Small or big, for every business, inventory management is a profitable practice as it promises business longevity. But still, many companies are not employing good inventory management practices, which causes problems such as overstocking, stockouts, wrong-shipments, and so on. Overstocking and stockouts are the two most common cases arising due to improper management practices.
Some businesses maintain too little inventory as compared to the demand due to which the firm faces out of stock situations more than often, which leads to customer dissatisfaction and loss of sales. In contrast, if warehouses are overstocked, no doubt, it may help fulfill every customer’s demand but, on the other hand, it could lead to dead stocks and difficulties in accommodating new products and handling the already piled ones. Overstocking can also block cash flow and could even necessitate the extension of warehouses.
To take care that situations like this do not arise, we should adopt better inventory management techniques and practices. Some useful techniques and processes you can employ for better inventory management:
#1 Automate inventory management
Automation of inventory management processes is crucial, accurate, time-saving as well as efficient. Automation simplifies record maintenance and with accuracy in contrast to manual inventory management processes. Utilizing the facility of Automatic Identification and Data Capture (AIDC), the items in the inventory can be easily identified and tracked, thereby easing the inventory counts and saving on substantial hours. One example of an AIDC device is handheld barcode scanners, which allows you to scan various items in the inventory via the barcode of those items. These data can be used to track objects in the database, thereby automating the data collection process.
Moreover, installing a POS system can help you evaluate demand trends such as best selling products, products accessible on particular days of the week, and other details. Using these insights you can plan your purchases accordingly.
Investing in inventory management software is the best and profitable practice you can do to automate the most tedious tasks in your inventory.
#2 Anticipate demands
Demand forecasting is a practice in which sales data history is used to anticipate customer demand for the future. The final results of the prediction are used to set the targets for the production and sales team and make business decisions about inventory planning and warehousing requirements.
The data collected can be used to get an overview of plant capacity requirements to meet the production target, production volume, types of equipment required, and more.
#3 Safety stock
Safety stock is the extra inventory that is kept aside for use in emergencies like stockouts and when the vendor is unable to supply required materials. At difficult times this safety stock can be used to meet the demand. Therefore, maintaining optimum safety stock level is crucial to ensure that the time is not wasted and production never ceases. To manage your safety stock, you can take the help of free and open-source inventory management software.
#4 Quality control
Quality always ensures customer satisfaction as well as a better business reputation. Maintaining the quality of goods is the best thing to do to ensure that your product demand remains the same as expected. Also, the inventory won’t enter into situations like overstocking due to reduced demand as a result of lousy quality.
To quality control, the businesses can start with making a list of all mandatory standards that products should meet. Further, the employee and team in charge of quality control can check whether all the products meet the criteria or not. Significant factors to be considered for quality control are:
- Look for any sort of damages like broken seals, scratches, and leaks.
- Ensure that the details like product color, size, and other features match the description of the one advertised or promised.
Moreover, the warehouse where the product is to be kept should meet essential product storing requirements such as optimum light, temperature, and moisture levels.
#5 Just-in-time inventory management
Just-in-time is an inventory management technique devised to reduce waste by ordering and receiving goods on an as-needed basis. This technique has proven efficient in reducing the risk of deadstock (the inventory stored for a long time and doesn’t get sold) as you only order the items as and when needed.
The just-in-time technique offers a range of benefits like improved cash flow, minimized dead stocks, and lower inventory holding costs. Therefore adopting this technique is a good practice for your business.
#6 Inventory kitting
Inventory kitting is also referred to as “product bundling.” This is an effortless but efficient technique. Many retailers combine two or more products as a package or combo and then sell it offering an attractive discount. More often, out of these products combined into a package, one product is an in-demand item, whereas the other one is a low demand or slow-moving product. This practice allows retailers to clear their inventories with ease and thereby reducing the risk of deadstock.
Inventory kitting, in a way, boosts your sales as it increases average order values, offers convenience and flexibility to customers. In short, inventory kitting allows you to make more profit with your existing unsold inventory.
Effective inventory management practices allow you to maintain an optimum level of inventory in your warehouse and reduce the danger of overstocking and deadstock. A part of the total profit and revenue of a business depends on how well and intact its inventories are. Cutting a long story short, if a business wants to flourish and wants to cut down costs on managing and storing the inventory, it should invest in the best techniques for its inventory management.
Author Bio- Hi There, I am Shaun Williams, a content writer with Goodfirms, a research platform for Cloud Computing, Ecommerce companies, Translation services companies, among many others. I enjoy communicating ideas and knowledge creatively and also ensure that the readers never suffer from boredom while reading my posts.