November 18th, 2020
7 Ways to Manage Inventory and Grow Business
Running a seamless retail operation is one of the best ways to beat your competitions. With Ricemill, You make fewer mistakes and get your deliveries to your customers faster. Thanks to our inventory management methods, you wouldn’t only make more profit, but you also waste less money as you create raving and loyal customers.
This sounds like something every retailer should know, but sadly, 43% of retailers from experience have realized that this is one of the most significant challenges they face. It has proven to be a clear struggle, especially without eCommerce warehouse management software.
Why Is Keeping Track Of Your Inventory Important?
Putting a new inventory plan into action is never an easy task. After all, you’re already used to your previous system. However, there are times where you must change your current method not because it is flawed or out-dated but because there are some pretty huge benefits that make these methods worthwhile.
Benefits Of Proper Inventory Management
Increased sales: growing your sales is one thing that is bound to put a smile on your face. With 70% of customers ready to leave once they realize you keep them waiting for back-ordered items; having better inventory management is critical. That is because it is the first step in ensuring that this never happens. It is also much easier to open new sakes channels thanks to automated tools that assist in inventory management.
Building loyal customers: having returning clients not only proves that your customers love your services it also helps improve your marketing strategy. Did you know that about 65% of buyers cut ties with brands over one bad experience? That means you have little or no room for errors, and keeping your inventory helps add value to your services and create loyal customers.
Reduce storage cost: with the right inventory plan, you can maximize your storage space. You keep the right amount of stock on hand to meet all your demands, but not too much that you end up spending extra for storage—what a great way to save costs.
Less waste: in the retail business, having to throw out products because they are expired or damaged is enough to keep you awake at night. With a proper inventory management plan, you get to ensure this never happens. Products in storage that doesn’t move can end up getting spoilt or dead. You can avoid this completely with the right inventory manager.
In general, you get to make more profits, stay in business, and keep your customers happy. Your investments, as well as profits, will no longer get stuck in stocks in your storage. You get to sell fast and use your extra profit to build your business.
Methods For Forecasting
Your inventory is one place you can predict the future quite accurately. Inventory forecasting is an essential part when you hope to control the flow of your inventory. Once you can achieve this, you can easily optimize your stock levels and strike the perfect balance between having too much and too little stocks at any given time.
When trying to forecast your inventory, there are three primary key methods you must consider they are as follows:
- Setting a safety stock level:
Your safety stock is your back up when you lack sufficient stock in your store. Consider it the backup stock you keep on-hand for each of your items. That is one of the safest ways to ensure that you are prepared for the unexpected. This backup shouldn’t be used for normal inventory sales, and you keep it for moments when there is a spike in demand.
Remember, this is an estimation, but you shouldn’t just blind guess and hope; that’s very risky. So to make a more accurate estimate, it is better to use as much data as possible. To help with that, you should take a look at your best sales days in the last quarter or year and then inputting those figures into this special formula:
This gives you a more accurate prediction of the quantity of stock that makes up your safety backup. While using this, you will also be able to maintain your typical daily sales.
- Determining the right Reorder points
A reorder point is the exact point at which you need to order new stocks. This sounds simple at first but learning to buy new stocks at the optimum time or period is a lifesaver. What you may have not realized is that if you order too early, you have more stocks than you need or can sell. When you order too late, you leave your customers starving.
That makes it imperative that you take into account to most efficient time between ordering new stocks and selling the stocks you have on hand to maximize profit as well as efficiency. This way, you avoid touching your safety stocks when you don’t need to. You can work out your reorder point with the following steps:
Take the average number of days between ordering and having them ready to distribute.
Multiply that average by your average daily sales volume in the past month/ quarter or year.
Add your safety stock numbers.
- Economic order quantity
Safety stock and reorder points help determine when to order new stock. It does this while also keeping the carrying cost at a minimum.
EOQ = square root of (2 x D x S/H) or √ (2DS / H)
Your EOQ ensures that you have the perfect order amount for production.
Organizational inventory control measures
Optimizing stock level is only one part of running a successful retail inventory. Another aspect is organizing the warehouse. Both aspects play pivotal roles in controlling the inventory. Here are some inventory controlling methods that help organize stocks:
- First in, first out:
This is specifically critical when dealing with perishable items. When your inventory isn’t properly arranged, you use your newer stock to service your demand leaving the older stock to age. In the end, you’re left with expired or damaged products. To avoid this, you should make a rule and bring older stocks before newer inventory.
- ABC Analysis
This helps you prioritize your stock. Certainly, some of your stocks are more important than others, and ABC analysis helps you organize these items accordingly. It works by dividing all inventory into three groups A, B, and C.
Category A: this is the smallest category which consists of the most important stock items.
Category B: here, you find slightly larger in terms of volumes of SKUs and they are usually products of less value.
Category C: items that fall into this category are typically the largest in number but contribute the least to your business’s bottom line.
You can use this analysis to organize your warehouse to boost its efficiency. It becomes easier to pick up C items because they are the closest.
- Optimal location labelling
A poorly organized warehouse can be a nightmare. A team should be able to look through a warehouse to pick products for clients quickly. To aid this, you need clear location names and labels for items in your warehouse. Learn to keep it simple and clear. You can designate different areas in the warehouse and operational shelves if you can afford them to make a more organized warehouse.
- Stock reviews
You can do all these things and still face challenges with your inventory. It is not wise to blindly follow any inventory method. To ensure that everything is moving as planned, warehouse managers need to review stocks regularly. This is essential to keeping errors to its minimum. Here are some review methods:
- Cycle counting: this is when team members are assigned counting tasks of specific items each week.
- Spot checking: there is no particular pattern to this. It can be done if a team member is bored and looking to pass the time.
Having an inventory stock manager is not something you should overlook or take likely. Your storehouse is an essential part of the ecosystem of your business. Having that section function efficiently makes running the business much easier. Using technologies like barcode scanners are important to help you keep track of your inventory. Smartphone apps can be linked to these scanners, and they are regularly updated to keep the user informed.
Managing inventory is critical. Practicing these seven methods would go a long way in relieving the stress of running a business and improving your business’s operations. You finally have a partner that helps you save time, inventory management and eliminates costly human mistakes. All these are what make us the right decision for your business.
Please take action today, get in touch with us, and together, let us built your business.