A smooth running business depends on a lot of things – experienced staff with the ability to fulfill their duties, reliable equipment or machinery that gets repeatedly called upon, and a seamless supply chain from storage to delivery.
Unfortunately, people pay little emphasis to these. Even though something like poor inventory management could make or break a business. Not enough stock could lead to unfulfilled orders and unhappy customers, while too much stock ties up valuable cash flow.
Effective inventory management strikes the balance between these two extremes. But how is it possible?
Categorize inventory by priority
Do you know what your most popular products are and which are most important to your business? Categorizing your inventory by priority and price, you’ll know how much of each item you need to have in stock.
For example, you’ll typically need plenty of lower-cost items in stock due to their quick turnover, with the opposite true of higher-ticket products.
Keep track of product information
In years gone by, keeping track of product information was a labor-intensive process that required plenty of paperwork. But thanks to the warehouse inventory management software, it is now a lot simpler and more straightforward.
Barcode scanning can often provide you with information such as SKUs, suppliers, country of origin, and lot numbers instantaneously. Track your stock over time and you’ll also gain insights about things like scarcity and seasonality.
Practice the 80/20 rule
Generally speaking, 80 percent of a company’s profits come from just 20 percent of its stock. Therefore, it makes perfect sense to prioritize these items for inventory management purposes.
Take time to understand the sales lifecycle of these items like how many are sold in a week or month. Whatever you do, don’t mismanage your most profitable products.
Don’t settle for a second best supplier
Inventory management isn’t limited to your warehouse or storeroom walls; it also encompasses your suppliers. If you’re having problems with an unreliable supplier such as late or incorrect deliveries, make sure you do something about it.
This doesn’t necessarily mean switching supplier at the first sign of trouble. Start by having a discussion and try to determine the cause of the problem, be ready to switch if needs be.
Audit your inventory regularly
Inventory management systems enable you to keep tabs on your stock all year round. But nearly every product-based business will still comprehensively count their inventory every 12 months to be absolutely sure of stock levels.
You may even decide to conduct monthly, weekly, or even daily spot checks of your most popular items for the ultimate peace of mind.
Analyze sales data
It might sound obvious, but with a comprehensive overview of your sales including details about seasonal peaks and trends, you’ll find it much easier to effectively manage your stock.
For example, if you buy more Christmas-themed items in the build-up to the holiday season it will ensure demand is met and customers remain happy.