Inventory management is one of the barriers to scaling your business.
Whether you’re an established business ready to take the next step into new markets, or you’re a small retailer that is just getting off the ground – inventory management best practices have a profound impact on your ability to grow.
Taking small steps to streamline your processes, save valuable time, and ensure that your business operations are as efficient as possible is essential.
At One Warehousing, we know the true value of efficient inventory management practices. To help, we have put together a helpful guide of 7 inventory management best practices that are guaranteed to streamline stock management, and effectively overcome growth hurdles.
1.Keep Detailed Records
One of the most important aspects of inventory management is keeping detailed, digital records. Businesses must know exactly what they have on hand at all times, as well as metrics like sell through rate, average shelf life, and average return rate to ensure that they are not wasting valuable warehouse space.
Keeping detailed records helps businesses to monitor stock on hand, know when new stock needs to be ordered, and understand trends to ensure that they are never low on stock.
Steps to improve records include:
2. Use Batch Tracking
Batch tracking or lot tracking helps businesses to group items with similar characteristics that are produced in the same batch. Tracking things like expiration dates, manufacturer locations, part numbers, and raw materials means that businesses can effectively manage stock at scale.
Batch tracking also means that businesses are able to effectively issue stock recalls and replace like-for-like products where required.
3. Follow the 80/20 Rule
This is often referred to as the “80/20 rule.” In business, it means that 80% of your profits come from 20% of your customers. This rule can also be applied to your inventory. For example, if you have a clothing store, you may find that 80% of your sales come from 20% of your clothes. Therefore, it’s important to focus on stocking the items that are most popular with your customers.
By doing so, you can ensure that your most profitable lines are always in stock. The 80/20 rule proves that keeping the right stock on hand is always more important than have a full warehouse.
4. FOCus on inventory turnover rates
Inventory turnover rate is one of the most important performance indicators for any business. A high inventory turnover rate indicates that a company is selling its products quickly and efficiently. Conversely, a low inventory turnover rate suggests that a company may be struggling to move its products off the shelves.
There are a number of ways to optimise your inventory turnover rate.
5. Focus on forecasting
Forecasting sell-through rates helps businesses to anticipate future demand and plan accordingly.
Accurate forecasting data enables businesses to make better decisions about inventory levels and stock-outs. Additionally, forecasting can help businesses to identify trends and seasonality in customer demand, which means carrying more/less stock as required and being able to effectively predict seasonal trends.
Above all, forecasting helps businesses to improve their bottom line by reducing the cost of inventory, warehousing, and therefore maximise profitability.
6. Automate Processes
Automation helps to reduce operational expenses, cut down on errors, and improve overall customer satisfaction. If you’re serious about scaling, then automation is key.
Some of the most important benefits include:
Reduce errors: When inventory is managed manually, there is a greater chance for human error. This could include things like miscounting items, misplaced items, or incorrect data entry. Automating inventory management can help eliminate these errors, which can save time and money.
Improved efficiency: Automating tasks can free up business resources to focus on other important tasks. Additionally, automated systems generally work much faster than manual ones to improve turnaround times.
Greater customer satisfaction: Fast, accurate order dispatch and tracking mean happy customers and repeat business.
7. Don't wait, act now
The best time to implement these inventory management best practices was years ago. The second-best time is right now. Implementing these inventory management practices now means that you will save time and money in the long run and effectively reduce operational costs for years to come.
Effective inventory management has major impact on a company’s bottom line. Poor inventory management can lead to stock-outs, unhappy customers, and overworked staff. In addition, too much inventory ties up working capital that could be invested into other aspects of the business.
By implementing these inventory management practices, your business can improve cash flow, reduce costs, and boost customer satisfaction.
Learn more about effective outsourced inventory management with One Warehousing. Australia’s leading provider of 3PL and warehousing, we help businesses across the country to grow with effective, efficient, and streamlined warehousing services.