A good number of SMEs miss out on the benefits of employing inventory management systems, perhaps because they underestimate their scalability. In reality, these techniques form the basic building blocks for thriving wholesale enterprises.
Hitting your various business targets, regardless of the industry or operation style, must involve intentional planning in all aspects, inventory management being a top focus. And it is easy to see why. Several other processes depend on the proper handling of inventory activities. Even worse is relying on antique data entry techniques that end up wasting so much time with little result to show for it.
With inventory management software to shoulder inventory lifecycle tracking, making guided decisions concerning inventory levels becomes easier.
Let’s consider some of the most simple and effective inventory management techniques that can help your business achieve enhanced accuracy and yield.
Inventory Management Techniques Explained
Every single process in the supply chain matters, and planned inventory management helps you track stock throughout the entire cycle.
These techniques offer your business better control and visibility to a single aim: improved operations and efficiency. Business owners who have always understood the importance of inventory management looked to spreadsheets and other outdated systems, but these offer limited outcomes.
Thanks to inventory management tools, automating the entire inventory control cycle is possible and as easy as integrating it with other business platforms, e.g., your website. Inventory automation software allows you to monitor your available inventory anytime and across platforms. And there is more. You also receive thorough insights about customer behavior and preferences using the provided reporting feature.
Which Inventory Management Techniques Should You Utilize?
Since several inventory management methods help you track every lost or missing inventory, the methods you opt for depend on your business’ peculiarities. We’ll look at seven common techniques that your company’s success mostly always depends on.
1) Inventory Reporting
Scaling your business becomes challenging without detailed reports on your marketing, inventory, purchasing, and warehouses. This is one task you will never have to worry about with an inventory management system that offers reporting as a basic function.
The tool extracts reports from the data your other business platforms' data and turn them into insights that help you make better inventory decisions later on.
The allocation of inventory based on categories is intentional and critical to helping your business understand the movement of products and why these goods follow specific directions.
Your suppliers become better prepared to work in line with inventory trends because they have been properly notified. In the case of Qualtry, these insights improved supplier relationships, saving the business tens of thousands of dollars.
Of course, you can only expect results when you utilize the data received. But a system that allows for effective information sharing between the company’s assets is how you get these reports in the first place and prevent overselling.
2) Stock Auditing
Poor labeling is one common cause of inventory management problems. It is even worse when teams have to deal with utilizing various dissimilar systems. The way out? Prevent these mistakes by choosing a system that integrates seamlessly and functions as a whole.
Your business cannot maintain accurate stock levels or avoid an overflowing inventory without frequent inventory auditing in place. On the other hand, regular stock auditing makes it easier to attain precise data and achieve KPIs provided the systems are connected.
Whether cycle counting, physical inventory, or spot checking is your business’ preferred auditing method, what matters is that you are leaving out the process completely and doing so with the right tool.
3) The FIFO Principle
The benefits of First-in-first-out (FIFO) are quite apparent. When the first items you receive are also the first to be sent out, you can get rid of products before they transform into extra inventory that results in a loss.
An inventory management system that ensures items entering your warehouse go out first results in a win-win for both your company and customers. The business doesn’t have to deal with unsellable items, and customers receive high-quality products that keep them coming back.
4) Bulk Shipments
Your inventory management software's insights should help you accurately forecast inventory. This, in turn, guides you toward shipping evergreen products in bulk.
Bulk shipping grants you access to an impressive amount of inventory items that the business can make available to a wide network. This settles the issues of delayed order fulfillment. Just make sure you are shipping items that are guaranteed to sell out quickly.
5) Economic Order Quantity
Economic order quantity (EOQ) has a simple goal which is to minimize cost. It does this by helping you determine the ideal order quantity to reduce inventory costs. Variables like demand rate and overall production costs matter here.
Another benefit of this inventory management method is that it sometimes helps retailers free up hanging cash.
Item bundling is commonly used to upsell, but it can also be an effective tactic for pushing stale inventory. One method is to include an undisclosed gift to order. Since the free items are kept a secret, it is easy to switch them out based on availability. This moves slow inventory and keeps customers feeling special.
While the forecasting provided by inventory management tools would go a long way in preventing over-purchase, sometimes it happens, and this bundling will come in handy.
7) Tracking KPIs
There is no better way to determine your business’ challenges and create solutions than through KPI tracking. Whether the issue is frequent stockouts or you are experiencing loss, keep short and long-term goals in mind when mapping out KPIs.
You will need to track variables like your sell-through rate, stock-to-stock ratio, and average inventory. Using the right inventory management tool takes away the confusion that often comes with managing these goals.
Who Is Responsible For Implementing These Techniques?
Businesses see the most results when everyone in the team works together to ensure adherence to these inventory management techniques. From the purchasing department to the merchandising and warehouse teams, everyone has a portion of the process to contribute.
Are These Techniques Measurable?
Yes, they are. Supply chain and operation managers show the result of their efforts through the numbers. As you incorporate these techniques, analyze the data provided by your inventory management software and compare it with the previous numbers.
Some variables that show success include improved cash flow, better levels of customer satisfaction, and a decrease in shipment errors. All these would result in a stronger supply chain.
What Are The Best Ways To Manage Peak Sales Seasons?
The best way to manage peak seasons is to prepare for them by having sufficient supplies ready ahead of the period. Get extra staff to handle the increased demand if you can afford to, and of course, investing in reliable inventory management software always helps.
How Do I Figure Out Order Frequency?
Identifying order frequency is mostly dependent on accurate reporting. Use the reports from past sales seasons to determine your ideal order frequency during the peak seasons. This will involve a bit of comparison and paying attention to all your sales platforms to understand demand.
Making Inventory Management Techniques Work For You
Selling across various channels and platforms can be tough if you have to manually handle inventory management. If your current strategies already incorporate some of the listed techniques above, your focus should be on getting an automated platform that integrates with the systems you have on ground. This way, you can enjoy better insights and easily fix dissimilarities across your business.
Inventory management techniques that work are not limited to the ones mentioned here, so go ahead and try out a few others until you figure out the best solutions for your brand. Implementing an all-in-one inventory management can be tough, and you should reach out to a professional at Luminous to help you deal with your supply chain woes.