Savvy inventory management is crucial to streamlining business operations, meeting customer demand, and improving profitability. While many business owners start selling without a clear inventory strategy in mind, keeping track of and controlling inventory levels effectively is vital to growing over the long term.
Here are some of the inventory management considerations every retailer or wholesaler should know.
Key inventory management stages
Foundation: Inventory management should start with a fundamental system of categorizing and naming products. Giving each product an SKU (stock keeping unit) ensures all your inventory is uniquely identifiable and easily tracked. SKUs can easily be created for products using an SKU generator.
Growth: Growing your business usually means expanding your product offering and branching out to multiple sales channels. For example, you might start selling products on third-party websites as well as your own website. During the growth phase, it’s especially important to have an inventory management system in place that allows you to effectively manage sales and inventory across multiple channels, and integrate with eCommerce platforms.
Measurement: Tracking and measuring sales and inventory performance is essential to making the right adjustments to your order management process and continuing sustainable growth. At this stage, you should engage with your order management system’s intelligence and inventory reports (useable data to help you scale up), which are based on your stock movements and sales.
Forecasting: Of course, smart inventory management isn’t just about managing the here-and-now; it’s also about being prepared for the future. Once you have some solid sales and inventory data to work with, you should begin to forecast performance for the upcoming period using a sales and inventory forecast tool.
Inventory management metrics to track
Once you’ve moved into the measurement and forecasting phases of inventory management, keep track of the following metrics:
Incoming and outgoing stock movements – how much stock is being sold each month versus how much is being received by you.
Performance of sales channels – how different sales locations and platforms are performing in comparison to one another.
Inventory seasonality – any periods in which your stock movements increase or decrease in an atypical fashion.
Reorder point – when to order more stock to reduce the likelihood of stock-outs or overstock. This can be easily calculated using the reorder point formula.
Reducing inventory holding costs
Effective inventory management based on the considerations above should result in reduced holding costs – meaning you have enough stock on hand to meet customer demand without having to pay to keep excess inventory.
You should also consider utilizing your inventory management system’s batch tracking capabilities to ensure that older products are sold first, and sell in packages or bundles wherever possible to mitigate the risk of dead stock.
TradeGecko’s stock control software provides a sophisticated solution to managing inventory and sales and tracking performance all in the one place. Sign up for a free 14-day trial of their order management system today.