What Is Inventory Management?
Simply put, inventory management is the management of your stock and inventory. Inventory management is a core pillar of supply chain management, a process that includes ordering inventory, managing inventory, inventory storage and product management.
The definition of inventory management is as follows; At a bare level, inventory management is about having the right inventory at the right time, right place, right cost and at the right quantity to ship products to your customers.
While easier said than done, there’s a few inventory management techniques you can follow (best practices) to ensure you’re managing your inventory effectively and efficiently.
How To Calculate The Right Amount Of Inventory In Stock
Having the right amount of inventory in stock is important. If you don’t have the right amount of inventory in stock and run out, customers will search elsewhere for that product. If you order too much product, you run the risk of having left over stock you’ll have to depart from at a wholesale price.
While there’s a number of different ways to calculate your inventory, we’ve found one of the best ways to stay on track is by forecasting your inventory based off the previous month. Essentially, you want a system that tracks inventory automatically.
While using inventory forecasting software is an option, we’d recommend doing your forecasting using the prior month’s inventory.
Getting Inventory For The Right Price
Nobody wants to pay more for their inventory and most of us know that we get a better price when we buy more. While suppliers will often give you price quantity deals, you could end up biting off more than you can chew.
If you’re having to keep inventory in warehouses, that carries additional cost. The more inventory you have in storage, the higher the cost. It can be tough trying to figure out exactly how much inventory you should be keeping.
You know your margins, you know your cost, you know the price point you need to get your inventory. Make sound judgements, don’t order extra product just for a reduced fee. You want to place orders backed by data and you can always fall back to your last month’s inventory for those numbers.
The last thing you want is additional stock that’s not moving and costing you to shelf.
Calculating The Best Time To Reorder
Knowing when to order new inventory can be a challenge. Ideally, your new inventory order will arrive just in time as you’re about to sell out, if only that was always the case. You want to order stock when it’s about to sell out but you don’t want to order too much and have to pay for in storage fees.
As we discussed in earlier in this article, relying on last month’s inventory is again important. This is a reliable and effective way to calculate the best time to order new stock. While you can manually count inventory, it’s much easier and less time consuming using an appropriate ordering software program.
You can also keep safety stock, which is emergency stock for unexpected occurrences. For example, if your business is located in the Northeast, you may keep safety stock in case of blizzards, the East Coast may keep stock for hurricanes.
The Best Place To Sell And Distribute Your Inventory
While most businesses have transitioned into the ecommerce space, some have made the mistake to not invest into the online space and we do feel that’s a mistake. In today’s market, you need an online presence to compete with the bigger brands in your market. The good news, it’s online marketing that has leveled the playing field, giving smaller companies the means to compete with global brands.
Selling on multiple channels can be a challenge if you’re not experienced in dividing your inventory among those outlets. Knowing how much inventory is needed per channel is crucial to your success.
With online fulfillment, you’re pulling your stock from stock pool, it’s simple and easy. You won’t have to think too much about fulfilling your orders online, it’s straight forward. The problem we see businesses run into is not having accurate inventory and obvious that’s important.
Ensuring The Highest Level Of Optimal Inventory Management
We’ve discussed a wide range of issues in this article and how to properly handle them. With that said, having an inventory management system that tracks all your inventory across all sales channels in real time is vital in today’s economy.
The right inventory management system will allow you to see real-time stock movements across all your channels, which will reduce your risk of overselling and that’s what you’re looking for. Inventory management systems will help you streamline your inventory management and other areas of your fulfillment process.
For optimal inventory management, you need to track inventory movement regularly. You don’t want to risk doing it occasionally, it needs to be daily and the right inventory management software is going to give you that liberty.
In this case, automation is your best friend, your fulfillment needs automation technology to accurately track inventory movements consistently. It does eliminate likely human errors, which is why all major fulfillment companies have this type of software in place.
While it can be a big investment now for your company, the benefits are far greater than trying to do your inventory management manually. If you don’t have plans of handling your inventory and fulfillment, you may decide to go with a fulfillment center or a third party company that can help you in that area.
Either way you go, inventory management is a key core pillar of your business.
