Inventory management isn’t something that gets most people excited. In fact, it keeps a lot of business owners up at night. But when you understand some basic principles and techniques, it becomes a lot less scary. It can even become a strong suit of your company. To simplify the workflow and to save time, try these 5 inventory management tips.
At the end of the day, better inventory management produces two major benefits: improved efficiency and better profitability. It also reduces stress and gives management the ability to focus on other core tasks like sales, marketing, and customer service. But what is it that separates average inventory management from first-class inventory management? Try the following:
1. Avoid Dead Stock
If your business is like most, you keep a percentage of “safety stock” in your warehouses. While you can call it what you want, this is essentially nothing more than dead stock. Safety stock is only valuable if it’s used and you should try to come as close to matching supply and demand as possible. This is obviously easier said than done, but the next tip should help you improve accuracy.
2. Use the Right Automation Tools
You have access to powerful automation tools that businesses would have paid millions of dollars for in previous decades. A failure to use these tools is, frankly, foolish.
For example, did you know that there’s software that gives you complete visibility over every warehouse you have – regardless of how many different sales platforms and channels you’re using online? By centralizing inventory control, you no longer have to guess what’s happening. This helps you avoid overselling and underselling, both of which are frustrating.
3. Recognize Sunk Costs
Does your business keep inventory in stock that you know you won’t sell? This is inventory that you’ve had for years and that shows no signs of ever moving. While you may think you’re doing the right thing by keeping this inventory in your warehouses, you’re actually doing more harm than good.
Worthless inventory is essentially a sunk cost. You’ve already paid the expense, so there’s no point in hanging onto it any longer if it isn’t going to sell. By recognizing which inventory is nothing more than a sunk cost, you can free up space and working capital for inventory that will sell. It’s a no-brainer.
4. Conduct Regular Audits
“Regular reconciliation is vital,” entrepreneur Cassandra Campbell says. “In most cases, you’ll be relying on software and reports from your warehouse to know how much product you have stock. However, it’s important to make sure that the facts match up.”
There are a number of ways to audit your inventory. Options include taking physical inventory, spot checking, and cycle counting. Occasionally switching up your methodology will produce the best results.
5. Measure Everything
It’s impossible to improve your inventory management if you don’t know what needs to be improved. And the only way to know what needs to be improved is by tracking certain metrics and measuring results over time.
Every business has unique needs, but some of the top metrics to be aware of include inventory on hand, inventory turnover, sales velocity, sell-through rate, cycle time, and the average age of inventory.
Superior Inventory Management: A Competitive Advantage
You may not always look at it this way, but inventory management can become a competitive advantage if you let it. The key is to be meticulous and precise – don’t let anything slide just because it seems inconsequential. When you give as much attention to the finer details as you do to the big processes, you’ll notice how much there is to be gained from an investment in superior inventory management.
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