Inventory management is something that many company owners or managers may consider trivial. However, maintaining effective inventory management can provide a number of benefits to businesses, including loss prevention and improved cash flow.
Instead of using a huge amount of money to purchase a lot of expensive supplies all at once, managing your inventory means you can parcel out expenditures over time by ordering products on an as-needed basis. A good system also eliminates time wasted searching through cluttered supply closets for needed items. This can be particularly important for industries that need to maintain high levels of hygiene and product quality or have constant introduction of new products, such as the hospitality, medical, or aesthetics industries.
Three Main Types of Inventory
You may be wondering, what types of inventory even are there? There are three main types:
- Raw materials inventory: These are the raw materials that your business changes to produce its goods and/or services. For example, if you manage an ice cream business, raw materials inventory could include the milk, sugar, and any other ingredients you need to make ice cream.
- Work-in-process inventory: Work-in-process inventory is any unfinished goods that your business has made. Going back to the ice-cream business, these would include any tubs of ice-cream that are being made and are not yet ready to sell.
- Finished goods inventory: These includes any finished goods that are ready to sell. For your ice-cream business, this could include all the finished tubs of ice-cream that are ready for you to serve to your eager customers.
There are additional items that you may want to include in your inventory lists, such as consumables. These are items that you purchase to help you run your business on a day to day basis. For an ice-cream business, this can include items like waffle cones, ice-cream spoons, or paper cups. Items like maintenance items like cleaning supplies, serving items, or uniforms, or office supplies such as light bulbs or stationery are also included in consumables.
By adopting a proactive approach to inventory management and implementing best practices, you can overcome these challenges and achieve success. To effectively manage your inventory, follow these 5 proven strategies.
1. Know what you already have
Conducting regular stock takes is an excellent place to start. By making a physical count of all your supplies on had, you will understand just what you have, and what you need.
Streamline this process for staff by making simple forms that are easy to follow and fill in. This approach will help you keep track of your inventory levels and identify any discrepancies or inaccuracies. Schedule stocktakes regularly, ideally on a monthly or quarterly basis, to ensure that it is routinely done and not forgotten about.
2. Anticipate what you need
Forecasting demand is essential for ensuring that you always have enough products in stock to meet customer demand. By analysing sales data and other factors, such as seasonal trends and upcoming promotions, you can make informed decisions about how much inventory to order.
Accurately forecasting demand is critical for ensuring that you have enough inventory to meet customer needs while minimising the risk of overstocking or understocking.
3. Decide your stock par levels
A par level is the minimum amount of inventory you need to always have on hand. Setting par levels is a simple but effective way to ensure that you always have enough products in stock.
By setting par levels for each product, you can quickly identify when inventory levels are running low and reorder before running out of stock. This can help you and your staff maintain a consistent inventory level and reduce the risk of stockouts or overstocking.
4. Optimise your inventory
As we mentioned before, consumables are the items that help you run your business. If we switch our example to a beauty salon, consumables may include cotton swabs, gloves, gauze, and nail polish remover pads to use during nail treatments.
It’s important to keep track of consumables just like any other inventory to ensure that you always have enough on hand to run your business smoothly.
Increase your inventory turnover rates by experimenting with pricing, forecasting customer demand, and redistributing inventory to other warehouses.
Reducing your inventory is another strategy for improving your inventory management. You can reduce your inventory levels by lowering lead times, eliminating or liquidating obsolete inventory, and improving inventory forecasting.
By optimising your inventory, you can free up working capital, minimise waste, and maximise profitability.
5. Use an inventory management system
Using an inventory management system is an excellent way to streamline your inventory management process and reduce the risk of errors. With an inventory management system, you and your team can easily track inventory levels, set par levels, reorder products, and analyse sales data. Modern inventory management systems use sophisticated algorithms and machine learning to optimise inventory levels and minimise the risk of stockouts or overstocking.
Many modern inventory management systems are cloud-based, which can help reduce the risk of errors. Cloud-based inventory management software (like Zoho) can have features that include product expiration dates, lot numbers, and other important information that can be critical for product quality and regulatory compliance. This can help you improve your quality of services whilst avoiding the risk of fines, legal issues, and damage to your reputation.
By taking the necessary steps to effectively manage your inventory, you can achieve greater efficiency, profitability, and customer satisfaction. So why not take the first step today and start implementing these best practices in your business? Your bottom line and your customers will thank you for it!
At Collappor8, we understand the unique challenges faced by businesses and we can tailor solutions to fit your specific requirements. Whether you need guidance on inventory optimisation, technology implementation, or any other aspect of your business, we’re just a call or message away.
Reach out to us today to discuss how our experienced team can help you achieve greater efficiency, profitability, and customer satisfaction through effective inventory management. Your success is our priority!