Of all the factors that contribute to a business’s success, inventory management is one of the most crucial yet overlooked ones. Having good control over your inventory allows you to cater to your customers’ requirements better and avoid stock-out issues. It also helps you meet sudden spikes in customer demands during festive or holiday seasons, gaining you a good edge over your competitors.
For a good control over your inventory, you need to have best practices in place. In this blog, we will talk about the best inventory management practices you can introduce to your business to enhance profitability and customer satisfaction. Keep reading to know more:
#1. Having strong knowledge of your inventory and properly categorizing them
What are the types of stock you handle? What are their lead times? What is the customer demand for these products? Have you stocked inventory based on historical data and market trends? The answers to these questions will give you a good understanding of your inventory and ways to manage it.
Also, as soon as you report the inflow of inventory, one of the best practices you should always follow is to categorize it properly. Doing an ABC analysis of inventory is a good method to manage your stock the best way. In this method, you identify your stock and put them in one of the following categories:
- A: High-Value, High-Profit items deserving top priority
- B: Medium-Value; Medium-Profit items deserving reasonable attention
- C: Low-Value; Low-Profit items that don’t require too much of your time or effort
This kind of organised system helps you know the stock levels better and restock appropriately when there is a demand.
#2. Using the right inventory management system powered by the latest technology
Currently, there are quite a few popular inventory management methods that help manage your inventory and keep it at the right level. You can implement the one among the options listed below, based on the nature, size and budget of your business.
- Stock review – This is a manual process, and it suits small businesses well. It involves manually recording all inventory on hand and making sales forecasts based on historical data.
- Just in time (JIT) – This is a useful inventory management method for businesses that don’t need to store bulk quantities of stock in the warehouse. Here, inventory is sent out as soon as it arrives, making it great for businesses handling perishable goods.
- ABC analysis – This method involves segmenting inventory based on its value and profit-earning potential. Identifying each segment and employing a different inventory management strategy appropriately will help you manage your inventory efficiently and avoid issues like excess stock, stock-out and more.
- Economic order quantity (EOQ) – This type of system helps you make the right investment and have just the right quantity of inventory to fulfil customer demands. Your inventory stays at optimal levels in this system, helping you save on carrying costs and other expenses.
- First in first out (FIFO) / Last in first out (LIFO) – You can choose any one of these based on the nature of your business. In the FIFO method, you will first sell off those items that entered your warehouse first. On the contrary, in the LIFO method, you will first sell off those items that newly entered your warehouse.
Apart from choosing one of these systems, it is important to use updated technology to make the systems work accurately. Using the right inventory management tools for automation like stock reordering, making forecasts based on market trends and historical data and more will help reduce human errors to the maximum possible extent.
#3. Training employees to work on these systems
Adopting new and sophisticated inventory management systems is only half the job done if you don’t train your employees on how to use them. Opting for TallyPrime inventory management software, which is quick to get started with, is the key.
#4. Regular evaluations, audits and maintenance checks of inventory
One of the must-follow practices to manage your inventory efficiently is to conduct regular audits, inspections, maintenance checks and evaluations. These regular checks will let you take stock of your inventory in real-time so that you can know if they are in line with customer demands.
Using automated tools to conduct regular inventory audits is also a great way to check if the systems and technologies you have employed are working properly. These audits add a lot of credibility to your inventory management process, giving you the confidence to make proper sales forecasts and avoid stock-related issues at all costs.
#5. Maintaining a good relationship with suppliers
While taking care of your inventory and using updated tools and systems to manage your stock better is a great idea, that alone will not be enough to ensure the profitability and accuracy of your business. Having a good relationship with your suppliers and collaborating with them at different stages of inventory management will give you the results you desire.
Having healthy communication with your suppliers about your optimal inventory levels, current stock requirements, forecasted demand, and other related matters can smoothen the supply chain process of your business.
Bottom line
Since inventory management checks are vital to the profitability, efficiency and reputation of your business.
Employing the best inventory management practices will help you plan your forecasts better and cater to present customer orders without any hassles. This will earn you a lot of respect and appreciation from your customers and will go a long way in making your brand a huge success.
