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7 Inventory Management Best Practices to Streamline Your Business

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.

7 Inventory Management Best Practices:

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:

  • Use barcodes or RFIDs: Barcodes and RFID tags can be a helpful way to keep track of your inventory. By scanning items as they come in and out of stock, you can quickly and easily keep track of what you have on hand.
  • Routinely review stock levels: It’s important to regularly review your inventory levels so that you can adjust your ordering accordingly. If you find that you’re running low on certain items more often than others, you may need to order more of those items.
  • Regular stocktake: Stocktake doesn’t need to be a drain on your time or company resources. Detailed records effectively ensure that there are no nasty surprises when it comes to quarterly stocktake.

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.

  • Closely track inventory levels. This means that you can identify patterns and trends in your sales data so you can make adjustments accordingly.
  • Maintain lean inventory levels (refer to the 80/20 rule above) by carrying only the items that you know you can sell quickly. This will minimise the chance of products going out of stock and reduce the overall cost of your inventory.
  • Consider using just-in-time inventory management to reduce the amount of stock that you hold at any one time. This will help to further reduce your inventory levels and warehousing/storage costs.

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.