How to Manage Inventory
Inventory management is a business process that can improve your profits. It is commonly practiced by large organizations—companies that have the leisure to optimize every part of their business.
But some smaller, growing firms have not optimized their inventory management. They have been busy innovating and building a customer base.
What problems can poor inventory management cause?
- A company might run out of a certain product when customers are clamoring to buy it. Those customers could jump ship to buy from another business, possibly forgetting about the first business completely.
- A business might commit funds to products only to realize that demand has fallen, losing those funds when the products won’t sell.
In both cases—and many others—improved inventory management can help a business meet customer needs while improving profitability.
What Is Inventory Management?
What is the goal of inventory management? Is it just to count how many products are on the shelves?
You can compare it to excellent budgeting. Many people feel like their budget is just a way of tracking their expenses. But a great budget can help them do much more—create a rainy day fund, save for exciting goals, invest, and prepare for retirement.
Similarly, great inventory management creates real improvements in your business. You can:
- Ensure that certain products are available when customers are demanding them—and in the quantities needed
- You don’t have too much of any product (which would cost you warehouse space and possible wasted expenses from over-buying a product)
- Increase your sales revenue
- See current inventory in real-time, rather than several days later
- Avoid food products going bad
- Avoid products being out of date and no longer in demand
How to Improve Inventory Management
Do you want to know how to manage inventory better? The tips below may sound simple, but they are the fundamental skills companies start with and improve to reduce expenses and increase revenue.
- Switch to FIFO: This stands for “first in, first out.” It is a sensible way to look at inventory and sales. The first products that you bring to your warehouse should also be the first to be sold. For example, a warehouse can organize shelves so that boxes dropped into the back of shelves slide down to the front and become the first to be picked for shipping.
- Purge Poor Sellers: Implement a system that periodically discovers the worst sellers. Maybe certain products haven’t sold at all for 6–12 months, for example. Your business could stop ordering that product and/or sell your current inventory through a promotion.
- Count It: Many businesses today track their inventory using electronic systems. However, physically count your products and compare what you find to what had previously been recorded. This can catch systemic errors that have crept into your processes.
- Forecast Better: Use several ways of forecasting which products will sell, predicting the quantities you’ll need as well as possible. Use your past sales results, reports on the economy, your upcoming marketing campaigns, competitor trends, and more.
- Consider a 3PL Solution: A third-party logistics provider can store, ship, and manage your inventory for you. A great one can even order more products for you when you start to run low, ensuring enough are available for projected orders.
Do you need help with your inventory management? Would your business be improved by using third-party e-commerce fulfillment services, letting your employees focus on business development?
Contact Elite OPS for professional, state-of-the-art inventory management and logistics fulfillment, backed by over 25 years of experience. We can create a custom quote for your business needs. Contact Elite OPS to start on the path to better profitability today.