Increasing competition, complex supply chains, and fluctuating demand are just a few of the issues that inventory management often faces. You’ll need to keep up with the most recent trends in the market to overcome them and flourish.
Here are some tips that can help you stay on top of inventory management.
One size does not fit all
Inventory management requires a fine balance. While not investing all of your money in inventory and warehouse space, you must maintain a sufficient amount on hand. There isn’t a single, successful method for managing inventory that works for all businesses.
What works for other people might not work for you. After all, inventory frequently brings a wide range of difficulties together. Everything from geopolitical events to technological advancements can have an impact on your supply chain and inventory.
Furthermore, you might need to handle some inventory differently than others within your own business, such as perishable versus non-perishable commodities.
Keep thorough records as you experiment with various strategies and utilise software to assist in tracking data and generating reports and dashboards to determine which strategies best suit your brand.
Understand the different kinds of inventory
Inventory is held in varying amounts and forms by various businesses. The phrase “inventory” often refers to the components, raw materials, and finished goods that your company utilizes, produces and sells.
Which four sorts of inventory are there? You should be familiar with the classifications of raw materials, semi-finished items, finished goods, and operational, maintenance, and repair supplies. All four types may be stored by manufacturers. Only the latter two may be stored at other warehouses, such as those that specialize in e-commerce.
Ensure that you know the kind of inventory you are stocking and how to handle it well.
Balance vendor and supplier relationships
Your company wouldn’t be successful without its suppliers. It’s crucial to keep up positive relationships with them. You’ll frequently need to contact your vendors for support or other factors, and their quick and favorable responses can prevent your company from going through a lot of trouble.
As you make judgments or observe patterns about your stock, inform your merchants. Inform the vendor well in advance if a promotion that potentially leads to increased inventory turnover is anticipated. Also, if there is going to be a sale, suppose in December, ensure that they know about it by July.
Treat your suppliers as important partners. Find out how they produce the products or resources you buy from them, as well as the steps they take to complete those steps. This fosters trust and gives you a better grasp of any obstacles they could face.
Be ready for surprises
Customers are fickle, and supply chains around the world are susceptible to change. When unexpected problems arise, you can adjust, thanks to contingency preparations.
Some of the common unexpected roadblocks are:
- Stock shortage
- Cash flow problems
- You run out of space
- You have purchased too much inventory
Consistency
Verify the number of pallets, boxes, and storage keeping units (SKUs) the stock contains when it is received, enter this information in a warehouse management system (WMS), and then physically place the goods inside the warehouse. The variance between what your system claims you have and what you actually have on hand can be decreased by carrying out this task consistently.
Don’t leave the order restocking to someone else
Take charge of your reorders rather than leaving that to merchants. Future revenue forecasts and consumer demand tracking are both improved. Additionally, inventory management software that establishes automatic reorder points and provides up-to-date sales history can be useful.
Managing your own orders can save time, guarantee you have the products on hand to fulfill consumer demand, and help you better manage your warehouse space by having the right quantity of inventory on your shelves, even though it could entail extra work for you.
Regular audits
Understanding inventory levels is the first step toward effective management, which requires counting your inventory initially. What are the advantages of an inventory audit, and how do you go about performing one?
When auditing your inventory, start by comparing what is actually on hand to what is displayed in your program. Either you or a third party can carry out the audit. A complete audit examines other performance indicators, such as your inventory turnover ratio and your inventory expenses, in comparison to historical patterns, in addition to only a physical count.
An inventory audit enables you to monitor shrinkage and identify areas for improvement, such as receiving inefficiencies.
Understanding EOQ
The ideal order quantity (EOQ) is the number of items that your business should buy to have just enough on hand to satisfy consumer demand. When dealing with a product that sells quickly, you’ll want a lot of it and need less of the more expensive, slower-moving ones. However, velocity—how rapidly things sell—is not the sole factor.
The EOQ varies according to how much it costs to make, ship, store, and handle the item. Learn to adjust EOQ, and you’ll be able to buy less inventory overall, maximizing profit while minimizing handling and storage expenses.
Setting par levels
The least amount of stock you can have before placing another order is called a par level.
When determining your par level, you should factor in the typical amount of units consumed during a specified time period, sometimes a quarter. The next consideration is safety stock for demand peaks.
The benefit of par levels is that once established; you don’t need to make difficult decisions; all you have to do is keep track of your inventory. Par levels, though, aren’t fixed in stone. You might need to update your products if their velocity changes or if seasonality is present.
Collect accurate data for analytics
Utilizing data from a variety of sources, inventory managers optimize their warehouse storage, expenses, and processing times. Examples include things like picking levels, lot numbers, SKUs, and supplier information.
By keeping track of this data, you may build a priceless data repository that will serve as the basis for your analytics practice. You can reliably create, track, and save this information with inventory management software that integrates with UPC scanners and other RFID devices to reduce the need for manual data entry.
Additionally, that software can assist in serving data insights using easily readable dashboards showing measurements and KPIs for inventory management.
So, these were the tips for inventory management. For bigger inventories, it can get tough to manage everything by yourself; that is when inventory management systems can be used.