5 Tips And Practices For Effective Inventory Management

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Managing inventory is important for the growth and success of your company. If you aren’t monitoring the movement of your stock, you’ll likely face many challenges. How you manage your inventories can build or break your business enterprise.  

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Inventory management is the practice of supervising or monitoring the movement of stock items in a business. It helps track inventory from when they get purchased to the time of sale. The primary goal of inventory management is to ensure there are always enough goods in the company to meet customers’ demands.  

Effective inventory management is critical since it ensures no stockouts or overstock in the business store and shelves. When you run out of stock, you stand a higher chance of losing revenues and profits. On the other hand, overstocking comes with several problems. These include increased storage costs, increased damage through breakages and expiry, holding of capital that could have been used for other purposes, and incensed theft cases. Therefore, you should manage your stocks to ensure they always remain at an optimum level.  

Effective Inventory Management 

Effective inventory management can be a cornerstone for a well-established business. It helps enhance your cash flow strategy and increase sales. Here are some tips and best practices for effective inventory management for your business.  

1. Consider Just In Time Inventory Management Technique 

Just-in-time inventory management is one of the practical ways to maintain an optimum level of stocks for your business. The Just-in-time (JIT) inventory management technique requires business owners to keep as few stocks on hand as possible. In other words, this is an inventory management system in which products are manufactured or ordered as customers demand. Therefore, you won’t make any orders unless clients want them.  

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Implementing the JIT stock management method for your business organization has many benefits. For instance, it reduces inventory waste. Many companies experience a lot of inventory waste because of stocking more quantities than customer demands. When you overstock, you may have a lot of dead stocks and expired items, which increases inventory waste. In JIT, you’ll produce or order only what customers want. Therefore, you’ll minimize the number of unsellable stocks, thus reducing inventory waste.  

Another benefit of the JIT stock management method is that it helps reduce warehouse or storage holding costs. Managing a stock storage facility is expensive. And having excess stock makes the situation worse since it increases your holding costs. In JIT, you order only what you want. Therefore, you can keep your inventory holding costs to a minimum.  

2. Consider FIFO Inventory Management Method 

First-in, first-out (FIFO) method is another inventory management method to manage your stock effectively. In this technique, the first goods purchased should be sold first. This means the older stocks will be available to customers before the newer inventory.  

FIFO is a popular method for stock management because of the many benefits associated with it. For instance, it can minimize the impact of inflation. When there’s an increase in inflation in an economy, the price of commodities rises over time. FIFO can reduce the inflationary impact your business feels, as the oldest inventories are sold first.  

Apart from that, FIFO can help reduce obsolete stocks. As time goes by, the needs of consumers may change. And this may mean that the product they used to solve a particular challenge may no longer be effective. Such items are considered obsolete and should be disposed of. FIFO can help prevent obsolete stocks in your business. It ensures items that were manufactured first are sold first. This reduces the number of outdated items on your business stores or shelves.  

3. Audit Your Inventory

Auditing is an important process of running a business. It’s a practice of examining a company’s assets, including stock. The main purpose of auditing is to give an overview of a company’s position regarding what assets it has.  

You can audit your inventories yearly, semi-annually, monthly, or weekly. Whatever you choose, ensure you physically count all the stock items in your business to determine whether it matches what you think you should have.  

If there are any discrepancies in your physical stock count and what you’ve in the system, it shows that there’s a problem with your management strategy. Such discrepancies can be due to theft or some items sold with the wrong code. Therefore, you should take effective measures to deal with such issues and strengthen your inventory and supply chain management strategy.  

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4. Build Strong Relations With Suppliers 

Suppliers are vital to the success of your business. These are manufacturers or companies that supply you with the goods. Without suppliers, your company won’t take off the ground. As you find vendors, you should also strive to build strong relations with them. While running your business, you’ll likely need the assistance of suppliers from time to time. For instance, you may want to make an emergency order at some point. A vendor’s quick response helps you avoid stockouts.  

There are many ways to strengthen relations with suppliers. One of them is effective communication. Ensure you regularly communicate with suppliers about any changes in your stock. If you think the demand for your stock will increase in the coming few days, make sure you inform your supplier. This will help them to prepare and produce enough stock items for your anticipated increased demand.  

You also need to give your vendors a reasonable lead time. Don’t expect to make an order and receive the items overnight. Allowing supplies ample time to produce and deliver goods to you will help create trust with them. And that also strengthens your relations.  

5. Work With The Right Team

Lastly, you should work with the right team to help in your stock management. First, ensure you hire the most suitable people for managing your inventories. You can achieve that by partnering with a staff recruiting agency or using recruitment software. The right company or software should help you to screen all candidates for the job and identify the right ones.  

Once you employ the right employees, train them in the best practices for inventory management. This allows them to know what is required of them. And most importantly, don’t overstress your staff with excess tasks. As such, they’ll always remain active and productive, which goes a long way in enhancing your inventory management strategy.  

Takeaway

Managing inventory is important when running your business. It allows you to maintain optimal stock items in your store and shelves. Therefore, you won’t run out of stock or have excess items. Some tips and best practices for managing your inventory are just-in-time, first-in first-out, auditing, building strong vendor relations, and working with the right team.  

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