Lack of inventory oversight is a common culprit behind many business failures.
Can you imagine running out of inventory right after a major influencer endorsement? Unfortunately, this horror story is all-too-familiar for businesses that couldn’t keep up with their newfound momentum.
Another horror story is an excess of items. Yes, too much inventory can engulf your business, especially if you’re ordering too much of the wrong product.
Inventory Management: How to Manage Your Small Business Effectively
Know Your Customers
Inventory management and marketing have more in common than you think. In fact, both contribute to the success of the other in significant ways.
For starters, every marketing campaign starts with thorough market research. Businesses must understand the regions, income brackets, likes and dislikes, favorite apps, preferred shopping methods, culture, and ages behind their customers.
Likewise, inventory managers should know customers’ favorite products, average sale amounts, purchase history, and other customer metrics.
Customer Metrics are generated from data, which means you need a suite of tools for gathering, interpreting, and applying information.
This data is typically managed by sales and marketing teams and should be shared with inventory managers.
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For example, Inventory managers need access to daily sales reports to ensure the right products are stocked at all times.
Your inventory team also needs access to customer feedback. If there are customer complaints or product recalls, warehouse managers need to address those concerns quickly and make necessary adjustments in the system.
Remember, the supply chain’s ultimate goal is to get products into customers’ hands quickly and efficiently. Like marketing, customers’ needs should be at the forefront of your inventory management strategy
Get Rid of Old Inventory
Sales reports reveal which products your customers love and which are missing the mark. A change in visual merchandising or marketing can turn a dud into a star, but some products just fall flat with consumers.
This problem isn’t uncommon in business, but don’t hang on to those duds for too long. Old, unwanted items clog inventory. They take up much-needed spaces in warehouses and databases.
While every business owner wants to see a higher return on items, your best bet is to sell them at a fraction of the cost. Run regular clearance sales, discounting items at 40% to 75% off. Work with the marketing team to organize large weekend sales.
Don’t forget about your company website! More people are switching to online shopping, so list those clearance items as quickly as possible.
Managing Damaged and Unwanted Items
What happens to those items left hanging on the clearance rack?
Unfortunately, unwanted clearance items find themselves with the warehouse dust bunnies. What people don’t realize is how much these lost items affect inventory. Every item counts in inventory management.
If a product is dying on the clearance vine, move it to an assigned bin for unwanted items. You can donate them to charity or toy drives. Whatever you choose, remember to write off the item in the system; otherwise, your quarter inventory counts will be off.
Create a separate bin for broken and damaged items. Like donated items, write these off in the system, as well. However, you may be able to sell items with only minor packaging damage.
How to Avoid Lost Items
Damaged products aren’t the only items banished to the dark corners of the warehouse.
Any product can slip through the cracks — literally. Products fall behind shelves and curtains; sometimes, they’re accidentally kicked under counters and store fixtures. These problems are common in retail, but they do cost money.
One of the biggest mistakes businesses make is managing inventory once a year. You’ll often see stores close for an entire day for inventory counts. Some close down for two or more days!
Make inventory management a part of your everyday retail routine, like closing out drawers, managing deposits, and cleaning the store. Require inventory adjustments daily and reflect those changes in daily reports.
Another problem is “floater” items.
Another problem is “floater” items.
Floaters are products without identifiable information, like SKU numbers, barcodes, and price tags. Don’t let these items pile up and turn into an inventory nightmare! A cashier can sell the item at the correct price, but that sale won’t reflect accurately in the POS system.
Instead, create a separate bin for floater items, just like your damaged or unwanted items. Create new SKU tags for floater items, and ensure the inventory database reflects what’s on-hand.
Routine floor and warehouse cleaning is the best way to avoid floaters, damaged items, and lost products. Create a set of bins for rogue items, just like your recycling bins at home. Managers must communicate these changes to staff to ensure everyone is on the same page.
Never Run Out of Stock
Remember that horror story about the hot startup that ran out of product during its momentum? While some customers may be forgiving, for a little while, don’t expect their patience to last long.
Be prepared for anything. While getting a celebrity shout-out is the holy grail, it’ll turn into a nightmare if you can’t meet demand. Always maintain par inventory levels, especially for your hottest items.
What’s a par level?
This term refers to the minimum amount of product you need on-hand.
By setting par levels, your buyers can order products well in advance, never letting inventory dip below par levels. Of course, you can adjust these levels as customer preferences shift.
If you’re worried about running out of stock, you can set order alerts for the buying staff. Talk to your vendors about automated orders, so that you’re supply chain never skips a beat!
The Problem With Perishable Items
Perishable items throw a few more challenges into the fray.
When you’re dealing with perishable items, like food or flowers, you don’t get the benefit of clearance racks. You don’t want to be caught selling items past their expiration date.
Daily inventory management is critical for accounting, health, and safety.
If you’re selling perishable goods, you must follow the FIFO method; this method means “first in, first out.”
Don’t sell the fresh stock before the day’s previous supply. If you get a new shipment of powdered donuts, stock them behind the last batch.
The FIFO method doesn’t apply to perishable items only. It’s a good rule to follow in any retail location.
FIFO helps businesses avoid unwanted items from piling up in the stockroom.
Organize Your Warehouse
Warehouse organization impacts inventory control directly. An unorganized warehouse leads to lost and damaged items, pricing mistakes, wrong inventory counts, incorrect SKUs, shipping problems, and more issues.
Warehouse managers also need access to sales and inventory reports. For example, how will warehouse managers know which products to move upfront if they don’t know which items sell the fastest? Warehouses should be organized for maximum efficiency.
Create a warehouse layout that enables easy access and prevents damage. Label aisles to help stock associates grab products quickly. Avoid lost items by assigning small, miniature items to labeled drawers.
Like sales floors, warehouses should conduct regular audits and communicate regularly with sales staff about inventory. Ensure all product inventories are updated by the end of the workday or workweek at the latest.
Upgrade Your Inventory Technology
Efficient warehouses also depend on the latest Inventory Management Software for small business. This software also corresponds with point-of-sale systems so that sales managers and inventory staff can enjoy accurate, automated inventory adjustments.
Inventory software organizes products by SKU numbers, product types, product category, date ordered, on-hand product numbers, backorder numbers, vendor, and more data.
Today’s software also comes with convenience smartphone apps that let employees scan product codes quickly. You also enjoy inventory planning features for managing product replenishment cycles, shipment monitoring, and sales tracking.
Take full advantage of automated features, especially if you run an inventory-business. Juggling hundreds (or even thousands) of SKUs is a challenge. You don’t have time to update inventories manually.
Automate your website, especially if you sell products alone. For example, if a product is out of stock, your automated system will reflect that change automatically, preventing customers from buying the item online.
Negative inventory counts are a big red flag. Automated inventory software is great at mitigating this issue, but you still need to audit regularly by hand to ensure utmost accuracy.
Take Back Control of Your Inventory
Don’t let an avalanche of inventory ruin your business. Optimize your inventory management strategy with this complete guide!
Remember to invest in the latest inventory software, warehouse planning methods, market research, and more. Don’t forget to follow the blog for even more invaluable advice.
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