One of the most important parts of your business is inventory management as it is necessary for any business to evaluate on a regular basis to ensure that you are on track to success. Not properly tracking things can lead to mistakes such as lost orders, delayed orders, or even potentially losing a customer.
What is Inventory Management?
Being a part of supply chain management it aims to always have the right products in the quantity for sale at the right time. A business can reduce the costs of carrying excess inventory while maximizing sales if done effectively. The good inventory helps you to track your inventory in real time to streamline this process.
Inventory management not only supervises the flow of goods from manufacturers to warehouses but also facilities to a point of sale. A key function of inventory management is to keep a detailed record of each new or returned product as it enters or leaves a warehouse or point of sale.
Things you should look into your Inventory management software:
- Tracing inventory in real time
- Prevent production and product shortages
- Improve cash flow, reduce costs, and boost your business’s bottom line
- Prevention from excess stock and too many raw materials
- Easy inventory analysis allowed on any device
- Less time-consuming barcode scanning to speed up the intake
- Optimization of warehouse organization and precious employee time
- Allow for multi-location management, tracking inventory across several locations or warehouses
Some common mistakes entrepreneurs make in managing their inventory and also the solution to it.
1. Too Much Inventory
It is easy to spend too much on inventory, which can eat up working capital and erode profits. Of course, Warehousing is not free and inventory that sits on a shelf is subject to damage, depreciation, and even obsolescence. Old inventory can be very hard to move. “marking it down, selling to discounters, or shipping it to overseas liquidators”, you may end up like this.
Start keeping a record or journal of how much you will need and when you will need it. If you have sold 200 items per month for past 12 months, chances are that you will need 200 this month. Then there’s seasonality: Do you usually see a fourth-quarter spike with holiday sales? If you have home and garden business, do you see more activity in the spring selling season? You can also identify and quantify less obvious patterns such as month-end spikes.
2. Inaccurate Inventory Tracking
Make sure to have all it on your hand once you know how much you need. During receiving, during order fulfillment and the all-too-common pilferage. In manufacturing, you have also got to account for yield or scrap during production.
Barcode scanning and using electronic data interchange (EDI) helps in the elimination of data entry errors. You can also use a system name “cycle counting”. Select particular items a day and compare the inventory record to the actual count. Best sellers should get counted more often.
3. Lack Of Priorities
It can take an outsized amount of time and resources to keep track of all the details for each inventory item. Some triage is in order.
The items that matter the most should be more focused. Usually, 80% of demand will be generated by twenty percent of your items. Your most of the efforts should be spent on those “A” items, forecasting, reviewing the in-stock position and reordering more frequently. Next highest-selling 30% of items, the “B” items, will typically generate about 10% of sales. The slowest-selling “C” items account for half the items you stock, but only generate 10% of your sales.
4. Using Spreadsheets
For almost everyone, it may seem natural to use spreadsheets such as Microsoft Excel or Lotus 123 to track your inventory. It’s easy for spreadsheets to be accidentally deleted or for changes to be lost and there’s no foolproof way for multiple people working on inventory to synchronize their Spreadsheets.
Use software such as (SOFTWARE NAME). Yes! It is better-known as accounting packages but they include inventory features and will make it easy to get a dollar value for your inventory. Moreover, They can provide you with a central database.
Have you ever thought what will happen if there’s a fire on your computer or it got damaged or stolen? It is not just enough to get your inventory but to make a back plan is better.
Your backup plan can be as simple as saving critical data to a removable thumb drive. There is some special software which done our work too. Send a backup copy of your inventory data to your accountant every month will not take much time of yours. After all, why should the fun of inventory be limited to your employees?
4 Inventory management Tips:
Here are 4 tips on managing inventory in order to allow any inventory-based business to grow without operational headaches.
Understand the differences between product types
Generally, 4 types of product exist in businesses which are used to account for inventory
Item- No packaging or assembling effort is there and the product is ready to be sold to your customers, a simple product that gets delivered to the warehouse.
Assembly– Any item which is needed to get assembled together by smaller item parts within the warehouse like a bicycle is comprised of a frame, wheels, chains etc., then finally put all of the parts together results in a finished assembly.
Family– A group of like items or variants of a parent item like having a jeans item, it comes in 3 different sizes and 4 different colors.
Always have SKU numbers, barcodes and product specifications
Every product to have a unique ID no. known as SKU (Stock Keeping Unit) similar to driver’s license. An SKU is vital for internal use as there will be instances where a particular product needs to be found quickly and having an SKU will make it easy to find. Additionally, having an SKU is imperative because another company could have a product named “Black Pants” exactly like and resellers are dealing with multiple vendors, thus creating a need to differentiate between similar products.
Track what you sell and to whom
There is a vast amount of data related to a company’s products and who the consumer is. For example:
- Which products are top-sellers?
- Which customers are buying the most?
- when people rarely buy, count that month?
- How many repeat customers do we have?
If you don’t have the right tools to track this information is similar to driving with a blindfold…it is just not a smart business decision.
Companies precisely measure key metrics to drive an increase in sales, customer lifetime value and purchase size. For example, if you want to run a profitable business, you need to analyze how much money it costs to get a customer (in terms of sales and marketing). Measure how much that customer will spend with you over the next two to five years. If the lifetime value is 3 times or more than the cost of sales and marketing for that one customer, then you will have a profitable business.
Making out decisions based on gut feelings lead to disaster when dealing with inventory and order management. Even early on in the building of a business, making an investment in a system to help with this can save a lot of time and money down the line.
Have monthly audits of your inventory
We still need to reconcile the numbers in our books with real numbers even with the greatest technology around. At least, Doing a monthly or quarterly audits of your inventory is a great practice. It’s an easy process that, with a well-kept system, will prevent major roadblocks in the future.
Here’s an easy way to perform a monthly audit:
Print out a sheet with the name of the product, the SKU number and the inventory number you have in the books. Leave an extra blank space next to the product so that you can quickly write in the counted inventory number and see if your system matches what you actually have in stock.
It’s high time that you should take control of your inventory management and stop losing money and Choose the right inventory management techniques for your business, start implementing them today.
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