Small business owners don’t have it easy these days with global pandemics disrupting supply chains and raw materials taking months to arrive. From the beginning, these small companies need to focus their efforts on either increasing their income or decreasing expenses as much as possible to get to the next level. Efficient workflows play a big part in that equation of inventory management. They’re vital in giving you more time to propel your business forward.
Inventory Management, as a part of supply chain management, comprises tracking and managing products a company acquires and stores in its warehouses. This includes activities like updating inventory lists, calculating stock demand, and managing orders from clients or suppliers. It basically dictates the overall flow of goods from purchasing to sales making it a crucial part of any business dealing with physical products.
Use these recommendations to add to your small business toolbox. Implement the ones that make the most sense for you. But first, let’s look at the reasons for implementing a strategy for your inventory.
Why You Should Implement Inventory Management
The key to success for every business is to standardize and automate as much as possible.
You need to adopt a continuous approach to managing inventory because there are so many constantly changing factors in the process. Therefore, you should keep your inventory strategy dynamic and lean, regularly revising the effectiveness of your efforts. If you’re already a bigger player, this is best determined by a team member of every department involved in supply chain management, for example, operations or finance professionals. Otherwise, you won’t know if what you’re doing is really the best option for your business.
Most essential for a small business is of course saving money. Implementing inventory management helps manage your supply so that you know when exactly money needs to be invested to stock up. Having the right amount of stock will also increase the odds of retaining happy customers. Especially as a lesser-known brand, you need to build up a loyal following by delivering what you promise.
What Can Go Wrong Without Proper Inventory Management?
First of all, there is almost always a discrepancy between what a company forecasts regarding stock turnover and what is actually possible to achieve by the people who do the work. Inventory management has the ability to connect different departments resulting in better communication on all levels.
Additionally, stock shortages or buying excess inventory will cost you a lot of money, especially when you deal with products that expire or otherwise become unsellable with time. Also, did you know that the more unsold inventory you have, the more taxes you pay at the end of the year? It results in higher business property and income taxes which can be an unfortunate surprise. Financial issues arising from situations like that can be detrimental for a small business. That’s why you need to understand and plan for inventory-related expenses to stay competitive.
How You Can Manage Your Inventory More Efficiently
Here’s a list of recommendations on how you can manage your inventory more efficiently.
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Choose the Right Way to Source and Store Products
How you want to store your inventory is the determinant of your inventory management strategy. If you have your own storage facility, it will be easier because you can handle processes yourself in person. If you ship through a supplier warehouse, dropshipping or fulfillment center you need to come up with a solution with them.
Generally, there are four techniques that vary by your business type. You can have a pull strategy, based on customer demand, or a push strategy, based on predicted demand. Moreover, there’s the just-in-time strategy which means you produce products when they’re ordered or the Early-in-Early-Out strategy where you sell products in the same chronological order as they were purchased. Make sure that you choose the right strategy for your specific situation.
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Use a Web-based Inventory Management Software
A web-based inventory management software helps you to stay on top of your inventory game by syncing all your sales channels and storage locations in one place, conveniently at your disposal. The key benefit of these applications is their ability to integrate with other systems. So if you’ve already set up your website through Shopify, it’s no hassle to connect it to an application like Megaventory to manage your inventory there.
In a study investigating warehouse efficiency, Durabook saw a significant reduction in picking errors and costs as well as improved efficiency when they implemented an inventory management software. Not only does it enhance workflows because you can interpret generated reports and determine future demand, but you can also set reminders when products are out-of-stock. It also helps you back up your data, another reason why you should opt for a cloud solution and not a locally installed software.
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Automate How You Enter Data (& Generally, as Much as You Can)
Entering data by hand will take up valuable time and increase errors. Mistakes are inevitable here because employees are just humans at the end of the day (obviously). Giving them useful tools like barcode scanners, that are connected to your inventory management software, will enable them to work much more efficiently.
Additionally, you should ensure to clarify with everyone involved what inventory data you need, like Quantities-on-hand, product storage location, product cost, etc. If you apply a coherent process of how data is accumulated and checked, your reporting will be more accurate. This leads to better demand forecasts. Moreover, an internal SKU system is also helpful to identify key details like how a product is displayed or shipped normally.
You need to think ahead and lay the foundation for data-driven operations early on. Since they will become even more prevalent in the future. Big players like Amazon are already using robots in their warehouses. While other businesses still think they can be competitive with spreadsheets. As a small business owner, you need to think ahead. This is so that you can easier adopt new technology in the future.
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Receive Inventory the Right Way
Automating how you enter your data should tie in seamlessly with the monitoring of the inventory you receive. Staff needs to be properly trained to check incoming and outgoing goods. They need to understand the information on purchase orders and compare it with the arriving inventory. A POS (Point-of-Sale) system can help with automatically showing inventory levels and integrates seamlessly with your inventory management software. So your employees have an easier time tracking products.
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Optimize Processes Involving Your Employees
As already mentioned, your employees play a big role in your inventory management strategy because they’re the ones working in the actual warehouse, picking and packing orders, and so on. Have you ever checked how long your warehouse staff takes to pick an item and send it out? Maybe they’re at a disadvantage because processes aren’t efficiently set up. Asking them what can be improved would be a great first step to find out weak spots in your current inventory strategy.
Furthermore, if you do implement an inventory management application, ensure that your employees understand exactly how it works to avoid any problems going forward.
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Audit What You Have in Your Warehouse
Automating data and implementing fancy technology doesn’t do anything if you still have no idea what inventory you have. Use quarterly audits to uncover dead products and inefficient workflows. Pro Tip: Spot-check random product lines from time to time to uncover errors, theft, or losses.
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Know Your Numbers
A great benefit of inventory management applications is that they give you lots of data. You can see your weekly/monthly/quarterly/yearly revenue, the number of sales, carrying costs, storage lifecycles, manufacturing costs, shipping costs, and even employee costs. Enterprises use this data to plan ahead and give out detailed reports on their performance. If you’re just starting out, you obviously don’t have big amounts of data. In that case, look at competitors in your niche that already have information out there. Learn from that until you have your own numbers.
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Don’t Just Accumulate Data, Interpret It
Needless to say, once you have your data, you need to be able to understand it to draw the right conclusions from it for your business. It can seem like a tedious task at first, but practice makes perfect. In the end, you will benefit from the knowledge you gain through the data. Afterward, you can optimize sales channels and financial investments. As well as you can calculate the optimal amount of inventory you need to carry. Not flying blind will make your customers happier in the end. Mostly, because you can keep up with their demands by thinking ahead in your business operations.
Inventory Management of the Future
As already touched upon, the IoT (Internet of Things) and automation software will be used even more in the future as a part of Industry 4.0. Even small businesses will be able to afford advanced smart technologies and should start preparing for the future.
The most important part is, that inventory management can’t get more accurate than when you make a product traceable. Take out as much human error as possible. It makes reporting and demand forecasting easier and improves product transparency as well as invoicing. If you want to know more, check out this article about the impact of IoT on Inventory Management.
Wrapping Up
So, let’s recap what we’ve learned so far:
- Standardize and automate as much as possible
- Implement a cloud-based inventory management software
- Touch base with your employees working with inventory
- Use modern technology to improve efficiency for everyone involved
- Interpret inventory data to get ahead of your competition
Successfully running a small business’ supply chain and inventory management requires a lot of time and money. Improving processes as much as you can takes some load off your shoulders. Plus, give you the opportunity to scale your business. With implementing an inventory management strategy you improve productivity among your staff and handle your company more efficiently.
The post How SMBs Can Use Inventory Management to Boost Efficiency appeared first on KillerStartups.
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