Managing your inventory effectively comes with a number of challenges. Could these inventory management best practices be the answers you’re looking for?
Inventory management isn’t the end-all solution to running a successful products business. But it does provide a strong foundation for sales and efficiency. When you have items in stock, don’t have to backorder items, and know where items are located at all times, you can deliver a better customer experience.
Why Follow Inventory Management Best Practices?
Your inventory is a critical arm of your business. No inventory means no sales. Poorly managed inventory can also mean no sales if you can’t put hands on the items your customers ordered.
When you run into inventory issues, you incur higher operating costs and risk losing a sale. That one lost sale could turn into multiple lost sales if a poor experience scares off a customer.
Many businesses we work with have room for improvement in the inventory management department. See if you can put these best practices to good use to create cost savings, scalability, and clarity now and in the long term.
1. Conduct an ABC Analysis
An ABC analysis is a popular technique for prioritizing your inventory from the most important to the least important.
Tier A items are those that you know sell quickly and often. They usually require constant restocking.
Tier B items are those that are medium priority. You might order them monthly or quarterly.
Tier C items are those that have low priority. You typically order these items in bulk and don’t have to order them frequently.
Separating and organizing your inventory using an ABC analysis can help you allocate the right amount of space, choose the best location for items in your warehouse, and optimize your order fulfillment processes.
This can also add visibility to stock levels so you will know when critical items need to be reordered.
2. Pay Attention to Item Quality
When items arrive in your warehouse damaged, spoiled, wrong color or size compared to what was ordered, or otherwise unusable, it’s like not having that item to begin with. You can’t possibly send it to your customers in that condition. And if you store it anyway, you’re taking up valuable real estate space.
Quality control measures should be implemented early and often. Take stock of how items arrive and address problems as soon as possible so they don’t affect your inventory management processes.
This can be as simple as giving your warehouse employees a check sheet of things to look for when shipments arrive. Establish inventory m management best practices to address issues as they arise, such as contacting vendors for credits.
From there, consider how storage practices might affect item quality. For example, exposure to light, heat, or humidity could affect an item after it’s been stored.
If you have inventory management software like Zenventory, you can manage specific items and their storage requirements within the software. Add notes about how certain items should be inventoried and stored, quality issues that have arisen in the past, and other details to avoid making the same mistakes.
3. Optimize Your Pick and Pack Processes
The picking and packing process affects how quickly items are shipped to the customer and how many orders you can fulfill each day!
Without good optimization, your warehouse employees may spend too much time backtracking when collecting items, which can slow down productivity.
A good warehouse management system (WMS) can help you optimize this process without the guesswork. By inputting the items and locations in your warehouse, your WMS can list items in the order in which the employee will come to them, saving them valuable steps. They can also potentially fill multiple orders at a time this way.
Adding barcodes to bins, shelves, and pallets can also make for fast and easy scanning. Know with confidence the correct items are being picked. Each scan will update your inventory numbers in real time. If you’ve set par levels for your inventory, you will receive alerts when inventory starts to run low on a product so you can reorder in a timely manner.
4. Set Reorder Points
We touched on this a little bit with the ABC analysis. A reorder point is the point where you absolutely have to reorder more products. If your inventory dips lower than this point, you run the risk of not being able to fulfill your orders.
Many companies use a reorder point formula to calculate the reorder point for each item. To calculate the reorder point, you’ll need to consider the product demand during the lead time. Multiple the lead time by the daily average sales for that item. Then, add your number of safety stock items. The result is your reorder point.
[Lead Time x Daily Average Sales] + Safety Stock = Reorder Point
5. Invest in Safety Stock Inventory
Even when you make inventory management best practices a top priority, inventory shortages can still occur. One way to mitigate these instances is to invest in safety stock.
Safety stock inventory is a small amount of a product that provides a buffer in case demand for that product suddenly spikes or lead times lengthen. Businesses saw a lot of this during the pandemic (namely hand soap, hand sanitizer, and toilet paper).
When you don’t have safety stock and you run into higher demand and/or slower lead times (due to things like supply chain disruptions), you risk missing out on critical sales, losing customers, and giving up market share.
6. Use an Integrated Inventory Solution like Zenventory
The inventory management best practices on this list can be better supported with automated tools and technology like Zenventory. Our platform integrates with e-Commerce platforms like Shopify and bookkeeping tools like QuickBooks to give you seamless operations across your business.
Zenventory’s feature-rich platform includes item management, par levels, cycle counting, kitting, low stock alerts, and more to help you become more efficient and take care of your customers.
Put these inventory management best practices to work with Zenventory — schedule a demo today!