If you’re a business that sells products, implementing effective inventory management strategies is a number one priority for you. Not only do you have to deal with shrinking products thanks to theft and human error, keeping track of stock levels helps you grow your business and improve customer satisfaction.
While you may have a few inventory management techniques already in place, it’s always worth it to discover new methods that help improve productivity while reducing theft and administrative errors.
Which is why you should keep reading. We’re sharing with you 10 inventory control methods every business needs to use.
1. Implement Inventory Management Strategies Like Double-Checking Your Delivered Stock
One of the most effective inventory control techniques is to check to make sure that what was delivered is correct. People make mistakes. Sometimes suppliers get orders wrong.
Never assume your delivery is correct until you’ve double-checked it first. That way, you avoid being short-stocked which can lead to unhappy customers and lost sales.
You also avoid ending up with more stock than you need. Too much inventory leads to you not knowing when it’s appropriate to reduce prices, whether or not to order more or what to do with products you can’t unload.
2. Adopt FIFO
FIFO or “first in, first out” is one of the smartest inventory management methods. What it means is that the oldest stock you have on hand gets sold first. You leave your newest products to sell last.
If you deal with perishable products, this method is extremely important so you avoid ending up with unsellable items that have spoiled. But you can also use this same method just as effectively for non-perishable items.
Items left alone unsold are more likely to get worn out. And it’s possible that if left untended for too long, the packaging design and features changed over time.
Technology products also become obsolete quite quickly and it’s harder to sell older items. Organize your warehouse by adding new items to the back and pushing older items to the front.
3. Develop a Contingency Plan
No matter how well developed your inventory control strategies are, things don’t always go the way you plan. Your sales spike and you end up overselling your stock.
Your warehouse can’t accommodate a seasonal spike. You run into a cashflow problem.
You know problems happen so you may as well create a contingency plan ahead of time so you know how to tackle these issues.
4. Build Up Your Relationships
Make sure part of your contingency plan is building up your relationships with your vendors. Having a solid relationship with them is helpful when things go awry.
You may need them to agree to take back an item that isn’t selling quickly so you can make room for a newer product. Sometimes you’ll need their help troubleshooting manufacturing problems.
A good relationship is about good communication. Let your suppliers know what to expect when something comes up so they can adjust accordingly.
5. Organize and Label Your Inventory
Having a well-organized warehouse is always a necessary part of all inventory management methods. You can’t just place products wherever they fit without losing time and money.
Create a database that shows where everything is stored. Store like-items near one another. Make sure your employees know and understand the system you’ve developed.
And clearly label everything. It’s helpful when items accidentally go missing or even just to ensure an employee doesn’t grab the wrong item to ship to a customer.
6. Keep Track of Expiration Dates
Many products in life come with an expiration date. Some dates are only a few days or weeks. Some products last up to a decade or longer.
But if you don’t create inventory control strategies around these expiration dates, you’re causing a lot of problems for your business. That includes liability issues and hefty fines if expired items end up in the hands of a customer.
Developing a system to track products so you can sell them before they expire.
7. Perform Regular Audits
Just because you’ve set up inventory management methods, it doesn’t mean you can relax. Things change for various reasons.
It’s important to conduct regular audits to ensure everything matches up.
It’s a good idea to perform a physical inventory at year-end to tie it in with accounting and income tax. However, to make it easier on yourself, periodically perform a spot check.
A spot check is when you choose a product, count it, and compare the number to what your information states. This makes the year-end process less tedious and helps you pinpoint trouble spots before they become problems.
You can also use cycle counting which is the act of spreading reconciliation audits throughout the year. This process checks products on a rotating schedule so everything gets check periodically.
8. Invest in Software
Thankfully, there is software available to help you manage your inventory more effectively. Utilizing software helps eliminate problems such as administrative and staff errors.
Automated software also helps prevent customer and employee theft. But the software also provides you with other tools to assist you by saving you money and time.
InFlow can help. Click here to learn more.
9. Batch Tracking
Batch tracking is also known as lot tracking. It’s the process for tracing goods along the distribution chain by using batch numbers.
Batch tracking allows you to see exactly where your goods came from, where they’re going, how much of it was shipped, and when/if they expire. And you can view the process all the way from when it was raw material to when it became a finished good.
Batch tracking helps improve relationships with your suppliers, eliminates errors, helps streamline expiration tracking, and it’s easy and quick to recall any items when necessary.
10. Safety Stock Inventory
There are certain items in your stock that sell better than other products. Safety stock inventory means you keep a small, surplus amount on hand of a certain product for times of increased market demand.
Adopting a safety stock inventory system helps protect you against unexpected demand and stockouts. It’s a way to protect you from losing revenue, customers or a loss in market share.
Here’s a good formula if you’ve just adopted this method:
(Max Daily Sales x Max Lead Time in Days) – (Average Daily Sales x Average Lead Time in Days) = Safety Stock Inventory
It’s important when you own a business to keep learning. Knowing the best inventory management strategies helps increase productivity while lessening errors and theft.
But it’s not the only process a business needs to understand. Getting funding is also a complex part of owning a business. Click here to learn the most common business funding options.