This is a guest post by Marla DiCarlo, an accomplished business consultant with more than 28 years of professional accounting experience. As co-owner and CEO of Raincatcher, she helps business owners learn how to sell a company so they can get paid the maximum value for their company.
The mere mention of it may strike fear into the hearts of those working in the manufacturing, ecommerce, or logistics sectors as, after all, it can be rather complicated.
But with the right high-value processes, procedures, and techniques in place, inventory management can be turned from a fear-inducing activity into one which helps your business to truly thrive.
That’s why in this short, informative post, we’ll take a look several inventory management best practices, so you can help your business be more efficient, productive, and better all-around at managing their inventory. Just read through the following sections:
Now, let’s get started.
Simply put, inventory management (also known as “inventory control”) is the act of overseeing the goods, items, and objects which are sold on to consumers.
As Adam Hayes at Investopedia further explains:
“Inventory management refers to the process of ordering, storing, and using a company’s inventory. These include the management of raw materials, components, and finished products, as well as warehousing and processing such items.” – Investopedia, Inventory Management Definition
To help with inventory management, inventory management systems (which come in the form of software) are used to help streamline the whole process.
Specifically, inventory management systems help with everything from buying and receiving at the front end to tracking and shipping within the company, managing inventory at multiple locations, and tracking turnover. Ideally, inventory management will have parts of it automated, helping those tasked with overseeing inventory management to complete tasks as effectively and efficiently as possible.
Now that we’ve understood the definition of inventory management, let’s look at some techniques that make the inventory management process a whole load easier.
In this section, we’ll be looking at the following 13 procedures and techniques to bolster your business’ inventory management:
In order for you to get the most value out of these inventory management procedures, let’s look at and discuss them in closer detail.
“Location, location, location” is the mantra repeated by real estate specialists across the land, and yet it is also applicable in the context of inventory management.
It is imperative that not only your warehouse (or other space for inventory) is easily accessible, but the stock inside must be well-organized and accessible, too. Otherwise your employees will be looking for what should be easily-retrievable items instead of focusing on more pressing tasks.
By planning the location and organization of your warehouse properly, it will help your business operate like a well-oiled machine.
As the business owner or manager, you should understand the basic layout of the area where inventory is stored. This way, if you or an employee need an item, it can be retrieved in an orderly and timely manner.
Furthermore, establishing a floor plan or referencing one that is already created will help you mastermind the optimal location for your goods.
Once the warehouse or other inventory space is in use, evaluate its efficiency every couple of months. If you notice any problems with the storage, spacing or inventory process, make notes and alter the procedure as necessary.
Having an optimized inventory system means not having too few or too many of your products, but just the right amount.
By pinpointing the minimum and maximum level of stock, there’s no chance of running out of inventory and committing the cardinal sin of business: Leaving money on the table due to the failure to meet demand.
It is also prudent to establish a list of high-priority products that tend to sell quicker than others. These items should always be in the warehouse regardless of the time of year. And by monitoring sales rates and tracking the market’s trends, it will be that much easier to prepare for upcoming supply and demand issues.
Let’s say a product you stocked didn’t sell well. There’s no point leaving it to take up space in your warehouse or storage facility – get rid of it!
Have promotions or offer discounts to eliminate goods that have remained in stock for an excessive period of time. Such deals boost client happiness, makes it easier to refresh inventory, and keeps business moving along.
As Francesa Nicasio helpfully advises:
“Be sure to time and implement your sale events wisely. Doing them too often can result in the events losing their allure and can train customers to hold off on buying from you until you discount your items.” – Francesca Nicasio, Liquidating Old and Surplus Inventory: 10 Smart Ways to Get Rid of Excess Stock
Cycle counting is an important component of inventory management, and yet plenty of businesses cycle count in a sporadic manner. Such haphazard cycle counting produces inaccurate results. It’s for this reason that cycle counting should become an essential component of your weekly or even your daily routine.
Do not wait until an opportunity arises to count your inventory; establish a cycle count schedule to properly analyze product flow.
Take a close look at each inventory order after its arrival. Though it’s unlikely, there is a chance the inventory delivered to your business is not exactly what you requested. Suppliers sometimes incorrectly pack stock orders. There is even that you’ll receive too much or not enough stock.
Spend a little bit of time to determine if your delivered stock is accurate, and you will be able to unload it with full confidence.
Even if you have minimal turnover among your stockers and other employees, it’s still useful to add a label to each item in your inventory.
This label should have the product name, number, quantity, and description. If there are additional important details, they should be added to the label, too.
The use of labels makes it significantly easier to identify products as quickly as possible. In fact, research has shown that appropriate tagging can increase inventory accuracy by 95%. Labeling inventory also makes it easier to track items that come in and out of your warehouse and the sales floor of your business.
You should focus on perishable items and goods that have the potential to lose value as time passes. After all, an expired product is an outright financial loss.
Specifically, you should:
The worst thing you can do is assume your business is too small or your inventory orders are too infrequent to justify tracking. After all, how else will you know how many items of stock you have, where the stock is coming from, or when the items are leaving the warehouse? And although there are several different ways to track inventory, the easiest way to do so is by making use of process and workflow management software.
With the right software, you can track the specifics of your inventory, like the amount of inventory you have, its size, and the rate at which it is moved in and out of the warehouse, among others essential details.
Ultimately, by using management software, you will be able to enjoy complete control over your inventory and manage it exactly as you envision, unlike the 43% of SMBs who do not track their inventory.
In addition to tracking software, there are other business tools you should utilize to help you manage your inventory masterfully – namely, a point of sale (POS) program.
Such programs automatically track the sales of goods on your behalf. This way, as soon as something on the floor is sold, it will be quantified for immediate analysis. POS programs and other tech truly simplify the often intimidating challenge of inventory management.
Though it may be tempting to ask a group of trusted employees to pitch in on inventory management as necessary, it’s better to assign inventory management duties to one reliable individual.
By delegating inventory management tasks to one individual, they’ll be able to focus on the process and make sure task management is completed properly. After all, if a random assortment of employees is tasked with inventory management, not only will this take time away from the tasks that they need to be getting on with, but they’re also far more likely to not give inventory management the care and dedication that it needs.
Using software for inventory management is the biggest takeaway from this post. But you need to make sure that you also have back-ups of the data, so that crucial data is always available, accessible, and never goes missing. And if, on the off-chance, data does go missing or deleted, you’ll have back-ups ready to reinstate, so your business and your customers won’t be negatively impacted.
Inventory management, from beginning to end, is a process; multiple steps need to be undertaken and documented so that your warehouse’s inventory can be properly overseen.
However, don’t be afraid to change, alter, or edit certain steps so that the process is as streamlined as possible. No matter if that means delegating all management tasks to one person or changing how you review order budgets, you’re not scuppering the process by doing changing a process slightly – in fact, you’re actually improving and optimizing a process, thereby tailoring it to your business’ needs.
There are no two ways about it: Inventory management is a process that requires software. And by utilizing management software, there is a range of benefits that you, your team, and your business-at-large can take advantage of.
For instance, management software:
If you’re looking for process and workflow management software that’ll bring you all the, quite frankly, rather wonderful benefits outlined above, look no further than Process Street.
If you haven’t used Process Street before, Process Street is state-of-the-art workflow management software which helps you and your team do their best work possible by the way of templates and checklists.
With Process Street templates, you can document all of your business’ processes, procedures, and workflows, then have your employees launch checklists so they follow processes to the T.
For more on what makes Process Street an incredibly useful for tool – and especially for logistics management – check out the short video below.
To aid you on your inventory management and logistics journey, there are these free templates which you can jump straight into. All you need to do is sign up for a free account, add the templates, then edit them to suit your needs.
First up is this inventory management process. Use and run this checklist each time you need to order new items and update the itinerary.
The next checklist is the order fulfillment checklist. This is the checklist you need to successfully prepare and deliver ordered items to your customers.
Last but by no means least is the facility inspection checklist. For maintaining a high-quality, functioning warehouse, follow this guide.
And there you have it.
On top of being given 13 actionable inventory management procedures to help you bolster your inventory and logistics management, you’ve also been given 3 undeniably useful templates to use immediately!
Here’s to going about inventory management the right way.
Are you in charge of your business’ vendor management process? If so, are there any additional tips or tricks you’d like to offer to the Process Street community? Write them down in the comment box below!
