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Inventory management is crucial for any industry or commercial enterprise. It involves organizing your logistics in a well-thought-out manner that can lead to substantial cost savings and a highly rewarding return on investment.
However, it extends far beyond financial considerations. By optimally managing your stocks and supplies, it positively impacts customer satisfaction.
Explore 6 tips to enhance stock management, whether in a store or warehouse.
What does inventory management entail?
Inventory management entails:
- Controlling the inflow and outflow of goods
- Ensuring immediate product availability upon order and meeting demand
- Minimizing costs for the company while avoiding wastage and losses
The concept of stock can encompass various types of goods:
- Raw materials or intermediate products for production industries
- Finished products intended for sale by commercial or e-commerce enterprises.
What are the risks of poor inventory management?
Companies that neglect proper inventory management risk:
- Poor order management
- Increased labor requirements
- Delays in preparation and delivery times
- Poorly organized storage space
- Suboptimal equipment utilization
- Workplace accidents
- Loss, wastage, and breakage of goods
They also risk a decrease in competitiveness in the market, losing ground to better-organized stores or warehouses. The key here is to strike a balance between overstocking and under-stocking by calculating safety stock.
The risks associated with overstocking
While it may seem like a good idea to anticipate and mitigate the risk of shortages, overstocking comes with its own set of drawbacks:
- It requires larger and thus more expensive storage spaces.
- Due to the quantity to be stored and managed, additional costs arise in terms of organization (time spent searching for products, labeling, order preparation, etc.).
- There’s a risk of stock obsolescence and goods not moving: a newer product might replace an older one, leaving the older stock on the company’s hands.
The risks associated with under-stocking
Similar to all extremes, under-stocking is also detrimental:
- If the production of a product depends on the availability of a part that’s not in stock, the entire production chain gets interrupted.
- If an item is unavailable in-store, it leads to a missed sale, jeopardizing customer satisfaction and potentially their loyalty.
Here are six tips to ensure your company optimizes its warehouse procedures and inventory management.
6 Tips to Improve Inventory Management
These pieces of advice apply to both warehouses and in-store stock management.
1 — Organize the warehouse or storage space
Ensure systematic and orderly organization of your warehouse so that:
- Items are easily identified for customer orders.
- Incoming materials are efficiently received and stored.
This aims to save time and reduce costs associated with productivity loss.
☝️ One technique for organizing a warehouse is “slotting,” which involves determining and adjusting the optimal location of merchandise in storage space to enhance process productivity in areas such as receiving, restocking, and order preparation.
Read also: 16 ESSENTIAL TOOLS FOR GOOD MANAGEMENT OF YOUR BUSINESS
2 — Establish good naming and labeling practices for stocks
Stock Labeling
Stock labeling goes hand in hand with organization: in a well-organized large warehouse, staff can easily locate the right section, while well-labeled shelves in a store enable easy finding of items.
Proper merchandise labeling allows:
- Clear identification of each item.
- Provision of crucial information about its specifics (expiration date, presence of hazardous materials, packaging requirements, etc.).
☝️ Regarding accompanying documentation, suppliers transmitting products to the warehouse should also follow good inventory practices.
Ideally, the supplier should send items using the same labeling as the delivery warehouses, coordinating references or using UPC or UCC codes. This facilitates inventory management.
Stock Naming
In addition to clear labeling, the naming convention used for item identification on labels is equally important, not only on labels but throughout the inventory system.
Unique identification of items is crucial here. However, along with uniqueness, consideration should be given to the length and clarity of the names.
Ideally, the item names should be clear and well-thought-out beforehand to serve a descriptive function.
The characters and/or numbers used for the item number (in an organized naming system) should have meaning, with each character or set of characters identifying a specific category in your stock organization system.
These names can then be useful for searching items during inventory, order fulfillment, warehouse-specific tasks, or when filtering or searching for reports.
3 — Define and document replenishment methods
The Calendar-Based Replenishment Method
It’s the simplest and least customized method. It involves ordering a fixed quantity on a fixed date. Thus, it suits less fluctuating stock and order management.
The Order Point Management
Method Orders are placed at variable dates when a certain stock level is reached. The ordered quantity can be fixed or variable based on the replenishment strategy.
When stocks are replenished based on actual consumption through real orders to avoid shortages or overstocks of goods with irregular consumption, it’s referred to as a demand-driven or “Demand Driven MRP” method.
Implementing this method is facilitated by using suitable and intelligent software like b2wise. This supply chain planning tool, developed around the DDMRP method, synchronizes your supply chain with actual market demand. Consequently, you can identify the ideal stock level to trigger your replenishment. Say goodbye to excess costs from overstocking and stock-outs!
Further read: The different types of risks for your purchasing process
How to calculate the reorder point or replenishment threshold? A little reading ⤵️
The Replenishment Methods
The Replenishment Method This method differs by having a fixed date but a variable quantity, which depends on the number of sales made.
It’s more suitable for products with regular consumption patterns that are costly, perishable, or bulky.
The Order-Based Replenishment Method
For variable stock management subject to seasonality, for instance, this method involves replenishing stocks with a variable quantity at a variable date based on demand.
☝️ The warehouse’s effectiveness is directly linked to well-documented policies and procedures. All process documentation should include procedures for:
- Physical interaction
- Material handling
- Safety protocols
- Report quality
Instructions should also cover how to manage damaged stocks: can they be salvaged, or should they be disposed of?
4 — Implement Cycle Counting
Even though most companies have established processes to better manage their stocks, this doesn’t eliminate the need for utilizing cycle counting.
Cycle counting is a method involving inventorying small subsets of stock over an extended period. This approach differs from the traditional physical stock count where operations are suspended while counting all items in the store. Thus, it has a less disruptive effect on daily operations.
It provides ongoing assessment of stock accuracy and the execution of procedures. Additionally, it can be adapted to focus on higher-value items, those with significant movement volume, or items critical to operational processes.
5 — Limit and Monitor Stock Access
A straightforward safeguard for effective inventory management is ensuring that only employees who require inventory-related data have access to stocks and associated information.
By precisely knowing who has access and ensuring that this small group of employees is adequately trained on the inventory system and organizational procedures, it becomes much easier to manage the system, reduce errors, and implement necessary changes when needed.
6 — Use Inventory Management Software
In today’s business landscape, technology is integral to almost every operational process. If your company persists in tracking stocks using Excel, you might be missing out on a stock management system, as well as order, sales, and delivery tracking, that could be much simpler, smoother, and automated.
The Question to Consider:
- Do you need a simple system that tracks stock levels and movements?
- Or do you require a more complex inventory management system that monitors inventory in real-time?
Barcode technology plays a crucial role in any warehouse with an automated system.
Printers and barcode scanners are relatively inexpensive and can be integrated into warehousing operations.
They significantly reduce manual data entry errors that occur in the warehouse or store.
💡 Example of Software:
👉 Small and medium-sized businesses operating in B2B will appreciate Erplain, a comprehensive B2B inventory and sales management software. With this platform, you centralize and automate all aspects of inventory management, both strategically (setting reorder points, generating reports, synchronizing with QuickBooks, Shopify, and Pennylane, etc.) and operationally (managing multiple warehouses, product traceability, barcode integration, etc.). The result: valuable time saved, real-time updated data, and streamlined processes to avoid overstocking, stockouts, or inventory errors.
👉 Small to large enterprises appreciate GSE-Web’s inventory management solution for its user-friendliness and rich functionality. The tool allows you, among other features, to manage movement orders, reserve products, and track spare parts and perishable products. It adheres to Good Manufacturing Practices through its batch management functionality.
