Any business that has large investments in inventory aims to maximize use and gain profit from it without intruding on customer satisfaction levels. By improving your inventory management, you can increase the profitability of your business while decreasing costs and missed opportunities.
Use a Systematic Approach
Good inventory management techniques rely on data-driven decisions and accurate forecasting. The best way to improve your inventory is through creating clear goals and using metrics to measure performance against those objectives. You need a reliable tracking system like manufacturing ERP software for recording what’s happening with products in real-time; you also need a forecasting system to help predict future demand patterns and product requirements.
Every good investment should be backed by strong planning, which means understanding how to use data to drive results.
Know What You Have, When You Have It, and Where It Is
Many businesses have no idea what they actually have in inventory or when they plan on using it – this is a terrible mistake because you cannot manage something if you don’t know how much of it you have. One of the most important goals for planning an effective inventory management system is to attain accurate knowledge regarding actual items available on-hand (AOH). Some businesses lose revenue due to a lack of visibility into their inventories; others overstock their products and risk damage due to storage overloads.
Analyze Product Life Cycles
Product lifecycles are more than just about product age; they encompass the relationship between a product and demand. Most products will have upswings in sales within certain periods. This is due to factors such as seasonality and trends.
Since every product has a different route to purchase, it makes sense that their life cycles can vary greatly. The best way to track the stages of your products’ lifecycles is by keeping detailed records on what you sell and when you sell it. This means tracking how many units were sold and why those units were bought (this requires insight into market share). You should also know what days of the week or months of the year are good for selling specific items; understanding these patterns allows you to make smart decisions about which items should be discounted or marked down.
Shrink Your Inventory When You Can
Keeping too much inventory can actually waste money because it takes away your opportunity to sell at the right price. Furthermore, holding onto excess stock might also cost you more than you realize – most forget that warehousing storage space needs insurance coverage, is susceptible to damage, and must be monitored for security concerns. So not only does holding excess inventory carry financial risks, but it can also come with legal dangers.
Improve Warehouse Efficiency
The first step towards improving warehouse efficiency is knowing exactly how much space you’re using on a daily basis; use barcodes or radio frequency identification (RFID) to track shelf levels in real-time. This will allow you to know how much room you have when filling orders and how much room you need when picking products for specific orders.
Another key component to improving warehouse efficiency is ensuring that the right product goes into the right bin or onto the right shelf. The last thing you want is an excess number of stock-keeping units (SKUs) in your storage space; this will decrease productivity and waste time finding what you’re looking for. It also increases inventory accuracy errors and takes longer to process incoming shipments.
Don’t Forget About Slow-Moving Items
It’s not uncommon for businesses to focus all their attention on high-demand items and neglect slow movers; this can lead to lost revenue opportunities. Many times, there are things other than fast-moving items that must be sold before they become obsolete.
Accurately Predict Trends
Businesses should have some sense of what’s coming down the pike so that they can prepare – having a clear picture of how the industry is changing gives you time to strategize ways in which your business can adapt without losing momentum. It also allows you to get ahead of your competition by anticipating their next move rather than reacting to it.
Shop Around Before You Make Purchases
You may find that materials, for example, is cheaper when purchased from another dealer; knowing where to look for bargains will help you save money and make smarter purchasing decisions in terms of cost-to-benefit ratios.
Change Your Inventory Management Policy When Needed
Your inventory management policy is always subject to change; there’s no sense in holding onto antiquated systems that don’t serve your purposes any longer. Moreover, you should continually question the purpose of your inventory system and look for ways to improve it, especially if the current one isn’t getting the job done.
Sometimes you need to break your old process down before you can build something new – this includes looking at what worked well about past procedures and what didn’t. You may find improvements are as simple as switching out storage locations or using different software. There are many options for managing inventory, so remember not all processes work equally well for every business!