’s why it is so important to prioritize inventory management for this valuable 20%. Carefully track the complete sales lifecycle, including how many are sold in a week or month, and keep an eye on them at all times – these items make you money!
Keeping track of your monthly sales figures is essential for determining which items have been experiencing an increase in demand. Utilize forecasting models that take into consideration past and seasonal data to accurately predict future needs. Using this knowledge, adjust procurement levels accordingly – be sure to account for extra stock when predicting a high level of interest! With the right strategy, you’ll never have too little or too much inventory on hand at any given time.
All too often, businesses find themselves with products that linger on shelves for far too long. This zombie inventory may seem harmless at first glance and you might think it’s nothing to worry about, but in reality the funds used on these stagnant items could be more productively invested elsewhere within your business – like upgrading websites or investing in advertising campaigns!
It can be hard to keep track of what isn’t moving from a fulfillment center day-to-day basis so make sure to regularly check up and assess this type of inventory; put it on sale if necessary and clear out any deadwood for maximum agility during this year compared to last.
Inventory control can be a daunting task, especially when there is discrepancy between what your documents say should be on the shelf and what’s actually present. Shrinkage is one of many euphemisms used to refer to damage, breakage, loss or misappropriation that could have caused this depletion in stock.
Keeping your goods in the warehouse can pose a risk of damage, loss, breakage and even theft. Unfortunately, personnel often forget or overlook updating their inventory logs to reflect any changes – leaving discrepancies between the actual number of items available and those that are officially recorded. This causes problems with correctly identifying minimum stock levels which reverberate across the entire supply chain. Eradicate these ghost items by disposing them both physically as well as deleting them from records for good!
Did you know that reducing overstocks and stock-outs can lower inventory costs by 10%? When it comes to shrinkage, one of the most effective solutions is keeping safety stock on-hand. However, this raises a tricky question: how much should you store? It can be difficult to strike a balance between running out of items and too many unsold products taking up storage space in your warehouse.
To prevent any future complications, it is essential to correctly calculate and observe the safety stock index and minimum stock levels. Safety stocks are extra items you should maintain in order to guarantee that your inventory never runs dry. On the other hand, reorder points (also known as minimum stock) will help determine when exactly you need a new shipment before your existing products run out – both taking into consideration how many of each item is left, as well as considering delivery times for when they’ll arrive.
Taking care of the initial six items on this list may seem feasible if you have a small business, but as your company grows and your inventory becomes more complex, it will become too time-consuming to manage everything with spreadsheets and notebooks alone.
Did you know that 24% of small businesses track their inventory with a pen and paper?
Fortunately, there are tools available to make these tasks a breeze. An inventory manager can easily use software to track and manage existing levels of stock, generate invoices for new or recurring orders, group items into numerous batches, create reports in real-time and observe the movement of goods. What’s even better – you can set automatic restock points so that your shelves never go empty!
Before you decide on a solution for your business, be sure to evaluate its essential features that will support your company’s objectives as well as the analytic insights it provides. Lastly, and most critically, ensure that the interface is user-friendly.
If you are running a business with limited stock, then utilizing a free program may be the right fit for you. However, if your company has to manage more inventory than usual, investing in an advanced inventory management software is likely necessary. Here’s what to keep in mind when selecting the most suitable inventory control system for your operation.
Once you’ve identified that the software has all the features necessary to meet your needs, it’s time to put it into practice!
Here are some of the best inventory management software that you can take advantage of:
By taking the time and investing resources into inventory management, businesses can expect to see cost savings and increased productivity.
Taking a proactive approach to inventory control can help enhance customer satisfaction with better service levels and streamlined inventory movements. Having an inventory management system in place that is efficient, accurate, and reliable is essential for business success in this day and age. Don’t wait: invest in improving your inventory management processes today!