Managing inventory isn’t glamorous, but you can’t run your business without it. Here are seven great tips for painless management and inventory success.
Managing inventory is among the least glamorous — but most urgently necessary — aspects of running a successful business operation. Without effective inventory management, virtually any small business would experience a routine loss of orders, shortage of products and/or supplies, delays in fulfillment and shipping and, consequently, a steep drop-off of satisfied customers. According to the warehouse management firm Scanco, a typical business spends 25 to 35 percent of operational budget on inventory costs — an even higher amount when ineffective and improper management techniques are used. By upgrading techniques and equipment, “most businesses could potentially decrease their inventory costs by as much as 35 percent,” says the firm.
Here are seven tips on managing inventory that you can implement in your small business to help reduce loss and save money:
1. Systemize the Listing of Product Specifications
Put a system in place that lists all production specifications, including (but not limited to) the name of the product, SKU number, UPC number, size, weight, dimensions and price. The SKU (Stock Keeping Unit) number is a one-of-a-kind product number. The UPC, a variation on the SKU, is a scannable bar code for identifying products through a live database. These product IDs make locating a product in your warehouse easier and quicker.
2. Base Product Orders on Sales Trends
The overriding goal of inventory management is having just enough stock on hand — not too little that you can’t fulfill orders, but not too much so your warehousing costs increase. Analyze patterns of your product sales to assess when it’s the best time to replenish stock. Which items move quickly? Which take more time? Monitoring these trends gives you a fairly accurate sense of when (and how much) to order.
3. Monitor Receipt of Inventory
This is often a touch point where errors occur. Your staff should regularly match up packing slips with catalog shipments and inspect items for damage, or incorrect inclusion, as quickly as possible.
4. Process Customer Orders in a Way That Makes Sense for You
Fulfilling your customers’ orders is clearly too important a task to be handled haphazardly. Inventory management expert Raad Mobrem recommends this multi-step process:
- Create the sales order in your order management or accounting system
- Confirm that the ordered product is available in inventory
- Pack the product and determine shipping costs
- Create an invoice and apply payment to complete the transaction
The most desirable option, Mobrem notes, is fully automating this process to cover these steps and to create useful inventory-related analytics.
5. Create a Viable Inventory Storage Process
The right way to store inventory depends on the specifics of your product, quantity, etc. For some small businesses, a neighborhood warehouse is most appropriate, while for others a distribution facility represents the most cost-effective solution. Just make sure the storage facility is set up in a way that makes it easy to locate products and prepare them for fulfillment. This may take a bit of research, but it can be a solid investment in time, money and manpower.
6. Take Inventory of Your Inventory
No inventory-management system is complete without regular audits. These can take place monthly or quarterly, as long as a rigorous process is implemented to track inventory loss due to misplaced, damaged or stolen products. In a best-case scenario, a daily audit of orders helps businesses stay on top of orders and inventory at the same time.
7. Focus on Preventing Loss
According to Kabbage, a financial services data and technology platform, inventory loss generally results both from employee loss and from clerical mistakes. For this reason, it may be necessary to enact loss prevention techniques, such as, “utilizing security cameras to reduce customer and employee theft, using security tags, limiting access to inventory and carefully monitoring customer returns.”
So while managing inventory isn’t many people’s idea of a rollicking good time, you and your team can stay on top of customer orders and fulfillment and minimize stressful episodes where your products can’t be found or prepared for shipment — by considering a few best practices.