Inventory management makes sure your orders are on time and in good condition whether you’re sending them to your storage spaces or directly to your customers. Inefficient inventory management creates problems for your business such as delays in deliveries, overstocking, shortages, damage or loss of items, and others. All these reduce your profits, negatively affect customer brand perception, and increase your operational expenses. You’ll have to identify ways to improve inventory management to avoid these problems.

These are some of the inventory management best practices you can implement.

Organize Inventory Types

Identify the types of goods you have in stock and organize them into categories. This approach allows you to implement a cost-effective ordering schedule. You’ll know which items to purchase more of and the frequency you need to buy them. This also enables you to determine which products are profitable but cost more and takes more time to move. Consider categorizing your goods into high cost, low cost but quick turnover, and in-between. These simple categories make it easier to prioritize which items you should order more of and more frequently.  

Monitor All Details about Your Products

It’ll be difficult to schedule orders and determine the number of goods you need if you fail to track your products efficiently. You’ll need all the details about your products to make monitoring your inventory effective. The details you should take note of include SKU, countries of origin, suppliers, and barcode data. These enable you to determine the number of items you currently have. This information allows you to determine the frequency of your orders and the number you need to purchase to restock. These also make it easier for your team to trace the goods you lost.

Conduct a Regular Audit

The number of goods you have and how fast you’re able to move them influences your company’s budget. The longer items remain in your storage spaces, the more it’ll cost you. Your team should always be aware of your inventory to avoid this problem. One of the inventory management best practices you should implement is a regular audit of your stock. This approach involves an inventory count of all your goods. You can conduct this once a year, monthly, weekly, or daily depending on your needs. You can do a combination of all of them as you see fit. An audit makes sure you’re always updated on the current level of your inventory.

Evaluate the Performance of Partners

Review the performance of your business partners to determine if they’re worth the investment. Some of the factors to consider when dealing with partners:

  • Are they always late when it comes to delivering orders? If so, it’s time to assess your partnership.
  • Do they frequently short a delivery? Their negligence has a negative effect on your bottom line and customer perception. Shortages may lead to loss of customers and poor reviews because an item is frequently out of stock or late.
  • Are their deliveries frequently damaged or missing? The way they handle their deliveries reflects the quality of their service.

If you think your suppliers are no longer meeting your standards, prepare to change partnerships without affecting your current inventory.

Implement the 80/20 Rule

Many businesses follow the 80/20 rule which means that 80% of the revenue you generate comes from only 20% of your inventory. Make it a priority to manage this small but important percentage of your stocks. Review the fast-selling items in your portfolio. Learn more about their sales cycles and the number of items you sell in a month. This allows you to schedule orders appropriately and keep inventory at a level that meets the demand of your customers.

Be Consistent in Processes

Consistency is vital to a process like inventory management. You can’t leave employees following their own process when they receive, store, and encode inventory. You must establish a consistent process that everyone on your team follows. This enables you to identify discrepancies in your inventory, determine shortages or losses, and it makes it easier for you to monitor all the goods that go in and out of your storage facilities. Keep the process as simple as possible so that it eliminates mistakes. Keep a record of all the transactions whether it’s receiving inventory or delivering them to customers. Invest in inventory management software to simplify all your processes. Software allows you to store data securely in the cloud and access it at your convenience. It also allows you to browse data, schedule orders, locate items, determine stock levels, and do other related tasks.

Monitor Sales Regularly

Your inventory management best practices should include monitoring sales. Identify which items your team sold and the number they moved at the end of business days. Always update your stock totals so that your team is always aware of available inventory. Dive deeper into the data you collect to determine which products sell the most and during which seasons these take place. Identify which items customers often purchase together. A granular approach to data analysis and implementation improves efficiency and allows you to maximize the profits you make from your inventory. This also enables you to determine which goods you should always have stock of.

Invest in Technology and Tools

Manual inventory counting is time-consuming and error prone. Include inventory management technology in your budget so that you can simplify the work you need to do. Software and tools allow you to store inventory data and access them whenever you need to. It makes it easier for you to gather, analyze, and visualize data. You’ll be able to identify which items are the most in demand. You can schedule orders automatically based on customer demand and inventory levels. It’s also easier to monitor lost or stolen goods in your storage spaces using a tool. Look for software and/or tools that have the features you need and are within your budget.

These inventory management best practices improve your operations, scheduling of orders, and tracking of goods. If you need assistance with updating your books, we at Robookkeeper can assist you. We have a team of expert and experienced accountants. We offer first-rate outsourced bookkeeping services.