5 Inventory Management Strategies to Improve Efficiency
Inventory management involves keeping track of your stocked goods, making sure that the right products are in the right place at the right time, and at the right cost.
An effective inventory management system allows you to react quickly to market demands and ensures you don’t have too much or too little stock – both highly undesirable scenarios.
Strategic inventory management makes your whole organization more efficient, but it’s an ongoing challenge for most companies. Consider implementing these five inventory management strategies to improve efficiency and increase revenue.
1. Use ERP software designed for inventory management
It’s common for small businesses to start out using spreadsheets to manage their inventory. As they grow, they may move to a simple inventory management software that allows them to order and track items more effectively. But the shift to an ERP solution designed for inventory management will take you miles further, allowing you to manage your supply chain and order-to-cash processes in a single system. You can even choose to incorporate additional technologies to further optimize inventory management, including:
Barcode scanning systems – Barcode scanning allows you to process incoming inventory, as well as data from cash registers and point of sale systems if you have a retail component to your business.
Advanced radio frequency systems – Radio Frequency Systems (RFIDs) guarantee efficiency by automating warehouse control end-to-end, making them popular with companies with thousands of orders to move every day.
2. Automate your inventory management system
Even in a small company, relying on manual inventory management – humans counting things – can be bad for business. Even the most diligent employee can get it wrong, leading to educated guesses and a high margin for error – which in turn leads to upset customers and potentially lost sales. Manual inventory counts are also time-consuming, frustrating for your staff and drain precious manpower resources that could be dedicated to more productive work.
The right inventory ERP system can take care of this onerous task with much greater accuracy and efficiency. With all relevant purchasing and sales order data in the same system, inventory levels are tracked and updated in real-time. So, when a customer calls asking if a product is in stock, you can answer immediately with a quick check.
3. Use data analytics to optimize inventory management
Having access to real-time inventory data and analytics gives you accurate product and sales forecasts in an instant. You can use this data to predict market demand and scale your inventory up or down at the right time, resulting in increased profits. Predictive data analytics has several benefits including:
Increasing cash flow by reducing the inventory investment
Improving customer service by providing more accurate product availability
Predicting the right inventory quantities to meet demand
Improving profit margins by limiting the discounting or scrapping of old stock
Having accurate sales forecasts allows you to market your business more effectively to specific customer segments. You can do this through a targeted advertising campaign that ensures the right people are finding out about your business at the right time.
The benefit of adopting this tactic is that your campaign will produce its own data analytics. This means you can refine your approach with each campaign that you run, evolving your strategy at each stage and making sure that your available inventory matches the demand of your customer base.
4. Forecast effectively with sophisticated planning tools
The most important part of efficient inventory management is accurate forecasting so you can make informed predictions and ordering decisions. For example, is your company doing a promotion that may increase product demand? Do seasonal events, like Christmas or vacations, affect demand? What products sell quickly, and which do you sell the most of? Accuracy in forecasting can have a huge impact on profitability. There are two main inventory forecasting models:
Quantitative forecasting involves using past sales data to predict future demand. The more data you have, the more accurate the prediction will be.
Qualitative forecasting relies on the knowledge of experienced experts to predict demand based on less measurable factors like potential demand and market forces.
While the latter method is more of an art than a science and takes a while to finesse, the former method can be easily used when you have the right systems in place. A comprehensive ERP solution will provide visibility into all data that impacts your forecasts, helping you plan more effectively and boost profits.
5. Integrate mobile technology
Using mobile technology to give your staff easy access to your inventory ERP system can improve efficiency dramatically. Mobile apps are a lifeline for salespeople, giving them real-time inventory data and accurate shipment information. They can also help warehouse workers control and track inventory, and manage assets, shipments and operations at any time, from any location. Having immediate access to this crucial information drives efficiency at all levels of the supply chain and results in higher customer satisfaction.
Today’s modern ERP solutions offer a range of mobile app access depending on your needs. Do some research to ensure your chosen ERP solution has the mobile access your team needs to be effective.
Maximize your inventory management strategies with an ERP system
Efficient inventory management strategies are only one piece of the puzzle. Having the right systems in place lay the foundation to deliver the best results. An ERP solution allows you to reduce your inventory investment, optimize your product mix more effectively and improve customer service. Taking a firm grip on your inventory management strategy – and the systems that support it – will increase efficiency and help you increase sales. Implement the tips described above and watch your business become a streamlined, profit making machine.