Ways that you can efficiently manage your inventory effectively

June 1, 2019June 7, 2019 Geekopedia 0 Comment Business, GAIN, Inventory, Management, Profile, Software, Stocks, Supply Chain

The inventory management process is an important aspect of a business’s main goal of gaining profit. However, quite a number of small and medium sized enterprises do not seem to practice good management when it comes to the items they sell. Some do not even ask for the help of inventory management software and rely on counting by pen and paper or write down the quantities in a spreadsheet application.

Normally, the way that It usually works is that having too little inventory is a detriment to a business as you will not have items to sell when there is a demand. Customers may become disappointed with your business when the items they are looking for are not in stock or on the shelves or through they appear as out-of-stock on your website. There are at least some of those customers that will go elsewhere and take their business with them for the missing item that you cannot give them. This makes it risky that those frustrated consumers may never return and can influence others to buy the item elsewhere.

On the other hand, some businesses does do the complete opposite of what is described above. They can sometimes overstock on items just in case the demand goes over what is usual. This can payoff albeit can be quite risky because while you are sure to always have the items for your customers to buy at anytime, the danger with this strategy is burning money from your business from spoilage and damages. Not only does this practice limit the available cash for a healthy flow, but it can also change the cost you more to store and make it more difficult to track.

The solution to this conundrum is running an effective inventory management which can lie somewhere between these two extremes of being overstocked and understocked. This will require much more effort, time and take some planning to achieve an efficient management process. In the end the ultimate goal is for your profits will reflect your effort.

This article will list the ways that you can have an effective inventory system.

Prioritize

By making it a priority to categorize the inventory in your stockrooms, you can easily understand which you need to order more of and more frequently, and which are important to your business but may be costly and move more slowly. There are many experts that will typically suggest putting things into sections in your inventory and labelling them by easy to remember names. The items in, say, A group are items that are higher ticket and you will not need more of them. While the items in the C category are less expensive items whose inventory turns over quickly. What are left will be put into B group and these are the items that are moderately priced and move out the door more slowly than C items but more quickly than A items.

Track

You have to ensure that you monitor a record to keep of all the product information you have for items in your inventory. Furthermore, the information should include SKUs, barcode data, suppliers, countries of origin, lot numbers and any other information that may be specific only to your business. Another thing that you may also want to consider is the tracking the cost of each item over time as there are many factors that may change the cost that as you are already aware of. Some of these factors include scarcity and seasonality.

Finally, you should consider investing in inventory management software as these information can get convoluted quite quickly.

Audit

There are some businesses that decide to do comprehensive counts at least once every year. While there are others that prefer to do monthly, weekly or even daily spot checks of their hottest items or the items that can sell out fast. And there are many that does all of these things. However, regardless of the method that you use do it, you can make it a point to physically count your inventory regularly. This will ensure that it will match up with what you think you have.

Analyze

You have to be aware of running the risk of ending up with an unreliable supplier which can cause havoc for your inventory management schemes. Should you have a supplier that is habitually late or is unpredictable on the quantity of items that they can deliver, it may then be time to take action. You should sit down with your supplier and have an intensive discussion about the issues and find out what the problem is. You should also be prepared to change partners, or deal with uncertain stock levels and the possibility of running out of inventory as a result of the discussions after it concludes.

You can also run inventory management software analysis to gain valuable insight into the supply chain management.

80/20 inventory rule

There is a rule of thumb that is quite known in warehousing and this is the 80 percent of your profits come from 20 percent of your stock. The result of this scheme is the inventory management of these items as a priority. You can then be able to understand completely the sales lifecycle of these items and this will include how many you sell in a week or a month, and closely monitor them. In summary, these are the kinds of items that make gain you most profit, thus it is imperative that don’t fall short in managing them.

Be consistent

This might may seem like common sense or simply something that can be figured out along the way to make sure incoming inventory is processed. However, you have to ask yourself if there is indeed a standard process that everyone follows. The small discrepancies in how new stock is taken in could have you battling with a lot of questions at the end of the month or year, wondering why your numbers don’t align with your the purchase orders.