Today, if you are a small business owner that’s focused on moving goods, it’s imperative that you’re applying inventory management techniques and using best-in-class technology.
Gone are the days of passing around a sheet of paper or using a static Excel sheet to track stock levels. The speed of business simply moves too fast for such archaic, slow processes these days.
In order to keep up with the demands of fast-moving inventory and the ever-fickle consumer or buyer, you must also enable people to shop online—where they can view available inventory in real-time— just as they can in store.
Why Real-Time Inventory Management Matters
Although all of these things are visible and important to buyers, so too is inventory management. Because most inventory management activities occur in the back office and warehouse, buyers may be unaware of how relative such processes are to their overall opinion of your company.
Also not visible to the buyer are cloud-based inventory management software tools that should be in place in order to digitize inventory management. Such solutions when paired with inventory management techniques can make or break any business today.
Not only does a strong inventory management program enable you to maintain healthy stock levels, it enables you to earn strong customer service ratings and inherently can help you maintain a strong and healthy business. It also helps you:
Avoid dead stock (those trendy or seasonal styles)
Keep perishables from expiring, rendering inventory unsellable
Reduce inventory costs
To get you started, let’s first define what inventory management is before we jump into how to do it.
What is Inventory Management?
Inventory management is often best achieved—as mentioned earlier—through a combination of technology and techniques. It can’t be completely automated nor should it run entirely on human power. Instead, inventory management requires a delicate balance of technology and strategy in order to use it as a business advantage.
Inventory Management Strategies for SMBs
1. Use Real Time Inventory Management Software
This is a core, must-have to succeed for any small business. Whether you ship 10 or 1,000 items a day, cloud-based inventory management software can scale with you as you grow. It also can help you maintain always-accurate stock levels on your website or in B2B selling portals. Never be at a loss as to whether or not you can fulfill an order.
2. Demand Forecasting
The foundation of this technique requires human judgement but technology as well. By reviewing prior year sales data, you can plan for similar scenarios in the coming year. This, of course, requires that someone review the data and make a judgement call based on the prior year sales figures. This is yet another example of how inventory management software can be combined with human judgement to work as a business advantage. This method also includes what sales is forecasting for the coming quarter.
3. FIFO (First In, First Out)
This technique demands exactly as it reads. For any one item in your warehouse, the first batch of inventory that is shipped and received into your warehouse, should be the first to be shipped out when ordered by a customer. This one is especially important in the world of perishables as those goods have a greater chance of spoiling the longer they sit in your warehouse. Use barcodes and alerts to prevent items from spoiling. Instead, if items are nearing their sell-by date, run a sale or discount on those items and move them out before that can occur.
4. ABC (Always Better Control)
This strategy requires you to classify inventory into three categories. Category A is typically defined as high-priced, expensive items that you maintain a high number of stock in. Category B are less expensive items that are moderately priced and stocked. Finally, Category C items are typically less expensive (than categories A and B) and are limited in stock. By dividing inventory into these three classes, you can better choose the investment you make into specific items within each category.
5. Minimum Stock Levels
This method requires that a minimum stock level is reached, requiring an order to occur when inventory reaches that number. Keep in mind you’ll need to include the time it typically takes to receive an order from that supplier. Make sure you have enough inventory to get by until you can receive that order and begin shipping those items out.
6. FSN (Fast, Slow and Non Moving) Method
This strategy requires you to classify inventory based on it being fast, slow or non-moving. Naturally, you’ll want to make sure you maintain healthy minimum stock levels on fast- moving inventory. You’ll want to closely monitor this category of goods. Slow-moving goods might be goods that are seasonal and run the risk of being irrelevant by the next season. Keep a low inventory of these items and watch them carefully for obsolescence. If you know that these items will eventually become obsolescent, it’s time to run a sale or offer a discount on these items.
7. Drop Shipping
Often used by growing business, this method allows you to build your brand and reputation, but not stock inventory. By developing and paying vendors to ship for you when your customer places an order, you invest less in inventory while your business is growing. You will pay a service fee per shipment, but drop shipping this method allows you to focus on growing your brand awareness and sales, not shipping.
8. Cycle Counting
This method requires that you count only a portion of your inventory on a regular basis—once a month is often suggested as best practice for this particular inventory management tip. Technically an inventory auditing method, this technique is less disruptive to your warehouse and teams. You can also focus on Category A items as mentioned in the ABC method.
Ready for Inventory Management Tools?
Systum is the industry’s first enterprise-grade, affordable business platform that helps you run your wholesale, distribution or digital commerce business. Switch to Systum and optimize your operations, unify data and better serve every customer from one dashboard. If you’d like to learn more about how Systum can help you track inventory KPIs in real time, fill out the form below.