Inventory Management For Small Business: The Ultimate Guide

 

 

 

It’s no easy feat being a small business owner, especially when you run a wholesale distribution company. Your success is dependent on a lot of moving parts. You and your business are quite literally on the move.

 

Stock is coming in and shipments are going out. Your team is working the line, updating inventory information, and you’re working to improve processes and systems while still lending a hand on the production line.

 

No matter how many employees or customers you have, there are plenty of growing pains that come along with scaling a small business. And as the face of the organization, you’ll wear various hats to keep it running smoothly.

 

When it comes to the heart of your business, you may instantly think of your inventory. Do you have enough product in stock to support your current customers? What about when there is a growth spurt? How will you manage the ebbs and flows of inventory management and tracking?

 

Many small businesses start their inventory tracking processes in spreadsheets—only to realize their processes quickly outgrow this method. But as the company scales, it’s difficult to take a step back and adopt a whole new way of doing business.

 

Luckily, small business inventory management doesn’t need to be a migraine-inducing activity.

 

With an inventory management and tracking system you can:

 

  • Sync your inventory system with your warehouse, eCommerce platform, and other distribution channels
     
  • Simplify and automate your order fulfillment process
     
  • Automatically generate pick and ship instructions, including bin numbers and location, and shipping labels
     
  • Set up low inventory alerts and issue purchase orders with suppliers so you don’t find yourself in a difficult situation (or without enough stock on the shelves)
     
  • Control and prioritize stock levels

 

In this guide, you’ll learn more about inventory management, types of inventory management systems, the best ways to organize and manage inventory, and the benefits of using an inventory management and tracking software.

 

Back To The Basics — What Is Inventory Management?

 

Inventory management is the process a business follows to track the flow of product from manufacturers to warehouses then from these facilities to the customer. Inventory management requires you to track the amount, weight, and location of your company’s stock.

 

Effective inventory management allows business owners to keep a pulse on how much stock they have on hand to meet the demands of customer orders. There’s a fine line to maintaining healthy inventory levels. Too much stock could result in huge profit losses for your small business. And too little stock could result in unhappy customers who can’t receive their purchases on time.

 

Unfortunately it’s not as easy as it sounds to provide great products and great customer experience while simultaneously running your small business. But it is possible to attain successful inventory management and it requires perfect alignment of your technology stack and inventory tracking processes.  

 

What’s Your Preference? Types of Inventory Management

 

There are a variety of inventory management processes you can follow and utilize for your small wholesale business. Selecting one method won’t necessarily make or break your business, but it’s crucial to analyze your options and choose what’s right for your business processes and customer experience. Ultimately, your customers will want a seamless experience when purchasing your products.

 

By tracking inventory in real-time you can avoid small issues that can lead to large problems along your supply chain.

 

These are a few different inventory management systems to consider for your small business:

 

  • Pick, pack, and ship:
    This system is like grocery shopping. You have your list and you roam the aisles until you fill up your cart with all the items you sought out to purchase. A good pick, pack, and ship system alerts employees exactly what they need to gather and where to find it in the warehouse. Packing an order for shipment and verifying the contents with a packing slip can eliminate mistakes and reduce returns.
     

  • Cloud-based inventory management software:
    If your end goal is to build a highly-efficient wholesale distribution business, then you’ll want to start with a strong foundation and implement a cloud-based software from the get-go. Choose a software that is designed for inventory management and provides real-time tracking. Everyone on your team can view and access inventory levels and won’t have to deal with bottlenecks thanks to automatic updates.
     

  • Drop shipping:
    As your business grows and you wait for more cash flow, drop shipping is a great option. You can utilize drop shipping from your suppliers to grow sales until you’re ready to stock inventory for those orders. Drop shipping ensures you’ll be able to deliver on time without having to invest upfront in a substantial amount of inventory.
     

  • Demand forecasting:
    If you’ve been in business for a few years, you can use demand forecasting to order and manage inventory. Demand forecasting combines your forthcoming forecasted sales and how similar products performed in the prior year. This allows you to plan and order the right amount of inventory for busy or slow seasons based on prior year data.

 

Sayonara Spreadsheets — How To Organize Inventory For Small Businesses

 

The speed of business is rapidly increasing and small business owners need to be organized and efficient with their processes to keep up the pace.

 

But you probably built your initial processes, inventory tracking, and management around what you know best – spreadsheets. Keeping track of inventory in spreadsheets makes sense as you start your business, but you’ll encounter several challenges as you begin to scale.

 

Inventory tracking is a fluid process that requires extreme attention to detail in order to be successful. One typo or forgotten update could lead to a delay in a large order for a new, important customer.

 

Consider this example:

 

Your field sales representative secures a large order for one of your most popular items and depletes your entire inventory in one transaction. Before the representative can update the Excel spreadsheet since she’s still in the meeting with the customer, two more orders came in for the same item.

 

Now your team has committed the same inventory to three different customers. You can only please one or two—your very large customer or the other two customers. One or more customers will need to wait until you get new stock into the warehouse. Instead of easily processing this order, your team has to inform the customers there will be a wait. And to top it off, any customer that wants to place an order before your new inventory arrives, will need to wait as well.

 

Today’s customer expects what they want when they want it. That means minimal hassle and wait times.  If you don’t have what they need when they need it, they’ll take their business elsewhere.

 

Spreadsheets don’t provide you and your team with automatic, real-time information about your inventory. Here are a few more common problems small business owners run into when they rely on spreadsheets to track and manage inventory:
 

  • Fulfillment risks:
    When you manually track inventory in spreadsheets, you raise the risk of not being able to fulfill customer orders. The moment you can’t provide that order, your competitor will be next in line to serve them.
     

  • Human error:
    It’s not realistic to have one person manage the spreadsheet so you’ll most likely have a few team members responsible for updating the inventory tracking and management spreadsheet. For example, if someone mistakenly neglects to deduct inventory sold, you may think you’re able to fulfill an order in another sales channel. Now you’ve billed the customer and you have to backtrack by calling them to let them know your mistake.
     

  • Troubleshooting difficulties:
    When errors do occur, it’s difficult to track who made the mistake. Instead of easily identifying who did what within your spreadsheet, you’ll spend minutes or even hours tracking down the team member so they can solve the issue.

 

A Single Source of Truth — The Benefits of Inventory Management Software

 

When you migrate from a spreadsheet to a cloud-based software, you can manage inventory the way you want. You’re not constrained by clunky workflows or user errors. This software should update in real-time across all channels of your business so you can minimize those disappointing customer conversations.

 

In addition, these systems should give you access to view real-time inventory levels so you can forecast how much can be sold and what needs to be bought to keep your on a successful path.

 

As you’re analyzing which inventory management software will work best for your business, make sure it has these features and capabilities:

 

  • Automated order fulfillment: With automated order fulfillment, your team can handle a higher volume of orders at a faster pace. The software automatically generates pick and ship instructions, including bin numbers and location, and shipping labels.
     

  • Automated alerts: Automated alerts notify you and your team when inventory is running low and it’s time to process new orders with suppliers.
     

  • Supplier stock management: You can reduce your on-hand stock by relying on suppliers that drop ship. In addition, you can utilize EDI feeds to pull in real-time supplier inventory that displays as your available stock on your website.
     

  • Ability to track KPIs: The software you choose should be able to track your business KPIs & inventory KPIs (Key Performance Indicators). These likely include inventory turnover ratio, demand forecasting, holding costs, lead time, and gross margins. This will give you an excellent view into how financially healthy your company is and where you need to focus your efforts to grow the business.

  • Easily integrates with other apps:
    A cloud-based inventory management software eliminates the add-on apps that require you and your team to log into multiple tools each day. However, you’ll have a few apps and tools that are essential to your business. Choose a cloud-based software that easily integrates with your existing software applications.

 

Systum is a single platform that replaces all the software you use to engage and support your customers while also providing real-time visibility into your business. Since it’s cloud-based software, Systum easily integrates with marketing, CRM, sales automation, e-commerce, inventory management and quoting and billing software tools.

 

The software has robust analytics and business intelligence so small business owners can easily see the status and health of their company through simple dashboards. This keeps you and your team organized in the back of the house so you can focus on delighting your customers.


If you’d like to learn more about how Systum can help you track and manage inventory in real time, visit our website

 

Back to top