If you manage retail operations, you must already be aware of the various challenges related to inventory control. If you run out of stock too soon, you won’t be able to meet customer demand, but if you purchase more than what’s needed, you risk wastage. Plus, you may have to deal with misplaced items, which can lead to added expenses and shipping delays.
You could be facing these challenges despite using an inventory management tool. That’s because good inventory management isn’t only about the technology you use but also the practices you follow to organize your stock and ensure warehouse efficiency.
In this article, we’ve shared five simple yet effective inventory management techniques to help you get higher inventory accuracy and visibility.
If customers visit your website or walk into your store and don’t get the product they want, they’ll buy it from someplace else. You’ll not only lose sales to a competitor but also leave a bad impression on customers. You should, therefore, always keep extra inventory—i.e., safety stock—to meet any sudden increase in demand. Here’s how you can do that:
Check your monthly sales data to identify products that have shown a consistent increase in demand over the past couple of months.
For each identified product, use demand forecasting models that analyze historical and seasonal sales data to predict demand in upcoming months.
Based on expected future demand, increase or decrease procurement. As a rule of thumb, maintain more safety stock for products with higher expected demand.
Maintaining accurate inventory data is important to ensure inventory optimization. But what’s equally important is auditing the data regularly to keep it up to date, given inventory records are updated every time an item is bought or sold.
Use the following approaches to tally the actual product numbers with the count mentioned in your records:
Physical inventory count: In this method, all your inventory items are physically counted to cross-check actual numbers with the numbers mentioned on your books. If you have multiple warehouses, a physical count is conducted for each warehouse. These checks are typically done once a year, and thus, they can be tedious and time-consuming.
Inventory cycle count: Unlike physical counts that are done annually, cycle counts can be done throughout the year—monthly, quarterly, semi-annually, or any time interval per your needs. All you need to do is divide your inventory items into separate categories, and set an auditing schedule for each category.
Inventory spot check: Spot checks are real-time inventory audits for specific items to see if you have the required numbers in stock. These checks can be done any and as many times you want. They’re supplemental to physical and cycle counts and are recommended for products that are fast moving or have high demand.
Good supplier relationships go a long way in ensuring smooth supply chain operations. For instance, if you face a sudden surge in product demand, your supplier can help arrange stocks on short notice. A good rapport will also help you negotiate better prices when purchasing inventory in bulk.
Here are some ways to maintain a good working relationship with your suppliers:
Fulfill your contractual obligations: Honor your contractual obligations by purchasing the promised products and paying on time. Repeated payment delays will create a bad reputation for your business and hurt supplier relationships.
Keep in regular touch: Communicate regularly with your suppliers to have a clear understanding of responsibility and eliminate any confusion or disagreement.
Products such as groceries have a limited shelf life and need to be sold before their expiration dates. To clear such items, follow the first in, first out (FIFO) method—i.e., sell the oldest products first.
To identify which products came in first, use batch tracking. In this method, products with the same expiration date are grouped together and assigned a unique batch code. Inventory tracking by batch number helps identify inventory items sitting the longest on your shelves.
To make things easier for you, we’ve created a batch tracking tool that tracks various product batches and their expiration dates. Enter the product name, batch code, dates of purchase and expiry, and available stock level in the corresponding columns, and the tool will automatically let you know if the available stock is fit for use.
The inventory management process is complex and involves various tasks. You need to maintain accurate records, process customer orders, create and send invoices, manage suppliers, and much more. Doing all of this manually is not just time-consuming but also prone to data entry errors. Use inventory management software to automate these processes and reduce the chance of human error.
An inventory manager can automatically track existing inventory levels, raise purchase invoices for new and repeat orders, categorize products into multiple batches, create real-time reports, and monitor stock movement. It also lets you set automatic reorder points to help avoid stockouts.
If you don’t wish to invest right away, here are some free tools to try.
The five techniques shared in this article will help you create an efficient inventory management strategy, but implementing all five at once can lead to complexities. Use a phased implementation approach—i.e., choose one technique, implement it, observe its impact, and then move to the next technique.
Here are some resources to help you select the right inventory management technology for your business:
Inventory management software buyers guide: A guide that provides the basic information you need to make inventory purchase decisions.
Inventory management software directory: A catalog of all the inventory management solutions listed on GetApp. You can filter the products by price, features, supported devices, customer rating, and much more.
GetApp's Category Leaders report: This report lists the top inventory management software based on ratings from end-users in five key areas: ease of use, value for money, functionality, customer support, and likelihood to recommend.