Every day, small and midsize businesses face inventory risks that range loss due to theft, shelf life, or damage, to excess supply. All of these risks, if unmanaged, can have a seriously negative impact on a company’s bottom line. Too little inventory will mean loss in sales and unhappy customers, while too much inventory increases expenses on space, transportation and handling charges.
But there are simple solutions to manage these risks by helping business owners understand and forecast inventory needs and track stock movement in real-time.
To manage inventory better, let’s first understand what inventory means – Inventory Management is the management of the quantity, location and other details of stocked goods which is available with the owner for the purpose of selling and revenue generation.
It’s important to effectively control inventory in order for your business to grow. Let’s look at few best practices to improve inventory management.
1. Know Your Inventory
It’s not enough to just be aware of what’s in your inventory. It will be easier to keep track of categories of inventory if you label both what it actually is, and what type of stock it is – whether that’s replenishment, or excess or obsolete stock. This is one of the best practices to improve inventory management.
2. Daily Checks on Safety Stock Levels
Another important task that’s often overlooked is checking safety stock levels. If you take a look at it on a daily basis and at a more granular level, then it goes a long way towards ensuring that your inventory data is as up to date as possible. It might seem tedious and something that can be tracked via automation, but keeping close tabs on safety stock makes a difference.
3. Identify Your Most Productive Inventory
Many businesses just try to keep a level inventory on all of their products, whether it’s high or low selling inventory. However, it’s important to determine what your most productive inventory is and focus purchasing on those items, rather than just trying to have the same amount of product across the board. It doesn’t make sense to keep levels of inventory on product that doesn’t sell frequently, and you definitely don’t want to run out of stock on product that does sell quickly.
4. Track Distressed Inventory
With a lot of inventory, the tracking of goods can become a challenge making them fall through the cracks. Keeping a proper tabs on distressed inventory is probably the biggest problem that most businesses and warehouses have. Sometimes you get overstocked when product doesn’t sell fast enough, and soon you have piles of distressed inventory to deal with. By keeping track of how long you’ve had certain inventory, you can move it out before it reaches the point of no return and you can’t sell it anymore. If you can’t sell it, donate it if you can, and then you’ll at least be able to write it off on your business’s tax return.
5. Complement Inventory Management to Sales and Operations Planning
An astonishing number keep inventory management separate from their sales and operations planning. By integrating the two, you maintain a better view of your overall business operations, which in turn gives you a better control over inventory.
6. Don’t Let the Market Sway You Too Much
Many businesses often get caught up in new trends and buy up a lot of new inventory in order to try out new products to sell. Too often that strategy won’t pay off, and you’ll end up with an overstock of items that you can’t get rid of. Instead of letting apparent market trends control you, seriously consider whether you’re making good choices for your business.
7. Perform Root-Cause Analysis
Perform root-cause analyses on excess and obsolete stock and know how they are linked to action plans that control these problems. Organizations with effective inventory management create two task forces with linked action plans. The first task force recognizes the root causes and determines ways to reduce the creation of new excess and obsolete stock. The second task force concentrates on ways to sell off the stock more effectively. It provides the sales team with a list of top excess or obsolete products to push to ensure that they’re discounting specified excess products.
Make sure your inventory is in the best health by avoiding excessive expenditure on managing overstocked inventory. And with inventory stockout you don’t only lose money on that missing good but also customer loyalty. Identifying the most productive inventory and distressed inventory is of equal importance as this can beef up your revenue or distress your revenue. Simply give your inventory the focus that it deserves as a healthy inventory leads to a better financial health of a company. Get the right ERP to help you manage inventory the right way and without hassle. Ask for a free demo.