Inventory Management: How to Manage Inventory for Your Businessby Derek Alam Sr Digital Marketing Executive @ Mind Digital Grou
Inventory management has a significant impact on business profitability, but many businesses, both large and small, do not manage their stock effectively. As a result, they frequently produce too much or too little product for their customers. Either way, the business bottom line suffers when customers leave because of undersupply matters, or business capital is restricted because of poor inventory management.
Therefore, the significance of effective inventory management cannot be overstated. But how exactly do you go about doing this?
Effective inventory management entails striking a balance between having enough stock to meet the current market's demands on your company and having enough excess stock to cushion any sudden upflow to this demand.
In this blog post, we will go over what to look for in a good inventory management auditor, fundamental inventory management techniques, and some top tips for inventory management.
But first, let’s go over the basics.
An Overview of Inventory Management
Inventory management is an integral part of a business supply chain oversight that works at having the exact products for sale in the proper quantity, every time.
Performed correctly, businesses can save money by carrying less inventory while increasing sales. You can also guarantee that your inventory is sold promptly to avoid obsolescence, spoilage, or capital waste on stock sitting in a stockroom or warehouse.
Other advantages of effective inventory management for a company's profitability include:
● Warehouse organization that is more efficient and saves employees time.
● Improved cash flow, lower supply chain costs, and a boost to your company's bottom line.
● Prevents production and product shortages.
● Access to valuable data that will assist you in forecasting demand.
● Aids in the avoidance of excess raw materials and stock.
● Makes inventory analysis simple.
Top Inventory Management Techniques for Businesses
While there is no one-size-fits-all strategy for effective inventory management, the techniques listed below have been proven successful in assisting businesses in effectively managing their inventory, and they can assist yours as well.
1. Engage the Services of a Stock Controller
If you hold stock, then the chances are you already have a system which tells you how much you have. But if you have a lot of inventory, then it would be more prudent to have a person or team responsible for monitoring your business stock.
Your stock controller's job would include but not be limited to receiving deliveries, making sure everything coming in matches orders placed, and processing all purchase orders. This will significantly improve the efficiency and productivity of your company's supply chain.
2. Practice the First In, First Out (FIFO) Approach
The principle behind this approach is straightforward; that is, ensure that stock is bought in the same order in which it was created or purchased. This is particularly true for perishable goods. It is also important for non-perishable stock because items that have been stored for a long time may become outdated, damaged, or otherwise can't be sold.
One of the most effective ways to incorporate FIFO into your supply chain process is to have new products added from the rear of your warehouse or stockroom, ensuring older stock is first taken off the shelf when orders arrive.
3. Improve Your Forecasting
Accurate forecasting is essential for effective inventory management. As a result, you must proceed with caution. To begin, ensure that your projected sales figures are based on metrics such as market trends, historical sales figures, the economy, predicted growth, marketing efforts, promotions, and so on.
Cisco, the networking equipment behemoth, discovered the consequences of poor forecasting the hard way in 2001. It wrote off $2.25 billion in equipment components, raw materials, and equipment components as a loss because of inaccurate inventory management modeling and poor sales forecasting. Do better.
4. Audit Your Stock
Even when superb inventory management practices are in place, you should still count your inventory regularly to ensure that what is in your inventory matches your estimated stock level, as well as identify low stock turn before it affects your business bottom line.
Businesses use various methods, but consider engaging the services of auditing firms who offer stock auditing services to help you with your stock audits.
5. Automate Key Inventory Management Tasks
Automating key inventory management tasks, among other things, is one of the best ways to track your inventory levels in real-time. It also has positive applications for the other techniques on this list, such as accurate forecasting and stock audits.
To get the most out of this, choose a software that includes real-time sales data and connects to your POS system, so your inventory data is automatically modified whenever you sell a product.
6. Reconcile Stolen, Damaged, or Lost Items
Unfortunately, stolen, damaged, and lost items are risks that come with having stock in your business. Shrinkage occurs when the amount of stock you have available is influenced by any of the factors listed above. Inventory shrinkage due to loss and theft falls under four categories: shoplifting, employee theft, paperwork errors, and supplier error.
Shrinkage is a costly problem for businesses that can lead to a loss of profit. And it's a double whammy: you can't recoup your inventory costs, and you can't sell the inventory to generate revenue.
As a result, shrinkage must be factored into your overall budget. You do not, however, have to accept it as a cost of doing business. Shrinkage may be deducted from your corporate or personal tax returns, depending on the nature of your business and where it is located. Consider hiring professional auditing firms in Dubai (or wherever you are located) to help you understand your options.
7. Consider Drop Shipping
Many online store owners use drop shipping methods, but this supply chain fulfillment strategy can be used by a wide range of businesses across all industries.
If your business implements drop shipping in its supply chain, you can sell stock without literally carrying the inventory in-house. Instead, a manufacturer or wholesaler is accountable for shipping the products to any consumer who buys from your store and holding inventory. This way, you won't have to worry about product storage, holding, or delivery.
Manage Inventory to Boost Growth
Giving your company better inventory management tools is critical to its success and operations across the board. Organizing your systems will help you set up your floor, manage your stock effectively, and make your employees productive.As a result, by investing in training to manage inventory for your business, you are essentially helping automate its success.
Created on Oct 4th 2021 07:56. Viewed 16,937 times.