As an entrepreneur, you know that inventory management is one of the most important aspects of running a small business. In fact, research shows that effective inventory management can reduce the cost of goods sold by up to 50%. Unfortunately, many businesses don’t have the time or resources to master this art.
Inefficient inventory management can be extremely costly – wasting money on unsold goods and unnecessary storage space. If you want your small business to thrive, you need to make sure your inventory management is on point.
Inventory management plays an essential role in any successful business, making sure your store has sufficient inventory to be stocked at an appropriate price. Nevertheless, the management of the inventory of a company’s inventory becomes more complicated with each increase. Effective inventory management techniques entail balancing inventory levels through constant changes. Inventory management is not to be confused with cycle counting.
Cycles are a method to count a set of items more often. Cycle counts serve as a vital check and balance tool in making sure that inventory is reflected in inventory management systems and the inventory is what is available on your shelves. Cycle counts should be conducted frequently and integrated into the daily operations of warehouse staff. Cycle counts can play an important role, but for the purpose of this article, we want to focus on inventory management.
Here are some 8 tips to help you optimize your company’s inventory management system.
It might sound cliche, but being prepared is the best way to ensure that your inventory management process runs smoothly. Depending on the type of goods you sell, you may want to re-evaluate your inventory levels each month, quarter, or even annually. And if you notice certain items selling out more quickly than others, you can adjust your future purchasing decisions accordingly.
If you’re selling a product that has a long shelf life, you can scale back on your purchasing of that item, but still, make sure you have enough on hand to meet customer demand. On the flip side, if you sell something that has a shorter shelf life, you may need to restructure your inventory levels more frequently.
Inventory is a necessary part of running a business, but it can get expensive. Luckily, there are ways to reduce the cost of your inventory purchases. One strategy is to purchase one-time items (like packaging, hardware, or cleaning supplies) as needed. If you need to purchase something for the first time, it’s probably best to purchase it as needed, instead of keeping it in your inventory. This way, it won’t cost your company anything unless the item is actually used.
There are a few exceptions to this rule. It’s a good idea to keep a few of your most commonly used supplies in stock at all times. Resources like cleaning sprays, small tools, and packaging materials may need to be replaced on a regular basis. In this case, you’ll want to keep some of these items in your inventory, but purchase them as needed to keep your costs low.
Inventory management systems involve a lot of manual processes, so it’s important to try to automate as much of your workflow as possible with inventory management software. In particular, you’ll want to look into software solutions for tracking your inventory levels. This will allow you to see at a glance how much of each item you have in stock (utilizing a safety stock can also yield beneficial), as well as it’s cost.
If you’re selling inventory online, you can also use software to automatically update your stock levels as items are purchased or reordered. Try to automate as many of your processes as you can, so you can focus your attention on other areas of your business. Automated processes also help reduce human error, which is another big benefit of investing in these solutions. The future of ecommerce and even brick-and-mortar stores will sttart to value the importance of technology. Inventory is a great start to introducing these to your business.
Many business owners neglect to pay attention to the markdown process, but it’s an important part of the warehouse management system. Expiration dates are also important to track, as certain items may get stale (excess inventory) and need to be resold before they’re purchased by customers.
You’ll want to keep track of the dates when items are purchased, as well as their condition (if applicable). This will allow you to monitor items that are getting close to their expiration date, so you can restock them or offer them at a reduced price. Markdowns can be used to clear out merchandise that hasn’t sold, but it’s an important process, and you don’t want to make mistakes. Inventory control is important. Be sure to keep track of expiration dates and markdown dates so you don’t sell stale goods, or mistakenly offer items at full price.
While it’s important to not purchase more inventory than you can sell, it’s also important to actually store your inventory properly. You might only need to store a portion of your inventory at one time, but you’ll want to make sure you’re storing it in a proper facility. Depending on the type of inventory you sell, you might want to store it in a climate-controlled facility. It’s also important to consider supply chain management when you are looking at storage. It all connects to the inventory.
If you have a physical inventory like you’re storing items like food, beverages, or chemicals, you may want to look for a facility with a high standard of security. If you’re storing inventory on your own property, you’ll want to make sure it’s properly safeguarded against theft and natural disasters.
Depending on the type of product you sell, you might be able to utilize committed inventory and/or warehouse space. Committed inventory is inventory that has been purchased and is already scheduled to be shipped to your business. It can be a great way to reduce your inventory costs. Warehousing inventory closer to your business can also help reduce your inventory costs.
This is particularly useful if you sell products that are bulky or require special handling, making them difficult to store at your business. If you are able to utilize committed inventory or warehouse space, it can help lower your inventory costs. However, it’s important to understand that you may be required to pay a fee for these services, so you want to make sure it’s worth it for your business before committing to a contract.
As you track your inventory costs, you’ll want to keep an eye out for anything unusual. If you notice a pattern where certain items are consistently out of stock, or constantly sell out, it might be time to scale back on purchasing that item.
If certain items are taking up too much room in your facility, it might be time to re-evaluate their importance. You might be keeping too much inventory on hand, or storing it in a manner that’s not cost-effective.
A lot of the inventory management tips above focus on managing your own inventory and dealing other variables like economic order quantity. However, you should also try to manage your vendors and suppliers. If you’ve found a reliable supplier, you may want to create a relationship with them. This may allow you to negotiate better prices, or receive discounts for large purchases.
If you notice a supplier is consistently providing low-quality products, or you’re paying more than you should be, you’ll want to switch up your source. You should also keep tabs on your suppliers, to make sure they are meeting your needs. If they start making changes (or go out of business), you may want to find a new supplier quickly.
Deciding on an inventory management solution is an important aspect of running a small business, but it can be difficult to manage. Fortunately, there are a few ways you can optimize your process, including planning ahead, making the most of one-time purchases, and automating as much as you can. It’s also important to pay attention to markdowns and expiration dates, and don’t forget the importance of storage. Additionally, it’s crucial to manage your vendors and suppliers, and track and review your inventory costs to make sure everything runs as smoothly as possible. Let us know if these tips brought you any success in your own inventory management systems. We want to continue to offer valuable tips and information for our readers
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