Seven Steps Towards Efficient Inventory Management
If customers are the backbone of your business, inventories are its ribs. Far aside from any anatomical metaphor, your inventory can make or break your company. It’s a living organism, it can move faster than the speed of light, or it can stay put like a mountain. It can be whatever you decide it to be. Zest ERP knows how important efficient inventory management is, and today we’re sharing seven simple steps in order to achieve it.
Evaluate Your Suppliers
Use your own data to compare and evaluate the performance of your suppliers. Who charges you the most for express shipping? Who has failed to meet a deadline? Or who has the most terrible, frustrating return policies? Quality and pricing can also be used as major filters. The goal is to identify those suppliers that will adhere to your needs and will allow you to increase your profitability without risking your sales or your quality. Keep your friends close, and your great suppliers closer.
Know Your Sales
We’re not talking about calculating how much you earned in a determined period, that’s great, we get it, but you need to dig a little deeper. Learn what products are selling and how many of them are selling, and use that information to update your inventory. If we haven’t made ourselves clear, the analysis of the data you collect from your sales channels is like steroids for your warehouse. If you know that a certain item drops off around June, why would you order more in May? Sales and inventory are not two different languages, they are strictly correlated and you need to exploit that. This takes us to our next step.
Marry Your Customers to Your Inventory
Insinuating otherwise is simply nonsense. The previous step is about provisions and supplies, this one is about trends and opportunities. Sales history can let you create a profile of your customers and predict shopping trends, which of course, has a direct impact on your inventory. If you have one thousand units of your bestselling item on your inventory, and the shopping trends indicate that your customers’ preference for that specific product increased in the last quarter, expect some shortage unless you do something about it. Again, customers and inventory are a match made in heaven
We’re talking about a Periodic Automatic Replenishment Level, or PAR Level, which is a stock level that can prevent your warehouse from running out of an item, a minimum baseline that also works as a safety measure. Once you have designated that minimum level, you must maintain it no matter what. Combining PAR Level with adequate strategies like JIT or FIFO can only increase your efficiency and prevent any type of shortage. The person who said boundaries are not good never heard of an empty warehouse.
Ensure Solid Auditing
Audits are not a nuisance. They can help you understand why you have an overstocked inventory in one of the greatest sales seasons ever, or recognize warehouse management challenges that need to be overcome towards better use of the designated space. Scheduled and non-scheduled audits are definitely some of your most important benchmarks. How much do you have in store? How much of that is still fashionable or in good shape? How much money can you make out if it? All the answers to these questions are just lying there in your shelves.
Rank Your Goods
Categorise your inventory into groups to have a full overview of which item you need more frequently and which item you don’t need anymore. Create a hierarchy and learn what are the higher-ticket items that you need fewer of, the lower-cost items whose inventory turns over very quickly, or those moderately priced and slower-to-move items. Knowing who’s who will tell you why and when.
Standarise the Data
A big warehouse with lots of items can be a total mess if you don’t handle the information appropriately. It doesn’t matter if it’s a pile of screws or an MRI machine. Always include SKU’s, supplier info, country of origin, hazard information, measures, and any kind of information that might help to understand what is that item doing in your company and, more importantly, what it can do for your business. Make this data user-friendly and approachable so all of your staff can know what they’re dealing with. Think about tracking costs too, so you’ll know which items are more at the mercy of scarcity or seasonality.