Inventory Management for Start-Ups

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Start-ups are most vulnerable in the first stages of their life. Although opinions differ on the statistics and of course every industry is different, the general consensus is that around 50% of small businesses fail within their first five years. If you want to be in the half that succeeds, you need to get the fundamentals correct, and one of the most important of these is inventory management. Below are five vital steps for sound inventory management practice.

1. Make an Inventory Plan

First up you need to plan what you’re going to sell, how much of each item you’re going to market (product mix), where you’re going to get it from, and how you’re going to get it to the customer. This is a critical stage that cannot be done too slowly. It’s critical that you are aware of your market and where your competitive advantages lie. Don’t try to split your focus over too many different products at once; know which ones are likely to sell best and work on doing them well first. Make sure you survey a range of potential suppliers if possible, to find out which will be more reliable, give you the best price, or make the most efficient deliveries.

2. Design Your Business Workflow

Plan and record every step of your workflow, from the time that you receive a purchase order to when that order is fulfilled and provided to the customer. Work out exactly how many people have a role in the process and at what time. This is the best way to spot bottlenecks and potential ways to gain efficiency.

3. Choose the Right Software

You will need at least some kind of software to manage your inventory, whether this is a free simple spreadsheet program or a comprehensive software package. Of course, it is tempting to go for a cheaper option, and this may be all you can afford to begin with, but in the long term a more comprehensive program could end up saving you large amounts of money through increased efficiency.

These programs can give you full visibility over your entire inventory (the location and status of every item at any time), automate recording processes that would otherwise consume much of your time, and integrate with sales and purchasing to streamline your workflow.  Whether or not this is a worthwhile investment is up to you, but do your research: these programs are now available at a fraction of the cost of previous years. (And obviously we think Unleashed represents exceptional value for money!)

4. Get Your People On Board

When starting a business, it is critical you get your staff using the processes and procedures you want them to. This can be more difficult than some think, and when it comes to inventory management processes, the consequences of getting things wrong can be severe. New staff are often used to doing things a certain way and some people are less happy to make changes than others. It often only takes a small portion of people to reject certain processes to compromise that entire part of the system. You can prevent this by engaging with your staff about how their job is different to what they did before. Ask for their input, and within reason, try to adapt to make them feel more comfortable. Give them training on software they are unfamiliar with, and make sure support is regularly provided.

5. Reevaluate

The above four steps will get you started when looking to effectively manage your inventory. However, this is only half the battle. Efficient inventory management is an ongoing process, and means continuously checking your systems to make sure everything functions as you want it to, and investigating whether efficiency gains can be made still. Hence, make sure you regularly reevaluate your inventory plan, your workflow, your software choices, and your staff to make sure you are doing the best you can. If you do, you give yourself the best chance of running a prospering business in the long term.

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Melanie - Unleashed Software
Melanie

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.

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