Inventory management is a critical contributor to your company’s operations. If you can reduce friction along your supply chain you can cut costs and increase efficiency. Strategic inventory management keeps your customers satisfied and your employees happy. It makes the whole organization move better. Most importantly, it improves your bottom line. It isn’t easy to do.
Making sure inventory is where it is supposed to be and gets there efficiently is a constant challenge for companies. Even Walmart, one of the biggest retailers in the world, and a master of supply chain management, is having difficulty managing its inventory and it is hurting the company badly. For small businesses, inventory management can mean the difference between another year of business and closing shop.
These 7 tips will help you tighten your inventory management and improve your company’s bottom line:
1. Take a holistic approach to inventory tracking – it’s not just about the inventory it’s about capacity.
When you think about your inventory and tracking it, do you just think about the inventory itself? Are you only looking at how much comes in and goes out and when? Then you aren’t looking at enough. Inventory management isn’t just about inventory it is about capacity.
Tracking capacity means tracking assets, like equipment, storage, and human resources. Can you move your product? Do you have a place for it? How long do you have that space? Are all questions you need to be answering. Asset tracking tools can help.
Using this information you can make better purchasing schedules and staffing decisions and improve your inventory flow.
2. Automate your data entry
Entering data about inventory by hand, whether a SKU code or just recording location details, is time consuming and error prone. It is repetitive and bad for employee morale, very few people like doing that kind of work. Barcode scanners can reduce data entry time and errors enormously. By using barcode scanners you can save your company time and money and make your employees happier.
3. Use a centralized, real-time database accessible to multiple users
In the old days people used pen and paper to track inventory, it worked. Barely. More recently, many companies mistakenly turn to Excel to track their stockroom. Truly efficient inventory management in today’s fast-paced business environment demands a centralized database that is accessible to multiple users in multiple locations and updates in real-time. This is the only way to have an accurate picture of your supply chain and your inventory needs.
“I no longer have to wait for someone else’s information to do my job,” said Harej.Using inventory tracking systems and technology will allow you to follow products from supplier to customer and understand the flow. When Bryan Harej from TopGolf started using a Wasp Barcode scanning system to track inventory he noticed immediate changes to his business.
“I no longer have to wait for someone else’s information to do my job,” said Harej. “I was immediately able to see reports to determine the usage at each site. From there I can see what we have in stock and what we need to order. I no longer have to guess inventory usage and spend hours a day updating spreadsheets. Plus, I don’t have to deal with last minute orders. Now, I can plan ahead so parts arrive in plenty of time.”
4. Don’t let your stock rot
Inventory loses value over time. If something isn’t selling it is taking up valuable resources that could be used for more popular items. You should try moving products around to see if placement is an issue. Offering coupons and discounts to lower the price might be another way to get customers interested in a poor performer.
If an item absolutely won’t move don’t hold on to hope, let it go. You can either trash the item and mark it a loss or turn it into a donation if that is an option.
5. See the big picture on cost and how it affects individual units
It can be easy to look at inventory at cost per unit, but that doesn’t capture the whole picture on cost. What does it cost to move and store the unit? What about when you restock and there is a seasonal discount? Or you get a big order and receive a wholesale discount?
Related Article: What You Need to Know: Fixed Asset or Inventory ManagementWhen you analyze those factors you get a more complete idea of what an item costs and how much you can sell it for. This will help you improve profit margins by taking advantage of lower costs and protecting yourself when your costs rise. It can also inform purchase scheduling.
6. Track and stack – track your product sales and use this information to inform your inventory storage
Inventory management is about inventory movement and movement is about time and energy. The less you need and use to get an item from where it is to where it needs to be, the better. Analyze your sales, store layout, and stockroom layout to see how items physically move through your store.
If your most popular item is in the back of the stockroom you are wasting a lot of time running back and forth to get it. Think about how often things are moved and where they are moved when you design your stockroom layout. Keep in mind that store room layout will often be dictated by other departments and sales and marketing considerations so this is an area where inventory management needs to be a team player.
7. Forecast effectively – high sellers? seasonal rush? marketing event? promotion?
At the heart of inventory management is forecasting. From your supplier’s supply through your company’s capacity and to your customer’s demand it is all about understanding when things will be available and when they will be sold. In considering this you need to integrate inventory management with your whole business.
Is there a marketing event or promotion that might impact demand for a product? What annual events (holiday season for one) might affect demand? What might impact supply (suppliers take vacations and may have multiple customers)? What products sell the most and how quickly do they sell?
All those questions need to be factored in if you want to create an efficient inventory management system. Following products from beginning to end is challenging, but also rewarding. Companies that master inventory management quickly find they have additional resources for growth and expansion. They also often have happier customers and employees.
Using the latest technology and approaches is crucial to achieving lean inventory management. Lean inventory management means your company can grow faster.
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