No one likes to lose money, especially in business. Yet poor inventory management can see serious sums ploughed into unshiftable or unusable stock. So if a significant amount of your business is invested in physical items, you really can’t afford to get your inventory wrong. To help you free some of your capital from dust-gathering stock, or even avoid this pitfall altogether, here are five ways to revive your inventory management.
1. Accuracy is key
To get to truly accurate stock levels, every part of the process needs to be as accurate as possible. After all, you can’t go off old information, best guesses and assumptions and expect the end result to be precise.
Timely inventory checks will help build up an accurate picture of your holdings so that you can better plan your ordering and logistics. While conducting inventory checks too often will tie up unnecessary resource, leaving them too long means you’re working off old information that may no longer apply. If you can manage it, a fortnightly inventory check often works well.
Accuracy needs to apply to your sales forecasts too. If you’re working off flat monthly information then you’re not taking into account fluctuations due to holidays, festivals and the weather. Also be careful if you’re working off last year’s figures, as there may have been particular events that created a spike last year that won’t apply this year.
Similarly, make sure that your calculations and projections are up-to-date. If an item was in demand six months ago and you’re still stockpiling it, take a step back to assess whether the demand is still there.
Be precise about the time between production and obtaining your stock. A week is a long time when it comes to supply and demand, so don’t count something as stocked until it’s actually in your store or warehouse. If you’re expecting an upswing in demand, make sure you’ve been accurate about when the supply will reach you and planned accordingly.
2. Zoom in and pull back
If you’ve multiple stores, don’t just look at your central inventory but each store or region. Ideally, order to meet their specific needs, sending stock to where it actually sells and not just forcing it upon all stores. Take this decentralised approach further by opening up communication between stores so that they can meet each other’s stock needs. Make sure this isn’t just a quick phone call when a store needs an item, but regular updates between stores to identify surpluses that may be building up and potential sales opportunities.
You can use this approach when it comes to your logistics too. By identifying regional patterns you may decide to store items closer to locations where they’re popular to reduce replenishment time. Or you might find you can improve production lag by sending finished items straight to store without going via a warehouse or holding. Zoom in and look at the patterns to see where you can implement solutions at a more local level.
When it comes to your inventory, you also need to pull back and take in the whole view. For example if you deal in both warehouses and stores then don’t just take your warehouse inventory as your stock but include what’s held in stores too. Similarly, account for items in production and transit when looking at your figures.
3. Look right down the chain
It’s not called a supply chain for nothing. If you focus on just one element you’re likely to miss kinks and weaknesses that could jeopordise the whole process. The key is to assess every step to see where improvements can be made. For example, you may be refocusing your end, but is it in fact your manufacturer that’s letting you down? Are they reliable enough, cheap enough, fast enough or do you need to start looking elsewhere?
Look beyond your chain as well to all the areas of your business it impacts. If just an isolated team of supply managers are making all the decisions then they’re missing out on useful insights. Collaboration with your marketing team can help you stock for promotions, working with your sales team means you can react to the latest reports, while going all the way to top management will keep you aligned with the latest company drives.
Even for businesses that manage their inventory well, safety stock can still be problematic. This is because it’s tempting to be cautious and invest in a generous buffer. While this does help avoid any interruption to in-demand items, it also takes up a significant amount of capital.
Again, with accurate, up-to-date information and good communication across your business, you can be precise with your safety stock. You can then be realistic about what you need to invest and not just expensively over cautious.
5. Act quickly and decisively
Gathering insight is one thing, but acting on it’s another. As we’ve already said, a week is a significant amount of time when it comes to inventory management, so when you see a solution implement it. Remove failing products from replenishments listsor even discontinue them all together. End processes that aren’t working. Seek alternative solutions. Could you split orders to reduce dispatch time? Could you offer a collection service from stores? As well as creating optimum stock levels, look to rapid solutions to get items to your customers quicker.
Your inventory represents a significant amount of your business’s capital. Keep it up-to-date through the use of collaborative, accurate information to avoid haemorrhaging funds.
Need to manage your stock in a more effective way? Veeqo has the perfect eCommerce solution which integrates with all the major platforms.