When you’re running a business, one of the most important things to think about is money. To keep a business afloat you have to think about how your money is used and managed. You want to ensure that you are bringing in money as well as saving money once you have it, but this can get a little tricky depending on the size of your business’ inventory.
Luckily, there are ways to save your business money that can be applied to any business. One of the best ways to save your business money is by using the right inventory management techniques. The following techniques are simple and doable, and we’ll walk you through each one so that you understand how to apply it. With these tips and techniques, you’ll be able to help your business grow both in experience and monetarily, which can result in excellent staying power and growth over time.
Why Inventory Management Is So Important
As a business owner and operator, you likely already know that inventory management is the part of the supply chain that intends to always have certain products in a certain quantity for sale at a certain time. In other words, when a product or products are usually in demands at a certain time, inventory management will ensure that your business has those products ready for distribution to meet customer demand. When inventory management is done well, your business can reduce the cost of having to carry more inventory than is needed while maximizing sales. Inventory management also helps you track your business’ inventory in real time so that you know which products are moving, which products stay on the shelves, and which products are in highest demand. With this information, you should be able to tweak your business so that your customers always get what they want when they want it, and you earn the reputation of being trustworthy, reliable, and the place that always delivers. Inventory management helps you avoid certain issues like in-demand products being out of stock, or having excess stock that ends up losing you money over time either due to poor or slow sales, the product spoiling while being held in stock (in the case of food and other organic goods), or the product not being bought at all.
In short, inventory management is so important because the right inventory management techniques should do the following:
- Improve cash flow and reduce costs for your business
- Keep accurate track of your inventory at all times
- Help you accurately predict demand for the coming sales seasons
- Help you avoid product/production shortages
- Help you avoid holding too many raw materials and excess stock
- Help save money and help your business grow
With all these reasons in mind and more, it only makes sense to learn how to save your business money in any way that you can. Using the right inventory management techniques will take some work, but it will be a positive endeavor for you and your business in the end.
Inventory Management Techniques that Will Help Save Your Business Money
The following inventory management techniques should help all business owners and operators save their business money as it continues to grow:
Keep Track of Sales (Predict Demand)
When it comes to excellent inventory management techniques, none is more important than tracking sales to predict demand. Predicting demand can be tricky, but with enough time and watchfulness, you can begin to decipher how many sales you expect to make during a certain period, which will give you the knowledge you need to order the exact right amount of inventory. There are a few ways you can keep track of sales and demand:
- Sales History: By looking over sales history at different times of the year, you can begin picking ou patterns of when certain products are in high demand. Some products may be in demand all year round, while others may spike during certain seasons. Pay attention to these different patterns so that you can know how much of which products to purchase and when.
- Promotions and Marketing Campaigns: You can look over the impact your sales promotions and marketing campaigns have on sales by looking over sales history. Once you have done that, you can adjust your inventory management to match the demand made by promotions and campaigns.
- Economy: When operating a business you need to pay attention to the economy as well. This can also help you keep track of sales, demand, and spending patterns of your target customer audience. When you keep an eye on the economy, you can begin to predict how demand will increase and decrease for certain objects.
Consider Centralizing Inventory Management with Inventory Management Software
Selling inventory through different sites can make inventory management trickier than it needs to be. When you allow customers to by through various channels, it can become difficult to keep sales records and history straight. To mitigate this, try centralizing inventory management by using multichannel inventory management software. With software, even if you are still selling through Amazon, Etsy, Shopify, and more, all your stock is managed and monitored from a single space – your inventory management software cloud. Inventory management software is often easy to use and operate, can be accessed through various devices (your phone, tablet, computer, etc), and gives you the power to monitor, manage, order, and reorder stock when the need arises.
Schedule Regular Inventory Audits
Even if you have the best day-to-day management system and techniques in place, you should always have a benchmark in place to double check everything. This benchmark can be an inventory audit, which is a useful manual check-up of your inventory.
Doing an audit can ensure that careless mistakes are caught and minimized and that helps business owners know how they’re doing overall. You can handle your inventory audit in the following ways:
- Annual Check: Once a year some businesses do an audit of their entire inventory to count all of their stock at once. This is a good way to do one, full and thorough check of your inventory before heading into the next fiscal year.
- Spot Check: Spot checking is useful for looking at one specific product in your inventory. You choose the product, count it, and compare the final number and compare it the amount your records say you should have. This is super effective for popular products that tend to sell quickly.
- Cycle Count: If you don’t want to check all your inventory at once or cannot do so, you have the option of a cycle count. This simply means that you will look over the inventory of different products throughout the year, meaning different products are checked in cycles. Some businesses find this easier to manage, especially if they have larger inventories to look after.
Employ ABC Analysis
Your business may stock some products that need a bit more attention than others. Such products may be more popular than others or else more important for the company. To ensure certain products receive the attention they need, you can use ABC analysis. This not only lets you prioritize important products but also helps you with inventory management skills of this product and others. In other words, you will know how to stock just the right amount of an important product and avoid over or understocking other items. The ABC analysis is as follows:
- A: These are high-value products that make up a small amount of your overall inventory.
- B: These are moderate-value products that make up a decent portion of your overall inventory.
- C: These are low-value products that make up the majority of your overall inventory.
When you separate your inventory into these categories, you are able to see which items require more attention than others based on the financial impact they have and how they affect the company.
Think About Drop Shipping (Especially If You Operate Your Business Online)
For businesses unable to handle and store their own inventory due to the high cost or storage space needs, you can try drop shipping. This option allows you to push the responsibility of holding and shipping products yourself onto a supplier. When you do this, you eliminate storage and fulfillment costs, thus saving the company money. Of course, drop shipping can be expensive itself, so you should do your research on which suppliers to work with and your ideal cost range if this option sounds good to you.
These inventory management techniques can help any business save money over time. No matter the bulk of your inventory, the demand for your products, or the level of your sales, you can always ensure that money is saved when you practice smart inventory management.
About the author
Chinh Nguyen has more than 15 years of digital marketing experience and is responsible for the marketing and business operations at Finale Inventory.
Prior to joining Finale Inventory, Chinh held marketing, business analytics, and product management leadership roles at a number of high-technology companies.