A well-functioning inventory management system is essential for the smooth operation of your business. If you don't have one, it could cause many problems and disrupt order execution and day-to-day business.
Consider a successful retail business that sells products and goods to its customers directly. You might have imagined a small business, a local shop, or a well-known supermarket. Then you try to deduce what these retail establishments have in common. They must keep a certain number of products and goods in stock, correct? What if they have a physical store as well as an online store?
How do they track what's in stock and what's sold out?
You can now see how important effective inventory management is for retail businesses. This is why we believe that providing you with information on how to manage inventory is essential to keep business operations running smoothly and efficiently. We also have the most effective inventory management techniques to guide and assist you in running your own online retail store.
What is Inventory Management?
Image is taken from Strikingly user’s website
Inventory management is a component of supply chain management that seeks to ensure that the right products are available for sale at the right time and in the right quantity. If done correctly, businesses can reduce the costs of carrying excess inventory while increasing sales. Inventory management software can assist you in understanding how to track inventory in real-time, thereby making the process more efficient.
Managing inventory ensures that you have the right products in the right quantities on hand, avoiding product outages and wasting money on excess inventory. You can also make certain that your products are sold on time to avoid spoilage or obsolescence and waste money on inventory that is taking up space in a warehouse or stockroom.
Inventory Types
Before you can tackle effective inventory management, you must first understand what inventory consists of. Here are a few examples of the many different types of inventory:
- Raw materials, or materials used to make your products
- Unfinished goods work in progress that is not yet ready for sale
- Finished goods are typically kept in a warehouse until they are sold or shipped
- Goods in transit, which have left the warehouse and are being transported to their final destination
- Cycle inventory or products delivered to a business from a supplier or manufacturer and immediately sold to customers
- Anticipation inventory or excess products purchased in anticipation of a sales surge
- Decoupling inventory refers to parts, supplies, or products set aside in anticipation of a production slowdown or hall
- MRO goods, which stand for "maintenance, repair, and operating supplies" are used in the manufacturing process
- Buffer inventory, also known as "safety stock," serves as a buffer in the event of an unexpected problem or the need for additional inventory
Sorting your inventory allows you to see which items belong to the same category and then manage accordingly. For example, you'll treat finished goods differently than raw materials.
Why is Inventory Management Necessary?
Image is taken from Strikingly user’s website
Effective inventory management is a fundamental component of long-term success. The rest of your supply-chain management will fall into place once your inventory is properly organized. Without it, you risk a slew of errors such as mis-shipments, out-of-stocks, overstocks, and mis-picks. It is impossible to overestimate the significance of proper warehouse management. Mis-picks are caused by incorrect paper pick lists, disorganized shelf labels, or a cluttered warehouse. Mis-shipments are a direct result of incorrect picks at the start of the inventory process and a lack of quality control procedures.
Out of stocks and overstocks occur when a company places orders manually without having a complete understanding of the state of its inventory. This is a poor predictor of effective inventory management forecasting, resulting in either too much or too little stock. All of these errors will cost you money and cost you time spent correcting the errors later. When management tools are not used, the risk of human error increases by the minute. And your customer reviews and loyalty suffer as well.
Effective Inventory Management Tips and Techniques
Here are a few methods for small business inventory management:
1. Improve Your Prediction Capabilities
The accuracy of forecasting is critical. Your estimated sales statistics should be based on historical sales figures, market trends, economic growth projections, promotions, marketing initiatives, and so on.
2. Use the First-in-first-out (FIFO) Method
Image is taken from Strikingly user’s website.
Goods should be sold in the same order they were purchased or produced. This is especially true for perishable items like food, flowers, and cosmetics. It's also a good idea for nonperishable goods because anything left out for an extended period can become damaged, out of date, and unsellable. In a warehouse or storage facility, the best way to use FIFO is to add new goods from the back so that older products are at the front.
3. Determine Which Stocks Have a Low Stock Turnover Rate
For effective inventory management, if you haven't sold any stock in the last six to twelve months, it's time to sell. Because excess inventory wastes both space and money, you should consider other ways to get rid of it, such as a special price or promotion.
4. Carry Out a Stock Audit
Even if you use advanced inventory management software, you should count your inventory regularly to ensure that what you have in stock matches what you think you have. Businesses use various methods, including a year-end physical inventory that counts every single item and regular spot-checking, which is especially useful for products that move quickly or have stocking issues.
5. Make Use of Inventory Management Software that is Cloud-based
Look for sales tracking software that can track sales in real-time. There are software programs that connect directly to your point of sale and allow you to adjust your stock inventory management levels automatically whenever a transaction occurs. Receive daily stock alert emails to let you know when items are running low or out of stock so you can order replacements as soon as possible.
6. Keep a Close Eye on Your Stock Levels at all Times
Make sure you have a good system for keeping track of your inventory levels, with the most expensive items being prioritized. By automating most of your tasks, effective software saves you time and money.
7. Reduce the Time it Takes to Repair Equipment
It's crucial to keep track of critical assets for effective inventory management because they aren't always in working order. A faulty piece of equipment may be costly. Understanding the life cycle of your machinery and its parts and anticipating problems requires continuous monitoring.
8. Don't Ignore Quality Control
Image is taken from Strikingly user’s website.
It is critical that all of your products look good and function properly, regardless of your field of expertise. It could be as simple as performing a cursory inspection during stock audits, complete with a checklist for damage symptoms and proper product labeling.
9. Seek the Help of a Stock Controller
Stock control refers to keeping track of the inventory you have on hand at any given time, which can range from raw materials to finished goods. You may need to assign responsibility to one person if you have a large inventory. A stock controller is responsible for processing all purchase orders, receiving deliveries, and ensuring that everything arrives in good order.
10. Keep Your ABCs in Mind
Many companies find that categorizing inventory products into A, B, and C categories help them keep a tighter grip on higher-value items.
11. Take into Account Drop Shipping
When your company uses drop shipping methods, you can sell items without keeping inventory. A wholesaler or manufacturer is in charge of effective inventory management and product transportation when a customer purchases from your store. You will not have to worry about inventory holding, storage, or fulfillment in this manner. Many online store owners use drop shipping methods, but this supply chain fulfillment strategy can be used by a wide range of businesses in various industries.
Inventory Management with Strikingly
Strikingly is dedicated to providing our users with the information and skills they need to succeed online. We understand how important it is to develop the most effective inventory management solutions, whether you are a retail shop owner, a small business owner, or a corporate business manager. Finding a website builder that includes everything you need for business operations and inventory management is rare. Strikingly has a solution for you if you struggle to keep track of your inventory files. You can run your retail business online or offline, but good inventory management techniques can help you stand out from the crowd. Adding a simple store to your company's website is a breeze with Strikingly.
Executive Summary
Because inventory is your company's most valuable asset, you must safeguard it and nurture it in the right direction to save and make money. If you don't use effective inventory management strategies, you'll never be able to get ahead. Invest in inventory management software that understands the basics. For a long-term business, the fundamentals are critical. Software should aid your development rather than hinder it.
