Small business inventory management tips article and permission to publish here provided by Simcha Michael.
Many overwhelming strategies, processes and techniques will come your way if you have to learn and perform inventory management. It can be hard to make sense of the overall framework you need to use any of the techniques for a small business.
But it’s certainly possible to deal with them with some of the trusted practices in the industry. Large businesses have already pushed limits to minimize human error, and it’s high time you build solid inventory management for growing your company.
Let’s look at our highly recommended small business inventory management tips!
Here’s why you should focus on building a robust inventory management system.
- 43% of the SMBs don’t track their inventory or use inefficient management systems rather than smart inventory database applications. (1)
- One in three businesses misses shipping deadlines because they sell unavailable stocks. (2)
Here are our 10 Small Business Inventory Management tips:
Tip #1: Build a contingency plan
Unexpected issues can come up with inventory management anytime, and they may harm your business processes.
- An unpredicted sales spike can lead to overselling
- The cash flow immediately dries up, and you have a hard time paying for immediate products.
- The warehouse runs short of space during seasonal spikes.
- A slow-moving item eats up all the warehouse space.
- You’ve ordered to complete, and manufacturers run short of items.
- Manufacturers discontinue your products while you have pending orders to fill.
Ask how you’ll solve these problems and think of contingency plans. Figure out their impacts and have a solid plan in the queue to go functional.
Remember! It all boils down to solid relationships with everyone linked with your business.
Tip #2: Deploy cross-functional models
You might come across multiple inventory models if you’re adopting an inventory management system.
These may include third-party fulfillment, supplier/vendor-managed inventory, and partnerships with other organizations.
Inventory experts believe the cross-functional approach spanning across departments, be it sales, operations, or marketing, can benefit inventory functions more efficiently.
Tip #3: Red flag less appreciated products.
Not the ideal thing you want, but there will always be some stock causing pain.Some goods simply refuse to disappear from your visibility, even if it’s twelve or fourteen months. You want to have info on these items and stop them from showing up again.
Furthermore, it’s wise to clear that dead stock with offers or discounts rather than letting them stay in your warehouse and tie up your capital.
Tip #4: Double-check your stock
Pat your back for having inventory management software, but it’s always good to play it safe by actually counting the stock. It ensures the numbers in your inventory don’t betray the numbers in your mind.
Try adding standard practices like spot-checking and year-end physical inventory counts for the items moving fast to your management habits.
Tip #5: Categorize your inventory for improved visibility
Businesses dealing with many products often have to strain their eyes while tracing and fulfilling the orders. And some products need more attention than others.
Since all stock is not equal (as you can categorize them in hundreds of heads), established analysis techniques like ABC analysis help segregate products that need a lot of attention from those that don’t.
ABC analysis knows the XYZs of warehouse space optimizing, pricing strategy, and the suppliers your business needs.
Add your products to any of these three categories:
- High-value products: add all the products with low frequency of sales
- Moderate value products: add all the products with moderate frequency of sales
- Low-value products: add all the products with high frequency of sales
Tip #6: Have a better inventory management framework
Owning a small business requires visibility into internal and external factors. Fortunately, you can have it by automating business processes. Automation usually helps build flexible and robust inventory management frameworks.
Barcoding or adding RFID to your products are sure shot ways to ensure you’re internally automated. Additional resources like smartphones and hand-held devices also rack up the automation. You might as well update network and cloud resources to have an international management framework in place.
Tip #7: Know more about the market and internal conditions
You can’t make crucial inventory decisions without keeping commodity and component availability insight and their current downstream and upstream pricing in knowledge.
While catching up with these data might not be comfortable for you, software like ERP and SCM typically breaks down real-time data on supplier data and point-of-sale for you.
But as much as data analytics tools can give deeper in-sight, you can also look-upon reliable third-party data that offers insight into vital market conditions such as seasonal demand fluctuation.
Tip #8: Apply first bought, first sold process
You don’t want to buy inventory and forget them for a good number of months. Instead, it makes sense to sell goods that you bought first.
Chronologically queuing up goods frees up the inventory in line and reduces losses should there be chances of damage or misplacement.
It means… you’re arranging the older products in such a way you’ll always sell them first. One way to do it is to put all your recent buys at the back of the old products. This is also know as FIFO (First-in-first-out).
Tip #9: Follow Last-in-first-out (LIFO) for heavy items
LIFO sits at the opposite spectrum of FIFO. It is usually used for heavy products as stone or brick. Pile them in a yard, so the latest products sit on the top. Proceed with the order from the top of the stock.
Tip #10: Forecast right business figures
The complexities around inventory would have been buried dead if only businesses knew to forecast projected sales. Imagine you would be buying and keeping stocks depending on your final sales figure.
But it’s almost impossible to forecast numbers without tracking pictures of your historical sales figures, current market buzzes, marketing campaigns, promotions, and the way the economy behaves.
If you haven’t thought of considering them yet, nail your inventory management with these predictive datasets:
- Market trend
- Year over year sales or sale in the same week
- The current year’s growth rate
- Contracts and subscription sales
- The overall economy
- Planned ad spend
- Upcoming promotions
Don’t forget to add more factors if they help better sales prediction.
Small Business Inventory Management
It’s not right to say inventory management tools or manual checking can independently solve your inventory problems. In fact, it has always been about using the best of both worlds to make your small business turn into figures you dreamt of!
It demands a lot of time to control your inventory management and keep the cash flow running. Choose among these inventory management techniques, and add more solidity to your business.
You must proactivity and diligently employ Small Business Inventory Management techniques.