You’re Losing Money By Not Using These 6 Inventory Management Techniques
B360 Inventory management software 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 system as much as possible. This means taking of advantage inventory management software.
1. First-In First-Out (FIFO)
“First-in, first-out” is an important principle of inventory management software. 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. In order to manage a FIFO system, you’ll need an organized warehouse. This typically means adding new products from the back, or otherwise making sure old product stays at the front.
2. Manage Relationships
Part of successful B360 inventory management system software 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.
In particular, having a good relationship with your product suppliers goes a long way. 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.
3. Contingency Planning
A lot of issues can pop up related to inventory management. These types of problems can cripple unprepared businesses. 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.
4. Regular Auditing
Regular reconciliation is vital. In most cases, you’ll be relying on software and reports from your warehouse to know how much product you have stock. However, it’s important to make sure that the facts matches up. There are several methods for doing this.
A physical inventory is the practice is counting all your inventory at once. Many businesses do this at their year-end because it ties in with accounting and filing income tax. Although physical inventories are typically only done once a year, it can be incredibly disruptive to the business, and believe me, it’s tedious. If you do find a discrepancy, it can be difficult to pinpoint the issue when you’re looking back at an entire year.
If you do a full physical inventory at the end of the year and you often run into problems, or you have a lot of products, you may want to start spot checking throughout the year. This simply means choosing a product, counting it, and comparing the number to what it’s supposed to be. This isn’t done on a schedule and is supplemental to physical inventory. In particular, you may want to spot check problematic or fast-moving products.
Instead of doing a full physical inventory, some businesses use cycle counting to audit their inventory. Rather than a full count at year-end, cycle counting spreads reconciliation throughout the year. Each day, week, or month a different product is checked on a rotating schedule. There are different methods of determining which items to count when, but, generally speaking, items of higher value will be counted more frequently.
5. 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.
6. Accurate Forecasting
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.