Building an Inventory Management System
Inventory management is vital to your business profit. Those goods you have in inventory are tying up money, so naturally you want to move inventory as quickly as possible. Having a system in place that accurately tracks inventory you will know the items that sell the most and prevent running out, and by the same token if there are items that have not moved quickly or reaching an expiration date, you will have the ability to identify them and implement a plan for fast liquidation. This prevents money loss and will free up storage space and costs. Inventory management will help improve your cash flow, enable you to routinely audit to ensure there aren’t discrepancies and will help you plan for the future.
Following are some of the essential tips to building an effective inventory management system.
Determine Customer Needs and Forecast Future Requirement
This is one of the more difficult pieces of inventory management, but well worth the time required. Devote some time to review the data of your past sales, including items sold and quantities, as well as past trends. For example, determine if you have an influx of sales on specific items at the beginning of the school year, summer or Christmas. Just as important is assessing if there are items that you routinely run out of, in which case, you should begin purchasing larger quantities.
Being able to accurately pre-plan for future demand may take some time, but it is essential that you begin somewhere and adjust purchases along the way. The forecasting will prevent overstocking an item that ties up costly storage space for too long, while also alleviating the issues of running out of popular items, which can lead to poor customer service.
Prioritize your Inventory
Inventory should be categorized into priority groups, sectioned by items that sell frequently, those that may not sell quickly but are still necessary, and also sectioning high-cost items. This will help you manage your storage space and cash flow as efficiently as possible.
Tracking Products
Items should be tracked by SKU or barcode. This will enable you to track quantities to monitor discrepancies as well as help you maintain minimum stock levels. In addition to tracking quantities, it is wise to record costs. If you recognize large fluctuations in cost, it may be worth contacting your vendor or seeking alternatives.
Monitor Sales
By monitoring sales of products, you will become familiar with which items move faster and determine if there are patterns such as certain days of the week, month or year. This will make forecasting more accurate.
Inventory Management Software
Software will help streamline the entire inventory management processes from beginning to end and help ensure accuracy while saving man-hours. It is generally well worth the investment.re
