Are you struggling with inventory? Wondering how to improve inventory management?
Whether you’re a beauty salon, a vet, a massage therapist, or any other type of business with inventory, proper inventory management is critical.
Here’s the thing: $1.1 trillion is lost worldwide due to poor inventory management.
Perhaps your Excel spreadsheet and barcode scanning method worked for a while, but you’re starting to run into trouble (this is likely the case if your business has grown).
Maybe you’re overstocking products, taking up valuable space in your warehouse and tying up cash in the process.
However your inventory problems may look, the good news is that there’s a better way.
How to Improve Inventory Management
1. Don’t Treat All Products the Same
When it comes to inventory, it’s often said that 80% of your profit comes from 20% of your stock.
That means honing in on your most profitable inventory will allow you to maximize profits, a process that involves understanding the sales lifecycle of these items completely (and closely monitoring them as well).
ABC analysis can help you prioritize your inventory better. It looks like this:
- Group A is for high-value goods that have low sales frequency
- Group B is moderate value products with moderate sales frequencies
- Group C is for low-value goods that you sell quite frequently
Following this rule, items in Group A require a lot of attention since they tend to have a higher financial impact and you cannot afford to not have them in stock.
Similarly, items in Group C require less monitoring since they’re the most traded items on your list. Items in Group B are somewhere in between these two extremes.
2. Forecast Effectively and Set Up Par Levels with Inventory Management Software
That said, you still have to equally monitor slow-moving inventory as it can continue to tie up cash flow and occupy space. Smart businesses, for instance, will put these items on sale. If items haven’t sold between 6 months to a year, it may be best to stop restocking these items altogether.
Once you’ve prioritized your inventory, the next step is to set par levels, the minimum amount of stock you should have at all times. This can be tricky as it depends on several different factors, from market trends to last year’s sales during the same week and even seasonality. Once stock dips below this minimum level, it’s time to order more.
(Keep in mind, however, that you will want to check the par levels a few times each year to ensure that the numbers still make sense for your business).
This is where software like Yocale comes in. Yocale is actually a scheduling software with a built-in point of sale and inventory management. Yocale gives you in-depth sales reports to determine which products are selling the most (and more) to help you forecast more effectively.
From here, the system also automatically updates your inventory levels as products are purchased (since it is connected to the POS) and even alerts you when products are getting low (read more here).
This is actually a great aspect of a system like Yocale, which is not a traditional inventory management system. Since it’s also an online scheduler and a POS, you don’t have to spend time moving between two different systems. The two simply work in tandem.
3. Audit Inventory Regularly
While your inventory management software will automate much of the inventory process, it’s still highly recommended that you carry out a quick spot check of your goods regularly. This ensures that the number in stock compares with your software.
This can be done on a weekly or daily basis.
As a side note, cycle counting, wherein you check individual products on a weekly or monthly basis, is also a good alternative to the time-consuming yearly physical inventory.
4. Your Suppliers Are Key
Even with a good system in place, your relationship with your suppliers can still make or mar your strategy. This means two things:
- Keeping Track of Performance. In this vein, it’s important to keep track of your suppliers’ performance, particularly when it comes to promised delivery dates and actual receipt. If your suppliers aren’t keeping up with the demand, it may be time to reevaluate.
- Forming Strong Relationship + Clear Communication. Strong relationships with your suppliers are key to successful inventory management as your suppliers will be more likely to negotiate minimum order quantities and offer other such perks. However, having strong relationships also means maintaining strong lines of communication. For instance, if you’re expecting an increase in sales, make them aware of this ahead of time.
5. Have a Contingency Plan
Like every other aspect of a business, it is still possible to run into some unforeseen problems with inventory management despite all your efforts.
When it comes to how to improve inventory management, it’s important to understand the possible emergencies that may arise and be prepared for them.
For instance, do you have a plan in place if you have a sudden spike in sales or if your supplier fails to deliver the required number of products?
Looking ahead and having a contingency plan in place in case any of these or any other emergency arise will save you from suddenly losing control of the reigns on your inventory management efforts.
Wrapping it up
An effective inventory management strategy can make all the difference between a thriving business one a struggling one. By following all of these tips, you’ll be better equipped to effectively predict your future sales and accurately determine the optimal inventory required to meet up.
This way, you not only reduce costs, but you also keep the cash flow going and ensure the profitability of your business in the long run.
Yocale is the top online business management system with built in inventory management software to help schedule clients and grow your business. Start for FREE by booking a demo here or contacting us with your questions here.