Inventory Management System Guide
Inventory is an investment, as Amazon states. However, having a well-managed inventory can help increase profits and make the customer experience better from the money you put into stocking your shelves.
To be effective, you need to collect data on purchases, reorders, logistics, warehousing, storage, customers, and turnover. Data on company inventory is stored using an inventory system that is part of the company’s supply chain management process.
An inventory management system helps you keep track of the goods in your supply chain so that you can ensure you have the optimal amount of each category. An inventory management system helps keep track of purchase orders and supply chain operations once it is up and running. Also, various forecasting and ordering systems can help you identify if you need to order again and when exactly.
How Do Inventory Systems Work?
There is a big range of inventory systems that businesses can use, and the right system for a business depends on what type of business it is and what kind of internal processes it has. The tasks they manage include:
- Barcode scanning
- Inventory counting
- Controlling sales and purchase orders
- Filling product information
- Reporting and editing
Automated Inventory Process Management
An automated inventory management system can speed up your workflows and save you time on physical inventories. Automated software can help you manage your inventory more efficiently and free up time to focus on other important tasks. Zoho Creator lets you automate various processes, including dropshipping, order fulfillment, invoicing, and customer tagging.
An automated inventory system can help improve your results, especially if you also manually control critical processes related to breakage, stolen goods, and product loss. This means that you can be sure that automated inventory management will not be affected by things like mistakes, items that are missing, or items that were scanned improperly. One good way to avoid having to manually fix common errors is to introduce mathematical corrections to them. This will help you keep track of inventory and make it easier to rely on software for decision-making.
Multichannel Inventory Management: Best Practices and Benefits
Companies turn to inventory management to help improve their business processes and results. Before you begin using the software, you should make sure that you will be able to see individual items. You need inventory control to manage your business results effectively, like special offers, sales figures, and operational speed.
Here are 4 reasons why your business needs to upgrade to the automated inventory control system:
- Greater flexibility : Managing tons of spreadsheets doesn’t help increase your business’s speed and agility of the inventory process. Once you move your inventory to the cloud, you will get a flexible system that increases your management capacities and lets your employees work faster and easier.
- Better accuracy : Due to fast and efficient auditing, the inventory management system lets you find and track items without spending too much effort. The software brings in better barcodes and label track inventory, eliminates write-offs, and lets you forget about stockouts.
- Cost optimization : The software lets you control inventory, minimize holding costs, and maintain storage efficiently. The more time it saves, the greater increase in profits you can potentially have.
- Growth boost : By providing employees with better tools and built-in analytics for managing stocks, creating reports, and making decisions, you can boost sales and make your business grow faster.
One important aspect of inventory management to keep in mind is that any system needs to be able to accommodate future needs and be open to future technological updates. The best way to use the software to control inventory is to base it on your current business needs and your plans for future growth.
Inventory Management Solutions: How to Choose?
Manual inventory control methods are difficult to maintain due to a number of reasons: they are time-consuming, difficult to keep updated, easy to make mistakes on, generate a lot of paperwork, and require regular checking and confirmation. An automatic inventory solution can help you solve all these problems at once.
Even though it may seem like a good idea to advance your inventory management, you should still make sure that you are fully informed about the decision before you make it. There are 4 key factors to consider while shifting from manual work to automated solutions for the inventory process: -Cost -Efficiency -Error Rate -Flexibility
1. Product composition
Inventory management solutions vary in appearance depending on the products they control. For example, the tools for controlling inventory for a clothing brand would be different than those for a high-end electronics company. The seasonality of clothes and the dependence on fashion trends requires different solutions for inventory management of electronics. Many factors contribute to what will be included in a business’s stock control system.
2. System integration
You can choose to have inventory control integrated with other systems in your computing environment for easier scaling in the future. The cost and amount of work required to build an inventory management system differs depending on your choice and particular needs.
The cost of inventory management solutions can vary, so it’s important to take that into account when making a decision. To get the best price, you should review your business, define what needs to be improved, and then make the changes. ROI should be relied on while controlling inventory in order to predict the performance of your solution and the wait time for profits from your investment.
Your employees who work with inventory management solutions on a daily basis are the best people to judge which one is the best for your company. The most important thing to consider when working out how much the software will cost is how long it will take staff to get used to it. Although a perpetual inventory system can diminish the need for low-skilled employees, it requires the hiring of new specialists who are knowledgeable in software installation, maintenance, and troubleshooting.
The best-case scenario is when all of your employees can quickly learn how to use new software. You will need to find new workers who specialize in controlling inventory software and reassign people.
6 Inventory Management Processes
1. Forecast your demand
if you want to be successful in selling, you need to understand who your target customers are and what they want to buy. How much demand is there likely to be for your product? If it takes off, how quickly can you get more?
Retailers that have been in the market for a while have an advantage because they have data on past sales. You can forecast future sales and inventory budget by using customer buying behavior indicators and seasonal shopping trends.
Should you use inventory calculations?
Inventory management calculations can help you set a reorder point for each product to predict when you will need to raise a Purchase Order.
You will need to calculate:
- The inventory turnover ratio , i.e. the rate at which inventory is “turned” into good solid cash flow, i.e. sold. A high inventory turnover means your inventory is selling well and bringing in revenue. A low one means you might have the stagnant stock problem on your hands, and measures must be taken to offload the non-movers.
- Maximum and minimum stock levels which tell you what is the most, and the absolute least, amount of inventory you need of a certain product.
- Reorder levels which indicate the volume of inventory at which you need to place an order for fresh stock. Reorder levels take into account vendor lead times, or the time it takes for your vendors to deliver goods.
2. Master warehouse organization
Inventory management not only includes how you track your inventory, but also how you organize your warehouse for maximum efficiency. Having an organized warehouse can help you save time and money by making it easier to find things and get your product out to customers quickly. The design and layout of warehouses are key to ensuring orders are filled quickly and efficiently.
Fulfilling an order includes quickly and efficiently storing, picking, handling, packing, and shipping the products. Warehouse design involves creating a layout for the warehouse that is efficient for both storage and transit of goods, with minimal obstacles for staff.
There should be sections for receiving, collecting, packaging, and shipping, with enough space for each activity. There should be a separate area to store damaged goods so that they don’t mix with the good products.
The bigger your inventory or warehouse, the more essential it is to effortlessly find items in storage. Assigning shelf numbers to each section, using barcodes to track products and their location, and designing efficient pick-up flows are all great things to have. This reduces confusion and dramatically reduces the time it takes to receive your order.
3. Choose an inventory management technique
The type of inventory management system you choose to use for stocking inventory will largely depend on the business, production, and sales cycles.
A buffer of safety stock is worth holding for products that have high demand but variable sales throughout the year. This will protect against sudden spikes in sales. If your vendors are reliable and your forecasting is accurate, you could manage your inventory using just-in-time methods.
Just-in-time inventory management
The just in time method may work for you if you only need minimal inventory and can have items delivered as you need them. This system will only work if your vendors provide excellent service.
To have a successful JIT model, one must be extremely detail-oriented in their planning, have standardized processes, and work with a limited number of suppliers that can be trusted. The result is a more coordinated effort, with less time needed to complete the work and quicker delivery.
Although it may not be ideal, it is better to kick yourself for being understocked during the holidays than to not have enough items to sell. This is where “safety stock” comes in. If you carefully plan your reorder points and regularly check your stock levels, you will never run out of products to sell.
4. Use an inventory management system
The most significant change you can make to your retail operations is to automate your inventory management. An inventory management system can be used as a retail assistant, warehouse management tool and omnichannel support system from the start.
The best systems for retail automate different aspects of the process, such as creating POs when stock is low for fast-moving items, to managing sales, exchanges, and purchases in real-time, to being able to handle multiple currencies, locations, and sales channels.
The following text describes how automated inventory management techniques can streamline the process of fulfilling orders by creating a standardized system for naming SKUs and generating barcodes.
5. Audit stock at regular intervals
If you want your inventory tracking to be as accurate as possible, you should use an automated inventory management system in combination with regularly scheduled inventory reports. Putting your actual stock figures side by side with your book value helps you understand what has been lost and the reasoning behind it. Many things can cause a loss of inventory, such as food spoilage and not knowing where it has been placed, to actual theft.
The stock audit exercise
You may need to stop other business operations for your first count. Inventory all of the stock for every item in a designated counting area. Do not put any item back before you have accounted for all similar items. Barcoding can help you keep track of where products are supposed to go.
Subsequent counts then become simpler. You can spread out audits throughout the week by doing them in different sections of the warehouse. Pick times that won’t interfere with regular business, for example after the last shipment has gone out. There may be some additional hours to work, but it will be worth it in the end.
The ABC counting method is useful when you have multiple items that fluctuate in different amounts. This system counts the items that move the fastest most often, and counts the items that move the slowest the least often.
6. Review your processes from time to time
Buyer trends change over time, and so do relationships with vendors. You can use retail reports to learn about your business’s performance and to identify potential problems before they become bigger issues.
The same goes for stock levels. If you find that an item that is moving quickly is losing favor among your customers, you need to adjust your reorder level. Fad purchases are those that are set off by a social media frenzy but then lose their popularity as soon as the next trend comes along.
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