This article was updated in March 2023 to reflect current industry trends, statistics, and new information.
Inventory managers face a daily battle – striking the right balance between too much and too little stock. This task requires a lot of careful planning, expertise and most of all, constant vigilance.
Maintaining control of the flow of goods and responding to the shifting currents of demand requires the use of some key tools and techniques. Here are our top picks for strategies to improve inventory management.
1. Pick the right inventory management platform
With so many inventory management software options available, it’s important to pick the one that provides the best solutions for your business.
A good starting point is to form an accurate assessment of what your business actually needs from its software. Having a detailed and realistic implementation plan can help you outline and define what needs to take place, how that looks and what to do if it goes wrong.
For example, if you need inventory serial tracking, make sure the system you are considering has this as part of its feature set.
The easiest way to accurate and streamlined inventory management is through a platform that integrates with an apps ecosystem. The more your systems work in sync with each other, the better your overall control and ability to forecast. Look for software that offers integration with accounting, eCommerce and point-of-sale systems.
2. Develop accurate forecasting
Sales and product forecasting has become a key inventory management technique in recent years, as it provides a useful way to predict demand and guard against over or under-stocking.
While it’s a dynamic tool when it works, it pays to remember that it’s not a perfect science. There are some big challenges to getting it right.
Like most multi-layered techniques, there are a number of parts that contribute to its overall success and usefulness. For any business to utilize it meaningfully, some careful planning and expertise are required.
Some common pieces of the forecasting puzzle include: the use of accurate sales history, access to real-time data and the ability to make inventory adjustments in real-time, the use of management software with complex supply-chain functionality, and realistic ‘flat’ sales forecasting.
3. Take a Risk-Based Approach
Inventory is both a source of and a response to risk. Inventory can create financial risks, and other inventory management strategies (such as just in time inventory) can introduce operational risk.
A good inventory management strategy will involve making realistic risk-based judgments. A risk-based strategy will guide inventory decision making by asking questions such as:
- How crucial is a particular supplier to your business’ overall supply chain?
- How often will supply chain failure occur, and how much harm will a failure cause?
- What will it cost the business to mitigate the risk?
4. Utilize Supply Chain Management
With the overall goal to reduce inventory through greater efficiency, Supply Chain Management offers some great inventory management solutions. Using a cross-functional approach, many businesses will utilize an integrated solution – like an Enterprise Resource Planning (ERP) system – for better control of their supply chain.
Again, budget and expertise are factors; if you have limited capital to spend, look for an inventory management solution that provides the basics.
Some cloud solutions offer great features and functions for a monthly subscription – which means more bang for your buck and the opportunity to upgrade later.
5. Deploy real-time analytics
Information is a powerful tool, but only when it’s accurate and up to date.
Many inventory management systems can provide real-time data and analytics, from layered inventory tracking right through to forecasting data, automatic ordering and individualized safety stock.
For the most accurate data, consider using perpetual inventory control software, as it is the best way to ensure the information you need is always at your fingertips.
6. Use individual supply and demand plans
One area that can yield great benefits is supply and demand plans for your products and stock.
Regardless of how complex your supply chain network is, there are some basic techniques that provide great overall solutions. Two areas to research and consider are how to manage your safety stock levels, and your individual supply and demand plans.
Businesses with complex and varied inventories are starting to develop individual supply and demand plans for each product, instead of using broad groupings.
This gives far more control over each item, and provides great opportunities for accurate sales forecasting and lean inventory practices.
7. Use suppliers that best suit your business
The suppliers you use are an essential part of your production or restocking equation. It pays to keep track of their performance, and to make adjustments when needed.
If your orders are not on time, or often arrive incomplete, then it is your business that ultimately suffers.
Many vendors will offer solutions to cater to your specific needs if asked. In this regard, as the old saying goes: the squeaky wheel gets the grease.
8. Make use of mobile technology
Mobile technology has provided a whole new level of flexibility to inventory management in recent years.
As the technology and management platforms have advanced, more and more intuitive control is enabled. Again, the use of a SaaS platform is usually best. Mobile devices can help both cut down on human error and labour, as well as ensure that inventory data is accurate.
For a complete solution, look for software that links and syncs to all of your business management solutions.
9. Use a perpetual inventory management system with lean inventory practices
Lean inventory management techniques ultimately enable you to reduce the waste involved with using, storing and holding inventory.
It is a set of principles or systems that help diminish the negative effects of aging, spoilage, over or under-stocking, inefficient transport management, and untimely ordering, to name a few. As there are a variety of techniques available, it‘s helpful to research which lean practices will most help your business.
Because it is an area that can yield fantastic rewards when done well, some companies hire a specialised contractor to assess their inventory operations and instigate lean techniques that best suit that business.
Smaller businesses can make use of the tools available by utilising management platforms that offer ongoing support with best practice solutions. In most cases, the use of a perpetual inventory system will offer the best features for lean inventory management.
On that note, perpetual inventory management systems are becoming better, more accessible and more user-friendly. They make the job of tracking your inventory, even across multiple locations, easy and efficient.
Making use of one goes a long way towards providing an overall solution to all your inventory management needs.
10. Utilise slotting and warehouse management
There’s a wealth of information available on how to best set up and manage your warehouses. One area that is commonly emphasised is layout and product slotting.
Placing your most popular products or items closer to hand will save you time and minimise the chance of stock-outs. Some businesses make sure items that are often used, sold or shipped together are next to each other when stored.
If you’re a new business, take the time to set up your warehouse space in a way that makes sense for what your business does.
The time spent at the start will make all the difference later. Ease and efficiency of operations yields huge rewards for all businesses large or small.