Your business may be small, but you still need to think big when it comes to inventory management. Unfortunately, many entrepreneurs and small business leaders overlook inventory management as a minor concern. In truth, inventory management involves much more than ordering items when you run out; it requires forecasting, accounting, organization and more to ensure that your business always has what it needs to make a sale. For smaller businesses, effective inventory management could mean the difference between survival and failure during any financial quarter.
The sooner you prioritize inventory management, the better. Here are a few tips to help you improve your inventory management and thereby improve your startup or small business today.
Investigate Different Inventory Methods
Believe it or not, there are many different strategies for managing inventory. Businesses with different staff structures, different material and item concerns, different storage capabilities and more will need to evaluate various inventory methods to identify the system that will be most efficient for their unique circumstances. A few of the more well-known inventory management methods include:O
ne method of managing excess inventory in a business is to sell closeouts. Businesses can recoup part of their investment by selling surplus goods and freeing up precious resources that can be put to better use. Companies can sell their excess inventory through a variety of channels, including online marketplaces, outlet malls, and wholesalers. Closeout liquidation purchasers are people or firms who specialize in purchasing surplus inventory from corporations that must get rid of their extra goods. These purchasers acquire the excess product at a bargain and then resell it through several channels, such as online marketplaces or physical storefronts, to make money.
- Just in Time (JIT). To reduce storage and insurance costs as well as to all but eliminate waste, JIT involves keeping only the inventory a business needs to immediately produce and sell products.
- Materials Requirement Planning (MRP). MRP utilizes accurate sales records to forecast upcoming sales and communicate inventory needs with manufacturers, suppliers and other members of the supply chain.
- Economic Order Quantity (EOQ). EOQ assumes constant consumer demand, which allows inventory managers to calculate the number of units needed by a company to maximize inventory while minimizing costs.
- Days Inventory Outstanding (DIO). A financial ratio that indicates the average time required to transform inventory into sales, DIO goes by many different names and can also provide insight into a business’s liquidity.
Practice Forecasting Demand
No matter what type of inventory management system you utilize, as a small business leader, you will need to be adept at predicting the rise and fall of demand within your target market. This will take time and experience, but it will also require your consistent practice. You should take advantage of tools like sales records, market trends, seasonality and even advanced tech like predictive analytics to assist you, but you should also learn how to trust your instincts to guide you toward inventory success.
Track Stock Levels Throughout the Year
The most fundamental inventory management task is tracking the availability of materials and goods available to you. At any moment, you need to be able to identify exactly how much of a certain product is in your inventory and thus capable of being sold to customers. You should develop a consistent inventory counting process that you and your staff can employ to minimize errors and ensure unfailing access to essential stock. Then, you should audit this process to ensure total accuracy at least once per year.
Through your stock level tracking, you should be able to identify some critical inventory trends. For example, you might note that certain products have higher seasonal demand or that the demand for some products has evaporated, making that stock obsolete. Paying attention to your inventory levels, you will gain greater insights into trends that can improve your ability to forecast demand.
Focus on Quality Control
Quality should be the focus of every inventory management process. You need to implement quality inspections to ensure that every material and product in your storehouse meets the standards you set for your business. As your business grows, every staff member tasked with inventory management needs to understand the importance of documenting quality control checks and adheres to processes you put in place to ensure high-quality goods for your customers. You might try to integrate the value of quality into your corporate culture, so employees develop a deep appreciation for quality control from the get-go.
Take Full Advantage of Your POS
You can invest in all manner of inventory management systems, and as your business grows and its inventory needs become more complex, you almost certainly will need a robust inventory management solution. However, when your startup is brand-new, you might be able to get by using the features of your point-of-sale system. POS technology can automatically update inventory levels with every sale and collect other types of data about stock that can guide procurement into the future.
Even for small businesses, inventory is a big issue. As an entrepreneur, you need to build inventory management strategies into your business plan to ensure efficiency as your company grows.