In order to run your business smoothly, you must have a well-functioning inventory management system. If you don’t have one, it might cause a lot of trouble and start to disturb the execution of orders and day-to-day business.
Inventory management can be very convenient if you know how to do it. The well-functioning system is a process of overseeing the flow of items into and out of your stock. It’s a balance of having just enough products in the warehouse. Effective inventory management keeps the stock costs under control so you can run a successful business.
We’ll give you some tips on how to start or improve your inventory management.
Step 1 – Getting Started
- Start by having at least one person responsible for inventory. This will ensure you that someone has a clear overview of your stock and can give quick answers about the inventory. You might end up with a big mess if there is no one responsible and several people are performing separate tasks.
- Implement an inventory management software. This will help you ease your work. Don’t choose the first software you see because the different software is perfect for different companies. Compare them and choose the one most suitable for your business. It’s even better if modifications are available for specific needs.
- Have a backup system ready for all the data if something happens to your computer. It’s important to have access to up-to-date inventory data from somewhere else.
- Install POS programs to track automatically sales of finished goods. It will simplify your inventory management from the beginning.
Step 2 – Ordering Goods
- The first rule – don’t spend too much on inventory. It’s not efficient, erodes profit, it’s expensive to store, it can get damaged and it’s subject to depreciation. You need to have a plan for supply and later it can be drawn on the basis of the previous month’s sales.
- You shouldn’t hesitate to bargain with the suppliers. Don’t be afraid. There are suppliers who are up for negotiation and willing to meet the terms suitable for both parties.
- Always consider whether it is cheaper to order a large quantity and how fast the supplier can fulfill your order.
- Implement a FIFO system for inventory management – first-in, first out. It’s even more important if you deal with perishable goods.
Step 3 – Tracking Inventory
- Once you have the inventory you should put in place a suitable method for tracking it. It might be a simple visual control on a regular basis or a sophisticated program. It also depends on the size of the stock and on the speed the goods are moving in and out. If you have implemented an inventory management software you don’t need to worry so much about this step.
- Accurate track of your inventory is a must. You can always be sure how much items you have. Electronic data interchange and barcode scanning can eliminate data entry errors and regular checkup is also necessary.
- A tracking system will provide a control over the inventory and also monitor turnaround times.
- Whether you are using a spreadsheet or a program to keep track of your inventory, a central database is necessary to ensure that all the changes are visible to everybody and that no data will be lost.
Step 4 – Stock Optimization
- Determine the number of products you need to keep on hand and also the minimum stock level. This way you won’t run out of inventory.
- Put in place a list of priority products that you always have to have in the warehouse.
- You shouldn’t forget to keep track of those items that are about to be sold or taken into use but are still recorded in the stock. Once they are deducted you might not have anything left to fulfill other obligations.
- Don’t get used to the routine of ordering same products. Always track market trends and analyze which items are selling and which ones are becoming popular.
- Also use market research to identify proper products for different markets, study the economic forecast and keep an eye on your competitors.
- Have discounts and promotions to get rid of goods that have stayed in the stock for too long. Special deals make your client happy and help you freshen the inventory.
If for some reason you still find inventory management difficult or you have a large company and it’s impossible to handle everything, then use an outside inventory management agency. They can manage your inventory, help you get started or help you with your inventory count for year-end.
Always keep in mind that managing your inventory correctly helps to keep the budget on track and enables you to manage efficiently your companies operating capital.