Inventory Management is more than just a few routine tasks. It can impact how much money you make, how happy your customers are, and whether your business stays afloat.
When we talk about inventory management, it refers to the various procedures and processes that impact the ordering, receiving, storing, tracking, and accounting of all goods a business sells.
Using smart management techniques can offer real-time insights into future demands so that you can adjust your supply accordingly. These techniques allow you to strike the right balance between too little and excess inventory. And this is one of the factors contributing to a business's success and profitability.
Tips For Effective Small Business Inventory Management
Prioritize, Track, and Audit Your Inventory
It is a good idea to categorize your products into priority groups based on cost to manage your inventory more effectively. For instance, you can separate them into lower-cost, moderately-priced, and higher-ticket items.
Keep track of all relevant product information, such as SKUs, barcode data, supplier/vendor details, lot numbers, countries of origin, and cost changes.
It is ideal to conduct a comprehensive inventory count at least twice a year. However, consider doing daily, weekly, or monthly spot checks for items that sell quickly.
If you're uncertain about your stock levels, prioritize manual counting to ensure an accurate inventory audit.
Read More: Best Practices for Optimizing Warehouse Storage Space Effectively
Use The Right Inventory Method
Suppose you're selling perishable products like food or flowers. In that case, opting for the first-in-first-out (FIFO) inventory strategy is better.
FIFO is the standard method most small businesses use to sell the inventory they bought first. That way, you can move the oldest products and materials out of your warehouse to make room for fresh stock.
Analyze Supplier Performance
Managing inventory can become chaotic when dealing with unreliable suppliers.
You must ensure you haven't engaged a supplier who is persistently late with deliveries, repeatedly shorts an order, or causes constant supply chain delays.
These challenges should be discussed with the supplier.
Once you identify the core cause of the problem, explore possible solutions before it becomes a more significant concern.
If it calls for it, be ready to replace an unreliable supplier with a capable one with access to diverse routes, ports, and locations.
Foresee Demands Accurately
Up-to-date inventory data allows your warehouse managers to forecast demand accurately. Accurate demand forecasting helps in maximizing your sales opportunities and managing inventory costs.
Keep track of your stock usage, including historical sales and purchase orders, market trends, and seasonality. Utilize predictive analytics tools to make informed decisions based on data.
Combining your inventory usage data with other factors such as weather, economic conditions, demand variations, and more will allow you to plan your small business inventory effectively.
Follow the 80/20 Rule for Inventory
According to the 80/20 productivity rule, most of your profits (80%) stem from a small portion (20%) of your inventory. It means that a small fraction of your product line is responsible for the largest share of your profits.
It is more important to focus on managing this 20% of the inventory than to spend your efforts on the rest of the merchandise.
Invest in Inventory Management Technology
It could benefit your business to invest in inventory management software or a warehouse management system that allows you to track your inventory levels, sales data, and purchase orders in real-time from a central location.
Implement barcode scanning or RFID (Radio Frequency Identification) systems for inventory data capture and analysis. RFID tags and barcode scanning allow you to replace manual data entry methods with automation.
Cloud-based warehouse inventory management tools offer secure access to your data. With an internet connection, you can access your inventory data securely round-the-clock from any location. Unlike physical, on-premise data servers, these cloud-hosted servers are more secure and provide up-to-the-minute inventory data.
It is also helpful to research market trends and understand customer expectations through social media to decide on inventory ordering or promotion strategies.
When In Doubt, Outsource
One of the biggest mistakes that most small business owners make is trying to manage everything themselves. Though it may seem a cost-effective option initially, it will become an expensive blunder.
By outsourcing certain aspects of inventory management, you will gain several benefits:
1. Save time and money with reliable, efficient, and accurate inventory management.
2. Outsource major logistics woes such as warehousing, transportation, and distribution to an experienced vendor who does all the heavy lifting for you.
3. Retain oversight over your inventory management processes and ensure you never get stuck with excess or run out of inventory.
Practising Better Inventory Management
For many small businesses, efficient inventory management (storing, moving, and delivering goods) is still complex, expensive, and time-consuming.
Improper inventory management processes make it hard for your business to scale and drain your time and resources. That's why most small companies outsource some or all of their inventory management.
You can free up time and resources to focus on growing your business if you consider outsourcing your inventory management.
At Cargoz, we help companies to connect to state-of-the-art warehouses equipped with flexible storage and inventory management services. That way, you can efficiently manage different types of inventory and pivot to consumer demands quickly.
If you are looking for flexible, on-demand, short-term or long-term warehouse rentals anywhere in Dubai or any other emirate, feel free to contact our warehouse specialist.