The basics of inventory management involve counting physical product, then making sure that what you see aligns with the numbers you have in your books. But the bigger a company gets, and the higher the volume and variety of the products they sell, the harder the task of inventory management becomes. There’s a lot of pressure for companies to be accurate and careful with their physical stock—neglecting this could result in thousands of dollars’ worth of loss from damage, spoilage, shipment errors, and the like.
That said, any company’s approach to inventory management should skew towards earning more money, instead of losing it. If this hasn’t been the case for your inventory keeping practices, then it’s time to change them for the better. Here are seven simple ways that you can do so.
- Know the goals of inventory management. When in doubt, revisit the two key concerns of inventory management: what it encapsulates and what it is supposed to achieve. There are five key “trackables” in inventory management, and they are: (1) type of stocked good, (2) weight, (3) volume, (4) dimensions, and (5) location. The ultimate goal of inventory management is timely and effective decision-making on re-ordering, re-starting the manufacturing cycle, and stocking of physical product. Once these are ingrained in you and your staff, the process of inventory management will surely become more purposeful for everyone.
- Hire a third-party logistics provider to up your overall efficiency. No matter how much you’ve grown as a company, all that growth is for naught if your inventory management system can’t keep up with it. Why not consider outsourcing someone else’s system and hiring a logistics service provider? Their specialty equips them with both the hardware and software to upgrade your inventory keeping practices, such as enterprise resource planning (ERP) software, advanced warehousing facilities that use bar codes and trackers, and a large delivery fleet. There’s no shame in getting a boost if your staff, storage facilities, or equipment can’t handle it all. In fact, it may be the most practical decision you’ve made all year.
- Avoid dead or spoiled stock by following the first-in, first-out (FIFO) policy. The “first-in, first-out” policy is a cornerstone of modern inventory management, and it’s still worth following. FIFO involves moving the oldest products forward and newest products back to the end of the supply chain. This helps you get rid of older stock faster. Otherwise, it becomes more vulnerable to damage, spoilage, expiry, or wear-and-tear the longer that it stays in a storage facility.
- Systematize your re-ordering routine by setting par levels. In inventory management, par levels define the minimum number of product you should ideally have in store at any given time. Once your stock of the product dips below the minimum you’ve ascribed for them, you’ll automatically know to re-order it instead of just re-ordering whenever. Par levels serve as a proper benchmark for your physical stock, as well as a more structured method of re-ordering products.
- Prepare for surges. On occasions like Christmas, Father’s Day, Mother’s Day, Valentine’s Day, or Black Friday, the number of orders that you typically get from customers will multiply. The question is, is your inventory prepared to handle these surges? If not, prepare to adapt your re-ordering and manufacturing schedules way in advance.
- Conduct more than one type of audit on your storage facilities from year to year. Some businesses only conduct an annual physical inventory in their warehouse, but it may help to do a cycle count for fast-moving products or the occasional spot check in addition to this. These audits will help you check how accurately your physical stock reflects the numbers from your digital count.
- Maintain good working relationships with your suppliers. Going the extra mile with your suppliers will definitely aid in your inventory management. Good working relationships will ensure that restocks happen ASAP and that your suppliers are more responsive to you. But the relationships may also result in additional perks, such as being able to negotiate lower minimums (and therefore, fewer costs for the supply chain). To build such relationships, always approach your suppliers in good faith—communicate with them often, and open up chances for them to participate with you in troubleshooting stock-related problems.
Total accuracy and efficiency in this area of the supply chain may take a little time, as well as a lot of effort to adjust. But once you’ve made these changes to your inventory management system, both your business ops and your revenues may have something big to show for it.