Did you know that better inventory management and control is one of the biggest parts of running a successful business and yet it is one that is often put on the back burner for misconceptions of that it is not a major profitable pursuit?
Business owners know that holding inventory stock ties up a lot of cash, that’s why good inventory management is crucial for all businesses. It is time to bring this topic to the forefront now because with inventory being such a huge cash asset, it is too costly not to give it the attention it deserves.
Although inventory management is a highly customisable part of doing business, the optimal system is different for each business. However, every business should strive to remove human error from inventory management as much as possible, which means taking advantage of efficient inventory management software. Regardless of the system you use, the following six signs will help you ascertain whether you’re on your way to achieving efficient inventory management.
Your business is setting and reviewing par-levels or safety stocks
This is the minimum number of items that must be on hand at all times. When your inventory stock dips below the pre-set levels, you know it is time to order more.
These levels vary by product and are based on how quickly the item sells and how long it takes to get back in stock. Although setting these levels requires some research and decision-making up front, having them set will streamline the ordering process. Also, important to note is that these levels should be periodically reviewed so this safety stock is still useful to your business or you may be stockpiling inventory for the sake of it.
No excess inventory
No excess inventory is a very healthy sign that your business is achieving efficient inventory management. However, if your business has inventory stock laying there and collecting dust for a while, you might be suffering from an excess inventory problem. Older products in storage with no potential to move means valuable space is being taken up that could be used for newer products. There is also a good chance of their value decreasing.
High rate of inventory turnover
A high turnover rate of inventory is a good sign, whereas a low rate is an indication of poor sales. Older items may also diminish in value and popularity with consumers, so it may have to be sold at a discounted price or it may become obsolete and actually end up costing your business money to get rid of.
No need for manual inventory management
Inventory management software fosters accuracy and efficiency. This also allows all your employees to keep track of changes within your management system, including tracking orders and shipping. Those still using a manual inventory management system can have greater problems in human error and then these errors can have compounding and significant effects on the business. The ability to streamline processes accurately is a more efficient inventory management system than its arduous and manual counterparts.
Tracking meaningful metrics
Using set metrics to track all critical elements of your inventory management process can help ensure no stone is left unturned and enable a business to accurately record data to uncover any problems or negative trends in your inventory and supply chain management operation. It enables a business to identify any threats early on and make positive action.
Collating metrics such as supply by location or product or variables that make sense to your business can organise your inventory data better creating greater and leaner processes.
Analysis, review and improve
Inventory problems can arise, accordingly analysing the root causes enables your business to make the necessary improvements to your inventory management system. Efficient inventory management begins and ends with effective and smart tracking and measuring the inventory management operation, analysing threats and weakness and reviewing processes where necessary to improve the overall system.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.