Businesses rely on good inventory management to remain profitable and stay in business. Unfortunately, it’s a notoriously difficult thing to achieve, and only a minority of companies are ever successful at it. Most simply tolerate unsold products, excess inventory, and stockouts, but that’s bad for customers.
In this post, we take a look at how to manage your inventory. Here’s what you need to do:
Organize All Your Product And Vendor Information Into A Single System
Most businesses keep product and vendor information in a piecemeal fashion, storing bits of information here and there. Others use slightly more sophisticated manual tracking platforms, such as spreadsheets. In both cases, figuring out what you have to hand, and what you need is challenging. Customers continue making purchases and it is someone’s job to match those up to stock levels and use that information to purchase goods from suppliers and vendors.
The trick here is to use a point-of-sale system that combines everything into a single platform. As soon as a customer order comes through, the system immediately identifies the product in question and then feeds that demand into the software. The software then waits until a critical quantity is reached and orders new stock, based on demand and inventory requirements.
Submit Accurate Purchase Orders
Creating purchase orders is one thing, but submitting accurate orders is quite another. Companies get their order quantities and SKUs wrong frequently because they fail to understand demand patterns, leading to both under and over-stocking.
To get purchase orders right, you need to cross reference demand with what suppliers are capable of delivering. Many companies simply look at historical trends and order new stock based on that instead of checking their inventory to see what they actually need.
They also get the purchase order process wrong. Many fail to use the right templates, leading to confusing, and illegible hand-written entries.
Make Sure That Your Inventory Orders Are Accurate
Once you receive an order, make sure that it’s accurate. Double-check to see whether everything you ordered actually arrived.
Remember, errors can occur anywhere in the system. Members of your team may have entered the wrong numbers in the purchase order form. But equally, the supplier may have sent you too much or little of a specific product.
Check the packaging slip first to see if it matches your order entry. If it does, the likelihood that the supplier made a mistake is small. However, if it doesn’t match, you’ll need to manually count the products to check that you got everything you ordered. Once you do the stock take, you can figure out which part of the information daisy chain is incorrect.
Label Your Inventory
Once goods arrive in the correct quantity, the next step is to label or tag them appropriately. You should include the following information as a bare minimum:
- Product information lets you track products internally within your inventory. Most firms use a barcode system
- Price information, such as how much your product or service costs. You’ll need this information if your product is customer-facing or if you are the final retailer of goods.
Ideally, you should tag your products as soon as you receive them. This way, you can track them internally immediately, either individually, or by the pallet. This prevents errors early on in your processes leading to over- or under-stocking.
Once you print out your labels, you can fix them directly to product packaging. If items come with pre-printing manufacturer labels, you can adapt these for your inventory tracking system, saving you money. You can also use SKU numbers if you want to avoid using your own system.
Keep Your Stockroom Tidy
Another critical strategy is to keep your stockroom as tidy as you can. The cleaner and better arranged it is, the more easily your employees will be able to find what they need. Furthermore, keeping things looking organized lets you assess the stock that you already have more easily.
Make sure that you get the right type of storage for your products. You want fixtures and fittings that can accommodate items delivered from vendors, both today and in the future. In some cases, it makes sense to invest in aluminum shelving. This strong, low-profile material displays what is on the shelf, not the shelving itself, helping you make better use of the available space.
If you have a lot of wall space, use double-tier racks and cabinets. You can also add storage bins to the floor for simple products, making it easy for employees to quickly grab high-volume items.
If you’re really pushed for space, you might want to use hanging racks. These are easy to use, even in smaller rooms.
If you choose a non-standard storage method, make sure that you label everything thoroughly. It should be easy for an employee with no experience to find relevant items, load them onto a pallet, and ship them to customers. If you need to be Sherlock Holmes to understand your inventory organization system, you’ve probably gone slightly wrong.
Keep Tabs On Your Inventory In Real-Time
Well-organized companies keep tabs on their stockrooms in real-time. This way, you can make sure that you have the right items in the correct quantities – an essential for good inventory management.
Again, the best way to do this is through a secure POS system. The moment a customer checks out at the checkout, the item registers that it is no longer in your inventory and that it’s been sold. The software then subtracts it from your running total, telling you how much you have remaining of an item at any given point in time.
Of course, mistakes can be made at this stage, too. Customers might leave items on your premises, or they may never leave your inventory in the first place. However, techniques like these avoid spreadsheets which tend to yield inaccurate results and make it hard to know how much you should order.
Figure Out What You Have On-Hand
Inventory counts, sometimes called stocktakes, are a vital part of any inventory management system. You can have the best software in the world, but unless you reconcile it with what’s actually in your stockroom, you can wind up in trouble.
Quantity on Hand is one of the most popular metrics. This tells you how much inventory you should have for each SKU that you sell to customers. Calculating the Quantity on Hand is easy. Just add newly received inventory to the previous quantity on hand, and subtract sold stock for the period.
You can also perform annual inventory counts. Firms usually do this at the end of their financial year. These tell you precisely what you have to hand and give you an overall picture of your stock balance position. This way, you can identify things like shrinkage issues and misplaced stock.
Some retailers do more frequent counts, such as once a quarter or once a month. How often you do annual counts will depend on your rate of stock turnover and the degree to which puzzling stock issues seem to be dogging your warehouse.
You might also want to do cycle counts on specific product lines. These tell you how much of a specific product sold over a given time frame, usually a couple of weeks. This way, you can see what’s selling well, and what isn’t.
This approach also lets you see what you’re running low on and whether you need to replenish your inventory more often. In many cases, you’ll find that you’ll need to increase the rate at which you order certain products.