10-Step on Inventory Management

When starting a business it is significant to know the ins and outs of your products. Basically, regularly checking up on the progress and in-betweens in a business can help you keep track of your business’ progress. With that, inventory management is one of the most integral parts of your business.

In this post, I’m going to show you exactly how to do inventory management efficiently.

In fact, this is the selfsame process that our clients use to improve their business to the profitability of more than 50% every month.

So if you want to get more sales, optimized product launches, and greater profits, then you’ll love this tutorial on Inventory Management.

Come, dive in...

What is Inventory Management?

Inventory Management is the piece of inventory network the executives that expect to consistently have the right items in the right amount available to be purchased, at the ideal opportunity. Hence, when it is done correctly, it ensures the business of maximizing sales and reducing the chances of costs of excess inventory. Great stock administration can assist you with following your stock progressively to smooth out this cycle.

Having an up-to-date stock rundown will assist you with keeping up with your stock levels and give you a superior comprehension of what's selling and what isn't. This can assist you with diminishing your expenses and incrementing your deals. It'll likewise assist you with meeting your duty commitments as all organizations should represent the worth of their exchanging stock toward the finish of every pay year (shutting stock) and toward the beginning of the following pay year (opening stock).

It is also considered to be a liability because you spend money to keep your inventory in the count or order. If a failure in inventory management, you may mismanage your inventory. If its shelf life is short, it slowly ruins your stock.

Once you can keep track and identify what kind of stock you have including its value, it then signifies that the company has good inventory management. Moreover, you prevent product shortages, excess stock, and optimize warehouse organization.

Inventory Management vs Inventory Control

In this part, we aim to outline the differences between inventory management and inventory control including how they work together.

As mentioned above, inventory management deals with the most common way of requesting, putting away, and utilizing stock, both at the level of the crude materials utilized just as completed merchandise. Inventory management assists organizations with distinguishing which stock to arrange, the amount to arrange, and when. It involves stock management, tracking of the lifecycle of raw materials and finished goods from the day it was ordered to the day it was delivered, and every in-betweens.

For instance, you are a fish supplier. You have to ensure that you are keeping track of the lifecycle of your live fishes and the frozen ones ready to be delivered. Failure to track the right data, you might deliver spoiled fish to your consumer. It might even cost you bigger money to resolve the problem. Likewise, an occasion organizer will not go through cash leasing additional room to store shoes that she will not use.

On the other hand, inventory control, although it might sound similar to inventory management, is a part of the inventory management process. It is the daily routine of inventory management which includes the constant receiving, storing, transferring of products, as well as tracking its progress.

It is an integral part of the inventory management process because it gets to hold and control products to either be stored or transferred. Basically, the owner can manage the flow of products coming in and out of the warehouse including filling in the needs of the customers. It also includes warehouse organization wherein every coming in products are being checked and scanned - eventually assigned with its unique respective barcode. One team also checks inbound and outbound items and notes delivery records. Lastly, once the product is sold, it is also recorded for tracking.

There are inventory control methods that every business owner should know to effectively manage their goods:

• FIFO (First In, First Out) - oldest inventory is used first to fulfill customer orders.
• LIFO (Last In, First Out) - inventory received most recently is used to fulfill customer orders.
• FEFO (First Expiring, First Out) - inventory closest to its expiration date is used to fulfill customer orders.

Inventory management is the whole process of manufacturing demands, ordering, and managing the stocks. While inventory control is part of the inventory management process which a particular team is taking control in terms of tracking the goods inbound and outbound etc.

Both inventory control and inventory management follow and oversee stock. Stock control is a piece of the general stock administration cycle and tracks everyday patterns for everything. Stock administration pursues more extensive directions over longer periods. The two practices utilize cell phones for scanner tags and radio recurrence distinguishing proof (RFID) filters for exact, constant updates.

Benefits of Inventory Management

As mentioned, inventory management is essential to all kinds of businesses as it helps your business progress effectively. The following are the benefits one can get from inventory management:

1. Helps identify your top and slow sellers - You can now target which products are more sellable and get rid of excess products that are not popular to the customers.
2. Help you make smarter decisions - You are now aware of which products you should invest more in and when to invest. It alerts you on what actions you should take for your business to progress.
3. You can drive revenues - Keeping track of your products and identifying your top and slow sellers, you can produce products that are most popular to the people. And eventually, you will earn more revenue given that you delighted the customers with what they need.
   
4. Save time - Focusing on the products that the customers need, saves you time from wasting it on other products that are not popular with people. And if for instance, you need to check progress, you already have a ready list of records.
   
5. Minimize inventory costs - As it drives you more revenues, it also lessens your costs in providing products that aren’t sellable to the customers. Inventory costs such as storage fees, insurances, taxes, etc.
   
6. Efficient and integrates your entire business - The ability to perform good inventory management influences the entire performance of one’s business. It keeps the business going without compromising too many costs.
   

Costs of Inventory Management

Inventory costs include all the deliveries, ordering of products, storing, managing of stocks in a business, even shortages are included. They can take up to 40% of inventory costs. Therefore, it is important to consider that there has to be sufficient understanding in managing these inventory costs because it encompasses the entirety of one’s business. Moreover, having the ability to manage can help a business owner in terms of investments, safety stocks, production of products, etc.

Here are the different types of Inventory Costs:

1. Inventory Ordering Costs - These incorporate costs brought about in requesting a clump, creation run, or acquisition of remotely made parts or items. Expenses, for example, organization and request endorsement costs including the expenses to run a stock administration and requesting framework are remembered for this classification.
   
2. Inventory Holding Costs - These are expenses brought about while holding stock or stock away or a stockroom and dealing with its conveyance to clients. The majority of these expenses can be evaluated without any problem. Some normal stock holding costs incorporate Warehousing and calculated expenses, Insurance, Spoilage/breakage misfortunes, Obsolete stock benefits, and the opportunity cost of tied-up capital.
   
3. Inventory Shortage Costs - “Stock lack” costs allude to the expenses, some immaterial, of running unavailable and not having the option to supply clients with the merchandise they request in a certain period or lead time. The vast majority of these expenses are hard to measure. The impacts of a stock lack, and cost, predominantly identify with lost deals and benefits, lost clients, stock-out fines, and agreement questions.
   

How To Conduct Inventory Management

We all gotta start somewhere. No one started as masters anyway. Thus, the following are basic tips the business owner, especially small businesses, should take note of in starting up inventory management:

1. Use the inventory mode which is right for your business - As the owner, you have to ensure that you are aware of how your business works for you to measure which inventory method is relevant to your business.
   
2. Identify slow-selling stock - It is important to know which products in your business are not popular and sellable to your customers. Through this, you can now minimize your cost of manufacturing or purchasing products that aren’t sellable and will only add in your inventory costs.
   
3. Track stock levels - This is where your products are and their condition in the public. Following the amount of which explicit things are close by — regardless of whether utilized in item improvement or addressing merchandise available to be purchased to clients — can assist with reviewing supervisors tweak their requesting measures.
4. Audit stock levels - Your stock administration framework should be exact. Guaranteeing its precision requires a mix of the right programming and the right strategies and practices.
   
5. Prioritize and group your inventories according to ABCs - It can help you keep track of which boxes or storage you stored your products for checking. Apart from grouping it to ABCS, group it based on its pricing levels. Things in the A classification are ordinarily greater expense and have lower deal volume yet higher worth than B things and C things.
   
6. Use the first in, first out system - It keeps you organized and easier to manage your products in terms of selling them to the customers. You will know which ones are sold out first based on the receiving date.
   
7. Select Tools - Abandon paper and bookkeeping pages and select a stock administration device that accommodates your business measures. There are free and minimal expense cloud-based choices that private ventures can associate with their retail location and bookkeeping frameworks. There might be an expectation to learn and adapt, however, the time contributed will pay off.
   
8. Focus on quality control - Quality control is a critical phase in inventory management, hence, implanting quality control into each part of stock administration, and exact documentation of the basic components of value control, for example, precise requesting and receipt coordinating, is indispensable.
   
9. Use a barcode system - Barcodes have been used in inventory management ever since and it has aided the system effectively as it represents information once scanned by an instrument used for scanning such. Moreover, it makes it simpler, quicker, and more precise for organizations to deal with their stock.
   
10. Invest in Inventory Management Software - As the world continuously grows, so are the instruments and machines used in allowing progress to easily and quickly move around businesses. Hence, investing in Inventory Management Software can help your business track and organize your inventory management easier and more conveniently.
    

Common Inventory Management Mistakes

1. Using the wrong tools - A spreadsheet may not be as effective as it used to be, given that the world is constantly evolving. Several software and technologies are spreading widely and effectively to help the entire business world. If a business would continuously manually check on their records, their business might be left behind.
   
2. Failure to regularly check inventory - A successful business reflects good inventory management. Once a company fails to regularly check its inventory, it may eventually create bigger conflicts over time.
   
3. Mismanaging stock levels - In connection with the previous point, too much or too little stock can affect the performance of the company’s business. Hence, it’s important to ensure that inventory management is regularly managed.
   
4. Not establishing KPIs - Key Performance Indicators center your business around what's significant. Vigorous stock administration frameworks will assist you with the following functional angles, for example: Getting proficiency, Picking exactness, Conveying cost of stock and Stock turnover

Key Inventory Management Formulas

Stock addresses a current resource since an organization normally expects to sell its completed products within a short measure of time, regularly a year. Stock must be genuinely counted or estimated before it tends to be put on an accounting report. Organizations normally keep up with modern stock administration frameworks equipped for following ongoing stock levels.

• Just-in-Time Management (JIT) - The technique permits organizations to set aside critical measures of cash and lessen squander by keeping just the stock they need to create and sell items. This methodology lessens capacity and protection costs, just as the expense of exchanging or disposing of overabundance stock. Given its name, it’s quite critical and tricky, which is why if the items aren’t delivered “just-in-time”, or minor delays, it can result in unwanted results.
  
• Materials requirement planning (MRP) - Producers should have exact deals records to empower precise arranging of stock requirements and to discuss those necessities with materials providers without wasting much time.
  
• Economic Order Quantity (EOQ) - This model is utilized in stock administration by computing the quantity of units an organization should add to its stock with each clump request to diminish the all-out expenses of its stock while expecting consistent purchaser interest. The EOQ model looks to guarantee that the perfect measure of stock is requested per cluster so an organization doesn't need to make orders too often and there is anything but an overabundance of stock sitting close by.
  
• Days sales of inventory (DSI) - This is a monetary proportion that demonstrates the normal time in days that an organization takes to turn its stock, including products that are a work in progress, into deals.
• Inventory to Sales Ratio -  This is the ratio of inventory values to the sales fulfilled within a certain period. With this, you can monitor sales performance in relation to product volume.

How Technology Transforms Inventory Management

Organizations use stock administration programming to oversee and advance their inventory chains. Stock administration programming helps independent companies ensure they have sufficient stock available and in the right areas to fulfill client needs and guarantee effectiveness in their assembling exercises.

Investing in software that can greatly help your inventory management can make labor in the company more convenient and feasible. It quickens the pace of what needs to be achieved compared to the manual recording of data. Businesses can set aside time and cash and boost deals with a high-level stock administration framework. It mechanizes the cycle to limit costs, precisely track approaching and active labor and products and give the ongoing information expected to settle on buying and item advancement choices.

The use of technology, in general, is essentially good in every job especially as intricate and critical as inventory management. It can be costly, but over time, the role of technology in inventory management can provide great results that weren’t imagined before. Technology has transformed all works into easier ones as long as it fits well.

Why Switch to Inventory Management Software?

Viable stock administration is fundamental for organizations of any size. For private companies specifically, however, compelling stock administration can assist with overseeing restricted assets, guarantee exactness at each place of the store network and help in settling on choices about item advancement and showcasing to construct and support a fruitful business.

Compelling stock administration is fundamental for organizations of any size. For private ventures specifically, however, powerful stock administration can assist with overseeing restricted assets, guarantee precision at each place of the inventory network, and help in settling on choices about item advancement and advertising to fabricate and support an effective business.

Barcode scanning, for instance, makes receiving and following products far quicker — and kills superfluous blunders. Deals applications, in the meantime, enable salesmen with stock information out and about. It can likewise be utilized underway to make a bill of materials and other creation-related reports.

Inventory management software such as DEAR Inventory enables you to key business measures from home, on vacation, and practically everywhere.

Conclusion

And there you have it.

A comprehensive guide on all things about inventory management.

It is just one aspect of your business that you need to master. But don’t worry, this process is made more efficient with data-driven systems. With such systems, you can optimize your business to satisfy demand with the right inventory at the right time. Furthermore, you will always transform your business to be customer-centric.

With an efficient inventory management system, you can cater to your customer’s needs better and increase your brand relevance towards profitability.

Included in all our data solutions is a customized inventory management system for any industry. Move towards demand-driven operations and take your company to the top. Check out our data warehousing and analytics solutions.