For inventory-based businesses, it’s important to maintain efficient processes for ordering, tracking and selling your stock. A properly implemented inventory management system can lower operating costs and increase margin.
We’ve put together these 5 tips to improve your inventory management:
1 - Maintain Safety Stock Levels
Use statistical formulas to produce accurate sales forecasts and then use the results to predict stock levels for each item in your inventory. In addition to forecasting sales, it’s important to keep a minimum in-stock count for each item and vendor. If you know a particular vendor has a lengthy lead time to ship you their products, maintain an appropriate minimum level of stock at all times.
A basic inventory management or Enterprise Resource Planning (ERP) system can help you track this information for each item and vendor.
2 - Use Real Time Data to Make Decisions
Powerful systems now exist to analyze your inventory and sales operations data in real time. Rather than using several excel spreadsheets, systems like these which operate on a unified platform can intake and compare sales forecasts, inventory levels and purchasing costs to provide the ideal model for inventory acquisition, lot sizes and manufacturing requirements.
An inventory management system which unifies customer, inventory, e-commerce and manufacturing data in one database can mean faster acquisition, allocation and fulfillment and higher profits.
3 - Do a Little Micro-Managing
Don’t treat all of the products in your inventory the same way. Inventory items will have different demand from your customers as well as varying costs and valuation methods. A comprehensive ERP system will enable you to track each SKU’s pricing, inventory levels and lead times. When an inventory level reaches a minimum, your system should notify you and automatically create purchase orders which are ready to be sent to vendors.
Not all vendors are alike either. Warehouse managers will know which vendors are more reliable than others, which items tend to be received in better condition than others and how to treat expected receipt dates and actual receipt dates. Your inventory management system should also know how to track this information.
The result will be useful for information for all rather than just relying on the knowledge of one or two people within your organization.
4 - Maintain Detail in Your Inventory Records
Insight into inventory and sales operations means tracking SKU numbers as well as lot numbers. If you do some light manufacturing and manage assembled items or kits, track the SKUs, lot numbers and stock levels of the component parts in case you have to purchase or return individual parts of assemblies and kits.
For this it helps tremendously to get rid of those excel spreadsheets and implement an ERP which tracks inventory management and light manufacturing.
5 - Communication is Key
It’s not surprising to learn that a lack of communication between the various departments and sections of a company can lead to inefficiency and higher operating costs.
The great thing about an ERP system which functions on a unified platform is that reporting can take place cross-company. Sales forecasts can directly influence budgeting for procurement and operations.
When purchasing managers submit purchase orders to vendors, the sales team can then see expected inventory levels right on their sales orders and manage client expectations on the spot in real-time.
If your inventory management system is not working for you, keep these tips in mind and perform an assessment of your company and operations. There might be some simple steps you can take to streamline the process.
You might also find it’s necessary to overhaul your systems and hire an outside consultant who can have a look at how your warehouse runs and interacts with the back office and customer service. Either way, no inventory-based business can afford not to keep a close eye on success in this area.
Looking for more information about how to implement an inventory management system? Contact Business Solution Partners to speak to an expert today!