Good inventory management is a balancing act. You want to make sure you have enough stock to meet customer demand, but not so much that you can’t shift it. Without an effective inventory control system, loss of sales and spiraling costs could make a major dent in your bottom line.
If a customer wants to buy something you haven’t got in stock, you could find yourself paying extra for a last-minute express order, or losing the customer, if they decide to go with a competitor who has the product readily available. Either way, you’re out of pocket – and you might have wasted time on additional ordering.
On the flipside, if you have more stock than you can sell, you could face significant additional costs for things like warehouse space, insurance, depreciation and asset tax. These expenses can quickly add up to sizable amounts, and managing unsold inventory takes valuable time away from running your business.
So how can you make sure your stock management is up to scratch?
A JIT strategy involves only ordering products as and when they’re needed for sale, in the exact amounts required. If you are confident that you can forecast demand accurately and have reliable suppliers, a JIT strategy will help you minimise unsold inventory and avoid waste due to storage damage and depreciation. It will also reduce your storage and maintenance costs.
A good inventory tracker and stock management system can help facilitate a JIT strategy, but it’s not going to be the right approach for all businesses.
You need to have a firm handle on your warehouse operations as well as your stock to improve your inventory management. We’ve outlined four actions you can take to start the journey towards a more effective and money-saving inventory control system:
1. Look at how you manage inventory control now
Start by carefully reviewing your current stock management practices, including any inventory software you’re using. Speak to relevant colleagues to get their thoughts on what’s working and won’t not. You’ll need to understand each step of the inventory control process to identify where there is room for improvement.
2. Check your physical inventory regularly
An inventory tracker that keeps tabs on what you’ve bought and what you’ve sold won’t necessarily account for goods that are lost, stolen or damaged in the warehouse. You need to know exactly how much of each item you have in order to establish an efficient stock management system. That means physically checking your inventory and comparing it with your records on a regular basis.
3. Use an inventory management system to keep stocks replenished
If you’re not taking a JIT approach, a stock management system that prompts you to place orders when your inventory reaches set levels will help make sure you never run out of stock completely. This is especially important during busy periods. By automating this process, you’ll reduce the risk of any product shortages between placing an order and the shipment arriving.
4. Understand and adapt to customer behaviour
Understanding customer behaviours and being able to forecast demand meaningfully is a powerful tool – not just for businesses with a JIT strategy. Having effective inventory management software in place will help you track which items are selling well (or not), specific periods when customers are ordering more or less, as well as any seasonal changes and outside influences affecting your product flow. You can then use these insights to shape and adapt your stock management strategy, maintaining the right inventory balance at all times.