Inventory planning tips to help you stay on top of your stock
The inability to know how much inventory needs to be allocated to each channel prevents you from listing items accurately online. As a result, you end up with too much stock rather than recording an accurate number of products. Increasingly, more warehouses are opening every day, increasing the number of people who need proper inventory management procedures along with those who are not knowledgeable about how to use them. Managing inventory effectively cannot simply be taken for granted.
Why Is Inventory Management Important
The longevity of a company is determined by the ability to manage inventory. Your supply-chain management will work appropriately once your inventory is in good order. If you don't have it, you're at risk of costly mistakes, including wrong shipments, out of stocks, overstocks, and missed picks.
Management of warehouses properly is crucial. A messy warehouse causes incorrect pick lists, disorganized shelf labels, or a disorganized warehouse in general. The majority of wrong shipments are caused by mistakes in the inventory process and insufficient quality control procedures. A company experiences out-of-stock and overstock when it places orders manually without fully understanding the state of its inventory. The result is too much stock or too little stock, resulting in incorrect inventory forecasting.
Inventory Management Technique
The power of inventory management is solely dependent on how you use it. Having the experts who created your software set up your inventory management is well worth the extra time and money. Get the most bang for your buck by working with them to ensure that you're using the right features and techniques.
Here are a few inventory-control techniques you might want to consider for your warehouse.
- Economic order quantity.
An economic order quantity formula is traditionally used for determining the ideal number of units a business should hold in inventory. It uses variables such as total production costs, demand rates, and other factors to choose a perfect amount to purchase. Economizing on order quantities has the overall goal of minimizing costs. To reduce the amount of buying, the formula determines which product units to buy in the most number. Unit costs are included in the procedure, as well as the number of units delivered and stored. This allows most companies to release cash tied to their inventory.
- Minimum order quantity.
A minimum order quantity (MOQ) is an order quantity that a supplier is willing to accept to sell a small amount of stock. You will not purchase a product from a supplier if you do not meet the MOQ. The minimum order quantity for more expensive inventory items is typically smaller than those that are more cost-effective and easier to produce.
- ABC analysis.
A simple inventory categorization technique identifies items that significantly impact overall inventory costs by grouping them into three categories.
Category A: Those products within Category A contribute the most to your overall profit.
Category B: The products in category B fall between the most valuable and the least valuable.
Category C: The small transactions in Category C are integral to the company's overall profitability but do not matter much individually for the entire business.
- Just-in-time inventory management.
Stocks are arranged just-in-time (JIT) from suppliers to coincide with production schedules, according to Just-in-Time inventory management. Just-in-Time inventory management reduces inventory costs significantly. Rather than ordering too much and running the risk of dead stock, companies receive inventory only when they need it. Stock that is dead is stock that has not been sold to customers and has not been used.
- Safety stock inventory.
Excess inventory is ordered when demand exceeds expectations in safety stock inventory management. As a result of incorrect forecasting or unexpected changes in customer demand, this technique is used to prevent stockouts.
- FIFO and LIFO.
Costs for inventory can be calculated using LIFO or FIFO methods. FIFO, or first in, first out, dictates that old stock should be sold first. Keeping inventory current is one of the benefits of FIFO. Last-in, first-out(LIFO), is used to assume that newer inventory is typically sold first; LIFO prevents insufficient stock from piling up.
- Reorder point formula.
The reorder point formula is a method of inventory management based on the organization's business cycles, varying from product to product availability at the warehouse. Because lead time is a factor in reordering points, they are usually higher than safety stock numbers.
- Batch tracking.
Batch tracking is a technique of quality control inventory management in which a set of stock with similar characteristics can be grouped and monitored simultaneously. Methods such as this one can review expiration dates of inventory or trace defective items back to their original batches.
- Consignment inventory.
This is the same thing as your local consignment store. Consignment inventory refers to when a consignor gives an affiliate (your local consignment shop) their list without requiring the retailer to pay for the item upfront. In a consignment arrangement, the consignor offers the inventory, and the consignor owns it, while the consignee pays only when the goods are sold.
Stores that use drop-shipping don't keep stock of the items they sell. It is a method of inventory management. Stores make sales by purchasing products from third parties and shipping them to consumers instead of picking them from their inventory. Consumers never see the products themselves.
Your company's most significant asset is its inventory, so protecting and nurturing that support properly will save you and your company money. Inventory management techniques are essential to profitable inventory management.
Inventooly is an inventory management software you should check out if you plan to use it for your business needs. The program offers a variety of features that can help you manage your inventory in your store. As a result, you can better evaluate your inventory stock levels, receive regular stock alerts, and generate robust inventory forecasts.