Understanding inventory management best practices helps you keep stock moving efficiently through your retail store so you can improve customer satisfaction and increase sales. But while products are your primary source of sales and revenue, they can also tie up a lot of cash. After all, inventory takes up space, it’s susceptible to spoiling or becoming obsolete, and it can also be lost or stolen.
That’s why it’s imperative that your small business uses the proper procedures and protocols to track inventory, from the day it arrives at your store until the day it is purchased.
Here are 6 inventory management guidelines from Wasp Barcode Technologies that will set up your small retail business for success:
1. Determine What Type of Inventory Control Is Best for Your Business
As a small business owner, no one knows your inventory flow better than you. With that said, you’ll need to decide which type of inventory management process will work best for your company: continuous or periodic review? To help you make the most viable choice, here are the facts about each method:
- Continuous: This method involves ordering the same quantity of items with each order placed. Because you have set quantity levels, you’ll need to monitor inventory closely so you know when to replenish your stock.
- Periodic: In this case, you order products at the same time each period. When you arrive at the end of each period, you’ll determine how many items need to be reordered based on quantity levels. Keep in mind that there is no set reorder levels for this method.
2. Implement a Counting Cycle Program
To efficiently manage your inventory, you’ll need to implement a counting cycle. Consider the following factors to ensure that you select the counting method that works best for your business:
- Frequency: How many counts are feasible for your team to perform each year? What are the effects of cycle counting on warehousing, receiving, and the delivery process?
- Strategy: After you have a grasp on your counting frequency, you’ll need to plan whether to divide inventory between locations, categories, items, or values.
- Supervision: Appoint a trusted employee to take charge of inventory counting procedures.
3. Evaluate Your Inventory Levels
Your inventory levels will vary depending on the type and size of your company. For example, the number of items kept in a storeroom or warehouse would differ significantly between a fresh food delivery business and a fashion retailer.
Overall, it’s best to keep low stock levels to in order to reduce operating costs. This will help increase cash flow so you won’t be saddled with the burden of maintaining stock for long periods of time.
Implementing an inventory management system will help you determine what stock levels are necessary to effectively run your small business. Additionally, through inventory management, you’ll be able to monitor important data (including sales patterns and turnover history) so you can make smarter business decisions.
4. Don’t Forget Quality Control
No matter the size of your business, you should have a system in place to ensure that products meet quality control standards, thus increasing customer satisfaction and business growth.
You can easily implement a quality control program by making a checklist of guidelines that employees must follow when entering the products they receive. Quality control procedures might include the following criteria:
- Looking for indications of Damage: Are there any leaks, tears, or broken seals?
- Checking Product Specifications: Do all items match the description on the purchase order (including styles, colors, and sizes)?
- Reviewing Prices & Terms of Sale: Do prices match the agreed upon rates? Can defective items be returned to the supplier and refunded as needed?
Having all employees working toward the same goal will significantly increase quality. Staff members should be trained well so they know when and how to return items that don’t meet company standards. Also, make sure your storeroom or warehouse won’t pose any harm to your products through lighting, humidity, or temperature.
5. Optimize Inventory Levels to Meet Customer Demands
When inventory best practices are in place, you’ll be able to optimize stock levels to amp up efficiency and meet customer demands. In today’s digital marketplace, customers aren’t shy about sharing any bad experiences they’ve had with your brand. And they certainly won’t hesitate to find another company that can deliver the requested products and service when you fail to do so.
Inventory optimization strategies are critical to your company’s long-term success and profitability. Efficiently executing inventory best practices will reduce the likelihood of losing customers, having to cut inventory levels, and scaling back employee numbers.
Instead of spending loads of money upgrading less important systems, focus on updating your inventory management methods. In may cases, the challenges and obstacles you face during the course of day-to-day business could probably be avoided with inventory management best practices firmly in place.
If you make inventory management a priority, you’ll be better able to recognize and avoid the inefficiencies in your business processes and plan for the future.
6. Prepare for Growth
Naturally, you don’t want your company to become stagnant. Like other small companies, your goal is to grow. But that won’t happen without preparation.
Just make sure your growth conversations include inventory management as a crucial part of planning because, as Wasp Barcode Technologies points out, “Inventory management best practices, or the lack thereof, can make your break your small business.”
Consider investing in an effective, easy-to-use inventory management system, like Music Shop 360, to eliminate the human errors that can occur with manual data tracking. That way, your staff members will spend less time fixing problems and shuffling papers–and more time working on responsibilities that will increase your profitability.
Poor inventory management is a leading cause of failure for small businesses. The State of Small Business Report indicates that 46% of SMB’s with 11-500 employees either don’t track their inventory or use a manual inventory system such as Excel.
Don’t be one of them.
Implement inventory management best practices today to streamline your small business for maximum efficiency, as well as the ability to meet customer demands and sustain growth.