Guest Post: 9 Important Practices for Proper Inventory Management for Startups

Managing your inventory is integral to the profitability of your business. However, inventory management is something that startups tend to overlook.

At one point, you will have little inventory that they cannot cater to client demand. In other, you have a vast inventory that much of it goes to waste. This mismanagement can hurt your startup’s bottom line.

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That’s because lack of inventory is the same as sending your clients away to your competitors. Another is that you will be paying for storage for items that you do not get to sell.

If you do not like wasting money but are afraid of having little inventory, inventory planning is vital.

What is Inventory Management?

Inventory management is the process of storing, picking, and shipping your products.

When done right, it lets you ensure that you have enough supply to cater to client demands. Thus, you do not have to keep your customers at bay or waste money storing unsold items.

Simply put, inventory management allows you to reduce your operation cost and maximize your sales. This is vital especially when you just started your ecommerce business or not.

This is made possible when you have a streamlined tracking process. For instance, you would know whether your stock is running low. This will prompt you to restock your inventory.

Inventory management also lets you forecast whether a product will be in high demand this coming season. Demand forecasting will allow you to make an informed decision on whether to restock your items as usual or double up. 

Lastly, inventory management ensures that you are not selling expired items. This is essential when you are selling perishable goods. Doing so means that you will not disappoint your customers while not wasting money on storage expenses.

How can Excellent Inventory Management Boost Sales?

It may not look like it, but improving your inventory management process can help increase your sales. Here’s how:

• Effective inventory management lets you sell multichannel.

   

  Since more and more customers are shopping in more locations than ever (social media, marketplaces, etc.), you can grow your sales. 

• Let your sales team close the deal.

   

  You can better manage your inventory using dedicated inventory software. Mind you; this can be an essential tool that supports your sales team. It will aim to promote other products and know that they can be discounted. 

• Keep your customers satisfied.

   

  It’s not surprising to any startup owner that their customers’ satisfaction reflects their business’ revenue. Satisfied customers will be loyal to your business, purchase again in the future and even recommend your products to people they know. It also helps you avoid understocking, lets you forecast the customer demand, and potentially shortens any lead times. 

9 Best Practices for an Effective Inventory Management to Boost Sales

At this point, you now know the meaning of inventory management and how it can help boost your revenue. This time, we will share with you nine best practices you can do to implement an effective inventory management process:

1. Identify low-turn stock

Do you have stocks in your inventory that weren’t sold for the last six to twelve months? If so, that’s a clear indication that you should stop stocking the item. 

You also might want to employ different tactics that let you dispose of that stock, like offering discounts, sales, or promotions. This is because having these in your inventory wastes your space and capital. 

2. Understand and accurately forecast demand

(Image Source: Lukas, Pexels)

When it comes to effective inventory management, accurate forecasting is crucial. Ideally, the sales calculations that you’ve projected should be based on critical factors. This includes historical sales figures, the economy, predicted growth, marketing efforts, and so on. 

Looking at it from a traditional perspective, though, accurate demand forecasting might be easier said than done. Different external factors will make it challenging for you to get a precise picture of growth. That’s because you have to rely on spreadsheets and review hundreds of historical data.

Fortunately, there are now automated demand forecast systems. Thanks to intelligent inventory management systems, these have made it so much easier for businesses of all sizes.

3. Track product information

See to it that you keep product records for items in your inventory. This information will usually include barcode data, suppliers, SKUs, and countries of origin.

Similarly, you might want to track the cost of every item in your inventory. Doing so can make you well aware of the factors that could change, like the item’s cost, seasonality, and scarcity. 

4. Practice the 80/20 inventory rule

Go with the 80/20 inventory rule. Generally, 80% of your profits will be coming from 20% of your stock. So, you need to prioritize the inventory of 20% of these items. 

Similarly, you should also make sure that you know the entire sales lifecycle of these items. 

This includes how many products you get to sell weekly, monthly and closely monitoring them. Usually, these are the items that allow you to make the most money, so make sure that you’re not falling short in managing them. 

5. Establish your inventory KPIs

(Image Source, Oleg Magni, Pexels)

Inventory KPIs let you measure your performance in a specific area and work on a particular goal over a specified period. This allows you to eliminate any guesswork potentially. As a result, you can provide clear milestones that you can hit every week, month, quarter, or year. 

With these, you’ll have all the information you’ll need that will allow you to develop more intelligent and more strategic decisions for your business. 

Ideally, here are the six most important KPIs that you should be focusing on:

• Inventory write off and inventory write-down

• Rate of the inventory turnover

• Order status and tracking

• Fill rate

• Cycle time

• Carrying costs of your inventory

6. Track moving inventory

You also might have to move your inventory across different locations. So, make sure that you have a singular view of your inventory per location. This will let you come up with a more seamless experience for your customers and employees, as well. 

For instance, employees must locate an available stock if one store is already sold out. They will submit an order and ship it to the customer or the location. 

Similarly, you might also have to track products while in transfer. Doing so ensures that these products will be pulled off your online shelves. This will prevent overselling and other order fulfillment nightmares. 

7. Conduct a regular inventory audit

Make sure that you also do a comprehensive count on your inventory yearly. Some businesses might be doing this monthly, yearly, or even daily, which will allow them to run spot checks on their hottest items. 

Nonetheless, make sure that you regularly do a physical count on your inventory to match the things you have. 

8. Be smart with storage

(Image Source: Alexander Isreb, Pexels)

You also have to be strategic on where you’ll be storing your items. 

Ideally, it would help if you kept it to allow the customer to receive the item sooner. Make sure that you’re basing the location on sales and trends. Move your items when needed. 

Doing so allows you to keep on top of your stock and deliver a great experience to your customers. 

9. Appoint the right inventory management team

Ideally, your inventory management team should be composed of people that will do their work correctly. 

Ensure that the people assigned to their inventory control process are the right people who will be doing the job. 

Over to You

So there you have it. It is undeniable that effective inventory management can help you save money and improve your sales.

For one, it prevents you from understocking your items. That way, you can cater to your customers’ needs. More so where the product is in-demand.

Second, it prevents you from overstocking your items. This ensures that your products will be cleared as needed, allowing you to spend less on storage.

Ultimately, inventory management allows you to provide excellent service and customer satisfaction. So if you want to achieve these results, refer to this post for best practices in building an effective inventory management system. Good luck!

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