How to Manage Inventory
Do you always have the necessary products available when you need them? Have you lost out on business because items were out of stock? Have you lost money due to excess stock? If any of these predicaments are true for you and your business, you may need to take a closer look at your system.
What are some basic inventory management techniques?
Basic inventory management techniques, coupled with software that fits your situation and adheres to best inventory management practices, will ensure that you always have the products you need in appropriate quantities, all at the right time. Make sure your point-of-sales system and mobile scanners communicate properly with your inventory management software to save you the hassle of having to constantly manually transfer data from one system to another.
Make it a point to avoid the potential of spoilage, lower your risks of holding on to outdated products, and focus on spending money on stock that makes you money, not costs you more. Don't find yourself out of stock or keeping funds tied up in excess stock that isn't being sold or purchased. Instead, seek an inventory management software program that keeps you on top of your inventory in a way that yields the most monetary growth for you.
What should you be looking for in inventory management software?
When searching for the right inventory management software for your situation, consider one that offers the following attributes:
- Lowers costs of purchasing inventory
- Enhances cash flow
- Increases your company's net income
- Tracks inventory levels in real time
- Predicts supply-and-demand values
- Identifies the potential for production shortages before they happen
- Ensures the company does not accumulate more stock than can be sold
- Provides you with easy access to inventory analytics
- Offers total accessibility via point-of-sale tools
- Focuses on improving the organization of the warehouse
- Comes equipped with bar code scanning features to expedite intake processes
- Provides multi-location management abilities
How can inventory management aid your company?
It is likely not news to you that your company could drastically benefit from inventory management techniques, but you might not know what that inventory management looks like in practice. Here are many ways that inventory management techniques can help you.
- Adjusting your forecasting process: Your calculations pertaining to projected sales are best when they are centered around sales figures in the past, current market trends, and the growth you anticipate seeing, as well as the current economy, promotions, and marketing efforts.
- Implementing the concept of FIFO: If you have not yet heard of FIFO, it's important to know that it stands for first in, first out. In other words, the first products you add to your inventory should be sold first, while newer products should remain on your inventory shelves. For example, perishable products, such as food, drinks, or other items that have expiration dates, should be sold in the order in which they were added to your inventory. The best way to operate under FIFO is by adding the newer items to the back of the shelves so that the older products are in front, ready to be purchased first.
- Taking the time to identify low-turn stock: If you are holding on to stock items that still haven't sold yet it's been 12 months since you added the stock to your inventory, then it's a sign you need to make a course correction. Consider no longer stocking that item, as it is not being sold so it's not making you money. Try to sell the stock that you do have by applying a special discount or promotion to the items. Once the products are purchased, do not restock them.
- Counting your inventory regularly: Take time to count your inventory every so often to ensure that you have the number of items that you believe you have. You might consider using a process where you check stock at the same time every week, month, or year, depending on which frequency works best for your company.
- Staying as organized as possible: A system in which your sales analytics are adjusted in accordance with ever-changing stock levels is very beneficial. You'll receive updates when stock values are low, and you'll have the option to prioritize your more expensive products. From there, you can monitor various aspects of your business in a more efficient manner. This also includes staying on top of quality-control procedures.
- Using a stock controller: A stock controller is an individual who is responsible for ensuring that all orders are properly processed, packaged, shipped, and received. Stock controllers are excellent if you find yourself overwhelmed with controlling stock on top of your other business-related responsibilities.
- Looking into drop shipping as an option: Drop shipping may be the right process for you. A major benefit of drop shipping is that it does not require you to hold on to any inventory on your end. That will eradicate the shipping and fulfillment processes for you, making your warehouse and stock costs far lower.
Inventory management is important, as it attributes better controls over the high-value items in your inventory by grouping said inventory into categories such as A, B, and C. Place all of the big-ticket items into category A, which should account for the smallest percentage of inventory across all three categories. However, category A will also equal the largest annual consumption value of your three categories.
From there, products that you place into category C are going to be the least expensive while also comprising the greatest percentage of all of your inventory. Equally so, it will have the lowest annual consumption value across the board. As you may expect, category B contains all of the inventory in between categories A and C.
At the end of the day, inventory management techniques help you track your inventory more diligently, keep tabs on your stock, and manage your inventory on a per-location basis across warehouses. Instead of purchasing merchandise in massive quantities for the sake of vendor discounts and earning free shipping, focus on applying inventory management techniques to all parts of your company's processes.
You won't have to take on the loss associated with losing large quantities of inventory when you focus on inventory management. For more advice, speak with your tax advisor.