7 Tips for Managing Your Inventory Well

Having enough products in stock to meet customer demand while avoiding a surplus of goods that would increase costs – the right balance is not always easy to find. Here are some tips to follow for efficient inventory management. Text: Diane Stehlé

Invest in stock management software
Of course, you can use an Excel file to facilitate your inventory management. But investing in specialized software will save you a lot of time and money and get the best out of your processes. There are many on the market. For example, Openflex, Odoo, Inventoris and Openconcerto have a good reputation. They all have several functions and are used for different purposes:

  • Keeping stocks in balance (between having too much and not enough)
  • Tracking inventory and its traceability when transported to different sites
  • Registering items received and their location
  • Movement, packaging and shipping of items from a warehouse
  • Traceability of sales and indication of stock levels
  • Thanks to any of these programs, if your company grows you will be up and running quickly.

Follow the trends
Be on the lookout for the latest trends on the market. You will have stock available of recent items that move quickly. If you have stock management software it will let you identify which of your products sell well and which have lower demand throughout the year. Analyze this information and uncover the trends or fluctuations, by season for example. Once you have identified a trend you will be able to pay for inventory of the goods that you should have according to your needs.

Categorize your inventory
Identifying and categorizing your merchandise well will allow you to find them more easily with or without an inventory management tool. For example, you can use the “Pareto Principle” to efficiently manage supplies. The principle consist of categorizing your inventory into three main classes based on their decreasing value, usually calculated in dollars. This classification will let you discover the strategic areas that you have to pay more attention to.

Check regularly
Even if you have opted for a stock management tool, you need to do physical checks. Your employees can make mistakes, such as mistyping some initial data. With regular checks, you will find the performance indicators that are most relevant for your business. Here are some examples of tracking to be done: stock ageing (average number of days of inventory storage until sale), losses, accuracy of inventory counts (comparison between the data from your cash registers and the physical inventory), supplier lead time and inventory turnover (how many times you turn over your stock over a period of time, typically one year).

Sell at discounted price
Have your customers avoided certain products? Liquidate them at a discounted price. In this way you will be able to recover a portion of the cash frozen by this inventory management, which is asleep in the warehouse. Flash sales, reductions of as much as -50% or private sales with discounts: it’s all  good to stimulate consumer buying. Otherwise, ask your suppliers if they would agree to take back some of these stocks. Make sure they get a profit from the transaction. Some of their customers might like to buy them. Encourage your representatives to sell more by offering bonuses. As a last resort, donate your unsellable goods to charitable organizations. You will be entitled to a tax receipt.

Ask questions about a surplus
Ask yourself why you have so many products in stock and look for solutions. Are your supply lead times too long? Do you have delivery problems? Are you forecasting too high a sales level?  Or is this inventory used to compensate for frequent production delays? By addressing these challenges, you will reduce the amount of inventory you really need and save money. If necessary, consult an operational efficiency expert.

Use a proven management method
There are several stock management methods. You can use one or pair them with other processes. Here are the main ones:

  • Minimum stock level: you identify a minimum stock level and re-order when stocks reach this level. This is the replenishment level method.
  • Inventory review: you periodically carry out a review of inventory. At each review you place an order so that stocks reach a predetermined level.
  • Just-In-Time: the Just-In-Time method, or JIT, consists of waiting for the customer’s order to procure. 

To learn more about inventory control, visit the website of the Business Development Bank of Canada at www.bdc.ca or the website of Canada Business at www.entreprisescanada.ca.

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