As most small business owners know, inventory management for small business owners is a difficult task. This is not the most attractive part of the job, but it still needs to be done because it is essential to the success of your business. With this in mind, you may have read many tips and strategies on the best and smartest ways to keep your inventory running smoothly, but are you using them all? Sometimes, we may get lost in all the details of small business inventory management, so that we ignore the big picture. When this happens, the best way is to step back and return to the basics & the fundamentals. So here are some tips on how to manage small business inventory:-
- Please pay attention to market trends: These depend on the type of goods you sell or the materials you make. Due to seasonality and the fact that weather, holidays, and events influence & affect consumer behaviour throughout the year, the demand for your products varies throughout the year. Therefore, you don’t want to keep too many items that are currently unsold. If you have a good small business forecasting tool, you probably know what you need in this area reduces demand for one product and increases the demand for another product, so please consider all these factors and adjust accordingly.
- Reassess the required inventory level: Failure to determine the ideal inventory level may result in a loss of funds. This can happen in different ways. The first one has to do with excess inventory, so you can waste storage space and adjust resources you don’t need because your inventory is much more expensive than the best inventory. The second way you may lose money is out of stock, which will cause you to lose orders, or even lose customers because you didn’t deliver your products to them. This is about placing a large number of small orders for a specific product, rather than ordering large quantities immediately and getting discounts from suppliers.
- Determine the minimum inventory: This point is similar to the previous point, but not the same. Before that, it is discussed that the optimal average inventory level is needed to successfully conduct business. They ship and sell products to customers. This will cause your inventory to decrease. When should you order more? It depends on how much you have that can provide you with more or less work leeway. Before re-ordering, you should allow a reasonable reduction in inventory to avoid the multiple small orders mentioned above. Using a powerful inventory management can solve this problem without worrying too much.
- Implementation of the first-in-first-out method: This may sound obvious, but it is not. FIFO (First In First Out) is just one of the many methods you can use. There are other valid options, such as LIFO (last in, first out). Out) and WAC (Weighted Average). FIFO, as the name suggests, means that the first batch of goods in your warehouse are sold first. In other words, you always sell the oldest products first. This can be said to be the best inventory turnover system and the most systematic. The most obvious use case for FIFO is when you sell perishable food that is about to expire or deteriorate over time.
- Use ABC analysis to optimize your inventory: The ABC analysis works as it shows. You divide your inventory into 3 product categories: A-type, B-type, and C-type. Items usually account for about 20% of your total inventory, but they account for 80% of the revenue generated by your business. Products constitute the middle part of your inventory and sales, and C items constitute most of your inventory, but only one. The minimum reorder threshold should be carefully set, and control should be performed more frequently. In short, for A-items, any good inventory management practice doubles.
