Coming up with the right strategy for managing your inventory is crucial for any business that wants to be highly effective and high-functioning.
Furthermore, every business regardless of size needs an efficient inventory strategy. This way you can optimize your customers' experience while balancing the company’s budgetary restrictions.
In addition, by establishing the best inventory management practices you’ll be able to run your business efficiently. That's why you must choose tools that can grow and scale your business.
Even then, implementing effective inventory management systems can ensure your business remains profitable, and help analyze sales patterns.
Also, you can predict future sales while you prepare your business for the unexpected thus increasing your chances to grow and thrive.
What is Inventory Management
Inventory management refers to a method for acquiring, storing, and selling your stuff, including both raw materials and completed commodities.
Furthermore, the inventory management in business terms refers to having the correct stock at the right moments and price.
In addition, inventory management systems are designed to help you keep track of where your inventory is at any time. Furthermore, it can show how much you have, so you can manage inventory levels properly.
How Inventory Management works
To clarify, inventory management ensures that stock is used as economically and effectively as possible. It is possible by managing items, components, and ingredients among suppliers, stock on hand, production, and sales.
Also, it can go as far as you need it to go, such as evaluating the difference between dependent and independent demand or estimating sales to prepare ahead. But it all comes down to your stock at the end of the day.
However, some businesses may choose to use a barcode scanner to scan inventory to improve efficiency and accuracy along pick routes.
Importance of Inventory Management
Inventory management is a crucial component of long-term business success. The remainder of your supply-chain management will come naturally when you will structure your inventory appropriately.
You risk a slew of blunders if you don't have them, like mis-shipments, out-of-stocks, overstocks, mis-picks, and so on.
However, warehouse management is crucial. Mis-picks might occur as a result of erroneous paper pick lists, unorganized shelf labeling, or just a cluttered warehouse.
Mis-shipments are caused by mis-picks at the start of the inventory process, as well as a lack of quality control measures.
Important details about inventory management
When a corporation uses manual techniques to place orders without having a complete understanding of the situation of its inventory, it results in out of stocks and overstock.
This is a poor predictor for inventory planning, resulting in either under or over-stock. These mistakes will cost you money and time to repair later.
Failure to employ management tools increases your odds of making a mistake due to human error by the minute. As a result, your customer reviews and loyalty will decrease.
Inventory Management Challenges
Inventory management's biggest headaches are having too much inventory and not being able to sell it, not having enough inventory to fulfill requests, and not knowing what you have in stock and where it is. Other challenges include:
- Obtaining Reliable Stock Information: Without accurate stock information, you won't know when to replenish stock or which stocks sell well.
- Customers' Needs and Tastes Change Frequently: Customers' tastes and needs are continuously changing. How will you know when and why their preferences change if your system can't track trends?
- Outdated or manual processes cause errors and slow down operations.
Inventory Management Techniques
Inventory control is only as effective as how you use it. Having inventory management set up by the software developers is worth the extra effort and money.
Collaborate with them to assure you're using the right approaches and capabilities to secure optimum results.
You can use the following inventory-control techniques:
Minimum order quantity (MOQ)
Minimum order quantity refers to the minimal amount of specified stock that a supplier is ready to sell.
The supplier will not sell a product if shops are unable to meet the minimum order quantity.
Inventory products that cost more to produce, for example, often have a lower MOQ than items that are easier and less expensive to supply.
Dropshipping is a type of inventory management fulfillment in which a store does not have the things it sells in stock.
When a store makes a sale, they purchase the item from a third party and have it shipped to the customer instead of picking it from their inventory. The seller is never aware that we have touched the item.
Economic order quantity(EOQ)
EOQ is a methodology for the optimal order quantity a company needs to obtain for its inventory with a set of variables, including total costs of production and demand rate.
The formula is used to reduce associated costs by determining the largest number of product units to order.
The number of units in the delivery and storage of inventory unit costs is also taken into account by the methodology. For most businesses, this helps free up tied cash in inventory.
Just-in-time Inventory Management (JIT)
JIT is a method of coordinating raw material orders from suppliers with manufacturing schedules.
It is a fantastic technique to save money on inventory. Instead of ordering too much inventory and risking deadstock, businesses acquire goods on a need-to-know basis.
Before being withdrawn from the sale status, the dead stock is goods that were never sold or used by customers.
Safety Stock Inventory
Extra inventory is ordered beyond predicted demand, which is referred to as safety stock inventory management.
This method is designed to avoid stockouts, which are often caused by inaccurate forecasting or unanticipated changes in consumer demand.
Cross-docking is a method of inventory management in which products from an arriving truck are unloaded directly into outbound vehicles, resulting in a just-in-time (JIT) shipping procedure. In between delivery, there is little to no space.
This inventory classification technique divides themes into three groups to discover objects that have a significant impact on overall inventory expenses, including categories like:
- A - includes your most valuable products, which contribute the most to overall revenue.
- B - those products that fall in between the most valuable and the least valuable.
- C - includes the small transactions that are important for overall profit but don't contribute as much to the organization as a whole.
Reorder Point Formula
The reorder points formula is an inventory management approach based on a company's buy and sales cycles, which differ by product.
To account for lead time, a reorder point is typically higher than a safety stock number.
Batch tracking is an inventory management strategy for quality control that allows users to aggregate and track a group of products with similar characteristics.
This method helps in tracking inventory expiration dates or tracing defective items back to their originating batch.
Consignment inventory is a business arrangement in which a consignor (vendor or wholesaler) agrees to sell their items to a consignee (store) without the consignee paying for the inventory upfront.
The inventory is still under the consignor who is selling it, and the consignee only pays for it when it sells.
Perpetual inventory management
Continuous inventory management essentially means counting stuff as it comes.
It's the most basic method of inventory management, and it can be done manually or with a spreadsheet.
FIFO and LIFO
LIFO and FIFO are inventory costing methodologies. The FIFO (First In, First Out) assumes that older inventory is sold first. It is a wonderful strategy to keep inventory fresh.
LIFO (Last-in, first-out) assumes that fresher inventory is sold first. It helps keep inventory from spoiling.
Six Sigma is a method of teaching that equips businesses with the tools they need to improve their business's performance (raise profits) while also reducing the rise of excess waste.
Lean is a collection of management techniques that may be used in any industry.
Its purpose is to increase productivity by removing waste and non-value-added tasks from daily operations.
Demand forecasting is based on prior sales. Retailers should be conversant with it as a method of inventory management.
In essence, the goods and services forecast that a firm anticipates customers to buy in the future.
Inventory Management Software
Since 2004, GoFrugal Technologies has provided retail, restaurant, and distribution organizations with Point of Sale Software in the form of complete business automation solutions linked with mobile apps and cloud solutions.
It's goal with digital solutions is to provide a positive customer experience. As such, their technical footprint has grown to serve 25,000+ retail firms in 50+ countries, with headquarters in Chennai, India.
Megaventory is for medium-sized businesses with multiple locations - including production - web-based inventory management, order tracking, invoicing, and reporting.
Stock updates, supplier availability, and lead times may all be found here. Over time, keep track of stock levels, costs, and inventory value.
Picking, serials, batches, and expiration dates, barcodes, refunds, consignment, dropshipping, and internal transfers are all things you'll have to deal with. User-friendly UI, extensive assistance, and good value for money!
For laboratories, eLabInventory is a flexible inventory tracking system. You can use it as a stand-alone or in conjunction with eLabJournal.
The highly flexible program organizes any sort of sample in the lab and may be fully customized to function in your specific setting.
Standardized documentation, efficient and structured inventory management, and a complete audit trail for each item are all available with eLabInventory.
eLabJournal is a simple and versatile way to keep track of data in your lab. Sample tracking and protocol management are also included in the all-in-one Electronic Lab Notebook.
When it comes to documenting, organizing, searching, and archiving data, samples, and protocols, eLabJournal makes it easier.
The program can be used in any lab, from small academic laboratories and start-up businesses to major academic institutions and multinational corporations.
Online and offline merchants will benefit from Primaseller Inventory Management Software. It includes features like a built-in POS, B2B eCommerce Portal, Purchase Planning, QuickBooks integration, shipper management, and discounted USPS rates.
It also has features like a built-in POS, B2B eCommerce Portal, Purchase Planning, QuickBooks integration, shipper management, and discounted USPS rates.
You can manage the orders very simply by integrating Etsy, Amazon, eBay, Magento, Shopify, WooCommerce, and BigCommerce stores.
The cloud-based inventory management software from EZRentOut makes it simple to keep track of rental products.
It allows you to increase efficiency and productivity while maximizing your return on investment. With our mobile app, you can save time. Scan barcodes and QR codes more quickly to create orders.
EZOfficeInventory is an asset tracking software that allows you to manage inventory and assets throughout your entire organization.
For better inventory management, track vendors, move products between locations, and configure low stock threshold alerts.
Scan barcodes, QR codes, and RFID tags to perform mass actions and manage operations on the go using our mobile apps!
This procurement tool enables quick inventory replenishment via POs, which updates your product catalog instantly. It's completely free to try!
Auto parts companies utilize PartsPal to offer aftermarket and OEM parts online with complete and accurate fitment information.
PartsPal compares inventory to fitment data from two industry-standard databases, GAPC and UVDB, to provide access to part information and vehicle compatibility.
After that, you can upload your parts to Shopify and the eBay marketplace.
With Xero's simple inventory management software, you can keep track of your supplies. Keep track of stock in real-time and stay on top of the figures.
QuickBooks Desktop Enterprise
Quickbooks is a small business accounting software, at its best, gives instant access to information on customers, vendors, and employees.
To streamline work orders, facilities, and asset management, UpKeep is your number 1 mobile-first Inventory Management Software.
Inventory Management Software Free
Odoo is an open-source ERP system with modules for CRM, eCommerce, POS, expense management, supply chain, and inventory management.
Users can track delivery orders, dropshipping requests, backorders, receptions, and inventory item transfers using Odoo's inventory management module.
Pricing: The first two modules are free. You can purchase any additional modules separately.
This module supports a variety of shipping providers, such as FedEx, UPS, DHL, and local post offices, making shipping operations simple to manage.
Wi-Fi, Bluetooth, and USB connections are all supported for barcode scanning. Because the other modules in the ERP ecosystem are seamlessly integrated, you won't have to manually update inventory or accounting reports every time a product is sold.
Customer service is available through Odoo's portal and by phone.
Square for Retail
Advanced services, including inventory transfers, purchase management, and vendor management, are included with paid memberships for each location, which start at $60 a month.
Square for Retail is a cloud-based retail management and point-of-sale solution that assists businesses in managing online and offline sales.
Some of the most crucial features are a website builder, inventory management, order management, checkout and payment administration, and reporting.
Pricing: The free plan contains; payment management, cart management, barcode scanning, customer management, etc.
Stock tracking and counting are among the inventory management tools offered by Square's free plan.
Low stock alerts are also available in the free edition, which informs consumers when inventory levels fall below the crucial order volume. This allows you to start replenishing inventory before stock outages harm your business.
Phone, email, social media, live chat, and a self-service knowledge base are among Square's customer support alternatives.
Zoho Inventory, a cloud-based inventory management software, includes inventory control, warehouse management, multichannel selling, and order management among its features.
The free version of Zoho Inventory allows up to two users to manage online and offline inventory orders, as well as track shipments and warehouse activity.
Pricing: the free plan contains Support online and offline purchases for a total of 25 orders.
Furthermore, the free plan also includes eCommerce platform connectivity, allowing you to manage purchases made through those platforms.
Customer support options include a self-service knowledge base, FAQs, forums, email, and phone support, among others.
Paid plans start at $49 per month per organization and support up to 1,500 online and offline orders each month.
How to Improve Inventory Management
Concentrate on your requirements
It can be difficult to manage a warehouse filled with inventory. As such, pinpointing the most crucial issues and focusing on them first will help you manage everything better.
It's doubtful that every item in your warehouse will see the same level of customer demand.
If you maintain the best-selling things in stock, you'll be well on your way to keeping your customers satisfied.
Communicate directly with suppliers
It's critical to handle supplier relationships well in any stock-based business. It's critical to build positive connections with your company's main suppliers to ensure consistent supply, unlock competitive pricing, and recognize new trends that could affect your business.
Keep track of what's working and what isn't
Consider how your business handles order volumes, replenishment cycle lengths, safety stock, forecasts, seasonality, and other considerations.
Make changes to each activity based on your business, keeping track of what works and what doesn't.
It may be more useful to make a substantial improvement in one area rather than a few minor improvements all around.
Make use of real-time data
Information can be a powerful tool, but only if it is accurate and current. Real-time data and analytics may make a big difference in your organization, from multilayer inventory management to predicting data, autonomous ordering, and customized safety stock.
Consider adopting perpetual inventory management software for the most accurate data, as it is the best method to ensure that the information you require is always at your fingertips.
Switch to mobile
For example, barcode scanning speeds up receipt and tracking of items while also reducing errors.
Sales apps, on the other hand, provide inventory data to salespeople on the go. You can monitor critical company processes from your home, vacation, or anywhere you are.
Devise and inventory management system
Ad-hoc inventory management will only go you so far. You'll need a management system to keep track of your stock properly. Because every organization has its own set of requirements, it's critical to select a system that fits your demands.
In the early days of her business, Kareen might be able to manage her inventory via spreadsheets, for example.
A global stock-based corporation like Amazon, on the other hand, necessitates a customized, comprehensive solution to handle the massive volume of orders it processes every day.
Inventory Management FAQs
There are some red flags in a warehouse that can help you figure out if your inventory strategy is working effectively. And they're all related to poor inventory management.
Here are a few indicators:
You have unsold inventory, which means you have a hot item in the backstock that you didn't list in time for the season.
Inventory levels are rising, but they aren't keeping pace with sales. This indicates that the stock is no longer available.
Because of the amount of shelf wear on the packages, you have to lower the price. This occurs as a result of poor inventory stocking or product sitting for too long and becoming dead stock.
How can you know whether you have successful inventory management?
When it comes to inventory management success, the numbers speak for themselves. Compare the data from before and after you've adopted new inventory management methods.
Have you noticed a reduction in the number of mis-shipments, mispicks, or out-of-stock? What about the stock that has expired?
You've completed inventory management if you can answer yes to these questions. As a result, you should observe an increase in customer loyalty and improved ratings.
Inventory is your company's most valuable asset, and you must safeguard it and nurture it in the right direction to save money and create money.
Inventory management help you to keep track of and manage your company’s inventory, when it’s manufactured, bought, stored, and used.
This process governs the whole flow of goods ensuring that your business always has the right items in the right quantities at the right time and in the right place.