Inventory management is the process of organising and managing stock throughout the supply chain. It ensures you have the right amount of product in the right place at the right time.
Good inventory management can help you:
- Reduce holding costs
- Improve your bottom line
- Analyse sales patterns and predict future sales
- Prepare for the unexpected
- Increase customer satisfaction
There are many different inventory management techniques, but some of the most important include:
- Set par levels: Par levels are the minimum amount of product that must be on hand at all times. When your inventory dips below these predetermined levels, you know it's time to order more.
- Follow the first in, first out principle: This means that your oldest stock (first in) gets sold first (first out), not your newest stock. This is especially important for perishable products so you don't end up with unsellable spoilage.
- Manage relationships with suppliers: Having strong relationships with your suppliers can help you get better prices, faster delivery times, and more flexibility.
- Make contingency plans: Things don't always go according to plan, so it's important to have contingency plans in place in case of stockouts, supplier delays, or other unexpected events.
- Conduct regular auditing: This will help you ensure that your inventory records are accurate and that you're not overstocking or understocking any products.
- Prioritize your inventory: Using ABC analysis, you can categorize your inventory into groups based on their importance. This will help you focus your efforts on the most important products and avoid wasting time on products that aren't as profitable.
- Practice accurate forecasting: The better you can predict demand, the better you'll be able to manage your inventory. There are a number of factors that can affect demand, so it's important to track these factors and adjust your forecasts accordingly.
- Apply the last in, first out (LIFO) method: The LIFO method assumes that the merchandise you acquired most recently was also sold first. This can be helpful for tax purposes, as it can help you reduce your taxable income.
- Try the just-in-time (JIT) approach: JIT inventory management is a more risky approach, but it can be very effective if done correctly. With JIT, you keep the lowest inventory levels possible to still meet demand. This requires careful planning and forecasting, but it can save you money on storage and carrying costs.
- Outsource your inventory storage and fulfillment: If you don't have the resources to manage your own inventory, you can outsource it to a fulfillment company. This can be a great way to free up your time and focus on other aspects of your business.
By following these inventory management techniques, you can improve your bottom line, increase customer satisfaction, and make your business more profitable.
The future of inventory management
Technology is constantly evolving, and this is also true for inventory management. New technologies, such as RFID, AI, and IoT, are being developed that can help businesses improve their inventory management processes.
- RFID: Radio frequency identification (RFID) technology uses tags to track the movement of inventory. This can help businesses to improve accuracy and efficiency in their inventory management.
- AI: Artificial intelligence (AI) can be used to automate inventory management tasks, such as forecasting demand and replenishing stock. This can free up human resources to focus on other tasks, such as customer service.
- IoT: The Internet of Things (IoT) refers to the network of physical objects that are connected to the internet. IoT devices can be used to track the location of inventory and monitor its condition. This can help businesses to improve efficiency and reduce waste.
These are just a few of the new technologies that are being developed that can help businesses improve their inventory management processes. As these technologies continue to evolve, we can expect to see even more innovative ways to manage inventory in the future.
Inventory management is an important part of any business. By following the tips in this article, you can improve your inventory management processes and make your business more profitable.
