Inventory Management in 2022: A mini-guide for your business
If you’re in the business of selling physical goods, then you know that inventory management is a crucial part of keeping your company running smoothly. Stocking too much inventory can tie up valuable resources, while stocking too little can result in lost sales. In this mini guide, we’ll go over some of the basics of inventory management so that you can ensure that you always have the right amount of product on hand.
What is Inventory Management?
Inventory management is the process of tracking and managing stock levels. It’s a crucial part of any business that deals in physical products, and it can be a complex and time-consuming task. It involves ordering, storing, using, and selling inventory in a way that maximizes profits and minimizes waste. Inventory management can be a complex process, but it is essential to understand and get right in order to run a successful business. There are many different software solutions available to help with inventory management, but the key principles are always the same: knowing what stock you have, where it’s located, and how much you need to keep your business running smoothly.
Why Inventory Management Matters
Inventory management is critical for businesses in order to ensure they have the right products in stock at the right time. It can help to avoid inventory shortages that can lead to lost sales, and also helps to avoid having too much inventory on hand, which can tie up working capital. Good inventory management can help businesses to optimize their profits and better serve their customers.
The SEC and Sarbanes-Oxley (SOX) Act mandate that companies track inventory to be compliant. Companies must document and archive their inventory management processes for compliance with this requirement.
What are the Benefits of Inventory Management?
- Improved utilization of existing assets
- Recover stranded and lost assets
- Identify obsolete assets for write-off and re-sale
- Improve operational efficiencies to increase flow-thru and decrease re-work
- Improve asset and location records for tax filings
- Recover capital tied up in stranded and lost assets
- Identify capital savings and improve financial record
How to Manage Inventory
Inventory management is a process that helps businesses keep track of the products they have in stock. By tracking inventory, businesses can ensure that they have enough products to meet customer demand and avoid stock outs.
Inventory Methods
There are several different methods businesses can use to manage their inventory, including the ABC method, just-in-time (JIT) inventory, and lean manufacturing. The best inventory management system for a business will depend on the specific needs of that business.
For example, businesses that sell products that have a long shelf life may benefit from using the ABC method to manage their inventory. This method involves categorizing products into three groups based on how often they are sold. Group A includes products that are sold frequently, group B includes products that are sold less frequently, and group C includes products that are sold infrequently.
Businesses that operate in fast-paced industries may find that the just-in-time (JIT) inventory method is a better fit for them. With JIT inventory, businesses only order the amount of product they need to meet customer demand at any given time. This helps to avoid waste and ensures that businesses always have the products their customers need.
In a Lean Manufacturing approach, the goal is to create as efficiently and with as few mistakes as possible, while sustaining high quality. The part of this that affects lead times and operating costs is how waste is defined – anything that doesn’t add value for the customer.
How to Manage Inventory Effectively
Inventory management is a process that helps businesses keep track of their products and materials. An effective inventory management system can help businesses save money, improve customer service, and avoid stockouts.
There are several different techniques businesses can use to manage inventory. The most popular methods include just in time (JIT) inventory management, economic order quantity (EOQ) inventory management, and inventory optimization.
JIT inventory management is a system where businesses only order the amount of inventory they need at the moment. This system can help businesses avoid stockouts and save money on storage costs.
EOQ inventory management is a system where businesses order a set amount of inventory at a time. This system can help businesses save money on ordering costs.
Inventory optimization is a system where businesses use data analytics to determine the best way to manage their inventory. This system can help businesses save money on both ordering and storage costs.
Why is Inventory Management Important?
Inventory management is important because it helps businesses keep track of their stock, ensure that they have enough products to meet customer demand, and avoid issues such as stock outs. Good inventory management can also help businesses save money by reducing the amount of inventory they need to maintain and reducing the cost of inventory storage.
Inventory Management challenges faced by companies are:
- High-speed growth
- “Hero” culture
- Lack of mature operational processes
- Willingness to bypass procedures to “get the job done”
- Large number of inventory management systems exist
- Data integrity across multiple systems have degraded over time
What Can Your Business Do?
Inventory management is a critical part of any business, but it can be especially challenging for small businesses. That’s because they often don’t have the same resources as larger companies to invest in inventory management systems and staff. But there are some things small businesses can do to improve their inventory management and get closer to that goal of zero stock-outs. Here are a few tips:
- Keep track of inventory levels manually or with simple software.
- Use barcodes or RFID tags to track inventory items.
- Set up automated reordering based on real-time data.
- Conduct regular physical audits of your inventory.
- Implement cycle counting to identify errors and discrepancies.
- Train employees on proper inventory management procedures.
- Review your processes regularly and make changes as needed.
Following these tips can help you get a better handle on your inventory and avoid costly stock-outs in the future.
How to Implement Inventory Management Software
If you’re looking to streamline your inventory management, one of the best ways to do so is to implement inventory management software. This can save you time and money by automating many of the tasks associated with managing your inventory. To get started with the process, follow these steps:
- The first thing to do is to decide which inventory management software is right for your business. There are many different types available, so take some time to research what each one offers and compare prices.
- Once you’ve selected a software, contact the vendor and set up a trial period. This will allow you to test out the software and make sure it meets your needs.
- Integrate your inventory system into your financial records.
- Train your employees on how to use the software. Make sure they understand how to input data and run reports.
- Start using the software! Keep track of your inventory levels and reorder items as needed.
With inventory management software, you can rest assured that your inventory is being managed effectively and efficiently. This can save you time and money in the long run, so it’s worth considering for your business.
Find more info about Sitehound Inventory Management here.
