It won’t be wrong to say that inventory is the life blood of your business, it’s the placeholder for money, i.e. you paid money for it, and you are going to get that money (and more) back when you sell it.
That’s the reason, controlling your inventory is crucial because a if not controlled, you may end up either with excessive purchases or short stock. In both the cases, serious cash flow problems may arise. In simple terms, effective inventory management is crucial to avoid running out of money in business.
The better inventory management is the optimized inventory flow you have. You must know the best practices to manage inventory as being a small business startup you may have to manage your inventory yourself and later on when handing it over to someone else, you need to explain him how to do the stuff.
Checklist for Effective Inventory Management
The checklist below will certainly help you in better inventory management:
1- Set Par Levels
This will make your life easier. By setting “par levels” for each of your products, you actually optimize the process right from the beginning. Par levels are the minimum amount of product that you must have in hand all the time. So, you place a new order when the inventory stock drops down the par level.
2- Automatic Purchase
Use stock alert software to replenish the good when the stock drops the par level. Though the software makes things much easier, but you may need to modify the new orders based on the sales season and the market trends.
3- Sales Analysis
Tracking the frequency of orders can help you increase or decrease the number of items in the inventory as needed. Ideally, the inventory management software should have the ability to perform this detailed analysis quickly, you still need some training to use and understand these reports.
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4- Trace Lost Sales and Customers
The best way is to document any rejection so that you have a proper regulation of your orders.
5- Know the Bestsellers
Have a record of the things that sell the best. This needs to be done with care so that you do not waste money just on one product. This can also be done quickly by the software, but you need to set some parameters to make it more effective, i.e. the best sellers based on seasonal promotions, or the best sellers overall.
6- Seasonal Adjustments
Take into account the seasonal change and fluctuations of the market and you can do it best by further investigating the best sellers and not so popular products.
7- Have a Contingency Plan
There can be hundreds of issues that may arise all of a sudden and have direct impact on the inventory, i.e. an unexpected huge sale that sold all your stock, a cash flow shortfall that you can’t pay for much needed product, no more space in the warehouse, a miscalculation in inventory leading to shortage in stock, your manufacturer runs out of the product or discontinues your product without warning and so on. So, you must have a plan B to meet an emergency.
8- Manage Relationships
A good inventory management means not just to manage the products, but keep up with the people involved as well. Whether you need to return a slow selling item, fix the problematic products, restock a fast seller very quickly, you need to have a good relationship with your suppliers. This will not just help you manage inventory smoothly, but you will have a peace of mind too.
The Bottom Line
Effective inventory management is the backbone of business, whether you are selling in store or through eCommerce. Hope this quick list will help you in the big concern!