If you run an inventory-based business, few things are more important than managing your inventory! Whether you’re working with cycle inventory, raw materials, unfinished products, finished products, MRO goods, or any other type of inventory, it’s critical that you have a defined process in place and are using the right technology to stay a step ahead at all times.
You don’t want to lose out on business by having too little inventory. You also don’t want to tie up cash flow and pay for unnecessary storage and tracking by overstocking items. The ultimate goal of inventory management is to always have the items you need.
It’s a simple enough concept, but it’s not easy to pull off. In fact, inventory management can be quite difficult, which is why so many companies struggle with it and face severe consequences.
Ez Information Management shares how to help your business create an inventory management plan that keeps your customers happy and boosts your bottom line.
Categorize Inventory
One of the first steps toward establishing effective inventory management practices is to prioritize your inventory by category. Separating your items via an ABC analysis is what most experts recommend. The reason why grouping your inventory is so important is that it will help you to know how frequently to order each item.
With any business, you have items that sell quickly and often, which means they need to be replaced as such. Similarly, there are items that, while important to your business, simply cost you more money and take longer to sell. Label any high-ticket items as Group A and lower-cost items with a quick turnover as Group C. Group B should be reserved for items that come with a moderate price and that move at a moderate pace.
Find Your 20%
The 80/20 inventory rule states that about 20% of your stock is responsible for 80% of your profit. With that in mind, it’s critical to prioritize those items when managing your inventory. Study and track the lifecycle of each item, and monitor how many you sell on a weekly or monthly basis. The reason for making that 20% of your items top priority is simple: it’s where your business will make the most money.
Track Your Inventory Diligently
This is perhaps the part of inventory management that you’ve heard most about. And yet it’s where most businesses fail. Be diligent about tracking all the information and costs of every item that comes into your inventory. This includes keeping records of suppliers, barcode data, SKUs, lot numbers, and countries of origin. Tracking costs is important because scarcity, seasonality, and other factors can change those costs over time.
Keeping track of your inventory is not something you want to do manually. Not only is that an outdated method, but it also takes way too much time and leaves you vulnerable to human error. There are many types of distribution software for businesses in the market today. Look for a system that will help you boost wholesale purchasing efficiency, streamline order management, and minimize pricing mishaps. If you run an eCommerce store, make sure your software offers an app that integrates with platforms like Amazon and Shopify. When using apps on your tablet or smartphone, it’s crucial that you have a device with the speed and power to effectively run your apps; it’s a good idea to shield your device with a protective covering as well.
Incorporate Other Tech
Along with distribution software, your company will likely benefit from using a variety of other technologies in your daily operations. The key is to find software that integrates with all of your other technology. If your systems don’t work well together, you won’t be able to reap all the benefits. For example, you might look into mobile scanners and POS systems, which can prove invaluable in helping you manage inventory, especially when all your software apps can communicate with each other.
It’s also vital that you have a professional website for your business. Not only will it attract more customers to your company, but a well-designed site will make it easier to keep your sales and inventory organized. If you don’t have much experience in design or development, you might benefit from hiring professionals to handle all the tasks that come with managing and growing your website.
Track All Sales
It goes without saying that you should be totaling your sales and updating your inventory at the end of each day. But effective inventory management requires more than simply knowing how many of each item has sold. Dig deeper by analyzing the data of your sales.
For example, are you dealing with any seasonal items? Is there a time of year when specific items sell quicker or more slowly? What about a particular day of the week? You want to maintain a big-picture perspective of your inventory as you make decisions going forward.
Scrutinize Your Suppliers
Deciding which suppliers to work with is critical to healthy inventory management. If a particular supplier is constantly sending you products late or sending the wrong products, it will make it next to impossible to manage your inventory effectively. That’s when it’s time to discuss the problem with the supplier. Hopefully, the supplier will make the necessary changes and become more reliable. If not, then you will need to consider finding another supplier.
Perform Regular Audits
Though incorporating software does wonders for simplifying the inventory management process, you still need to physically count every item you have on a regular basis. Depending on the size of your staff and the number of products you store, this might mean doing an audit every month, week, or day. Some companies even wait to conduct a comprehensive audit once a year. Just make sure you keep tabs on the products you have.
Gauge Your Team
Speaking of staff, do you have the right number of members on your team? If you’re finding it difficult to manage inventory while fulfilling all the other obligations in your daily operations, it might be time to start recruiting qualified workers. One possibility is to hire one or two people, or even an external group, to handle inventory management specifically. That way, you can ensure it’s taken care of without making the significant investment of hiring a lot of new employees.
Nail Down a Receiving Process
Many companies fail to establish a consistent receiving process, which can cause serious problems with your inventory management. If each worker is processing incoming stock in their own way, it leaves too much room for error and confusion. Come up with an efficient system for receiving stock that every team member adheres to, and you’ll stand a much better chance of your numbers aligning with your purchase orders. Consider a process map that lays out the system from the first step all the way to the last. A process map template from Miro can help you put together a document your entire team can benefit from using.
Take Care of Restocks
Finally, consider assuming the responsibility of restocking yourself. Many vendors will offer to handle reorders for you, but this can lead to getting inventory that you don’t need. For one, vendors are coming at it with their own sales goals in mind. Also, they’re not working with the same information as you are; they don’t really know what items you need and don’t need. Check your inventory, and handle restocks in-house.
If your goods-based business has any chance of growing the healthy way, you must prioritize inventory management. Consider the tips above as you navigate the challenges of implementing new technology and processes, and keep researching other ways you can set your operations up for success. In no time, you’ll know exactly what inventory you have at any given time and be prepared to order what you need!