Inventory management is critical in any business, but especially in retail, wholesale, and manufacturing. This management includes useful systems for managing your company’s inventory, determining how inventory items can be classified, and determining how accurate inventory records can be kept. Of course, if not managed properly, it can result in significant losses for your company. This can be caused by a shortage of stock, causing consumer needs to be delayed, or by an excess of stock, causing inventory costs to skyrocket.
Inventory management’s goal is to strike a balance between inventory investment and customer service. Without good inventory management, you will never be able to implement a low-cost strategy.
The following are five simple and effective ways you can implement to optimize your inventory management.
1. Manage & Monitor Your Inventory Levels
Make your inventory management streamlined by setting a minimum inventory level for each of your products. The minimum inventory level is the minimum quantity of items which should always be available in stock in the normal course of business. If your stock falls below the minimum level, then you must reorder immediately.
Ideally, you will resupply items so that the quantity will exceed the specified minimum inventory level. The minimum inventory level of each product is different. It is usually determined by how quickly the product is sold and how long it takes to get it back in stock.
Managing and monitoring inventory levels manually will certainly be very inconvenient, especially if you have various product types. Therefore, you should use a system that allows you to set up inventory levels automatically and provides alerts whenever your stock reaches the specified minimum level.
2. Use the FIFO & FEFO Methods
You are perhaps already familiar with the term FIFO (First-In-First-Out). This method is commonly used by retailers and wholesalers that sell a wide variety of products. According to this method, products that are produced or acquired first are sold first.
In the case of food and beverage businesses, a similar method that is commonly used is FEFO (First-Expired-First-Out). Unlike FIFO, the FEFO method requires you to prioritize products that expire faster to be sold.
The FIFO and FEFO methods help ensure that the products you sell to consumers are worth selling and have long life spans. Both of these methods also help you reduce inventory losses due to waste of space and unsaleable items.
3. Adopt an Automated Inventory Management System
Nowadays, inventory management systems are important to retailers, wholesalers, and manufacturers. Manual inventory management techniques are inefficient and not competent enough to help you optimize your inventory management.
An automated inventory management system helps you save a lot of time, money, and energy. It allows you to manage and monitor inventory levels, generate real-time inventory reports, keep track of item movements, and even forecast your inventory needs. These can be done through a single system.
4. Perform Inventory Audits Regularly
Here are some of the main reasons why inventory audits are very important:
- To match the actual quantity of items in stock against the accounting records while adjusting differences
- Inventory audits helps you to find out which items or products are over or under stocked
- To reduce unnecessary investments on inventory
- To compare actual physical counts and match them with business reports
- Audits can help you help determine the effectiveness of your warehouse procedures and identify problems in your inventory management
- To help reveal each failure owing to lack of security which results in loss, theft or misappropriation.
Inventory audits can be performed once a month, once a quarter, or once a year, depending on the quantity of your inventory. Some widely used inventory audit methods are; physical counting, spot checking, and cycle counting. With an inventory management system, inventory audits can be done automatically.
5. Optimize Your Supplier Management
It will be difficult to optimize inventory management without improving supplier management. With simpler and consistent supplier management, you will be able to manage your inventory more efficiently.
Make sure you have good communication with your suppliers. Know the right time to order. Keep all the agreements between you and the suppliers well-documented.
With EQUIP Purchasing by HashMicro, you can save all your transactions and contracts with suppliers, schedule your orders, create and send blanket orders automatically, and even allow your suppliers to send their quotations through a supplier portal. This system can also be integrated with EQUIP Inventory so that you will be able to optimize your inventory management entirely.
For more information about HashMicro’s Inventory Management System, please visit our website and discuss directly with our software experts.