Inventory Management Techniques for New Warehouse Owners
Inventory or stock commonly refers to the goods, products, or materials that a particular business holds for the sole purpose of selling, reselling, or repairing them. Today, so much of the world’s warehouse spaces hold stocks and inventory for companies and businesses alike. For one, LS Commercial’s warehouses are specifically designed to house quite a considerable amount of products and materials of varying shapes and sizes. However, let’s say you have a warehouse to store all your goods and other products, but you lack inventory management skills, or you probably might not know what inventory management is.
In this article, let us help you broaden your knowledge about warehouse spaces and how inventory management is an important aspect of succeeding in such an industry. More than that, we will also lay down quite a few yet beneficial and essential inventory management techniques for new warehouse owners to help you climb the ladder of success in no time.
What is Inventory Management?
Inventory or stock management is the process of keeping track of a business’s stocked products, goods, or materials while also monitoring its weight, amount, dimensions, location, and current status. The primary goal of inventory management is to minimize or cut down unnecessary costs through helping businesses know when’s the right time to actually replenish stocks or purchase a few more [raw] materials for manufacturing purposes.
Why is Inventory Management Important?
As mentioned, inventory management helps and notifies businesses when it’s the right time to replenish stocks. Effective inventory management is highly important in ensuring that a company has enough products, goods, or stock to meet customer demands and accelerate customer experience continually. Mishandling or neglecting a proper inventory management system can cause a business to either lose income on potential sales or waste money on stocking up too much, resulting in a surplus.
Inventory management is considered as one of the most significant factors of doing business, especially in the warehousing industry. While each system differs and varies for every business, it’s still important that companies strive in removing or at least reducing human errors from the entire inventory management; hence, the need to take advantage of an inventory management software.
Regardless of what system or software you use, we figured it’s best if we present all inventory management options and techniques for you to choose from that can help improve your company’s productivity and accuracy while also generating higher income.
Contingency Planning
So many times a business’s downfall is often caused by its inability to plan ahead and weigh all possible risks. A lot of problems and challenges can undoubtedly pop out of nowhere and when you least expect it, especially those relating to inventory management. These types of situations and circumstances can definitely cripple your business, which is why it’s crucial to–as early as now–figure out where your risks are, what these risks may possibly be, and then plot out a contingency plan. It’s not so hard to do this at all. In fact, it can save you a lot of time and minimize downtime whenever such risks and challenges are surfaced.
Let us help you out. Here are the possible risks or challenges you may face in regards to inventory management (scan through this list and figure out which ones you can relate to the most):
- You’re short of budget, and you can’t pay for an item, product, or material you desperately need for manufacturing
- Your warehouse doesn’t have enough room to house surplus stocks brought about by seasonal spikes
- Your supplier runs out of stock of a particular product that you need to meet customer orders and demands
- A slow-selling product takes up too much space in your warehouse whereas you couldn’t find a spot for more essential items
- Your supplier discontinues a product you desperately need without notice or warning
Be Aware of Par Levels
Manage your inventory and stocks better by setting “par levels” for every product or item. Par levels refer to the minimum amount of product that’s supposed to be on hand at all times. This is to prevent ordering too much and ending up with surplus goods that eventually don’t sell fast. When an inventory item or stock reaches close or below its predetermined levels, then you’ll know it’s the right time to order some more.
Do take note that par levels vary and differ for each product, based on how quickly or slowly that item sells, also considering the amount of time before it’s back in stock. Also, conditions change almost all the time, so make sure to check up on your par levels several times throughout an entire year to double-check if they still make sense and help you with your inventory management. Do not hesitate on adjusting your par levels according to seasonal changes, demands, etc.
Accurately Predict Demands
A massive chunk of successful inventory management goes to [accurately] predicting your demands. But, do not be fooled; this is not an easy task. There’s a lot to consider, and you’ll never really know the exact things to come, but you can at least try to get close. To help you out, here’s a list of things you might want to watch out for when predicting your future sales:
- Current market trends
- The current year’s growth rate
- Seasons
- Last year’s total generated sales on today’s exact same week
- Upcoming promotions
- Planned or partnership with ads
These are only some of the most common out of all the things you need to prepare for. If any other factors come to mind that can help you create an accurate forecast, make sure to keep it noted.
Consider Getting An Inventory Management System
An inventory management system is the fusion of digital technology and processes, procedures, or operations that oversee the tracking, monitoring, and maintenance of stocks. In today’s modern age, integrating an inventory management system throughout your entire warehouse operations is something you should definitely take advantage of. Without an inventory management system, your warehouse product flow will inevitably be up to no good. With this system, you’re able to control and maintain an organized and centralized record of every valuable asset or item in your company.
More than anything, why not also try incorporating a retail inventory management software, whereas it can help your business drive more sales with applications that focus more on customer relationship management and other factors. With this, companies can easily know current trends and customer demands, which makes it easier to deliver products and meet such demands in the long run. Today, there are many retail inventory management softwares available in the market, so make sure to choose which one suits your business needs perfectly.
First-In, First-Out (FIFO) Basis
This is another important principle in inventory management. This only means that your oldest stock (first in) should get sold first before your newest stock (first out) to avoid ending up with unsellable, spoiled, or damaged products, especially perishable ones.
Aside from perishable products, FIFO is also an ideal principle to practice for non-perishable goods as those placed far in the back are more likely to wear out or get damaged. After all, packaging and design often change, and you wouldn’t want to end up selling products that have gone out of the current style or trend.
But, before anything else, successfully implement a FIFO principle means you need to have an organized warehouse, so you must evaluate the current status of your facility. Is it FIFO-ready?
Wrapping Up
Always keep in mind that having an effective and organized inventory management [system] in place means you’re more likely to reduce errors, cut down costs, analyze sales patterns, accelerate customer experience, and generate higher income. With all these in place, your business gets a higher chance of succeeding within this fast-growing industry.
Author Bio:
Angelo Castelda works as a contributor for a news magazine in Asia. He loves to learn and understand diverse cultures and aims to share through his writing his experiences around the world.
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