Maintaining inventory control in a growing retail business can be a challenge especially for business owners who don’t have a lot of experience in maintaining stock. When your inventory is thrown off everything seems to go wrong. It’s important to note that poor inventory management can end up costing you your business. In fact, it’s not rare for companies to lose out on millions of dollars as a result of not having control of inventory.
Signs of Poor Inventory Control
The most obvious signs of reckless inventory management include:
- Frequently stock outs which will result in backorders
- Low inventory ratio turnover
- Shipping the wrong products to customer
- Having your money tied up in products that aren’t selling
- Paying high storage fees
- Losing customers
- Data entry errors
Check out these tips for properly maintaining your business inventory:
- Aim for Sensible Stock Levels
Smart buying is fundamental skill retailers and distributors must learn because it can lead to success or failure. When business is especially good, it can be tempting to spend the extra money diversifying stock or investing in more inventory. You will do well to keep in mind that you’ll actually have to sell whatever you purchase. If you are unable to turn over a profit, you’ll end up wasting money. Therefore, you’ll need to strike the right balance between having enough stock of a suitable range of products. This can be done by:
- Calculating supplier lead time and the number of products you are selling each day.
- Analyze sales reports such as the SKU structure to aid in generating sales reports based on each individual.product.
- Don’t allow suppliers to.push products you. Some will try and bait you with discounts or boast about products, but you should not fall for the trap.
2. Allocating Stock
Advanced inventory management systems allow managers to allocate stock to sales orders. This is most beneficial for online stores who have to reserved stock until sales come in from the website. It’s also advantageous for businesses who fulfill bulk orders. Allocating inventory as soon as it comes in from the suppliers will help prevent the last minute rush.
3. Efficient Systems for Receiving Orders
Whenever new inventories arrive, they should be properly recorded and received. Prompt receiving of incoming deliveries will take discipline when you’re running a busy distribution business. It’s easy to become sidetracked with dealing with customers, employees and other aspects of operating a company. Just think if you sell a product before you’ve gotten a chance to enter into in the system it can throw off the whole inventory. Remember, dedicating time to entering each product into the inventory management system.
4. Consider Employing A Barcoding System
If you haven’t already considered adding barcoding into your inventory management. This is especially imperative if you’ve been fortunate enough to sell in large volumes or your company tends to sell products that are in the same family or look alike. Barcoding automates inventory tracking and simplifies data reporting. When new inventory arrives from the supplier, using a barcode scanner, you’ll scan each product and apply a barcode label to it. Perhaps the biggest benefit of using a barcoding system is that it drastically reduces receiving errors which can be costly and messy.
5.Perform Weekly Stock Counts
Of course, no inventory system is perfect. Therefore, you can expect there to be some inaccuracies and odd errors. Performing weekly stock counts which involve taking inventory by hand to make sure that it matches the numbers in your system is helpful. The thought of taking real-world inventory can be daunting, but it doesn’t have to be done all at once. In fact, setting aside a day or two out of the week where check one or two product categories can make a big difference. Aim to entirely cover your entire product category at least once every month or so.
6. Don’t Forget to Keep Track of Write-Offs
Is your business involved in charity? Or maybe your organization occasionally sponsors events? In events like this, products leave inventory without a sale attached to them. These write-offs should be carefully documented in your inventory system. This can be done adding a new customer to the inventory system and adding in the donated products with a zero dollar price tag. Business managers will be able to see exactly how much is being donated. You can also set aside a portion of inventory that you plan on donating at the outset.
7. Record Returns
Returns made by customers also need to be received properly. It’s important to develop a system for efficiently returning and receiving products in order to successfully manage inventory. There are many ways this can be done. For instance, when you create a return you can attach it to the original sales receipt. You can also consider placing the returned item quarantine where it can be thoroughly inspected and you can determine whether it should go back on the shelf. Some business managers utilize distinct SKUs for returned items.
When returns are made, it’s important to understand why customers are returning inventory. In fact, watch for trends. For example, if you find that a specific product is coming back with damaged packaging, it may be necessary to switch to more durable wrapping. Yes, finding out why items are being returned can help reduce wasting and losing money from inventory.
8. Communicate With Third Party Logistics Companies
These days most retailers either outsource shipping or inventory storage with a third-party logistics company. While these companies have they’re own inventory and resource planning system it’s imperative to integrate with your company’s inventory infrastructure. Therefore, when inventory arrives at the warehouse and when products are shipped, your company’s business managers should be notified so that the system can be updated. It should be a collaborative effort.
Taking control of your stock which is the company’s largest asset is the best way to encourage the growth of your business. After all the way your inventory move can very well determine the success or failure of a business.