4 Best practices for efficient inventory management
Maintaining proper inventory levels is never something we think about when we start out in the business world. We’re too worried about the sales funnel, repeat customers, and where to spend our profits. But we quickly find that inventory management is very important.
If your company’s inventory management system is constantly letting you down, there’s no time like the present to upgrade. You can turn this area of weakness into a strength. Inventory management can also help reduce costs which will contribute towards improving profitability. Here are four best practices to install in your business to improve your inventory management:
#1 – Invest in inventory management software immediately
Digital technology is not a passing fad. It is a necessity for any business. This extends to your inventory management system. If you are still using paper bookkeeping methods and order forms, an upgrade is necessary.
Too many businesses are moving too fast to keep up without digital intervention. You’ll thank yourself in the long run. You will cut down on manual processes and can then use those vital staff-hours for more profitable endeavors. When you choose inventory management software, you can:
- Eliminate paper record keeping
- Enable more corporate social responsibility through helping the environment
- Provide accurate inventory counts
- Follow a product along the supply chain.
#2 – Make better forecasts with inventory management system data
When you use digital technology, data becomes your ally. The trick is to determine what data is important. Big data is a term people often throw around in regards to inventory management. But just because it’s listed on the order purchase does not mean it’s vital to the future of your company. Many inventory management software packages come with forecasting software. This can parse data and use it to:
- Reveal trends, because the last thing you want is to have too much stock, where you have to sell it at a loss or too little stock, where your customers leave you for the competition.
- Predict future patterns
- Spot seasonal shifts
- Help make other crucial decisions
#3 – Accurate inventory management eliminates extra stock
One of the oldest theories in inventory management concerns economic order quantity (EOQ). EOQ lets you know when to reorder stock. With inventory management software, you can quickly label every item in your warehouse and give it a status based on how long it has been in the warehouse, the last time something similar sold, etc. This can allow you to see what items you may have that aren’t selling or that are out of date. Ideally, you’ll use every last item in your inventory. Your software may offer an audit to show the current status of your inventory.
There are a few things you can do to unburden yourself of extra inventory, such as:
- Offer it at a below-market price
- Pair it with better-selling items at a reduced rate
- Donate it a suitable charity as a write-off
#4 – Re-configure the warehouse to maximize efficiency
Say your company sells condiments in bulk to restaurants. Your No. 1 seller is ketchup, which you stock right inside the front door of the warehouse. When trucks come with more from the manufacturer, it’s very easy to unload and restock. When orders come in, it’s a breeze for your pickers get it onto a truck for delivery.
Your No. 2 seller is mustard. Because of the way the warehouse is set up, mustard and ketchup are hundreds of feet apart. When stock comes in or orders go out, there’s a considerable amount of dodging and weaving involved on the warehouse floor.
A majority of your clients order ketchup and mustard at the same time. This means the ketchup does a whole lot of waiting for mustard to catch up – i.e. make it to the front door. The extra time lost in moving items around in the warehouse is reflected in:
- Working hours spent by your employees
- Time wasted by your transportation team sitting on-site to have the product loaded
- Slower speed in delivering customer orders (loss of brand appeal)
There are numerous ERP software packages designed specifically for warehouse maintenance that can help you see which items are selling the best and which are selling in conjunction with another product to develop a well-defined layout of your warehouse that maximizes your staff’s time and efficiency.
Inventory is everything when it comes to your business. Have too little, and you’re headed for the poor house. Have too much, and it’s tied-up money, burning a hole in your pocket.
An inventory management system is the only way to combat shortfalls that can cost your company time, money and its reputation.
An inventory software management system might be expensive up front, but it will pay itself off quickly and become a lifetime asset for your company.
Talk to our experts who will help you choose the right lifetime asset for your company.