The phrase “inventory management” might sound complex and expensive, like something that only a big company would need to worry about but the truth is, owners of even the smallest retail businesses can use some key inventory management tips to make sure they are minimizing costs, preventing losses, maximizing efficiency and getting the most out of their supply chain and their inventory.
Inventory management is a broad subject, but it touches on several key business operations, such as:
- Receiving Shipments of Inventory
Make sure that your inventory is delivered fully intact and undamaged, in the quantities and at the quality levels that were promised. With consistent inventory management processes, you can avoid getting shortchanged on your inventory orders, and avoid receiving damaged or incorrect products. This will save money for your business and improve your overall efficiency.
- Storing Inventory
Whether at your own business location, a warehouse or an offsite fulfillment center, inventory storage is important to get right. Make sure your inventory is safe from damage or theft, and that it is easily traceable and shippable from the storage location.
- Making Inventory Projections
Just like your business needs to make estimated sales projections to develop a sense of how many sales you are going to make throughout the year, you also need inventory projections to estimate your necessary inventory levels. Estimate how much inventory you will need based on prior sales and seasonal demand, and be prepared to adjust based on shifting customer preferences and new sales trends.
- Inventory Tracking
Good inventory tracking tools and practices will help you get an accurate count of the amount of inventory in stock and make adjustments to prices as needed. Accurate inventory tracking can also help you avoid losses or miscalculations – you paid for the entire inventory, so you should know where all of it is at any given time.
- Inventory Analysis
By looking at your inventory data, you can get valuable insights into how your business works, what sells and what doesn’t and how to make improvements along the way. For example, by analyzing your inventory data, you might discover that you need to significantly change the process of buying inventory from certain suppliers, or invest in buying more inventory at a slow time of the year when your cash flow is lower than usual – which means you might need an inventory loan to help finance the purchase of the new inventory.
Inventory management doesn’t have to be complicated, but it does require you to take a strategic look at the overall picture of your business’ inventory, keep track of the latest numbers and analyze the data to understand what’s happening with your stock of inventory and see which products are selling and which ones are slow to move. Good inventory management can help you be better informed about the overall forces driving your business, and help you make smarter adjustments in the way you buy and sell products.
Inventory Management Software
One of the best ways for small business owners to get smarter about inventory management is with the help of inventory management software. Instead of using spreadsheets or manual pen-and-paper methods to keep track of inventory, inventory management software gives your business better visibility, up-to-date tracking information and immediate insights into your inventory’s status and sales performance. And inventory management software doesn’t have to be expensive or “just for big companies” anymore! With today’s great cloud-based business tools, there are a variety of inventory management apps that enable your business to get just the right level of support and features that you need for a smaller business.
A few great inventory management tools include:
- Goods Order Inventory System Pro: This inventory management system gives your business a comprehensive way to track products and purchase orders, track inventory by location, store customer data in one place and add relevant taxes and discounts to customer orders before processing the sale.
- SOS Inventory: This is inventory and order management software that integrates with QuickBooks Online, reducing data entry errors and saving time. It works from any web browser on any device, and has support for multi-location inventory. This system offers comprehensive features to help you automate your business, whether it’s issuing purchase orders or tracking items.
- Stitch: Stitch is an inventory management tool that helps your business save time and money by keeping track of your inventory (quantities of each product, etc.), ensure accurate order processing, automate the processes of ordering new inventory and fulfilling new sales and making your business into a multichannel sales organization.
Check to see which inventory management tools have the right features and functionality for your business – some of them might even offer a free trial.
Once your business has integrated some inventory management principles (and perhaps some software tools) into your daily operations, you can start to look to the next level: inventory optimization. As described in this great blog article from Kabbage partner Xero, inventory optimization is the process of figuring out exactly how much inventory you need to meet customer demand, but without incurring unnecessary storage costs or creating unnecessary delays in fulfilling customer orders.
Inventory optimization is about striking the right balance between “too much” and “too little” inventory. If you have too much inventory, then that means you are incurring extra costs of buying, shipping and storing the inventory – reducing your cash flow and hurting your business. If you have too little inventory, then you risk running out of popular products, resulting in disappointed customers and missed opportunities for sales.
With inventory optimization, you can develop a deeper, data-driven understanding of your business – which products or categories account for your biggest sales totals, which patterns or fluctuations of customer demand are affecting your sales and how it relates to your business accounting. Inventory optimization helps you go beyond just tracking your inventory, and go further into assessing your inventory data and developing actionable business intelligence to take your business to the next level of efficiency and success.
Inventory is the stock in trade of every small retail business – your inventory is your business. So why do so many business owners neglect to pay attention to the fine details of the inventory on their shelves? It doesn’t have to be this way. With smart inventory management, inventory financing and next-level inventory optimization, your business can save money, satisfy more customers and operate more intelligently with greater visibility and better data to show the status and sales potential of every item you sell.
Have you tried inventory management software? Which software would you recommend? Leave a comment and let us know.
Ben Gran is a freelance writer from Des Moines, Iowa. Ben has written for Fortune 500 companies, the Governor of Iowa (who now serves as U.S. Secretary of Agriculture), the U.S. Secretary of the Navy, and many corporate clients. He writes about entrepreneurship, technology, food and other areas of great personal interest.