As we have seen in all our previous blogs (Inventory Management 101: Small Business Guide and Inventory Management Techniques: 2021 Edition) that inventory management is a visual analyzer used to track inventory in real-time. Certain good practices in Inventory Management processes will help you best utilize cloud computing and analytics software and hence curb losses due to mismanagement.
1. KNOWING THE CORRECT INVENTORY FOR YOUR BUSINESS
Each business has a different inventory set that correctly suits its needs and has the most effective management techniques curated for the same. So it is crucial to identify the type of inventory that suits best your business and how you order it. We have discussed the various inventory management techniques here, but let’s recap two of them in brief:
- Continuous Evaluation: With a continuous evaluation review system, we optimize our order according to the exact amount needed. This uses the pull/JIT method as described here. This method requires critical evaluation and monitoring, and the moment the stock is on the verge of getting over, it must be replenished. This calls for some advanced monitoring software like GrofleX, which provides clear visibility on each inventory and provides a real-time tracking facility.
- Periodic Evaluation: This follows the inventory management technique of emergency stocking, as discussed here. The stocking is done after a decided period and evaluated at the end of the period. The excess stock determines the quantity for the next quarter or serves as safety stock. There is no clear planning and no necessity to closely monitor each stock, hence not optimizing the inventory in the best possible way.
2. IMPLEMENT CENTRAL COUNTING PRINCIPLE
To find discrepancies in the supply chain, this step is the most effective one. Central counting is so effective because it provides a birds-eye-view over the complete functioning of the inventory levels/stock levels, hence easily spotting the loopholes and correcting them accordingly. What are the factors to keep in mind?
- Frequency: Decide the frequency of counting and increase it to enhance the probability of finding intricate faults, easily missed through rare counting.
- Strategies: Demarcating a clear strategy plays an important role to improve the effectiveness of counting. “Failing to plan is planning to fail.” sales order/purchase order to plays an important role here.
- Authority: Someone with a great sense of work ethic and reliability must be made in charge of counting rounds because even a single mistake could directly impact the firm’s total cost.
3. WAREHOUSE MANAGEMENT
Most businesses neglect this crucial step, but its importance cannot be undermined. The storage of raw materials goes through a series of common problems:
- High Storage cost: Following the Economic Order Quantity (EOQ) or Just-In-Time inventory management techniques are the best methods to solve this problem. Have trouble following? Check out: Inventory Management Techniques: 2021 Edition to familiarise yourself with all the various techniques and terminologies. The amount of inventory must be carefully tracked using charts and other strategy tools.
- The possibility of becoming Ageing stock: This is a critical situation when the final product prices are not lucrative enough for the customer to buy them, making them a potential deadstock. To curb this issue, a systematic chart must be made using software like GrofleX to check the latest price, the rate of inflation, and whether a stock is turning into an aging stock. Sell them at lower prices to prevent them from becoming deadstock.
- Stocks turning into deadstock: This is the worst possible case where there is no sale of the inventory, and not many people are interested in the particular stock. A proper warehouse management system like GrofleX is absolutely critical because this problem leads to a drastic loss in working capital. The above-discussed Inventory Management techniques such as JIT and EOQ are practical too.
4. QUALITY AND INVENTORY CONTROL
In any business, customer satisfaction is of the utmost importance. What’s more important is to impress the customer through the exemplary quality of the finished products and match the exact descriptions mentioned in the product description. Making a checklist mentioning all the intricate details of the things to be kept in mind is the best possible way of quality control for finished goods. Some pointers can be:
- Damage or flaws: Check for dents, deformities, or damaged spare parts.
- Product Details: Includes color, pattern, shape, and looks.
- Cost and warranty agreements: These must be strictly adhered to, and the details must specifically be mentioned beside each product.
These are not just the only parameters that matter. Storing raw materials in warehouses has its own set of problems. These include fluctuating temperature, light, and humidity.
5. OPTIMIZATION OF INVENTORY MANAGEMENT SYSTEM
Inventory management is the heart of a business and relies on the rich supply of products and the best possible management of these inventories. So why is inventory management optimization important?
- Fluctuating Customer Demands: During the current pandemic, customers have become more selective in buying products, and their demands have become more abrupt. The rise of e-commerce has been a significant stimulus in this change, and hence we must be careful in managing inventory to curb the direct impact on our working capital.
- Increasing Competition: Each business has its own competitors, and the pandemic has led to an even set field due to the compulsion to digitalize all the systems. Reorder point getting affected is a major concern. What matters now is how well a business manages its inventory in an informed and correct way using advanced software like GrofleX.
- Reduced Working Capital: The Covid-19 pandemic hit every business adversely, and the working capital of every firm has diminished drastically. Spending most of it on inventory makes inventory management the heart of growing the business without incurring losses. Having to deal with loss in the current situation and restricted cash flow is the worst possible nightmare for any business, and the only way to evade it is Inventory Management optimization.
6. AUTOMATE EVERYTHING POSSIBLE
Complex tasks can easily be automated using Automation technologies like GrofleX. This ensures enhanced efficiency with less human dependency, leading to less time wasted in managing mechanical, repetitive tasks, where that workforce and time can be utilized in other productive tasks. To know more about automation, check out: How to Leverage Accounting Automation? – Small Business Guide. The achievable aspects are:
- Customizing the storefront for B2B buyers.
- Consolidate sellers, and reduce dependency.
- Managing data entry into accounting software.
- Track and plan how to increase revenue
- Bulk-order management and warehouse automation.
7. FOLLOW ADVANCED INVENTORY MANAGEMENT TECHNIQUES
Advanced Inventory management techniques include ABC categorizing, following FIFO and LIFO methods of inventory management. If you want to learn the basics, do check out: Inventory Management Techniques: 2021 Edition.
- ABC Categorizing: This involves planning and giving priority according to the profits yielded by the particular inventory, keeping the topmost priority one as A and the least priority one as C. This helps reduce wastage of the high demand and the most costly inventories, yielding more profit for the firm.
- FIFO: First-In-First-Out is the technique of selling the one reaching first, reducing the chances of inventory turning into aging stock.
- LIFO: Last-In-First-Out is the technique opposite to that of FIFO where the last item is sold first, hence none of the items turn into deadstock, generating lead time.
HOW CAN GROFLEX HELP ME IN INVENTORY MANAGEMENT?
Software made by experts is adept at solving all these common problems strategically and in a systematic manner. Each of the best practices mentioned above is followed by GrofleX and curated by experts in Inventory management, the simple user interface makes Inventory tracking a cakewalk. GrofleX Inventory management software clubbed with Accounting Automation technology can provide the much-needed boost to your business, providing an edge over your competitors. The informed and correct use of the software is the key to having an edge in these trying times of online business.
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