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The Best Practices for Inventory Management

Revel Systems | March 4, 2021 |

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The Best Practices for Inventory Management

Inventory management can be burdensome. However, that doesn’t eliminate the necessity of the process. Thankfully, you can find an inventory management system to decrease the labor involved significantly.

Establishing an inventory system can drastically affect the efficacy and profitability of a company. Unfortunately, many new entrepreneurs and small business owners follow insufficient inventory control management protocols that affect their bottom lines. This leaves them with either insufficient stock to address demand or overstock, which eats into overhead costs. 

Today, we cover two questions:

  • What is an inventory management system?
  • What should you look for when incorporating one into your operations?

What is Inventory Management?

The basic premise of inventory management is tracking your supplies. To reduce the effort needed to maintain an adequate supply of goods, companies adopt an inventory management system or stock management system. Through stock inventory management, you can maintain an overview of your company’s supply chain. Store inventory management can further enhance a business’s operations by pinpointing weaknesses within the chain.

Regardless of the form that your business takes, be it a brick and mortar shop or strictly online, understanding your supply chain’s logistics through inventory management is critical to your financial success. 

Inventory Management Techniques 

If you want to reduce unnecessary costs, these inventory management techniques can help you.  

Categorize Your Inventory

By establishing a hierarchy of your wares based on priority, you can identify the frequency with which stocks need to be replenished and where you should focus your attention to maximize marketing efforts. The most common technique is the ABC formula. This valuation consists of:

A: Higher priced items that are vital to the business but move slowly, requiring fewer on-hand. 

B: Mid-tier items that are moderately priced and have a steady stream of turn over.

C: Low-cost items that are continuously in demand. 

Pareto’s Law, while not exclusive to stock, can also play a part in how you implement your inventory management. Most frequently referenced as the 80/20 rule, it states that 80 percent of your sales will come from 20 percent of your stock. By understanding where products fall within these percentages, you can plan which items require you to maintain a healthy supply and which to restock less frequently.  

Maintain Records of All Product Information 

Whenever a new product line is introduced, all relevant information should be stored for easy access. This information should include:

  • SKU
  • Barcode
  • Lot Number
  • Supplier
  • Pricing data

This information will help you track the performance of any given product over its lifespan.

Inventory Management Audit

Through regular periodic checks, a physical count of your goods will ensure that you have enough product stocked as well as account for any potential shrinkage. 

Identify Weaknesses in the Supply Chain

An inventory management system can easily identify if your suppliers are frequently tardy when it comes to deliveries, leaving you without adequate stock. If you notice that trend developing, it may be time to find an alternate supplier that can meet the demand in a timely manner. By catching these signs early, you can avoid missing out on seasonal rushes that make up the bulk of your yearly revenue.

Analyze Product Sales

It’s a given that sales should be calculated at the close of business. However, by performing a more thorough analysis of sales, you can start seeing patterns in how your inventory moves. You can see which products have an unusual sales cycle or an unlikely pairing of items that continuously sell together. By delving into the numbers of a product, you can make more informed decisions when allocating resources. 

Control the Reorder Process

In an age of automation, this may seem counter-productive. However, by controlling when you restock products, you avoid the risk of overstocking a product at the end of its lifecycle. 

Create a Network of Inventory Management Tools

An inventory management system by itself is a great tool for tracking your product. However, supplementing it with other tools to create a comprehensive picture will allow you further control over the entire logistical movement of a product. Integrating tools such as handheld scanners or other point of sale hardware will make the process from receiving the shipment to selling a product seamless.  It will also help you avoid any inaccuracies along the way. 

The Value of Inventory Management

For many companies, the products on the shelves, whether physical or digital are their main stream of revenue, and being unaware of their movement isn’t even a conceivable option. By neglecting inventory management, a business may lose considerable profits through shrinkage, overstocking unwanted items, or creating poor customer interactions by not having the product available. All too often, if you’re out of stock of a high-ticket item, there is a competitor down the street that can provide an alternative. 

With an established protocol covering inventory management, you can reduce costs, deliver exceptional customer service, and prevent missing products. 

Let Revel Help Streamline Your Inventory Management

One of the easiest ways to ensure a comprehensive overview of your inventory is by integrating systems that work together. This is where Revel Systems can help. With our enterprise-grade POS systems, you can effortlessly connect your inventory management to track every item that leaves your store. Speak with one of our representatives today to schedule a free demo or to learn more about our point of sale platform features.