Effective inventory management can save you time, money, and negative customer feedback in the future by ensuring that all the stock flowing in and out of your business is monitored and organized correctly. If you are a smaller business, then there might be less inventory to account for; however, these smaller quantities must still be managed effectively for peak business performance. Here are 5 top tips for managing your small business inventory.
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Invest in Inventory Management Software
If you are looking to take care of all of your inventory on-site then you will need to invest in an inventory management system that can track new products as they come in for storage and update itself when they have left the premises. A good system will track your inventory at all times, prioritize higher-value items, and do much of the hard work for you. However, it is still crucial to audit your inventory periodically to ensure that what you actually have in stock matches what you think you have.
Outsource Order Fulfilment
If you are too small to have sufficient storage facilities for your inventory then outsourcing your order fulfillment will save you from investing in a warehouse, including the employees that will need to manage it. In this case, a third-party logistics or order fulfillment company will have employees that manage the whole process of receiving stock to delivering orders to the end customer. Use an order fulfillment company with centers located all over the country to ensure same-day fulfillment and lower distribution costs, such as Red Stag Fulfillment which you can find here.
Apply FIFO to Your Warehouse
Adopting a ‘First In, First Out’ rule or ‘FIFO’ ensures that you are constantly renewing your inventory with the newest products so that the customer does not need to worry about sell-by dates or receiving a dusty, old version that could damage your reputation. The process of managing this rule is simple: add new items to the back so that the older products are at the front and can be sold first.
Categorize Your Inventory
Have an ‘A, B, C’ method in place for categorizing your inventory to keep track of the sales between your highest-value items and the lowest. This helps you to measure your annual consumption value, which is the annual demand multiplied by the cost of the item. Category C should include the least expensive items, that make up the largest percentage of inventory, with category A grouping the highest value items that are in the lowest supply.
Practice The 80/20 Rule
If you understand that 80% of your profits come from 20% of your stock, then you will be able to better prioritize the products that make you the most money to analyze them in greater depth. This way, you can get to know their complete sales lifecycle, including knowing exactly how many products in this top 20% you are selling each week.
Whether you are outsourcing your order fulfillment or managing a warehouse using your own employees, it is still vital that you take control of your inventory to manage the inflow and outflow of your highest and lowest value items. This way you can maximize your future profits and ensure that customers are getting what they pay for.