Inventory management is crucial for a company. Holding inventory stock ties up a lot of a company’s cashflow and just like cash flow it can either make or break a business. Great inventory management can save your business money. Here are some good practices when it comes to sound inventory management.
Avoid Wasting Stock
Sound inventory management helps you keep an eye out on products that may have expiry dates. This could include items like food and beverages through to even health and beauty products such as make up. There is the chance that if you do not sell this inventory stock in time it will spoil and then result in dead stock. Dead stock is inventory stock that cannot be sold. And not only does this apply to expired products but also stock that becomes obsolete due to it being out of season, or now being an irrelevant product.
Control Storage Costs
Often you need to store your inventory stock in a warehouse, which can be a fluctuating cost as you may need more or less space for inventory stock based on demand, especially if forecasts are seasonal. When you are storing too much of a product at once, and if you find that product is difficult to sell, your storage costs and warehousing costs will increase. Sound inventory management helps you avoid this.
Good inventory management saves you money. Because inventory stock is part of your assets and ties up cash flow, you need to factor this into your cash flow management. As you buy inventory stock and sell items, a good inventory management system will let you know how much stock you have, and based on sales, you can project when you will run out to make sure you replace items in time. This is important so you can be sure not to lose sales, but also helps you plan a head for buying more inventory stock, ensuring you have enough cash set aside, which is critical for cash flow.
Download Inventory Software
No more is inventory management associated with arduous and labor-some notions. Every business should strive to remove human error from inventory management. To do this take advantage of downloadable inventory software for better management. With a perpetual inventory software, you’ll be able to keep an eye on changes to your inventory levels as it happens.
Set Safety Stock Levels
Inventory management is made easier by downloading inventory software. You can set safety stock levels for each of your products. These are the minimum amount of inventory stock that you need on hand at all times, to never miss out on a sale. When your inventory stock falls or gets close to these safety levels you will be alerted to order more. It is important that this is revised however, as especially with seasonal products you will need to adjust these safety stock levels so you do not have too much inventory stock on hand especially in markets that fluctuate.
Reconciliation in inventory stock management is extremely important. Although it is efficient to download inventory software, it is vital to make sure that the automated reporting matches inventory levels. This can be done by physically counting all your inventory at once. Many businesses do this yearly and coupled with spot checking can help you find discrepancies. This is basically picking a product and counting it and then comparing this to the data on hand.
Inventory management is the life line of any business. It is critical to understand best practices and techniques to overcome the shortfalls of mediocre inventory stock management by taking into consideration these six practices.
Want to learn more? Read our Inventory Management Guide