Inventory management has a powerful effect on your business’s efficiency, customer service, and reputation. Running out of stock on important items or suffering from data-entry mistakes that inaccurately reflect your current and past inventory can seriously hurt your overall business. When you can’t fill an order correctly or on time, it’s frustrating for employees and clients, affects your profit margin, and can damage your relationships with clients. So what are the best ways to stay on top of your inventory and manage your inventory-based business?
Get the numbers right before you buy, and adjust as needed.
Too much and too little are both bad when it comes to stocking your products. Overstocking inventory can negatively affect profit margin because stocking inventory that doesn’t sell can be an expensive mistake that drains your capital, especially if you need to mark it down to move it. However, not stocking enough of the right product is also an issue when you need to fill an order and don’t have it.
Be balanced and accurate by looking at past sales to predict future patterns, such as seasonal or time-of-month rises or falls in sales. Then, continue to track your inventory, look for patterns, and make adjustments as needed. If there is a big difference from normal sales, understand why and identify if it is a short or long term trend.
Know the importance of each inventory item.
Not all inventory is created equally. Often, a few products will heavily drive your sales, while others may be sidelined but are still important overall to your business. Weigh out which items are of highest priority and most affect your profit to ensure these items are always in stock no matter what. If you see fluctuations in item sales, adjust your inventory to properly reflect this.
Remember that it’s not just about what you sell and buy, but when.
When it comes to your inventory, it’s not just about what you are selling, it’s also about when. Pay attention to lead time, or the time it takes to re-order inventory, and customer delivery timing to effectively measure inventory turnover. You need to know how long it takes items to leave your warehouse, get to the customer, and be replenished to properly time out your ordering.
Also, identify the items that sell quickly as well as those that sell slowly, so you can better predict that amount of time it takes specific items to leave your shelves.
Stay accurate and accountable.
One of the biggest mistakes inventory-based businesses make is not paying attention to the importance of accuracy during data-entry. Mistakes during order fulfillment and receiving can seriously hamper the accuracy of your predictions for future inventory.
Be smart about software.
Inventory-management software is one of the most important investments your business can make because it can help you track your inventory more accurately, reduce data-entry mistakes, communicate effectively and synchronize information between sales and inventory teams, complete inventory analytics, and more. How do you choose which inventory-management software to invest in? Choose software that offers a comprehensive set of flexible tools and allows you to keep track of item levels and cycle counts and communicate inventory needs instantly. Additionally, ensure the software works with the tools your team already uses to make it easy to integrate.
Even the best software means nothing if you lose data due to hardware issues. Make sure to stay backed up both in the cloud and off so that you never risk losing all of your hard work.
Your goals when managing your inventory-based business should be to stay as accurate as possible so you have better predictive buying power. A central database of pertinent stock and product information and comprehensive understanding of your inventory allows everyone to be in the know so they can make better business decisions. If you have an inventory-based business, what tips do you have for managing?