7 ways to improve Inventory management – It has been seen that everyday small business and mid-sized business face inventory risks that range loss due to theft, shelf life, or damage, to excess supply. If there is no proper management of all these risks, it can have a seriously negative impact on a company’s bottom line. Little inventory will lead to the loss of sales and unhappy customers, while too much inventory increases expenses on space, transportation and handling charges.
There are simple solutions to manage these risks by helping business owners understand and forecast inventory needs and track stock movement in real-time.
In order to manage inventory better, we first need to understand what inventory means- The term Inventory management simply means the management of the quantity, location and other details of stocked goods which is available with the owner for the purpose of selling and revenue generation.
In order to grow your business, it is important to effectively control inventory. Let’s look at a few best practices to improve inventory management.
- Know your Inventory
Not enough to just be aware of what’s in your inventory. You need to have a proper look at what your inventory is capable of as it will be easier to keep track of categories of inventory. If you mention both what it actually is, and what type of stock it is – whether that’s replenishment or excess or obsolete stock. This is one of the best practices to improve inventory management.
- Identifying the most productive inventory you have
There are many businesses which just focus on keeping a level inventory on all products, whether it’s high or low selling inventory. However, it is also necessary to determine what your most productive inventory is and focus purchasing on those items, rather than just trying to have the same amount of product across the board. Does it make any sense to keep levels of inventory on products that don’t sell frequently? You definitely don’t want to run out of stock on the product that does sell quickly.
- Keep a check on safety stock levels
Another important task that is often overlooked is checking safety stock levels. On a daily basis and at a more granular level, then it goes a long way towards ensuring that your inventory data is as up to date as possible. It may seem boring and something that can be tracked via automation but it is better to keep close tabs on safety stock makes a difference.
- Tracking Distressed Inventory
Tracking of goods can become a challenge with a lot of inventory, making them fall through the cracks. Probably the biggest problem that most businesses and warehouses have is keeping a proper tab on the distressed inventory. It happens sometimes that you get overstocked when a product doesn’t sell fast enough, and soon you have piles of distressed inventory to deal with. If you will keep track of how long you’ve had certain inventory, you can move it out before it reaches the point of no return and you can’t sell it anymore. In case you can’t sell it, donate it if you can, and then you’ll at least be able to write it off on your business’s tax return.
- Complement Inventory Management to Sales and Operations Planning
An astound number keep the inventory management separate from their sales and operations planning. You can maintain a better view of your overall business operations, which in turn gives you a better control over inventory
- Don’t Let the Market Sway You Too Much
Business often gets into new trends and buy up a lot of new inventory in order to try out new products to sell. You will end up with the overstock of items if the strategy won’t pay off and the worst part is you can’t get rid of easily with that. In spite of letting control by the apparent market trends, seriously consider whether you’re making good choices for your business.
- Root-Cause Analysis is needed
Performing the root cause analysis an excess and obsolete stock will let you know how they are linked to action plans that control these problems. Organizations with effective inventory management create two task forces with linked action plans. Firstly, it recognizes the root causes and determines ways to reduce the creation of new access and obsolete stock and then concentrates on ways to sell off the stock more effectively. Providing all the sales team with a list of top excess or obsolete products to push to ensure that they’re discounting specified excess products.
Make sure to avoid excessive expenditure on managing overstocked inventory and with inventory stock out you don’t only lose money on that missing good but also customer loyalty. Identifying the most productive inventory and distressed inventory is of equal importance as this can beef up your revenue or distress your revenue. Simply give your inventory the focus that it deserves as a healthy inventory leads to a better financial health of a company. Get the right ERP to help you manage inventory the right way and without hassle.