When it comes to eCommerce, gaining the ability to understand, handle and regulate inventory management can mean the difference between just staying afloat and being a real commercial success. By taking care of your inventory management affairs, you can boost productivity and reduce unnecessary costs, significantly. In fact, a notable academic medical center reduced errors in administration by more than 40 percent by introducing barcodes to their stock — a clear indication that the value of inventory management goes beyond dollars and cents.
What’s inventory management and why does it matter?
Essentially, inventory management is the element of supply chain management designed to always have the right products in the right quantity, and at the right time.
Handled correctly, this process offers the following benefits to small business owners:
- Reduce costs, enhance cash flow and boost your bottom line.
- Help you make accurate forecasts and predictions for stock demand.
- Prevent you from ordering unnecessary or excess stock.
- Optimize the organization of your stock and save you or your staff time.
- Through the use of specialist software, you can track the state of your inventory in real-time.
Common inventory management mistakes
To help steer your inventory management project in the right direction, here are some cardinal errors or mistakes you should avoid at all costs:
A lack of communication
One of the most common and debilitating errors in inventory management is a lack of communication between key team members or departments. If changes to processes or recently launched deals or promotions aren’t correctly communicated, for example, errors and delays in service can occur which is of course, bad for business. Making sure you brief all key stakeholders on any change or upcoming event will help to prevent such calamities.
In many cases, budding eCommerce or small business owners become worried that they will get caught short and be unable to deal with surges in demand on particular sale items, so they overstock to be safe.
By sitting down and analyzing your stock over a set period with your team, you will be able to forecast the stock you will need far more accurately, preventing excess inventory clogging up your stockroom.
Another common inventory management mistake, particularly among small business owners, is either investing in the wrong areas or barely investing in the management of your inventory, at all. Implementing the best inventory management practices will ultimately save you time and money, so it’s an area worth investing in. Taking the time to provide the best level of training for your staff and choosing the right tools for you and your business will prove invaluable in the long run, so make sure you work collaboratively to make the best possible decisions before committing to anything.
Fundamental inventory management tips
Here are a selection of essential tips and inventory management practices that will help you notably improve your business’s stock flow:
Manage your relationships
One of the foundations of any solid inventory management situation is having a stable relationship with your suppliers. Whether you need to resolve an issue with a faulty batch of stock quickly, replace a poorly selling item with another or solve any other stock-related problem, maintaining a good relationship with your third-party suppliers will ensure these matters are dealt with swiftly and efficiently.
By taking the time to forge bonds with your supplier through checking in and showcasing your value, inventory-based success will be yours for the taking.
Adopt the first-in, first-out (FIFO) mentality
An essential principle in handling inventory, the first-in, first-out (FIFO) mentality is simple yet effective: your oldest stock (first-in) is sold first (first-out), not your most recent stock.
This approach is incredibly vital for perishable products, to avoid unwanted spoilage.
That said, the FIFO approach is still important for non-perishable goods due to natural wear and tear.
To achieve this, you will need a very well organized stockroom or warehouse with a labelling system in place to ensure the oldest stock is easily accessible to staff when it comes time for fulfilment.
Prioritize your stock with ABC
Another important element of inventory management is the ability to prioritize your stock. To do so effectively, you can use the ABC system to your advantage:
A: The high-value products with a low sales frequency.
B: The moderate value items with a moderate sales frequency.
C: The low-value products with a high sales frequency.
More often than not, the high-value items will need the most attention in terms of handling, management and analysis as the turnover is significantly lower than those in category C. Using the ABC model will help you keep your efforts regarding time and staff placement both consistent and logical.
Choose the right inventory management software
We live in a digital age where data reigns supreme, and as such, there is a host of incredible inventory management software out there to help you with most of the areas mentioned above, and more.
Today’s inventory management tools provide insights and metrics that will allow you to make accurate and cost-effective amendments to your inventory, spot trends, identify strengths and weaknesses and make accurate forecasts that will help make your business a well-oiled commercial machine.
As mentioned, making a wise investment in this area is essential to the ongoing success of your business. To ensure you make the best choice for your business, you should conduct software research in a collaborative environment, noting down all of the core features and functionality you will need for your particular business, as well as your inventory management budget and your primary business aims. Once you’ve taken the time to understand these elements of your businesses and conduct your comparative research, the best tool for the job will present itself, without a doubt.