Since inventory is frequently the single greatest asset on a company’s balance sheet, the effectiveness of your inventory management strategy can have a significant impact on your business’s bottom line. It makes sense that businesses trying to increase profits in a competitive market are paying close attention to the inventory management process.

 

What comes to mind first when you think of the top priorities for your inventory management process? Does it get rid of extra and useless stuff? Enhancing the quality of on-time deliveries? Stock balances between distribution centers? Reduce your lead times strategically to assist you to get more orders from customers and deliver those orders. What’s your current top priority? Afterward, which one? Your first response is probably based on the corporate strategies of your business, the size of your organization, your function, and the industry you work in. Your inventory management process’s level of maturity will usually determine your second response if you have one.

 

Reducing inventories will be a top priority for finance and company management. Customer satisfaction is prioritized by customer service professionals when reducing stockouts. The proper parts must be available at the right time for manufacturing activities. Inventory manager frequently finds themselves juggling several groups with competing goals. As a result, they develop the skills of a firefighter, helping whoever complains the loudest. An inventory manager may easily develop tunnel vision and place an excessive amount of emphasis on one statistic above others. Better inventory decisions will be made possible by more developed organizations assisting the inventory management and clearly defining some company priorities, such as target inventory turns and customer service standards. As inventory selections frequently need to strike a balance between these competing objectives, this can make matters even more complicated.

 

Guidelines for managing your inventory

The 10 most important guidelines for managing your inventory profitably and cash flow are provided here.

  • Set priorities for your inventory

By grouping your inventory according to importance, you can determine which items are crucial to your business yet may be more expensive and slower to move. This will assist you in deciding which products to order more frequently and in larger quantities. A, B, and C groups are the most common divisions that experts advise for your inventory. You require fewer of the more expensive products in the A category. Low-cost, quickly revolving goods fall into the C group. The B group is the transitional category, made up of reasonably priced items that sell more quickly than A items but less quickly than C items.

  • Keep track of all product details

Make sure you keep track of the specifics of each item in your inventory. This information must include units, barcodes detail, suppliers, countries of origin, and lot numbers. To be aware of factors like seasonality and scarcity that could affect the price, you might also consider keeping track of each item’s pricing over time.

  • Examine your inventory

Some businesses perform a thorough count once a year. Some people quickly check their most popular items on a monthly, weekly, or even daily basis. Numerous people engage in all of the aforementioned activities. Whatever frequency you choose, make it a point to physically count your inventory frequently to make sure it corresponds to what you believe you have.

  • Perform a supplier analysis

Your inventory may have issues from an unreliable provider. If a supplier frequently over-delivers orders or misses delivery deadlines, it’s time to take action. Talking with your supplier about your worries will help you identify the source of the issue. Alternatively, you may need to manage fluctuating supply levels using SCM ERP software and the risk of inventory shortages.

  • Practice the 80/20 rule for inventories

Typically, 20% of your stock accounts for 80% of your profits. Give managing the inventory of this 20% of items top priority. You should carefully track these sales and be aware of the full sales lifetime of these products, including how many you sell in a week or a month. Don’t fail to manage these because they are what bring in the greatest money for you.

  • Be consistent with the way you receive stock

Even while it would seem obvious to make sure new inventory is processed, do you have a set procedure that everyone adheres to, or does each employee receive and handle incoming stock in their unique way? Small variations in the way new stock is received could cause you to wonder why your numbers and purchase orders don’t match up at the end of the month or year. Make certain that every employee who receives stock follows the same procedure, and that all boxes are confirmed, received, and unpacked together, precisely counted, and checked for accuracy.

  • Monitor sales

Your inventory totals should be updated each day, and you should be aware of the items and quantities you sold. You must, however, study this data to move beyond that. Do you know when specific products sell more quickly or less frequently? Is it seasonable? Are certain things only sold on a particular day of the week? Do some goods typically sell in groups? By understanding both your sales data and the wider picture of how products sell, you can keep your inventory under control.

  • Self-place resupply orders

Some suppliers offer to place inventory reorders on your behalf. Having someone else monitor the process for at least some of your items first seems to be a good thing because you may save employees time and money. Bear in mind, nevertheless, that your vendors might not share your priority order. While you want to stock the items that will bring your business the most revenue, they want to sell their inventory. Spend some time checking the inventory and ordering new supplies for every item you sell.

  • Invest in inventory control software

If your business is small enough, you may be able to manually manage the first eight items on this list using spreadsheets and notebooks. But as your company expands, you’ll need to spend more time managing inventory than running it effectively, or you run the risk of having stock out of control. Good inventory management software streamlines all of these tasks. Before choosing a software solution, be sure you are aware of what you require, that it provides the statistics that are essential to your business, and that it is user-friendly.

  • Implement well-integrated technologies

Not all technology can assist you in managing merchandise, including inventory management software. Tools like mobile scanners and POS systems might help you stay on schedule. Put collaborative systems first when making technological investments. Even though it wouldn’t be the end of the world if your restaurant POS systems and inventory management ERP software couldn’t communicate, it might take longer to transfer data between them, which could lead to inaccurate inventory counts.