Starting, operating, and running a business does not only involve producing a product for sale and profit, but it also involves planning for sustainability and growth. You will have to be strategic and wise to keep your company going and achieve all your business goals. You will also need to consider many things from different angles to avoid making wrong decisions and bankruptcy.
If you plan to start a business this year, you must include inventory management in the list of things you need to consider. Inventory management is a strategic process of tracking and controlling your business’s inventory, stocks, or products. To know more about inventory management, you may read on:
What is Inventory Management
Inventory management is not limited to only keeping track of your business’s inventory. It also involves the process of ordering, holding, storing, restocking, and using the stocks or products in your company’s warehouse. It is a vital strategy to help you make profitable decisions while ensuring that your business stays afloat. It is beneficial to your business for the following reasons:
It Helps You Keep Track Of Your Inventory
Inventory refers to the list of items, materials, and goods you intend to resell or produce to earn profit. Without it, there will be no business to operate and cash flow to manage. There are different types of inventory, including raw materials, unfinished products, finished products, in-transit goods, cycle inventory, anticipation inventory, decoupling inventory, MRO goods, and buffer stock.
Inventory management involves keeping track of these types of inventory, and this can be quickly done if you invest in business inventory management software. You can get software from reputable companies such as Fishbowl.
Keeping track of your inventory can help you determine which materials and items need restocking and which ones are the most saleable. To know more about Fishbowl’s inventory software, you may visit www.fishbowlinventory.com for more information.
It Can Minimize Inventory Costs
Inventory costs refer to the considerable amount of capital you use in purchasing your inventory and the charges you are about to spend to maintain these items while being stocked in your warehouse. When you properly manage your inventory by following effective techniques and using inventory software, you can minimize these inventory costs.
It Helps You Prevent Having Excess Stocks And Stock-Outs
Keeping track of your inventory allows you to check every item and product in your warehouse. It will help you determine which products or materials need restocking and which ones need to be used first. If you don’t properly manage your inventory, chances are you will have excess stocks that would most likely reach their expiration dates or stock-outs that would leave your customers unsatisfied.
You should avoid having excess stocks as it comes with numerous business disadvantages. Excess stocks can lead to poor quality goods and degradation, stock obsolescence, and increased carrying costs. Proper inventory management can help you avoid experiencing these disadvantages.
It Helps Maintain Customer Satisfaction
If you put yourself in your customer’s shoes, you would see yourself being disappointed when a product on your list is unavailable due to stock-outs. So, as an entrepreneur, you must meet your customers’ demands by ensuring that your products are always available in the marketplace. Properly managing your inventory can help you increase sales, avoid stock-outs and maintain customer satisfaction.
Remember that your business will not grow, and you will not earn a profit if you don’t have satisfied, loyal customers. Thus, you should always do your best to live up to your customer’s expectations and needs by maintaining an excellent reputation to make them stay loyal to your brand and products.
Inventory Management Techniques
Since inventory management involves controlling stocks and products by knowing the quantity you have in store, there are techniques and ways that you can use to make it more accurate and effective. These techniques include using:
Inventory Management Software
To make inventory management more effective and efficient, you may invest in using business inventory management software. This type of software can improve productivity by making the inventory tasks more manageable and uncomplicated. It also comes with valuable and helpful features, such as a barcoding system and inventory control, that help track, measure, and categorize stocks and products.
ABC analysis is another technique that you may consider when managing your business inventory. It involves dividing your list of items, materials, and goods into three categories. These categories are labeled as A, B, and C. But it can go up to F, depending on how you choose to categorize your inventory.
Category A refers to those valuable items in your inventory that contribute the most to your business’s overall sales and profit. Category B represents those items that fall somewhere in between the most and least valuable. And lastly, Category C refers to those essential items that have little use in the growth of your business.
Using ABC analysis as an inventory management technique can help you control your working capital costs and can help you set the correct pricing for each item in your inventory. In addition, it can help you quickly determine which things need to be prioritized when restocking.
If you aim to make the most of your capital cost, you must apply the FIFO method when handling and managing the items in your inventory. FIFO stands for “first in, first out,” which involves utilizing the older items first before the new ones. This technique can help you avoid having obsolete stock and deadstock that can increase your inventory costs.
Applying the FIFO method as a technique in your inventory management comes with numerous advantages. Aside from it can help prevent stock obsolescence, it can also increase your warehouse space. Other benefits include enhanced quality control, keeping your inventory fresh and up-to-date.
Inventory management is only one of the few aspects that you will need to focus on when running a business, but it is crucial since it can determine your business’s growth or downfall. The advantages of inventory management mentioned above prove how important it is to your growing business. While those techniques mentioned are recommendations to help you make inventory management more efficient.