How To Manage Inventory Effectively With These 3 Proven Tips
Whether you own a small, medium, or large business, if you don’t know how to execute proper inventory management, your business is sure to suffer. Learning how to manage inventory effectively is one of the most important steps of owning and managing a business because it helps ensure that once your business gets going, it can sustain itself. quarter after quarter, year after year. Effective inventory management leads to a smooth-running business, contented customers and excellent customer relations, and more revenue as times goes on, making this practice imperative for success. There are many approaches to managing inventory, and some strategies work better for some businesses while some work better for others. As your business grows, you’ll learn which techniques are right for you. To start, however, these 3 proven tips are excellent for any business of any size. If you want to know how to manage inventory effectively, these three tips should be your starting points.
Here’s How to Manage Inventory Effectively with These 3 Proven Tips
Inventory management is important for helping your business grow and thrive. Too often a business runs into ruin and failure because of small errors like poor inventory management that could have easily been avoided. The most unfortunate thing to think about is that if you don’t put these proven tips and practices into place from the start, it can be incredibly difficult to remedy any mistakes that may come from doing business without them. For example, when you hold inventory for too long, it can actually hold up the flow of money, and it goes without saying that a stunted money flow can destroy your business with little hope to build it up again. With these three proven tips, you can be smart and ahead of the game, ensuring success and proper business management overall.
1. Always Use ABC Analysis
ABC analysis is a good place to start when it comes to learning how to manage inventory effectively. This analysis system is simple to learn and understand and really streamlines your inventory into a configuration that is both easy to manage and maintain. The way ABC analysis works is to arrange all the items in your inventory into a hierarchy of least important to most important. When put in practice, ABC analysis looks something like this:
- A-Items: These are your high priority, best-selling stock items that call for regular re-ordering and quality review. If these items are not often stocked, shipped, and replenished, it could result in poor customer service, loss of business, and even loss of money. To identify A-Items, look for what is always popular, what leaves the shelf first, and what customers are always asking after.
- B-Items: These are the items that are valuable, but less so than A-Items. They are medium-priority stock and usually call for monthly re-orders. Though they are not as popular as A-Items, their absence or a delay in their replenishment does not go unnoticed.
- C-Items: These items are low-priority stock and are often carried in high volume. This is because they do not move from the shelves as quickly or as often as A or B Items, meaning you usually have more of thee despite less demand overall. They require minimal re-ordering and may require smaller amounts when ordering to save on costs over time.
When you organize your stock by this standard, you actively streamline your inventory so that how items sell is directly correlated to what is more popular and in higher demand. In time, this technique optimized storage space as well as streamlines order fulfillment.
2. Utilize a Cloud-Based Inventory Management System with Barcode Scanning
One of the best decisions you can make for your business and effective inventory management is to start using a cloud-based inventory management software system. If your system comes with barcode scanning, even better. Cloud-based Inventory management systems allow businesses to pay for excellent and necessary features that can be upgraded when needed as your business grows. What’s more, a software system with barcode scanning offers a certain level of accuracy that is not easily attainable when managing inventory manually. Most cloud-based systems are obtained by paying a single subscription fee that renews monthly or yearly and include certain features like aut0 purchasing and replenishment of popular products when they get too low, multi warehouse data and management, Lot ID tracking, serial number tracking, barcode inventory solutions, and much more. In short, a cloud-based inventory management software system will take all the headache from inventory management and make it simple, quick, and easily accessible from any location and device, whether it is your phone, laptop, or tablet.
In addition, all your data is automatically backed up so that nothing is lost, software updates ensure you always have the latest version of your system ready to go, and you don’t have to worry about IT costs now that you’re working with your own database system.
3. Practice Regular Auditing
Auditing is one of the best ways to ensure that inventory and numbers are matching up. Whether you are working with a software system or handling the numbers yourself, you should always double and triple check things to ensure that inventory stock and recorded numbers are on point. If they aren’t, it could signify miscalculations, lost items, or misplaced money, which could lead to other issues. When auditing, there are actually a few ways to do so that are fairly simple and highly effective:
- Physical Inventory: Physical inventory refers to counting all your inventory at the same time. Most businesses that use this method do so at the end of the fiscal year, usually making it an annual, year-end event that ties in well with filing income tax and accounting. Of course, a physical inventory audit can be both tedious and time-consuming as well as prone to mistakes.
- Cycle Counting: An alternative to doing a full on physical inventory audit is to use cycle counting to audit inventory. Cycle counting saves businesses from having to do a full-count at the end of the year because they count in cycles throughout the year. Cycle counting can be done by checking a different product each day, week, or month on a rotating schedule so that everything gets checked and nothing is missed. Again, you determine how often the cycles come around so that you have a system that works best for your specific business and products.
- Spot Checking: Spot checking goes well with full physical inventory auditing at the end of the year. When you do the physical audit at the end of the year, chances are you can run into problems, especially if you have a lot of products to deal with. To mitigate this, you can begin spot checking throughout the year. Spot checking is super easy and only involves choosing a certain product, counting it, and then comparing it to the number of what the product amount is supposed to be in your records. Spot checking doesn’t have to be done on a schedule, but is most useful as a supplemental activity to physical inventory. The best products to spot check are those that are in high demand with customers.
As you can see, learning how to manage inventory effectively will get a little easier when you implement these three tips that are proven to work well. They are tried and true, showing that small changes can make a big difference in the life of your business. When it comes down to it, your business needs customers, consistency, and proper management to survive. These three tips provide each of these criteria and more, giving your business a total advantage for growth and prosperity.