One of the most integral aspects of business is undoubtedly inventory management. To keep your business growing in the most effective manner & systematic development and evaluation of inventory management strategies are vital. However, it is first essential to understand the basics- what is inventory management?
Inventory management is an aspect of managing the supply chain, which essentially means striving to keep the right products for sale at the right time, and in the appropriate quantity. By effectively managing inventory, you can avoid major issues such as your products being out of stock or misallocation of funds towards the excess supply that may eventually become obsolete. With excellent inventory management software, you would even be able to make accurate demand predictions, track inventory in real-time, and manage it across multiple locations or warehouses at once.
To make management easier and more effective for your small business, here are our top five inventory management strategies to help you track your products and maximize sales:
1.Using the best possible inventory management software
When searching for the most accurate inventory management software, always remember to prioritize real-time analytics that can help you forecast demand as well as track stock levels. Do not attempt to manage inventory only through an Excel spreadsheet, let alone through handwritten work. A small human error data on a massive scale, making the task burdensome when it doesn’t have to be.
2. Make well-informed forecasts based on data analytics.
Accurate forecasting to drive decision-making is crucial to growing your business. You can divide forecasting into quantitative and qualitative. With quantitative forecasting, past data tracked by your inventory management software is used for future demand for the product and hence manage supply accordingly. Qualitative forecasting involves accounting for other external factors that could influence demand and is also equally important to focus.
3. Analyse stock that remains in excess and the reasons behind it
Often some stock can remain unsold for an extended period, taking up extra space in warehouses which could be used for more profitable stock. In such cases, it is always important to identify this stock and delve into the issues surrounding its failure. It might be necessary to perform examinations on the supply and evaluate its quality, which overall despite being seemingly time-consuming.
4. Manual inventory counts
While it may seem unnecessary when you are using software, manually checking inventory counts regularly is crucial. This is because it serves as a backup to your current system, which can be useful in case anything goes wrong. It can help uncover any stocking issues by glossed over.
5. Strategise flow of inventory
The two methods used to maintain & controlled by inventory flow- FIFO and LIFO. FIFO stands for First In, First Out and focuses on selling older stock before newer stock. This strategy suits you if your business deals with perishable goods. LIFO however, stands for Last In, First Out which means that more recent items are given higher priority. This inventory management strategy suits your business if the price of your product is bound to fluctuate often.
And there you go! Five inventory management strategies that are bound to give your small business the push it deserves. Naturally, there is no one-size-fits-all, and it is crucial to try these strategies and effectively monitor their impact. You will realize what kind of approach best suits your business, and you can keep developing your plan to achieve bigger goals.