If you have a website or an online store selling physical products from your inventory or even from your own home, not dropshipping or affiliate marketing, then this article is for you.
No matter how big or little your stock is, you definitely need to practice inventory control or inventory management .
Inventory management is the process of keeping track of your stuck of goods and monitoring their weight, dimensions, amount, or location. Effective inventory management can help you minimize the cost of holding inventory and can also guide you when it comes to replenishing or buying products or materials.
How important is inventory management ?
Good or bad inventory management makes a huge difference with your e-commerce business . It saves you money and hassle and prevents you from losing potential sales due to over or under stocking issues.
1. Avoid Corrosion or Spoilage of Products
Managing inventory effectively helps you avoid products going rotten or expired if they’re not sold in time.
If your stocked products have an expiry date, like fresh/canned food, juice, makeup, or detergents, then you got to keep good tracking to avoid unnecessary money loss due to spoilage.
2. Avoid Dead Stock
Among the reasons why a stock cannot be sold is going out of season, out of style, or becoming irrelevant; this is called dead stock.
Following a good inventory management system makes you keep an eye on such stock to be able to sell it on time and avoid losing money on dead stock.
3. Avoid Unnecessary Storage Cost
Save unneeded storage money by managing your stock adequately. A large quantity of products stored at once or a stock of products that’s difficult to sell can cost you a lot.
4. Accelerate Cash Flow
You’ve invested money into your stock and you’ll get money when you sell it. But as long as it’s sitting in your warehouse it’s costing you money, and this is what we don’t need.
Having a solid inventory system will help you track your products in real time: replace products just when you’re about to run out, based on sales and future plans.
This way, your money will flow fast and the cycle of cash will be short.
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Inventory Management Secrets and Techniques
Regardless of the inventory control method you’re using or intending to use, the following techniques will improve your inventory management and cash flow.
1. Set Par Levels
Par levels are the minimum amounts of products that must be available in stock at all times. When the stock hits below these levels, it’s time to order more.
Setting par levels depends on different criteria and varies from product to another: how quickly the item sells and how long it takes to get back in stock.
Setting par levels for products in your inventory will systemize the ordering process and make the decision making faster and more accurate.
2. Audit Regularly
Whether your staff do the auditing or you rely on a software, you need to get your hands into the process and check things yourself.
Some businesses count all products in the inventory once or twice a year. It’s tiresome to do so and you can get lost.
You can make things easier for yourself and spot check certain products at a time, not all at once. This means choosing a product, counting it, and comparing the number to what it’s supposed to be. Choose problematic or fast-moving products to audit regularly.
Other businesses check products on a rotating schedule, daily, weekly, or monthly; this is called cycle counting. This method spreads the auditing throughout the year, instead of once a year.
Note that higher-value items will be counted more frequently when doing cycle auditing.
3. First In, First Out (FIFO)
As the name suggests, this inventory management technique states that the oldest products are sold first. This is a good technique for many reasons:
- you won’t end up with unsellable spoilage,
- you won’t have worn-out, old boxes sitting at the back, and
- you won’t get stuck with obsolete packaging design or features that have changed over time.
All you need to do is simply organize your warehouse and add new products from the back to keep the old ones in the front.
4. Keep Good Relations with Suppliers
You need to be on good terms with your suppliers and build strong relationships with them. All the time, problems will arise and the market will change – you might need return a slow – selling item, restock a fast seller very quickly, or troubleshoot manufacturing issues.
Being friendly won’t buy you a good relationship with others, being clear, straightforward, reliable, and honest will.
5. Prioritize Your Products
Based on the percentage of revenue of each stock, use an ABC report to grade the value of each stock products.
Why do we do that?
Suppose that stock X is the most profitable and valuable among all, then you’d better make sure it’s always available in your inventory.
For dead or low-value stock, you need to run a discount on to free up some space off your shelves and liquidize some cash from your inventory.
6. Set Aside Safety Stock
Set aside a quantity of safety stock for use in case of emergency. To know how exactly to calculate your safety stock, use this formula:
Safety Stock = (Maximum Daily Usage x Maximum Lead Time) – (Average Daily Usage x Average Lead Time)
By doing this, you’ll be prepared for any emergency, damage, or unseen circumstances that prevent you from purchasing or ordering new stock.
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To Sum Up,,,
Keeping an effective inventory system and stock control can mean a lot to your business. It can save you money and increase your profits. Effective inventory management helps you manage risks and emergencies, predict future sales, and survive in a fierce market.
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