When you have a successful business, it is important to be able to track and manage your inventory. Whether you’re just starting out or have been in the game for a while, good inventory management will ensure that you’re maximizing your profits and minimizing expenses.
It also ensures that you have the products that your customers want and are able to deliver them without any trouble. If you don’t have enough inventory, you run the risk of incurring unnecessary costs (just think of all those extra shipping and handling fees) and disappointing your customers.
So how do you manage your supply? The first step is to know what’s in-and-out of stock with an accurate inventory system. You can’t manage what you don’t know about! This article will teach you how to track inventory and avoid overstocking or running out. Ready to learn more?
Introduction: What is Inventory Management
Whether you have a retail store, an online store, or both, you need to know about inventory management. It is crucial for businesses of any size to inventory their goods and merchandise so that they can keep them on hand and meet the needs of their customers.
According to Investopedia:
Inventory management refers to the process of ordering, storing and using a company’s inventory. This includes the management of raw materials, components and finished products, as well as warehousing and processing such items.
Your inventory is a huge asset to any business, but without good inventory management it is difficult to maximize and track the relocation of your goods.
Once you have a clear idea of what you have and what you need to stock up on, you can track your orders better and get paid on time, which is great for your bottom line.
Most companies underestimate how much they could be making every year if they just had better inventory management. Think of inventory management as a machine that needs to keep running. It requires precise maintenance and monitoring.
It is the process of understanding your business inventory, so you know what items to order and how much to order while keeping track of your inventory, so you know if you need to order more.
Why Inventory Management Is Important for Your Business
Do you remember that feeling when:
- you wanted to sell your goods but did not have the stock to replace it?
- you knew that you had at least $200 worth of inventory in your warehouse that your business could not make any use of?
- you do not have inventory and you are losing money?
These are the reasons why it is so important to have good inventory management in your business. It is because it will not only help you to make a good profit but it will also prevent you from losing money.
Efficient management of your inventory gives you time to promote your products, which increases margin, and keeps you from missing sales.
As the owner of a business, you need to know where you stand and make smart decisions. Fortunately, inventory management is the key. You can use it to keep track of your inventory, redundant sales and even maximize sales so that you can skyrocket your profit.
As large inventory carries the risk of spoilage, theft, damage, or shifts in demand, it’s really essential to have an accurate inventory management system.
The most common process includes five main steps:
- Delivery of the materials or items
- Receiving them
- Putting away
- Manufacturing (if raw materials were delivered) or Distribution (if items were delivered)
- Shipping to the customer
During this process, you also need to keep in mind all the important information (lot number, serial number, cost, quantity, dates for production/expiration/shipment) and timely update it to not mess up and save your money.
Inventory Management for Online Stores
Do e-commerce businesses need an inventory management solution as well?
The days of constantly buying items in bulk to have an extensive inventory on hand are over. Consumers expect fast deliveries, and they expect to see a full assortment of items in the store.
Having an e-commerce store can help you to meet these expectations. Especially if you’re running your store from home.
Inventory is an important part of e-commerce, but there are a few different ways to look at it. Inventory is broken down into product, stock and profit. The ratio between these will give you an idea of how successful your business is.
But first, you need to know what you are doing before you put everything in place.
It is recommended to do a periodic inventory so that you can have an accurate and complete view of what you have. After that, you may try to expand your inventory.
5 Common Mistakes in Inventory Management
There are a number of common mistakes you can make when integrating an inventory management system into your e-commerce business.
Let’s have a look at the top five errors that most business owners make:
Mistake #1: Overbuying
As a business owner, you need to keep an eye on all your sales. This way, you can know what you are selling and why.
However, there are some things you have to consider before putting the system in place.
Mistake #2. Not Using Long-Term Inventory
Before you start getting a bunch of inventory, think about its life expectancy and how much of your inventory you should be keeping in store for future sales. A good way to determine this is by checking the minimum and maximum sales of your products and planning your inventories accordingly.
The last thing you want to do is start keeping inventory and later find out that your products are outdated or out of stock.
Mistake #3. Buying Bad-Quality Goods
Although there is a huge variety of quality goods and services available in today’s market, you should be careful in the choice of the dependable vendors, especially when you are a new or growing business. That is because purchasing bad-quality goods will significantly lower your profit margin and affect the quality of your products.
There is one way to spot good quality goods: to look for companies that have a track record of success and a long list of satisfied customers. A company that has excellent service and positive feedback is a good choice for business purposes.
Mistake #4. A Lot of Storage Sites
And for what? Increasing your space for the inventory without facilitating your items themselves or the service won’t lead you anywhere.
Even if you are able to fill all the shelves, this only means that you’ll have much more work to do. Therefore inventory management will become more difficult and more errors may occur.
Mistake #5. Trying to do everything by yourself
Most small businesses know that you can buy inventory management software online, and you can also set up your inventory on an Excel sheet, and you’ll probably lose quite a bit of the data you’ve been working so hard to build up.
To prevent all these mistakes and to grow your business smoothly and successfully, it’s recommended to give some technologies a try — the software that will help you with all the inventory management processes and will simplify your business workflow.
Supporting Your Process with Technology
The best way to ensure that you have a successful inventory management process is to use the technology that works for you.
Not all of the inventory software programs will tell you everything that you need to know. That’s why you’re going to need to understand the different features that your software will have.
How to choose the right inventory management software?
The best way to choose inventory management software is to ask a few questions. For example, are you looking for a way to make your inventory costs lower or are you looking for a way to keep an accurate record of sales?
The reason is simple – it can cost you a lot more if it isn’t accurate. Most inventory management software applications do not use barcode scanners. So if you don’t make accurate inventory records, you have to manually input each and every item on your shelves.
- Odoo — this one is a completely comprehensive and consolidated all-in-one open-source software packed with hundreds of expertly designed business applications.
- Square for Retail — it is a platform of software, hardware, and payments for retail businesses that is built to boost your sales and simplify your management processes.
- Zoho Inventory — it enables you to manage orders and inventory. With this powerful inventory control, you have a chance to optimize your inventory and order management to your advantage.
To not lose a dollar from your sales, you should try Synder software that will fetch correct inventory data from your sales platforms into accounting. So you don’t need to drink an extra cup of coffee to spend a whole night trying to find a missing item.
Although you might not think of inventory management as a very important part of running a business, it is important in this day and age.
Keeping track of your inventory is vital to your success as a business owner. Investing in reliable inventory software is a good way to get a handle on what you have and what you still need.
Customers are buying products faster than ever, which makes it difficult for you to find good sales. Here are three main reasons why you need to use inventory management software:
- Better understanding of your sales and profits.
- Inventory management software allows you to manage inventory more efficiently.
- You will be able to access your historical and current inventory data and manage it all from one easy-to-use interface.
Thus, you will be able to get a clearer idea of what items are selling better, which will help you plan ahead and make strategic financial decisions.
Having an accurate and precise inventory will provide you with peace of mind and a plan of action for upcoming seasons.