Inventory management tips
Inventory management is the part of supply chain management that aims to always have the right products in the right quantity for sale, at the right time. When done effectively, businesses reduce the costs of carrying excess inventory while maximizing sales. Good inventory management can help you track your inventory in real time to streamline this process. This, in turn, helps speed up the order fulfillment process and keeps customers happy.
A lot of issues can pop up related to inventory management. For example:
- your sales spike unexpectedly and you oversell your stock
- you run into a cash flow shortfall and can’t pay for product you desperately need
- your warehouse doesn’t have enough room to accommodate your seasonal spike in sales
- a miscalculation in inventory means you have less product than you thought
- a slow moving product takes up all your storage space
- your manufacturer runs out of your product and you have orders to fill
- your manufacturer discontinues your product without warning
It’s not a matter of if problems arise, but when. That is the reason you need to have reliable inventory management strategy.
A huge part of good inventory management comes down to accurately predicting demand. Make no mistake, this is incredibly hard to do. There are so many variables involved and you’ll never know for sure exactly what’s coming — but you can get close. Here are a few things to look at when projecting your future sales:
- trends in the market
- last year’s sales during the same week
- this year’s growth rate
- guaranteed sales from contracts and subscriptions
- seasonality and the overall economy
- upcoming promotions
- planned ad spend
If there’s something else that will help you create a more accurate forecast, be sure to include it.
First-In First-Out (FIFO)
“First-in, first-out” is an important principle of inventory management. It means that your oldest stock (first-in) gets sold first (first-out), not your newest stock. This is particularly important for perishable products so you don’t end up with unsellable spoilage. It’s also a good idea to practice FIFO for non-perishable products. If the same boxes are always sitting at the back, they’re more likely to get worn out. Plus, packaging design and features often change over time. You don’t want to end up with something obsolete that you can’t sell.
Manage good relationship with suppliers
Part of successful inventory management is being able to adapt quickly. Whether you need to return a slow selling item to make room for a new product, restock a fast seller very quickly, troubleshoot manufacturing issues, or temporarily expand your storage space, it’s important to have a good relationship with your suppliers. That way they’ll be more willing to work with you to solve problems.
Minimum order quantities are often negotiable. Don’t be afraid to ask for a lower minimum so you don’t have to carry as much inventory. A good relationship isn’t just about being friendly. It’s about good communication. Let your supplier know when you’re expecting an increase in sales so they can adjust production. Have them let you know when a product is running behind schedule so you can pause promotions or look for a temporary substitute.
Prioritize with ABC
Some products need more attention than others. Use an ABC analysis to prioritize your inventory management. Separate out products that require a lot of attention from those that don’t. Do this by going through your product list and adding each product to one of three categories:
- A – high-value products with a low frequency of sales
- B – moderate value products with a moderate frequency of sales
- C – low-value products with a high frequency of sales
Items in category A require regular attention because their financial impact is significant but sales are unpredictable. Items in category C require less oversight because they have a smaller financial impact and they’re constantly turning over. Items in category B fall somewhere in-between.
Inventory management software
Inventory management is a highly customizable part of doing business. The optimal system is different for each company. However, every business should strive to remove human error from inventory management as much as possible. This means taking of advantage inventory management software.
With EasyCommerce, you can check your stock availability from any device – computer, tablet or mobile phone. Have real time overview of your inventory, most selling products per month, products that are low in stock, etc. EasyCommerce will help you improve seasonal planning and facilitate budgeting fluctuation.
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