Majority of small businesses still use a pen and paper or Excel spreadsheets to keep track of their inventory. This leads to mishandling of stock and brings up many errors in operations including those related to data entry, shipping mistake and lack of information. Improper inventory management is a recipe for disaster and can lead to a decline in sales, dissatisfied customers and inefficient operations.
Despite the huge risks involved many businesses are unaware of how they can improve their inventory management system to achieve target revenues and implement better management practices.
Analyze Your Inventory Needs
As a business owner you should reflect on your needs and decide which review system would be best for you. There are two types of inventory review systems:
Continuous: These systems keep ordering a product when it is running low to replenish the stock. It requires monitoring of the inventory levels and placing orders for an item as soon as the inventory levels drop below a certain value.
Periodic: The periodic review system places orders for all items after a certain time period. You can determine the quantity that is required when the period ends. There is no level set to reorder a product automatically.
Count the Cycles
To successfully manage an inventory you should implement a cycle counting algorithm which considers the following factors:
Frequency: How often can the inventory be counted every year and how the counting process can affect manufacturing, procurement and delivery.
Strategy: The inventory should be divided based on locations, categories, items or values to help effectively count everything and minimize errors.
Responsibility: Make a trusted employee responsible for running the counting process by overseeing the frequency and strategy.
The size of the inventory depends on the type and scale of business being run for example, a fruit shop would have a different number of items being kept in its warehouse than a shoe store. It is generally recommended that the stocks should be lower to reduce the costs of operation. This increases the cash flow since businesses are not weighed down by the expenses of long-term stock management.
The inventory management systems help businesses know the inventory levels they need to run a profitable business. It decides this based on the cash flow and business activity level. Important data such as the seasonality of an item, sales patterns and previous turnovers are also stored in an inventory management system to help makes informed decisions.
— BusinessNewsLH (@NewsBusinessLH) 20 de junio de 2017