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7 Actionable Tips for Effective Inventory Management

Wondering How to Manage Your Inventory Better? Here are Seven Tips!

A booming business may mask many issues under the hood. Challenges related to inventory management may gnaw the organization internally. The business owner or other stakeholders may not find anything amiss.

Inventory-related issues may erode the credibility and goodwill of the business. Here are a few pressing issues that mar effective inventory control in an organization:

  • Stock not tallying with sales figures
  • Inability to identify fast or slow-moving items
  • Customer dissatisfaction due to stock-out

How can a business overcome such hurdles? In this piece, ReachOut provides seven ways to orchestrate an efficient inventory management system, to pre-empt such issues.

1. Give a unique identifier for each item

A unique identifier for each item may seem obvious in today’s digitalized world. But many businesses, owing to practical exigencies, fail to assign it.

A unique identifier, also known as SKU (stock keeping unit), helps in many ways, as stated here:

  • SKUs enable tracking each item, making explicit the stock level.
  • It facilitates inventory control by tracking each item, even when sellers bundle two or more items as a package offering.
  • Allows identifying variants of the same product. A store stocking up on a particular brand in high demand and ending up with mounds of dead stocks is all too common. Having a unique identifier for each color, model, or flavor makes it easy to identify high demand variants. Customers may, for instance, want a black color smartwatch. They would not accept a white color variant of the same smartwatch.

2. Prioritize the inventory

An inventory comprises several types of items over finished goods ready for sale. The inventory may include goods returned for repairs or exchange, spares, decoupling inventory, and more.

Categorize the inventory into priority groups. Categorization helps to:

  • Identify the nature of the stock. For instance, ensuring spares for after-sales support is hypercritical. Delays in repairing an item under guarantee will erode customer confidence.
  • Identify fast-moving and in-demand items, drilled down to the specific variant, flavor, or size. High-ticket items may need fewer units. Low-cost items tend to sell out fast.
  • Roll-out individual strategies for managing different inventory types. Smart businesses sync inventory levels with marketing campaigns. They focus on promoting products that offer higher margins.

3. Identify optimal stock levels

Keeping enough stock on hand may sound obvious. But many businesses do not find this feasible all the time. They end up losing billions in revenue due to running out of stock of fast-moving or in-demand items. The customer dissatisfaction of not finding the product they need, mostly when lured into buying the product through advertisements or promotions, is collateral damage.

Identifying and maintaining optimal stock levels is a complicated exercise. Consider the following factors to maintain optimal stock levels:

  • Devise and implement inventory controls to reduce out-of-stock situations. The most time-tested control is a reorder point when stock levels reach a particular point to trigger a fresh order.
  • Maintain a level of safety stock to use during an unexpected surge in demand or disruption in supply. When calculating the safety stock level, consider the average demand, the variability of the demand, and the lead time. Also, factor in delays for contingencies and leave a margin for error.
  • Avoid overstocking and understocking. Identify optimum stock level for each item. Factor in possible disruptions when identifying stock reorder levels. But overstocking items blocks capital. It also risks ending up with obsolete items and increases the burden on inventory management.
  • Use analytics to identify the nuances of the demand, and reorder accordingly. Not all requirements are equal. Markets may vary by geography, season, end-of-the-month, and other considerations. 
  • Track inventory regionally to identify items most and least in-demand. Send low-selling stock in a region to other regions where it’s in higher demand.
  • Adopt the inventory strategy suitable for the nature of the business. Keep the external environment in mind when benchmarking best practices. For instance, “Just in time” and other lean methods have their benefits and cut costs. However, such concepts fell flat on their face in the wake of the COVID-19 lockdowns and the supply chain’s ensuing disruption.

4. Pre-empt disruptions proactively

Issues in inventory may have nothing to do with the enterprise. It may result from an unreliable supplier or problems in the supply chain. The fluid and uncertain external environment, in the wake of COVID-19, increases the chances of disruptions.

Adopt a proactive approach in solving inventory-related issues through the following ways:

  • Review the supply chain at regular intervals, seek improvement methods as a continuous exercise, and discuss the underlying problems with supply chain partners proactively.
  • Evaluate supplier performance and consistency at regular intervals. Replace suppliers who are habitually late with deliveries.
  • Have backups. It is always better to have a pool of suppliers, even if one supplier delivers on very favorable terms. Likewise, have alternative shipping channels and routes ready for any contingency.

5. Churn the inventory constantly

The 80:20 rule is a time-tested rule of thumb. It means 20% of the products will generate 80% of the sales. Despite the best precautions and efforts, some stock always ends up as slow-moving or dead. Dead inventory eats up valuable space and processing effort.

Effective inventory management requires a constant rejig and churn of the items.

  • Be proactive in disposing of deadstock. Some options include discount offers and bundling with fast-moving items. Integrate the exit strategy into the overall inventory management strategy.
  • The destiny of any product depends on customer behavior. Monitor customer behavior and sentiments related to the product and make changes accordingly.

6. Invest in the right people

Enterprises that underestimate or ignore the workforce’s role falter in inventory management do so at their peril. Human resources are just as necessary as technology for inventory management.

  • Train employees on the critical functions related to inventory management. Even highly committed and resourceful staff falls short if they do not receive cohesive training.
  • Never over-stress employees by burdening them with excess work. Invest in technology to automate routine tasks. Make sure employees do cognitive, value-adding tasks.

Read more: 3 Field Service Scheduling Pitfalls You Should Avoid to Reduce Employee Turnover 

7. Invest in inventory management software

Enterprises managing inventory with spreadsheets and notebooks waste resources, which could find better use in furthering the core business.

Deploy inventory management software, and link it to the operations suite, including CRM, field management suite, and work order platform. Also, deploy tools such as mobile scanners and POS systems to automate and streamline the process. Link these tools to the inventory management software

Read more: 8 Ways a Service Management Software Helps Drive Servitization in Field Service

An integrated inventory management software:

  • Automates transactions and makes available the stock information in real-time.
  • Provides the analytics needed to generate insights for the business.
  • Track product information, such as barcode data, cost, supplier, country of origin, and more. Such insights help in pricing and reordering. Data analysis offers insights such as seasonal price variation and availability of alternate products. Such insights enable proactive actions to avoid stock-out situations.
  • Keep the UX simple. Make sure each user, even lay users, can look into the reports and recognize the information. For instance, when sourcing items from multiple vendors, including the vendor name or code will make reordering easy.

Effective inventory management optimizes business processes, delights the customers, improves workforce productivity, and creates an upward spiral of positive energy. Customers who find their favorite items always in stock make the store their first preference. 

Case Study: Running a Backflow Testing business with ReachOut! How ReachOut’s customizable digital forms and service scheduling features transformed a backflow testing business in Idaho?

ReachOut SuiteReachOut enables field service professionals to attain effective inventory control. You can manage your spare parts, add stocks and allocate parts to field agents using ReachOut Suite. Get in touch with our expert to learn more.

 

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