Think about the online stores you buy from regularly. Do they consistently have the product you want? If the answer is no, then the business likely doesn’t have as good control of its inventory as it should. Inventory management is at the heart of any well-run, sustainable retail business.
When a retail store owner or manager doesn’t have a detailed understanding of the inventory they have in hand, they’ll be greatly constrained in their ability to make smart reorder decisions. They cannot list items with accuracy on their online store since they don’t have correct visibility into their inventory. They could easily get stuck with too much inventory or fail to fulfil orders due to lack of product.
If you want to get inventory management right, you’ll do well to listen to what the experts have to say. Here are 10 paraphrased tips from people who know a thing or two about successful inventory management.
1. Update inventory records in real-time and make the information available to relevant staff – Jonathan Gaunt, Managing Director, FD-WORKS
To stay a step ahead of their competition, businesses have to move quickly and accurately. Access to fresh, correct information is key in this regard.
In the context of inventory management, tracking when the last transaction occurred, for instance, is crucial. There are costs to holding dead inventory such as warehousing, cleaning and security. Some products are seasonal or trendy. If it’s been weeks or months since a certain product sold or if there has been a dramatic decrease in its turnover, it might be financially prudent to sell it at a loss and inject the resulting revenue into an item that’s currently hot.
2. Categorize your inventory – Dan Schmidt, founder and CEO, The Emerging Business CFO
All products in your inventory aren’t created equal. If you devote equal inventory management time and resources to each product, you’ll be running overkill on some while shortchanging others. To maximize your inventory dollars and increase efficiency, divide your inventory into several categories depending on turnover, profitability and other distinguishing factors.
3. Weigh the costs of inventory against the benefits of inventory – International Purchasing and Supply Chain Management Institute (IPSCMI)
Successful inventory management comes down to your ability to constantly balance the costs of holding inventory against the benefits of the inventory. Small and medium-sized ecommerce stores can be especially vulnerable to miscalculating the real cost of carrying an inventory. It’s not just the money tied down in inventory but also storage, insurance and taxes.
4. Inventory requirements vary from business to business – Norm Saenz, Managing Director and Don Derewecki, Senior Consultant at St. Onge
Whereas there are principles that underpin inventory management best practices, inventory management procedures will vary depending on customer requirements and the types of products the e-commerce store sells. There will be variation in inventory management between pharmaceuticals, food, apparel, electronics, furniture, stationery, automotive, building materials and general merchandise stores.
5. Use effective methods for calculating safety stock levels – Bain & Company, Inc.
Are you using statistical formulas that incorporate production lead times, sales forecasts, manufacturing schedules and each product’s service-level data? Or are you still using rigid rules such as all products from a certain manufacturer requiring 20 days of safety stock?
The problem with rigid rules is that they are often applied to products with uncertain delivery histories. Use a standard or automated statistical formula that extracts historical individual product data in order to come up with an up-to-date safety stock level.
6. Align individual delivery sub-elements with overall objectives – Mani Iyer, Senior Business Manager, Genpact
Ecommerce stores often believe that order-to-delivery cycle time reduction would realize the competitive edge their business needs. However, many drop the ball when it comes to defining goals of individual cycle elements that contribute to overall lead time adherence. Inventory management must incorporate sub-targets such as supplier performance management on fulfillment, customer service satisfaction, working capital levels and more.
7. Keep customer satisfaction at the centre of inventory control – James Ellis, Assistant Professor, Business Department, Central Oregon Community College
Avoiding excess inventory is certainly a desirable goal. However, getting overly fixated on minimizing inventory levels can take away your attention from the thing that matters most of all—customer satisfaction. If the inventory is running too low or running out, that will lead to lost sales and, ultimately, lost customers. Therefore, inventory levels should constantly be compared to customer satisfaction levels.
8. Put one person in charge of inventory management – David Wheat, Materials Manager, Krausz USA
Many ecommerce stores are small enough to be a one-person operation. However, if your business has grown to the extent that you have 2 or more full-time staff, assign the role of purchasing and inventory manager to one person. The designated individual should keep track of inventory and be the first person informed if there’s any change in supply requirements. They’ll negotiate discounts for volume purchases or early invoice payment.
9. Invest in inventory management training – Jaymison Haeussler, Warehouse manager, Graphic Packaging
#1 is absolute attention to detail when training and developing your inventory management staff and system. In several different scenarios, I’ve seen excellent staff and processes fall short of their goals because the training and implementation weren’t cohesive.
It’s hard to row a boat across the ocean when everyone is paddling in different directions.
10. Incorporate lead times for your peak sales seasons – Andrew Chritton, Head of Account Management, Stitch Labs
Most businesses have a seasonality to their sales. Q4 is crucial for many ecommerce stores thanks to the holiday season but different stores will have different peaks depending on the product they sell and the market they sell to. The peak season is critical for many businesses ‘ annual profitability so careful planning and management of inventory are needed.
If you don’t own your means of transportation, which is the case for the overwhelming majority of ecommerce stores, transfers and shipping of products can be unpredictable. Build lead times early into your peak season inventory for shipping optimization and to ensure products are available in sufficient quantities.
11. Implement Inventory sync, Chris Crane, Advisor, Excelsior Integrated
Startups often run lean with minimal software layers. These companies should check which channels they can sync inventory to, or just rely on manually setting inventory themselves. For larger merchants with many sales channels, keeping inventory in sync across them all can become a challenge. When a sale happens on one channel, you want the other channels to be aware of it. Plus, if you’re selling with Amazon and using FBA, you’re responsible for maintaining enough inventory so you can quickly replenish FBA. There’s a point at which channel complexity justifies adopting an ERP system. Look for one that can handle inventory syncing to all your possible future channels, and if you’re using a 3PL, make sure they can integrate to it.
Will Schneider is the founder of insightQuote, a match-making service for B2B services, and writes informative posts about fulfillment services at Warehousingandfulfillment.com. He is passionate about helping businesses find the right solutions to improve their operations. When not working, Will enjoys coaching youth basketball.
The post 10 Experts Share Tips For Better Inventory Management appeared first on Global Trade Magazine.
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